UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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ý | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended March 31, 2019 OR |
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¨ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to |
Commission File Number 000-19514
Gulfport Energy Corporation
(Exact Name of Registrant As Specified in Its Charter)
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| | |
Delaware | | 73-1521290 |
(State or Other Jurisdiction of Incorporation or Organization) | | (IRS Employer Identification Number) |
3001 Quail Springs Parkway Oklahoma City, Oklahoma | | 73134 |
(Address of Principal Executive Offices) | | (Zip Code) |
(405) 252-4600
(Registrant Telephone Number, Including Area Code)
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Title of each class | | Name of each exchange which registered | | Ticker Symbol |
Common stock, par value $0.01 per share | | Nasdaq Global Select Market | | GPOR |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated filer ý Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
As of April 29, 2019, 159,317,360 shares of the registrant’s common stock were outstanding.
GULFPORT ENERGY CORPORATION
TABLE OF CONTENTS
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Item 4. | | |
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Item 2. | | |
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Item 3. | | |
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Item 5. | | |
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Item 6. | | |
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GULFPORT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited) |
| | | | | | | |
| March 31, 2019 | | December 31, 2018 |
| (In thousands, except share data) |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 17,996 |
| | $ | 52,297 |
|
Accounts receivable—oil and natural gas sales | 144,996 |
| | 210,200 |
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Accounts receivable—joint interest and other | 24,580 |
| | 22,497 |
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Prepaid expenses and other current assets | 12,560 |
| | 10,607 |
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Short-term derivative instruments | 17,958 |
| | 21,352 |
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Total current assets | 218,090 |
| | 316,953 |
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Property and equipment: | | | |
Oil and natural gas properties, full-cost accounting, $2,877,001 and $2,873,037 excluded from amortization in 2019 and 2018, respectively | 10,312,124 |
| | 10,026,836 |
|
Other property and equipment | 96,204 |
| | 92,667 |
|
Accumulated depletion, depreciation, amortization and impairment | (4,757,814 | ) | | (4,640,098 | ) |
Property and equipment, net | 5,650,514 |
| | 5,479,405 |
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Other assets: | | | |
Equity investments | 244,119 |
| | 236,121 |
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Inventories | 11,018 |
| | 4,754 |
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Operating lease assets | 29,795 |
| | — |
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Operating lease assets - related parties | 58,659 |
| | — |
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Other assets | 13,314 |
| | 13,803 |
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Total other assets | 356,905 |
| | 254,678 |
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Total assets | $ | 6,225,509 |
| | $ | 6,051,036 |
|
Liabilities and Stockholders’ Equity | | | |
Current liabilities: | | | |
Accounts payable and accrued liabilities | $ | 568,184 |
| | $ | 518,380 |
|
Short-term derivative instruments | 25,921 |
| | 20,401 |
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Current portion of operating lease liabilities | 27,983 |
| | — |
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Current portion of operating lease liabilities - related parties | 20,618 |
| | — |
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Current maturities of long-term debt | 656 |
| | 651 |
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Total current liabilities | 643,362 |
| | 539,432 |
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Long-term derivative instruments | 287 |
| | 13,992 |
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Asset retirement obligation—long-term | 82,900 |
| | 79,952 |
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Deferred tax liability | 3,127 |
| | 3,127 |
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Non-current operating lease liabilities | 1,812 |
| | — |
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Non-current operating lease liabilities - related parties | 38,041 |
| | — |
|
Long-term debt, net of current maturities | 2,087,714 |
| | 2,086,765 |
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Total liabilities | 2,857,243 |
| | 2,723,268 |
|
Commitments and contingencies (Note 8) |
| |
|
Preferred stock, $.01 par value; 5,000,000 authorized, 30,000 authorized as redeemable 12% cumulative preferred stock, Series A; 0 issued and outstanding | — |
| | — |
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Stockholders’ equity: | | | |
Common stock - $.01 par value, 200,000,000 authorized, 159,421,965 issued and outstanding at March 31, 2019 and 162,986,045 at December 31, 2018 | 1,594 |
| | 1,630 |
|
Paid-in capital | 4,202,023 |
| | 4,227,532 |
|
Accumulated other comprehensive loss | (52,225 | ) | | (56,026 | ) |
Accumulated deficit | (783,126 | ) | | (845,368 | ) |
Total stockholders’ equity | 3,368,266 |
| | 3,327,768 |
|
Total liabilities and stockholders’ equity | $ | 6,225,509 |
| | $ | 6,051,036 |
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See accompanying notes to consolidated financial statements.
GULFPORT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
| | | | | | | |
| Three months ended March 31, |
| 2019 | | 2018 |
| (In thousands, except share data) |
Revenues: | | | |
Natural gas sales | $ | 276,016 |
| | $ | 249,399 |
|
Oil and condensate sales | 32,482 |
| | 45,686 |
|
Natural gas liquid sales | 32,125 |
| | 46,836 |
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Net loss on natural gas, oil, and NGL derivatives | (20,045 | ) | | (16,529 | ) |
| 320,578 |
| | 325,392 |
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Costs and expenses: | | | |
Lease operating expenses | 19,807 |
| | 18,906 |
|
Production taxes | 7,921 |
| | 6,854 |
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Midstream gathering and processing expenses | 70,282 |
| | 64,193 |
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Depreciation, depletion and amortization | 118,433 |
| | 111,018 |
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General and administrative expenses | 11,558 |
| | 13,099 |
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Accretion expense | 1,067 |
| | 1,004 |
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| 229,068 |
| | 215,074 |
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INCOME FROM OPERATIONS | 91,510 |
| | 110,318 |
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OTHER (INCOME) EXPENSE: | | | |
Interest expense | 34,120 |
| | 33,965 |
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Interest income | (152 | ) | | (37 | ) |
Income from equity method investments, net | (4,273 | ) | | (13,536 | ) |
Other income | (427 | ) | | (95 | ) |
| 29,268 |
| | 20,297 |
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INCOME BEFORE INCOME TAXES | 62,242 |
| | 90,021 |
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INCOME TAX BENEFIT | — |
| | (69 | ) |
NET INCOME | $ | 62,242 |
| | $ | 90,090 |
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NET INCOME PER COMMON SHARE: | | | |
Basic | $ | 0.38 |
| | $ | 0.50 |
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Diluted | $ | 0.38 |
| | $ | 0.50 |
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Weighted average common shares outstanding—Basic | 162,823,997 |
| | 180,714,881 |
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Weighted average common shares outstanding—Diluted | 163,099,409 |
| | 180,802,301 |
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See accompanying notes to consolidated financial statements.
GULFPORT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) |
| | | | | | | |
| Three months ended March 31, |
| 2019 | | 2018 |
| (In thousands) |
Net income | $ | 62,242 |
| | $ | 90,090 |
|
Foreign currency translation adjustment | 3,801 |
| | (5,503 | ) |
Other comprehensive income (loss) | 3,801 |
| | (5,503 | ) |
Comprehensive income | $ | 66,043 |
| | $ | 84,587 |
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See accompanying notes to consolidated financial statements.
