Plug Into Gulfport Energy

 | Sep 26, 2012 | 1:00 PM EDT
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Investing can be a funny business. For instance, our biggest winner this year was also our biggest loser at one point. We purchased shares only to see them rise and then fall extremely hard as European fears took hold of the markets. But we were able to salvage the trade because of our willingness to listen to the conference calls of that company as well as its competitors (ones not only in the same industry but also the same resource play).

The company we are discussing is Gulfport Energy (GPOR). Due to the upside we see in the shares, this is the second stock we are suggesting readers look into adding to their portfolios. This is not an energy play where investors get a solid yield to take some risk out of the investment while they patiently wait for capital gains to accrue. Rather, in this play, investors are going solely for capital gains based on exploration success.

Since the shares hit their 52-week low a little over three months ago, we have exponentially increased our holding in the company via a mix of stock and call options. We have been buying all the way up, riding our winner higher, which is necessary when investing in resource stocks. Our confidence in the play results from Gulfport's success in the Utica Shale area thus far, coupled with what we know will be stellar results over the next few months.

Those who listened to last quarter's conference call heard the company discuss three wells that had been drilled and were either in resting or having frac stages completed. The wells discussed were the Boy Scout 1-33H, Groh 1-12H and the Shogert 1-1H well. The initial results for Boy Scout were 470,000 cubic feet per day of gas with 40 barrels of condensate/day in production from first of 22 frac stages. Groh had 384,000 cubic feet per day with 192 barrels of condensate/day in production and Shogert produced 2.9 million cubic feet. All these were based off of just a single frac stage, so we knew the numbers were going to be good. The company also threw investors a bone when they announced the actual results from the Boy Scout with 1,560 barrels of condensate, 7.1 million cubic feet per day and 1,008 NGLs to come out with a total of 3,456 BOEPD (barrels of oil equivalent per day).

We still are awaiting the Groh and Shogert results, but we can surmise that they will be extremely positive and conclude that Gulfport is indeed in a sweet spot in the wet gas window in the Utica Shale play. Management stated that they would probably release the results during the next conference call due to the required resting period. So we know the time frame for release on this data and investors have just over a month to accumulate positions before the company releases the official results.

We think shares are a buy at current prices. Looking long term, the stock could rise to the high $40-per-share level and possibly $50 per share. The company is in a sweet spot and its prime Utica land package is a company maker. After listening to management's conference calls, reading the investor presentations and doing the same research on their peers, we feel confident that Gulfport Energy will be one of the great growth stories coming out of the Utica Shale area over the next six to 12 months. We have already made it a pillar of our Utica portfolio.

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