Firefly Value Partners Sends Letter to Gulfport Energy Corporation Board of Directors
March 06 2019 - 9:00AM
Business Wire
Encouraged by Gulfport’s 2019 capital plan –
adopted after Firefly’s significant private and public engagement –
and expects its successful execution to create stockholder
value
Calls on Gulfport to – over the course of
2019 – urgently implement new capital and operational plan, better
align executive compensation with interests of all stockholders,
and refrain from equity issuances
Will continue to build on initial successful
engagement with Gulfport Board to advocate for best interests of
long-term stockholders – including taking steps to refresh the
Board should the Company fail to execute on key initiatives
Firefly Value Partners, LP (“Firefly” or “we”), which manages
funds that, together with affiliates, collectively beneficially own
8.1% of the outstanding common stock of Gulfport Energy (“Gulfport”
or the “Company”) (Nasdaq: GPOR), today issued a public letter to
the Gulfport Board of Directors (“the Board”).
The full text of the letter is below.
March 6, 2019
Board of DirectorsGulfport Energy Corporation3001 Quail Springs
ParkwayOklahoma City, OK 73134
Dear Members of the Board,
Firefly Value Partners, LP (“Firefly” or “we”) manages funds
that, together with affiliates, collectively beneficially own 8.1%
of the outstanding common stock of Gulfport Energy (“Gulfport” or
the “Company”).
As a long-term Gulfport investor, we are encouraged by the
Company’s 2019 capital plan, which effectively adopted the share
repurchase plan that we recommended in our extensive private
communications with the Company and our January 17th public letter
to the Board of Directors (the “Board”). We expect the successful
execution of the plan to create value for all stockholders, and we
look forward to the Company acting decisively to exploit the
market’s current misunderstanding of Gulfport’s intrinsic
value.
Despite this first step, Gulfport still has a lot of work to do
to regain investor trust and set the Company on a path to
maximizing value for stockholders. As we outlined in our January
17th letter to the Board, Gulfport has made several capital
allocation missteps, including issuing large amounts of equity five
times since 2013—each time at successively lower prices. Long-term
investors have endured the massive underperformance of Gulfport’s
shares—relative to both Gulfport’s peer group and the broader
market—over the last one, three, and five-year periods. This is
particularly frustrating given the Board’s low combined stock
ownership: less than 0.2% of the Company.
We continue to believe that the addition of meaningful
stockholder representation to the Board is the best way to ensure
alignment between the Board and stockholders. However, we do not
believe that a distracting proxy fight to accomplish that end is
the best course of action at this time. Rather, we think it is in
stockholders’ best interest to allow Gulfport’s new CEO the time
and focus to address the issues that contributed to Gulfport’s
underperformance.
We believe that in order to address the concerns of long-term
stockholders, Gulfport and its Board must take the following
actions in 2019:
- Implement the capital and
operational plan announced on January 17th, 2019, including
executing the $400M share buyback plan with urgency.
- Set short-term and long-term
executive compensation incentives that are more closely aligned
with the best interests of all stockholders.1
- Abstain from equity
issuances.
While Gulfport’s 2019 capital plan is an important step in the
right direction, one in a row is not enough. Given the success of
our initial engagement in helping the Board crystallize a
stockholder-friendly 2019 capital plan, we will continue to
advocate for long-term stockholders’ interests. If the Company does
not accomplish the three goals articulated above, we believe the
Board’s composition will need to change.
Sincerely,
Firefly Value Partners, LP
About Firefly Value Partners, LP
Founded in 2006, Firefly is an investment partnership focused on
fundamental primary research and business analysis. Firefly invests
with a long-term time horizon in a concentrated portfolio of deeply
undervalued companies.
_____________________________1 As late as 2017, Gulfport
included no compensation targets tied to per-share metrics. After
input from Firefly and other stockholders, Gulfport added some
per-share metrics in 2018’s short-term incentive program.
Short-term incentives still have room to improve, and long-term
incentives still need to be tied to stockholder-aligned
metrics.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190306005439/en/
Investors:John Ferguson / Joe MillsSaratoga Proxy
Consulting LLC212-257-1311jferguson@saratogaproxy.com /
jmills@saratogaproxy.comMedia:Dan Zacchei / Joe
GermaniSloane & Company212-486-9500dzacchei@sloanepr.com /
jgermani@sloanepr.com
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