GULFPORT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
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Paid-in Capital | | Accumulated Other Comprehensive (Loss) Income | | Accumulated Deficit | | Total Stockholders’ Equity |
| Common Stock | | | | |
| Shares | | Amount | | | | |
| (In thousands, except share data) |
Balance at January 1, 2019 | 162,986,045 |
| | $ | 1,630 |
| | $ | 4,227,532 |
| | $ | (56,026 | ) | | $ | (845,368 | ) | | $ | 3,327,768 |
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Net Income | — |
| | — |
| | — |
| | — |
| | 62,242 |
| | 62,242 |
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Other Comprehensive Income | — |
| | — |
| | — |
| | 3,801 |
| | — |
| | 3,801 |
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Stock-based Compensation | — |
| | — |
| | 2,785 |
| | — |
| | — |
| | 2,785 |
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Shares Repurchased | (3,618,634 | ) | | (37 | ) | | (28,293 | ) | | — |
| | — |
| | (28,330 | ) |
Issuance of Restricted Stock | 54,554 |
| | 1 |
| | (1 | ) | | — |
| | — |
| | — |
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Balance at March 31, 2019 | 159,421,965 |
| | $ | 1,594 |
| | $ | 4,202,023 |
| | $ | (52,225 | ) | | $ | (783,126 | ) | | $ | 3,368,266 |
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Balance at January 1, 2018 | 183,105,910 |
| | $ | 1,831 |
| | $ | 4,416,250 |
| | $ | (40,539 | ) | | $ | (1,275,928 | ) | | $ | 3,101,614 |
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Net Income | — |
| | — |
| | — |
| | — |
| | 90,090 |
| | 90,090 |
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Other Comprehensive Loss | — |
| | — |
| | — |
| | (5,503 | ) | | — |
| | (5,503 | ) |
Stock-based Compensation | — |
| | — |
| | 2,685 |
| | — |
| | — |
| | 2,685 |
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Shares Repurchased | (9,692,356 | ) | | (97 | ) | | (99,900 | ) | | — |
| | — |
| | (99,997 | ) |
Issuance of Restricted Stock | 109,933 |
| | 1 |
| | (1 | ) | | — |
| | — |
| | — |
|
Balance at March 31, 2018 | 173,523,487 |
| | $ | 1,735 |
| | $ | 4,319,034 |
| | $ | (46,042 | ) | | $ | (1,185,838 | ) | | $ | 3,088,889 |
|
See accompanying notes to consolidated financial statements.
GULFPORT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) |
| | | | | | | |
| Three months ended March 31, |
| 2019 | | 2018 |
| (In thousands) |
Cash flows from operating activities: | | | |
Net income | $ | 62,242 |
| | $ | 90,090 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Accretion expense | 1,067 |
| | 1,004 |
|
Depletion, depreciation and amortization | 118,433 |
| | 111,018 |
|
Stock-based compensation expense | 1,671 |
| | 1,611 |
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Income from equity investments | (4,132 | ) | | (13,495 | ) |
Change in fair value of derivative instruments | (4,791 | ) | | 25,403 |
|
Deferred income tax benefit | — |
| | (69 | ) |
Amortization of loan costs | 1,585 |
| | 1,488 |
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Gain on sale of equity investments and other assets | (43 | ) | | — |
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Distributions from equity method investments | 1,228 |
| | — |
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Changes in operating assets and liabilities: | | | |
Decrease in accounts receivable—oil and natural gas sales | 65,204 |
| | 7,916 |
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Increase in accounts receivable—joint interest and other | (2,083 | ) | | (23,366 | ) |
Increase in prepaid expenses and other current assets | (1,953 | ) | | (2,652 | ) |
Decrease in other assets | 42 |
| | 14 |
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(Decrease) increase in accounts payable, accrued liabilities and other | (53,339 | ) | | 27,486 |
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Settlement of asset retirement obligation | (71 | ) | | (99 | ) |
Net cash provided by operating activities | 185,060 |
| | 226,349 |
|
Cash flows from investing activities: | | | |
Additions to other property and equipment | (3,848 | ) | | (3,329 | ) |
Additions to oil and natural gas properties | (186,686 | ) | | (302,799 | ) |
Proceeds from sale of oil and natural gas properties | 52 |
| | — |
|
Proceeds from sale of other property and equipment | 56 |
| | 76 |
|
Contributions to equity method investments | (432 | ) | | (1,569 | ) |
Distributions from equity method investments | — |
| | 750 |
|
Net cash used in investing activities | (190,858 | ) | | (306,871 | ) |
Cash flows from financing activities: | | | |
Principal payments on borrowings | (150,151 | ) | | (145 | ) |
Borrowings on line of credit | 150,000 |
| | 200,000 |
|
Debt issuance costs and loan commitment fees | (22 | ) | | (280 | ) |
Payments on repurchase of stock | (28,330 | ) | | (99,997 | ) |
Net cash (used in) provided by financing activities | (28,503 | ) | | 99,578 |
|
Net (decrease) increase in cash, cash equivalents and restricted cash | (34,301 | ) | | 19,056 |
|
Cash, cash equivalents and restricted cash at beginning of period | 52,297 |
| | 99,557 |
|
Cash, cash equivalents and restricted cash at end of period | $ | 17,996 |
| | $ | 118,613 |
|
Supplemental disclosure of cash flow information: | | | |
Interest payments | $ | 15,266 |
| | $ | 7,944 |
|
Income tax receipts | $ | (1,794 | ) | | $ | — |
|
Supplemental disclosure of non-cash transactions: | | | |
Capitalized stock-based compensation | $ | 1,114 |
| | $ | 1,074 |
|
Asset retirement obligation capitalized | $ | 1,952 |
| | $ | 382 |
|
Interest capitalized | $ | 766 |
| | $ | 843 |
|
Foreign currency translation gain (loss) on equity method investments | $ | 3,801 |
| | $ | (5,503 | ) |
See accompanying notes to consolidated financial statements.
GULFPORT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
These consolidated financial statements have been prepared by Gulfport Energy Corporation (the “Company” or “Gulfport”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods, on a basis consistent with the annual audited consolidated financial statements. All such adjustments are of a normal recurring nature. Certain information, accounting policies, and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles ("GAAP") have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the summary of significant accounting policies and notes thereto included in the Company’s most recent annual report on Form 10-K. Results for the three months ended March 31, 2019 are not necessarily indicative of the results expected for the full year.
The major categories of property and equipment and related accumulated depletion, depreciation, amortization and impairment as of March 31, 2019 and December 31, 2018 are as follows:
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| | | | | | | |
| March 31, 2019 | | December 31, 2018 |
| (In thousands) |
Oil and natural gas properties | $ | 10,312,124 |
| | $ | 10,026,836 |
|
Office furniture and fixtures | 46,118 |
| | 42,581 |
|
Building | 44,565 |
| | 44,565 |
|
Land | 5,521 |
| | 5,521 |
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Total property and equipment | 10,408,328 |
| | 10,119,503 |
|
Accumulated depletion, depreciation, amortization and impairment | (4,757,814 | ) | | (4,640,098 | ) |
Property and equipment, net | $ | 5,650,514 |
| | $ | 5,479,405 |
|
Under the full cost method of accounting, the Company is required to perform a ceiling test each quarter. The test determines a limit, or ceiling, on the book value of the oil and natural gas properties. At March 31, 2019, the calculated ceiling was greater than the net book value of the Company’s oil and natural gas properties, thus no ceiling test impairment was required for the three months ended March 31, 2019. No impairment was required for oil and natural gas properties for the three months ended March 31, 2018.
Included in oil and natural gas properties at March 31, 2019 is the cumulative capitalization of $211.0 million in general and administrative costs incurred and capitalized to the full cost pool. General and administrative costs capitalized to the full cost pool represent management’s estimate of costs incurred directly related to exploration and development activities such as geological and other administrative costs associated with overseeing the exploration and development activities. All general and administrative costs not directly associated with exploration and development activities were charged to expense as they were incurred. Capitalized general and administrative costs were approximately $7.7 million and $8.8 million for the three months ended March 31, 2019 and 2018, respectively.
The average depletion rate per Mcfe, which is a function of capitalized costs, future development costs and the related underlying reserves in the periods presented, was $1.02 and $0.93 per Mcfe for the three months ended March 31, 2019 and 2018, respectively.
