One of Gulfport Energy Corps.’s major investors, Firefly Value Partners is urging the Oklahoma City company to begin a $500 million buyback program.
In a letter sent this week to Gulfport Energy directors, the New York City-based hedge fund’s leaders also urged the firm to sell its 22 percent ownership in Oklahoma City-based Mammoth Energy Services. Firefly also wants more members on the board of directors.
A report in the Oklahoman newspaper indicated Firefly leaders were frustrated because Gulfport’s leadership team had failed to maximize shareholder value.
“To date, we have been patient with decisions made by the board and management, and we appreciate the time that Gulfport’s chairman and new CEO recently spent with us to discuss our views on the company,” Firefly wrote.
“However, as we previously communicated to you, we have been discouraged by the board’s lack of urgency in addressing the company’s prolonged stock price underperformance and its unwillingness to commit to actions that we believe would maximize value for stockholders.”
The letter states it believes Gulfport, which drills and produces wells in Ohio’s Utica Shale field and Oklahoma’s SCOOP play, currently has more than a decade’s worth of low-cost, high-return drilling inventory the company has efficiently developed.
However, the investor’s letter states share values for Gulfport’s stock consistently have underperformed, compared to peer companies and broader indicies. Firefly also is critical in its letter about past equity issues the company has used to raise about $2.9 billion in funding.
“From November 2013 to present, Gulfport has increased its shares outstanding from roughly 78 million to 173 million, in large part to finance acquisitions,” Firefly wrote. “These share issuances have been extremely dilutive, reducing stockholders’ share of valuable acreage and future cash flows.”
As for the suggestion of selling non-core assets and investments, the letter continued,
“With significant cash on hand, positive free cash flow, and noncore assets to sell, Gulfport has been missing a meaningful opportunity to repurchase additional shares at a discount,” Firefly wrote.