The following table summarizes the Company’s non-producing properties excluded from amortization by area at March 31, 2019: |
| | | |
| March 31, 2019 |
| (In thousands) |
Utica | $ | 1,493,746 |
|
MidContinent | 1,382,118 |
|
Niobrara | 451 |
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Southern Louisiana | 586 |
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Bakken | 100 |
|
| $ | 2,877,001 |
|
At December 31, 2018, approximately $2.9 billion of non-producing leasehold costs was not subject to amortization.
The Company evaluates the costs excluded from its amortization calculation at least annually. Subject to industry conditions and the level of the Company’s activities, the inclusion of most of the above referenced costs into the Company’s amortization calculation typically occurs within three to five years. However, the majority of the Company’s non-producing leases in the Utica Shale have five-year extension terms which could extend this time frame beyond five years.
A reconciliation of the Company’s asset retirement obligation for the three months ended March 31, 2019 and 2018 is as follows: |
| | | | | | | |
| March 31, 2019 | | March 31, 2018 |
| (In thousands) |
Asset retirement obligation, beginning of period | $ | 79,952 |
| | $ | 75,100 |
|
Liabilities incurred | 969 |
| | 329 |
|
Liabilities settled | (71 | ) | | (99 | ) |
Accretion expense | 1,067 |
| | 1,004 |
|
Revisions in estimated cash flows | 983 |
| | 53 |
|
Asset retirement obligation as of end of period | 82,900 |
| | 76,387 |
|
Less current portion | — |
| | 120 |
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Asset retirement obligation, long-term | $ | 82,900 |
| | $ | 76,267 |
|
Investments accounted for by the equity method consist of the following as of March 31, 2019 and December 31, 2018:
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| | | | | | | | | | | | | | | | | | |
| | | Carrying value | | (Income) loss from equity method investments
|
| Approximate ownership % | | March 31, 2019 | | December 31, 2018 | | Three months ended March 31, |
| | | | 2019 | | 2018 |
| | | (In thousands) |
Investment in Tatex Thailand II, LLC | 23.5 | % | | $ | — |
| | $ | — |
| | $ | (140 | ) | | $ | (41 | ) |
Investment in Grizzly Oil Sands ULC | 24.9999 | % | | 48,004 |
| | 44,259 |
| | 393 |
| | 330 |
|
Investment in Timber Wolf Terminals LLC(1) | — | % | | — |
| | — |
| | — |
| | 2 |
|
Investment in Windsor Midstream LLC | 22.5 | % | | 39 |
| | 39 |
| | — |
| | — |
|
Investment in Mammoth Energy Services, Inc. | 21.9 | % | | 196,076 |
| | 191,823 |
| | (4,526 | ) | | (13,470 | ) |
Investment in Strike Force Midstream LLC(2) | — | % | | — |
| | — |
| | — |
| | (357 | ) |
| | | $ | 244,119 |
|
| $ | 236,121 |
|
| $ | (4,273 | ) | | $ | (13,536 | ) |
|
| | | |
(1) | On June 5, 2018, the Company received its final distribution from Timber Wolf Terminals LLC ("Timber Wolf"). See below under Timber Wolf Terminals LLC for information regarding this distribution. |
(2) | On May 1, 2018, the Company sold its 25% interest in Strike Force Midstream LLC ("Strike Force") to EQT Midstream Partners, LP. See below under under Strike Force Midstream LLC for information regarding this transaction. |
The tables below summarize financial information for the Company’s equity investments as of March 31, 2019 and December 31, 2018.
Summarized balance sheet information: |
| | | | | | | |
| March 31, 2019 | | December 31, 2018 |
| |
| (In thousands) |
Current assets | $ | 516,169 |
| | $ | 471,733 |
|
Noncurrent assets | $ | 1,363,785 |
| | $ | 1,302,488 |
|
Current liabilities | $ | 188,896 |
| | $ | 239,975 |
|
Noncurrent liabilities | $ | 215,093 |
| | $ | 94,575 |
|
Summarized results of operations: |
| | | | | | | |
| Three months ended March 31, |
| 2019 | | 2018 |
| (In thousands) |
Gross revenue | $ | 264,844 |
| | $ | 511,133 |
|
Net income | $ | 24,756 |
| | $ | 64,452 |
|
Tatex Thailand II, LLC
The Company has an indirect ownership interest in Tatex Thailand II, LLC (“Tatex II”). Tatex II holds an 8.5% interest in APICO, LLC (“APICO”), an international oil and gas exploration company. APICO has a reserve base located in Southeast Asia through its ownership of concessions covering approximately 108,000 acres which includes the Phu Horm Field. The Company received $0.1 million and an immaterial amount in distributions from Tatex II during the three months ended March 31, 2019 and 2018, respectively.
Grizzly Oil Sands ULC
The Company, through its wholly-owned subsidiary Grizzly Holdings Inc. (“Grizzly Holdings”), owns an interest in Grizzly Oil Sands ULC (“Grizzly”), a Canadian unlimited liability company. The remaining interest in Grizzly is owned by Grizzly Oil Sands Inc. (“Oil Sands”). As of March 31, 2019, Grizzly had approximately 830,000 acres under lease in the Athabasca, Peace River and Cold Lake oil sands regions of Alberta, Canada. The Company reviewed its investment in Grizzly for impairment at March 31, 2019 and 2018 and determined no impairment was required. If commodity prices decline in the future however, impairment of the investment in Grizzly may be necessary. During the three months ended March 31, 2019, Gulfport paid $0.4 million in cash calls. Grizzly’s functional currency is the Canadian dollar. The Company’s investment in Grizzly was increased by a $3.7 million foreign currency translation gain and decreased by a $5.3 million foreign currency translation loss for the three months ended March 31, 2019 and 2018, respectively.
Timber Wolf Terminals LLC
During 2012, the Company invested in Timber Wolf. Timber Wolf was formed to operate a crude/condensate terminal and a sand transloading facility in Ohio. During the three months ended March 31, 2018, the Company paid no cash calls to Timber Wolf. Timber Wolf was dissolved in 2018.
Windsor Midstream LLC
At March 31, 2019, the Company held a 22.5% interest in Windsor Midstream LLC (“Midstream”), an entity controlled and managed by an unrelated third party. The Company received no distributions from Midstream during the three months ended March 31, 2019 and 2018.
Mammoth Energy Services, Inc.
At March 31, 2019, the Company owned 9,831,770 shares, or approximately 21.9%, of the outstanding common stock of Mammoth Energy Services, Inc. ("Mammoth Energy"). The Company’s investment in Mammoth Energy was increased by a $0.1 million foreign currency translation gain and decreased by a $0.2 million foreign currency translation loss resulting from Mammoth Energy’s foreign subsidiary for the three months ended March 31, 2019 and 2018, respectively. During the three months ended March 31, 2019, Gulfport received distributions of $1.2 million from Mammoth Energy as a result of a $0.125 per share dividend in February 2019. The approximate fair value of the Company's investment in Mammoth Energy's common stock at March 31, 2019 was $163.7 million based on the quoted market price of Mammoth Energy's common stock. The (income) loss from equity method investments presented in the table above reflects any intercompany profit eliminations.
Strike Force Midstream LLC
In February 2016, the Company, through its wholly-owned subsidiary Gulfport Midstream Holdings, LLC (“Midstream Holdings”), entered into an agreement with Rice Midstream Holdings LLC (“Rice”), then a subsidiary of Rice Energy Inc., to develop natural gas gathering assets in eastern Belmont County and Monroe County, Ohio through Strike Force. In 2017, Rice was acquired by EQT Corporation ("EQT"). The Company owned a 25% interest in Strike Force, which was sold to EQT Midstream Partners, LP in May 2018. The (income) loss from equity method investments presented in the table above reflects any intercompany profit eliminations. During the three months ended March 31, 2018, Gulfport received distributions of $0.8 million from Strike Force.
| |
3. | VARIABLE INTEREST ENTITIES |
As of March 31, 2019, the Company held a variable interest in Midstream, a variable interest entity ("VIE"), but was not the primary beneficiary. This entity has governing provisions that are the functional equivalent of a limited partnership and is considered a VIE because the limited partners or non-managing members lack substantive kick-out or participating rights which causes the equity owners, as a group, to lack a controlling financial interest. The Company is a limited partner or non-managing member in this VIE and is not the primary beneficiary because it does not have a controlling financial interest. The general partner or managing member has power to direct the activities that most significantly impact the VIE's economic performance.
The Company accounts for its investment in VIEs following the equity method of accounting. The carrying amounts of the Company’s equity investments are classified as other non-current assets on the accompanying consolidated balance sheets. The Company’s maximum exposure to loss as a result of its involvement with VIEs is based on the Company’s capital contributions and the economic performance of the VIEs, and is equal to the carrying value of the Company’s investments which is the maximum loss the Company could be required to record in the consolidated statements of operations. See Note 2 for further discussion of this entity, including the carrying amount of the investment.
Long-term debt consisted of the following items as of March 31, 2019 and December 31, 2018: |
| | | | | | | |
| March 31, 2019 | | December 31, 2018 |
| (In thousands) |
Revolving credit agreement (1) | $ | 45,000 |
| | $ | 45,000 |
|
6.625% senior unsecured notes due 2023 | 350,000 |
| | 350,000 |
|
6.000% senior unsecured notes due 2024 | 650,000 |
| | 650,000 |
|
6.375% senior unsecured notes due 2025 | 600,000 |
| | 600,000 |
|
6.375% senior unsecured notes due 2026 | 450,000 |
| | 450,000 |
|
Net unamortized debt issuance costs (2) | (29,628 | ) | | (30,733 | ) |
Construction loan | 22,998 |
| | 23,149 |
|
Less: current maturities of long term debt | (656 | ) | | (651 | ) |
Debt reflected as long term | $ | 2,087,714 |
| | $ | 2,086,765 |
|
The Company capitalized approximately $0.8 million in interest expense to undeveloped oil and natural gas properties during each of the three months ended March 31, 2019 and 2018.
(1) The Company has entered into a senior secured revolving credit facility, as amended, with The Bank of Nova Scotia, as the lead arranger and administrative agent and certain lenders from time to time party thereto.
As of March 31, 2019, $45.0 million was outstanding under the revolving credit facility and the total availability for future borrowings under this facility, after giving effect to an aggregate of $271.1 million of letters of credit, was $683.9 million. The Company’s wholly-owned subsidiaries have guaranteed the obligations of the Company under the revolving credit facility.
At March 31, 2019, amounts borrowed under the revolving credit facility bore interest at a weighted average rate of 3.99%.
The Company was in compliance with its financial covenants under the revolving credit facility at March 31, 2019.
(2) Loan issuance costs related to the 6.625% Senior Notes due 2023 (the "2023 Notes"), the 6.000% Senior Notes due 2024 (the "2024 Notes"), the 6.375% Senior Notes due 2025 (the "2025 Notes") and the 6.375% Senior Notes due 2026 (the "2026 Notes") (collectively the “Notes”) have been presented as a reduction to the Notes. At March 31, 2019, total unamortized debt issuance costs were $4.2 million for the 2023 Notes, $8.4 million for the 2024 Notes, $12.1 million for the 2025 Notes and $4.9 million for the 2026 Notes. In addition, loan commitment fee costs for the Company's construction loan agreement were $0.1 million at March 31, 2019.
| |
5. | COMMON STOCK AND CHANGES IN CAPITALIZATION |
Stock Repurchase Program
In January 2018, the board of directors of the Company approved a stock repurchase program to acquire up to $100 million of the Company's outstanding stock during 2018. In May 2018, the Company's board of directors authorized the expansion of its stock repurchase program, authorizing the Company to acquire up to an additional $100 million of its outstanding common stock during 2018 for a total of up to $200 million. The repurchase program did not require the Company to acquire any specific number of shares. This repurchase program was authorized to extend through December 31, 2018 and was fully executed.
In January 2019, the board of directors of the Company approved a new stock repurchase program to acquire up to $400 million of the Company's outstanding common stock within a 24 month period. Purchases under the repurchase program may be made from time to time in open market or privately negotiated transactions, and are subject to market conditions, applicable legal requirements, contractual obligations and other factors. The repurchase program does not require the Company to acquire any specific number of shares. This repurchase program is authorized to extend through December 31, 2020 and may be suspended from time to time, modified, extended or discontinued by the board of directors at any time. The Company repurchased 3.6 million shares for a cost of approximately $28.2 million during the three months ended March 31, 2019. Additionally, during the three months ended March 31, 2019, the Company repurchased an immaterial number of shares for a
cost of approximately $0.1 million to satisfy tax withholding requirements incurred upon the vesting of restricted stock. All repurchased shares have been canceled and returned to the status of authorized but unissued shares.
| |
6. | STOCK-BASED COMPENSATION |
The Company has granted restricted stock units to employees and directors pursuant to the 2013 Restated Incentive Stock Plan ("2013 Plan") as discussed below. During the three months ended March 31, 2019 and 2018, the Company’s stock-based compensation expense, which is included in general and administrative expenses in the accompanying consolidated statement of operations, was $2.8 million and $2.7 million, respectively, of which the Company capitalized $1.1 million during both the three months ended March 31, 2019 and 2018, relating to its exploration and development efforts.
The following table summarizes restricted stock unit activity for the three months ended March 31, 2019:
|
| | | | | | | | | | | | | | |
| Number of Unvested Restricted Stock Units | | Weighted Average Grant Date Fair Value | | Number of Unvested Performance Vesting Restricted Stock Units | | Weighted Average Grant Date Fair Value |
Unvested shares as of January 1, 2019 | 1,535,811 |
| | $ | 11.57 |
| | $ | — |
| | $ | — |
|
Granted | 470,603 |
| | 7.97 |
| | 228,659 |
| | 9.66 |
|
Vested | (54,554 | ) | | 10.63 |
| | — |
| | — |
|
Forfeited | (5,119 | ) | | 12.61 |
| | — |
| | — |
|
Unvested shares as of March 31, 2019 | 1,946,741 |
| | $ | 10.73 |
| | 228,659 |
| | $ | 9.66 |
|
Restricted Stock Units
Restricted stock units awarded under the 2013 Plan generally vest over a period of one year in the case of directors and three years in the case of employees and vesting is dependent upon the recipient meeting applicable service requirements. Stock-based compensation expense is expensed ratably over the service period. The grant date fair value of restricted stock units represents the closing market price of the Company's common stock on the date of grant. Unrecognized compensation expense as of March 31, 2019 related to restricted stock units was $14.8 million. The expense is expected to be recognized over a weighted average period of 2.09 years.
Performance Vesting Restricted Stock Units
During the three months ended March 31, 2019, the Company awarded performance vesting units to its Chief Executive Officer under the 2013 Plan. The number of shares of common stock that will ultimately be issued will be determined by comparing the Company's total stockholder return relative to the total stockholder return of a predetermined group of peer companies at the end of the performance period. The performance period is 36 months. The grant date fair value was determined using the Monte Carlo simulation method and is being expensed ratably over the performance period. Expected volatilities utilized in the model were estimated using a historical period consistent with the remaining performance period of approximately three years. The risk-free interest rate was based on the U.S. Treasury rate for a term commensurate with the expected life of the grant. The Company assumed a risk-free interest rate of 2.42% and a range of expected volatilities of 30.5% to 72.6% to estimate the fair value of performance vesting units granted during the three months ended March 31, 2019. Unrecognized compensation expense as of March 31, 2019 related to performance vesting restricted shares was $2.2 million. The expense is expected to be recognized over a weighted average period of 2.76 years.
Reconciliations of the components of basic and diluted net income per common share are presented in the tables below: |
| | | | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, |
| 2019 | | 2018 |
| Income | | Shares | | Per Share | | Income | | Shares | | Per Share |
| (In thousands, except share data) |
Basic: | | | | | | | | | | | |
Net income | $ | 62,242 |
| | 162,823,997 |
| | $ | 0.38 |
| | $ | 90,090 |
| | 180,714,881 |
| | $ | 0.50 |
|
Effect of dilutive securities: |
| |
| |
| |
| |
| |
|
Stock options and awards | — |
| | 275,412 |
| |
| | — |
| | 87,420 |
| |
|
Diluted: |
| |
| |
| |
| |
| |
|
Net income | $ | 62,242 |
| | 163,099,409 |
| | $ | 0.38 |
| | $ | 90,090 |
| | 180,802,301 |
| | $ | 0.50 |
|
| |
8. | COMMITMENTS AND CONTINGENCIES |
Plugging and Abandonment Funds
In connection with the Company’s acquisition in 1997 of the remaining 50% interest in its West Cote Blanche Bay ("WCBB") properties, the Company assumed the seller’s (Chevron) obligation to contribute approximately $18,000 per month through March 2004 to a plugging and abandonment trust and the obligation to plug a minimum of 20 wells per year for 20 years commencing March 11, 1997. Beginning in 2009, the Company could access the trust for use in plugging and abandonment charges associated with the property, although it has not yet done so. As of March 31, 2019, the plugging and abandonment trust totaled approximately $3.1 million. At March 31, 2019, the Company had plugged 555 wells at WCBB since it began its plugging program in 1997, which management believes fulfills its minimum plugging obligation.
Firm Transportation and Sales Commitments
The table below presents the firm sales commitments by year:
|
| | | |
| | (MMBtu per day) |
Remaining 2019 | | 469,000 |
|
2020 | | 257,000 |
|
2021 | | 169,000 |
|
2022 | | 61,000 |
|
2023 | | 42,000 |
|
Thereafter | | 25,000 |
|
Total | | 1,023,000 |
|
The table below presents the firm transportation commitments by year:
|
| | | | |
| | (In thousands) |
Remaining 2019 | | $ | 191,493 |
|
2020 | | 287,619 |
|
2021 | | 286,657 |
|
2022 | | 286,657 |
|
2023 | | 281,855 |
|
Thereafter | | 2,394,486 |
|
Total | | $ | 3,728,767 |
|
Other Commitments
Effective October 1, 2014, the Company entered into a Sand Supply Agreement with Muskie Proppant LLC (“Muskie”), a subsidiary of Mammoth Energy, a related party. Effective August 3, 2018, the Company extended the agreement through December 31, 2021. Pursuant to this agreement, as amended, the Company has agreed to purchase annual and monthly amounts of proppant sand subject to exceptions specified in the agreement at agreed pricing plus agreed costs and expenses. Failure by either Muskie or the Company to deliver or accept the minimum monthly amount results in damages calculated per ton based on the difference between the monthly obligation amount and the amount actually delivered or accepted, as applicable. The Company incurred $0.3 million and $0.9 million in non-utilization fees under this agreement during the three months ended March 31, 2019 and 2018, respectively.
Future minimum commitments under this agreement at March 31, 2019 are as follows:
|
| | | |
| (In thousands) |
Remaining 2019 | $ | 18,000 |
|
2020 | 24,000 |
|
2021 | 24,000 |
|
Total | $ | 66,000 |
|
Litigation
In two separate complaints, one filed by the State of Louisiana and the Parish of Cameron in the 38th Judicial District Court for the Parish of Cameron on February 9, 2016 and the other filed by the State of Louisiana and the District Attorney for the 15th Judicial District of the State of Louisiana in the 15th Judicial District Court for the Parish of Vermilion on July 29, 2016, the Company was named as a defendant, among 26 oil and gas companies, in the Cameron Parish complaint and among more than 40 oil and gas companies in the Vermilion Parish complaint, or the Complaints. The Complaints were filed under the State and Local Coastal Resources Management Act of 1978, as amended, and the rules, regulations, orders and ordinances adopted thereunder, which the Company referred to collectively as the CZM Laws, and allege that certain of the defendants’ oil and gas exploration, production and transportation operations associated with the development of the East Hackberry and West Hackberry oil and gas fields, in the case of the Cameron Parish complaint, and the Tigre Lagoon and Lac Blanc oil and gas fields, in the case of the Vermilion Parish complaint, were conducted in violation of the CZM Laws. The Complaints allege that such activities caused substantial damage to land and waterbodies located in the coastal zone of the relevant Parish, including due to defendants’ design, construction and use of waste pits and the alleged failure to properly close the waste pits and to clear, re-vegetate, detoxify and return the property affected to its original condition, as well as the defendants’ alleged discharge of waste into the coastal zone. The Complaints also allege that the defendants’ oil and gas activities have resulted in the dredging of numerous canals, which had a direct and significant impact on the state coastal waters within the relevant Parish and that the defendants, among other things, failed to design, construct and maintain these canals using the best practical techniques to prevent bank slumping, erosion and saltwater intrusion and to minimize the potential for inland movement of storm-generated surges, which activities allegedly have resulted in the erosion of marshes and the degradation of terrestrial and aquatic life therein. The Complaints also allege that the defendants failed to re-vegetate, refill, clean, detoxify and otherwise restore these canals to their original condition. In these two petitions, the plaintiffs seek damages and other appropriate relief under the CZM Laws, including the payment of costs necessary to clear, re-vegetate, detoxify and otherwise restore the affected coastal zone of the relevant Parish to its original condition, actual restoration of such coastal zone to its original condition, and the payment of reasonable attorney fees and legal expenses and pre-judgment and post judgment interest.
The Company was served with the Cameron complaint in early May 2016 and with the Vermilion complaint in early September 2016. The Louisiana Attorney General and the Louisiana Department of Natural Resources intervened in both the Cameron Parish suit and the Vermilion Parish suit. Shortly after the Complaints were filed, certain defendants removed the cases to the United States District Court for the Western District of Louisiana. In both cases, the plaintiffs filed motions to remand the lawsuits to state court, which were ultimately granted by the district courts. However, on May 23, 2018, a group of defendants again removed the Cameron Parish and Vermilion Parish lawsuits to federal court. In response, the plaintiffs again filed motions to remand the cases to state court. The removing defendants have opposed plaintiffs’ motions to remand. The motions to remand remain pending, and further action in the cases will be stayed until the courts rule on the motions to remand. Also, shortly after the May 23, 2018 removal, the removing defendants filed motions with the United States Judicial Panel on Multidistrict Litigation (the “MDL Panel”) requesting that the Cameron Parish and Vermilion Parish lawsuits be consolidated with 40 similar lawsuits so that pre-trial proceedings in the cases could be coordinated. The MDL Panel denied the motion to consolidate the lawsuits. Due to the procedural posture of lawsuits, the cases are still in their early stages and the parties have conducted very little discovery. As a result, the Company has not had the opportunity to evaluate the applicability of the allegations made in plaintiffs' complaints to the Company's operations and management cannot determine the amount of loss, if any, that may result.
In addition, due to the nature of the Company’s business, it is, from time to time, involved in routine litigation or subject to disputes or claims related to its business activities, including workers’ compensation claims and employment related disputes. In the opinion of the Company’s management, none of the pending litigation, disputes or claims against the Company, if decided adversely, will have a material adverse effect on its financial condition, cash flows or results of operations.
Natural Gas, Oil and Natural Gas Liquids Derivative Instruments
The Company seeks to reduce its exposure to unfavorable changes in natural gas, oil and natural gas liquids ("NGLs") prices, which are subject to significant and often volatile fluctuation, by entering into over-the-counter fixed price swaps, basis swaps and various types of option contracts. These contracts allow the Company to predict with greater certainty the effective natural gas, oil and NGLs prices to be received for hedged production and benefit operating cash flows and earnings when market prices are less than the fixed prices provided in the contracts. However, the Company will not benefit from market prices that are higher than the fixed prices in the contracts for hedged production.
Fixed price swaps are settled monthly based on differences between the fixed price specified in the contract and the referenced settlement price. When the referenced settlement price is less than the price specified in the contract, the Company receives an amount from the counterparty based on the price difference multiplied by the volume. Similarly, when the referenced settlement price exceeds the price specified in the contract, the Company pays the counterparty an amount based on the price difference multiplied by the volume. The prices contained in these fixed price swaps are based on the NYMEX Henry Hub for natural gas, the NYMEX West Texas Intermediate for oil and Mont Belvieu for propane, pentane and ethane. Below is a summary of the Company’s open fixed price swap positions as of March 31, 2019.
|
| | | | | | | |
| Location | Daily Volume (MMBtu/day) | | Weighted
Average Price |
Remaining 2019 | NYMEX Henry Hub | 1,314,000 |
| | $ | 2.82 |
|
2020 | NYMEX Henry Hub | 204,000 |
| | $ | 2.77 |
|
|
| | | | | | | |
| Location | Daily Volume
(Bbls/day) | | Weighted
Average Price |
Remaining 2019 | NYMEX WTI | 2,000 |
| | $ | 59.44 |
|
|
| | | | | | | |
| Location | Daily Volume
(Bbls/day) | | Weighted
Average Price |
Remaining 2019 | Mont Belvieu C2 | 1,000 |
| | $ | 18.48 |
|
Remaining 2019 | Mont Belvieu C3 | 4,000 |
| | $ | 29.02 |
|
Remaining 2019 | Mont Belvieu C5 | 500 |
| | $ | 54.08 |
|
The Company sold call options and used the associated premiums to enhance the fixed price for a portion of the fixed price natural gas swaps listed above. Each short call option has an established ceiling price. When the referenced settlement price is above the price ceiling established by these short call options, the Company pays its counterparty an amount equal to the difference between the referenced settlement price and the price ceiling multiplied by the hedged contract volumes.
|
| | | | | | | |
| Location | Daily Volume (MMBtu/day) | | Weighted Average Price |
April 2019 - December 2019 | NYMEX Henry Hub | 30,000 |
| | $ | 3.10 |
|
For a portion of the natural gas fixed price swaps listed above, the counterparty had the option to extend the original terms an additional twelve months for the period January 2019 through December 2019. In December 2018, the counterparties chose to exercise all natural gas fixed price swaps, resulting in an additional 100,000 MMBtu per day at a weighted average price of $3.05 per MMBtu, which is included in the natural gas fixed price swaps listed above.
In addition, the Company entered into natural gas basis swap positions. As of March 31, 2019, the Company had the following natural gas basis swap positions open: |
| | | | | | | | |
| Gulfport Pays | Gulfport Receives | Daily Volume (MMBtu/day) | | Weighted Average Fixed Spread |
Remaining 2019 | Transco Zone 4 | NYMEX Plus Fixed Spread | 60,000 |
| | $ | (0.05 | ) |
2020 | Transco Zone 4 | NYMEX Plus Fixed Spread | 60,000 |
| | $ | (0.05 | ) |
2020 | Fixed Spread | ONEOK Minus NYMEX | 10,000 |
| | $ | (0.54 | ) |
Balance Sheet Presentation
The Company reports the fair value of derivative instruments on the consolidated balance sheets as derivative instruments under current assets, noncurrent assets, current liabilities and noncurrent liabilities on a gross basis. The Company determines the current and noncurrent classification based on the timing of expected future cash flows of individual trades. The following table presents the fair value of the Company’s derivative instruments on a gross basis at March 31, 2019 and December 31, 2018:
|
| | | | | | | |
| March 31, 2019 | | December 31, 2018 |
| (In thousands) |
Short-term derivative instruments - asset | $ | 17,958 |
| | $ | 21,352 |
|
Long-term derivative instruments - asset | $ | — |
| | $ | — |
|
Short-term derivative instruments - liability | $ | 25,921 |
| | $ | 20,401 |
|
Long-term derivative instruments - liability | $ | 287 |
| | $ | 13,992 |
|
Gains and Losses
The following table presents the gain and loss recognized in net loss on natural gas, oil and NGL derivatives in the accompanying consolidated statements of operations for the three months ended March 31, 2019 and 2018. |
| | | | | | | |
| Net (loss) gain on derivative instruments |
| Three months ended March 31, |
| 2019 | | 2018 |
| (In thousands) |
Natural gas derivatives | $ | (16,431 | ) | | $ | (9,696 | ) |
Oil derivatives | (454 | ) | | (9,147 | ) |
Natural gas liquids derivatives | (3,160 | ) | | 2,314 |
|
Total | $ | (20,045 | ) | | $ | (16,529 | ) |
Offsetting of derivative assets and liabilities
As noted above, the Company records the fair value of derivative instruments on a gross basis. The following table presents the gross amounts of recognized derivative assets and liabilities in the consolidated balance sheets and the amounts that are subject to offsetting under master netting arrangements with counterparties, all at fair value.
|
| | | | | | | | | | | |
| As of March 31, 2019 |
| Gross Assets (Liabilities) | | Gross Amounts | | |
| Presented in the | | Subject to Master | | Net |
| Consolidated Balance Sheets | | Netting Agreements | | Amount |
| (In thousands) |
Derivative assets | $ | 17,958 |
| | $ | (15,899 | ) | | $ | 2,059 |
|
Derivative liabilities | $ | (26,208 | ) | | $ | 15,899 |
| | $ | (10,309 | ) |
|
| | | | | | | | | | | |
| As of December 31, 2018 |
| Gross Assets (Liabilities) | | Gross Amounts | | |
| Presented in the | | Subject to Master | | Net |
| Consolidated Balance Sheets | | Netting Agreements | | Amount |
| (In thousands) |
Derivative assets | $ | 21,352 |
| | $ | (19,289 | ) | | $ | 2,063 |
|
Derivative liabilities | $ | (34,393 | ) | | $ | 19,289 |
| | $ | (15,104 | ) |
Concentration of Credit Risk
By using derivative instruments that are not traded on an exchange, the Company is exposed to the credit risk of its counterparties. Credit risk is the risk of loss from counterparties not performing under the terms of the derivative instrument. When the fair value of a derivative instrument is positive, the counterparty is expected to owe the Company, which creates credit risk. To minimize the credit risk in derivative instruments, it is the Company’s policy to enter into derivative contracts only with counterparties that are creditworthy financial institutions deemed by management as competent and competitive market makers. The Company’s derivative contracts are with multiple counterparties to lessen its exposure to any individual counterparty. Additionally, the Company uses master netting agreements to minimize credit risk exposure. The creditworthiness of the Company’s counterparties is subject to periodic review. None of the Company’s derivative instrument contracts contain credit-risk related contingent features. Other than as provided by the Company’s revolving credit facility, the Company is not required to provide credit support or collateral to any of its counterparties under its derivative instruments, nor are the counterparties required to provide credit support to the Company.
| |
10. | FAIR VALUE MEASUREMENTS |
The Company records certain financial and non-financial assets and liabilities on the balance sheet at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. Market or observable inputs are the preferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. Fair value measurements are classified and disclosed in one of the following categories:
Level 1 – Quoted prices in active markets for identical assets and liabilities.
Level 2 – Quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 – Significant inputs to the valuation model are unobservable.
Valuation techniques that maximize the use of observable inputs are favored. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement of assets and liabilities within the levels of the fair value hierarchy. Reclassifications of fair value between Level 1, Level 2 and Level 3 of the fair value hierarchy, if applicable, are made at the end of each quarter.
The following tables summarize the Company’s financial and non-financial assets and liabilities by valuation level as of March 31, 2019 and December 31, 2018:
|
| | | | | | | | | | | |
| March 31, 2019 |
| Level 1 | | Level 2 | | Level 3 |
| (In thousands) |
Assets: | | | | | |
Derivative Instruments | $ | — |
| | $ | 17,958 |
| | $ | — |
|
Liabilities: | | | | | |
Derivative Instruments | $ | — |
| | $ | 26,208 |
| | $ | — |
|
|
| | | | | | | | | | | |
| December 31, 2018 |
| Level 1 | | Level 2 | | Level 3 |
| (In thousands) |
Assets: | | | | | |
Derivative Instruments | $ | — |
| | $ | 21,352 |
| | $ | — |
|
Liabilities: | | | | | |
Derivative Instruments | $ | — |
| | $ | 34,393 |
| | $ | — |
|
The Company estimates the fair value of all derivative instruments using industry-standard models that consider various assumptions, including current market and contractual prices for the underlying instruments, implied volatility, time value, nonperformance risk, as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace throughout the full term of the instrument and can be supported by observable data.
The estimated fair values of proved oil and natural gas properties assumed in business combinations are based on a discounted cash flow model and market assumptions as to future commodity prices, projections of estimated quantities of oil and natural gas reserves, expectations for timing and amount of future development and operating costs, projections of future rates of production, expected recovery rates and risk-adjusted discount rates. The estimated fair values of unevaluated oil and natural gas properties was based on geological studies, historical well performance, location and applicable mineral lease terms. Based on the unobservable nature of certain of the inputs, the estimated fair value of the oil and gas properties assumed is deemed to use Level 3 inputs. The asset retirement obligations assumed as part of the business combination were estimated using the same assumptions and methodology as described below.
The initial measurement of asset retirement obligations at fair value is calculated using discounted cash flow techniques and based on internal estimates of future retirement costs associated with oil and gas properties. Given the unobservable nature of the inputs, including plugging costs and reserve lives, the initial measurement of the asset retirement obligation liability is deemed to use Level 3 inputs. See Note 1 for further discussion of the Company’s asset retirement obligations. Asset retirement obligations incurred during the three months ended March 31, 2019 were approximately $1.0 million.
| |
11. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
The carrying amounts on the accompanying consolidated balance sheet for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and current debt are carried at cost, which approximates market value due to their short-term nature. Long-term debt related to the Company's construction loan is carried at cost, which approximates market value based on the borrowing rates currently available to the Company with similar terms and maturities.
At March 31, 2019, the carrying value of the outstanding debt represented by the Notes was approximately $2.0 billion, including the unamortized debt issuance cost of approximately $4.2 million related to the 2023 Notes, approximately $8.4 million related to the 2024 Notes, approximately $12.1 million related to the 2025 Notes and approximately $4.9 million related to the 2026 Notes. Based on the quoted market price, the fair value of the Notes was determined to be approximately $1.9 billion at March 31, 2019.
| |
12. | REVENUE FROM CONTRACTS WITH CUSTOMERS |
Revenue Recognition
The Company’s revenues are primarily derived from the sale of natural gas, oil and condensate and NGLs. Sales of natural gas, oil and condensate and NGLs are recognized in the period that the performance obligations are satisfied. The Company generally considers the delivery of each unit (MMBtu or Bbl) to be separately identifiable and represents a distinct performance obligation that is satisfied at a point-in-time once control of the product has been transferred to the customer. Revenue is measured based on consideration specified in the contract with the customer, and excludes any amounts collected on behalf of third parties. These contracts typically include variable consideration that is based on pricing tied to market indices and volumes delivered in the current month. As such, this market pricing may be constrained (i.e., not estimable) at the inception of the contract but will be recognized based on the applicable market pricing, which will be known upon transfer of the goods to the customer. The payment date is usually within 30 days of the end of the calendar month in which the commodity is delivered. A significant number of the Company's product sales are short-term in nature generally through evergreen contracts with contract terms of one year or less, and the Company's product sales that have a contractual term greater than one year have no long-term fixed consideration.
Contract Balances
Receivables from contracts with customers are recorded when the right to consideration becomes unconditional, generally when control of the product has been transferred to the customer. Receivables from contracts with customers were $145.0 million and $210.2 million as of March 31, 2019 and December 31, 2018, respectively, and are reported in accounts receivable - oil and natural gas sales on the consolidated balance sheet. The Company currently has no assets or liabilities related to its revenue contracts, including no upfront or rights to deficiency payments.
Prior-Period Performance Obligations
The Company records revenue in the month production is delivered to the purchaser. However, settlement statements for certain gas and NGLs sales may be received for 30 to 90 days after the date production is delivered, and as a result, the Company is required to estimate the amount of production that was delivered to the purchaser and the price that will be received for the sale of the product. The differences between the estimates and the actual amounts for product sales is recorded in the month that payment is received from the purchaser. For the three months ended March 31, 2019, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was not material.
Effective January 1, 2019, the Company adopted Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842). The new standard supersedes the previous lease guidance by requiring lessees to recognize a right-of-use asset and lease liability on the balance sheet for all leases with lease terms of greater than one year while maintaining substantially similar classifications for financing and operating leases. The Company adopted the new standard on a prospective basis using the simplified transition method permitted by ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. Offsetting right-of-use assets and corresponding lease liabilities recognized by the Company on the adoption date totaled approximately $110 million, representing minimum payment obligations associated with identified leases with contractual durations exceeding one year. No cumulative-effect adjustment to retained earnings was required upon adoption of the new standard. The Company elected the package of practical expedients permitted under the new standard, which among other things, allows for lease and non-lease components in a contract to be accounted for as a single lease component for all asset classes and the carry forward of historical lease classifications.
Nature of Leases
The Company has operating leases associated with drilling rig commitments, pressure pumping services, field offices and other equipment with remaining lease terms with contractual durations in excess of one year. Short-term leases that have an initial term of one year or less are not capitalized.
The Company has entered into contracts for drilling rigs with third parties to ensure rig availability in its key operating areas. The Company has concluded its drilling rig contracts are operating leases as the assets are identifiable and the evaluation that the Company has the right to control the identified assets. The Company's drilling rig commitments are typically structured with an initial term of one to two years and expire at various dates through 2021. These agreements typically include renewal options at the end of the initial term. Due to the nature of the Company's drilling schedules and potential volatility in commodity prices, the Company is unable to determine at commencement with reasonable certainty if the renewal options will be exercised; therefore, renewal options are not considered in the lease term for drilling contracts. The operating lease liabilities associated with these rig commitments are based on the minimum contractual obligations, primarily standby rates, and do not include variable amounts based on actual activity in a given period. Pursuant to the full cost method of accounting, these costs are capitalized as part of oil and natural gas properties on the accompanying consolidated balance sheets. A portion of these costs are borne by other interest owners.
Effective October 1, 2014, the Company entered into an Amended and Restated Master Services Agreement for pressure pumping services with Stingray Pressure Pumping LLC (“Stingray Pressure”), a subsidiary of Mammoth Energy and a related party. Pursuant to this agreement, as amended effective July 1, 2018, Stingray Pressure has agreed to provide hydraulic fracturing, stimulation and related completion and rework services to the Company through 2021 and the Company has agreed to pay Stingray Pressure a monthly service fee plus the associated costs of the services provided. The Company has the right to suspend services of one crew and only one crew at any point in time without payment, fee or other obligation associated with the suspended crew, given appropriate notification of suspension. The Company has concluded the agreement with Stingray Pressure is an operating lease due to the implicit identification of assets and and the evaluation that the Company has the right to control the identified assets. The operating lease liability associated with this agreement is based on the minimum contractual obligations, which is the monthly service fee for one crew, and does not include variable amounts based on actual activity in a given period. Pursuant to the full cost method of accounting, these costs are capitalized as part of oil and natural gas properties on the accompanying consolidated balance sheets. A portion of these costs are borne by other interest owners.
The Company rents office space for its field locations and certain other equipment from third parties, which expire at various dates through 2024. These agreements are typically structured with non-cancelable terms of one to five years. The Company has determined these agreements represent operating leases with a lease term that equals the primary non-cancelable contract term. The Company has included any renewal options that it has determined are reasonably certain of exercise in the determination of the lease terms.
Discount Rate
As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company's incremental borrowing rate reflects the estimated rate of interest that it would pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.
Maturities of operating lease liabilities as of March 31, 2019 were as follows:
|
| | | | |
| | (In thousands) |
Remaining 2019 | | $ | 40,596 |
|
2020 | | 28,578 |
|
2021 | | 22,569 |
|
2022 | | 115 |
|
2023 | | 90 |
|
Thereafter | | 30 |
|
Total lease payments | | $ | 91,978 |
|
Less: Imputed interest | | (3,524 | ) |
Total | | $ | 88,454 |
|
Lease cost for the three months ended March 31, 2019 consisted of the following:
|
| | | | |
| | (In thousands) |
Operating lease cost | | $ | 8,536 |
|
Operating lease cost - related party | | 5,610 |
|
Variable lease cost | | 429 |
|
Variable lease cost - related party | | 31,453 |
|
Total lease cost(1) | | $ | 46,028 |
|
|
| | | |
(1) | The majority of the Company's total lease cost was capitalized to the full cost pool, and an immaterial amount was included in general and administrative expenses in the accompanying consolidated income statements. |
Supplemental cash flow information for the three months ended March 31, 2019 related to leases was as follow:
|
| | | | |
Cash paid for amounts included in the measurement of lease liabilities | | (In thousands) |
Operating cash flows from operating leases | | $ | 52 |
|
Investing cash flow from operating leases | | $ | 4,858 |
|
Investing cash flow from operating leases - related party | | $ | 6,545 |
|
The weighted-average remaining lease term as of March 31, 2019 was 2.42 years. The weighted-average discount rate used to determine the operating lease liability as of March 31, 2019 was 3.77%.
14. INCOME TAXES
The Company records its quarterly tax provision based on an estimate of the annual effective tax rate expected to apply to continuing operations for the various jurisdictions in which it operates. The tax effects of certain items, such as tax rate changes, significant unusual or infrequent items, and certain changes in the assessment of the realizability of deferred taxes, are recognized as discrete items in the period in which they occur and are excluded from the estimated annual effective tax rate.
For the three months ended March 31, 2019, the Company's estimated annual effective tax rate remained nominal as a result of the full valuation allowance on deferred tax assets. Based on the Company's estimated results for the period ending March 31, 2019, the Company anticipates remaining in a net deferred tax asset position. Based on the available positive and negative evidence, the Company expects to maintain a full valuation allowance as it cannot objectively assert that the deferred tax assets are more likely than not to be realized. During the quarter, the Company generated sufficient earnings and is no longer in a cumulative loss position as evaluated based on the generally prescribed view of a rolling 12 quarter assessment. However, there remains some uncertainty around the Company’s ability to fully utilize NOL carryforwards prior to expiration and potential impacts of Internal Revenue Code Section 382 (“Section 382”) ownership changes that would limit the amount of NOL carryforward available for use against future taxable income. Each reporting period, Management evaluates all positive and negative evidence and continues to maintain that a release of the valuation allowance is possible during an interim period in 2019. The Company determined that the negative evidence regarding the uncertainty of the possible Section 382 limitations warranted maintaining the full valuation allowance at March 31, 2019.
The release of the valuation allowance would result in the recognition of certain net deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of any potential valuation allowance release is subject to change based on the levels of profitability that the Company is able to actually achieve.
The Company’s ability to utilize NOL carryforwards and other tax attributes to reduce future federal taxable income is subject to potential limitations under Section 382 and its related tax regulations. The utilization of these attributes may be limited if certain ownership changes by 5% stockholders (as defined in Treasury regulations pursuant to Section 382) and the effects of stock issuances by the Company during any three-year period result in a cumulative change of more than 50% in the beneficial ownership of Gulfport. The Company is currently conducting a Section 382 analysis to determine if an ownership change has occurred. If it is determined that an ownership change has occurred under these rules, the Company would generally be subject to an annual limitation on the use of pre-ownership change NOL carryforwards and certain other losses and/or credits. In addition, certain future transactions regarding the Company's equity, including the cumulative effects of small transactions as well as transactions beyond the Company’s control, could cause an ownership change and therefore a potential limitation on the annual utilization of their deferred tax assets. The results of the Section 382 analysis will provide further evidence for the Company to consider in determining whether a full, partial or limited release of the valuation allowance is warranted in future periods.
15. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The 2023 Notes, the 2024 Notes, the 2025 Notes and the 2026 Notes are guaranteed on a senior unsecured basis by all existing consolidated subsidiaries that guarantee the Company’s secured revolving credit facility or certain other debt (the “Guarantors”). The 2023 Notes, the 2024 Notes, the 2025 Notes and the 2026 Notes are not guaranteed by Grizzly Holdings, Inc. (the “Non-Guarantor”). The Guarantors are 100% owned by Gulfport (the “Parent”), and the guarantees are full, unconditional, joint and several. There are no significant restrictions on the ability of the Parent or the Guarantors to obtain funds from each other in the form of a dividend or loan.
The following condensed consolidating balance sheets, statements of operations, statements of comprehensive income and statements of cash flows are provided for the Parent, the Guarantors and the Non-Guarantor and include the consolidating adjustments and eliminations necessary to arrive at the information for the Company on a condensed consolidated basis. The information has been presented using the equity method of accounting for the Parent’s ownership of the Guarantors and the Non-Guarantor.
CONDENSED CONSOLIDATING BALANCE SHEETS
(Amounts in thousands) |
| | | | | | | | | | | | | | | | | | | |
| March 31, 2019 |
| Parent | | Guarantors | | Non-Guarantor | | Eliminations | | Consolidated |
Assets | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash and cash equivalents | $ | 7,040 |
| | $ | 10,955 |
| | $ | 1 |
| | $ | — |
| | $ | 17,996 |
|
Accounts receivable - oil and natural gas sales | 93,698 |
| | 51,298 |
| | — |
| | — |
| | 144,996 |
|
Accounts receivable - joint interest and other | 12,084 |
| | 12,496 |
| | — |
| | — |
| | 24,580 |
|
Accounts receivable - intercompany | 694,036 |
| | 388,797 |
| | — |
| | (1,082,833 | ) | | — |
|
Prepaid expenses and other current assets | 11,412 |
| | 1,148 |
| | — |
| | — |
| | 12,560 |
|
Short-term derivative instruments | 17,958 |
| | — |
| | — |
| | — |
| | 17,958 |
|
Total current assets | 836,228 |
| | 464,694 |
| | 1 |
| | (1,082,833 | ) | | 218,090 |
|
| | | | | | | | | |
Property and equipment: | | | | | | | | | |
Oil and natural gas properties, full-cost accounting | 7,238,631 |
| | 3,074,222 |
| | — |
| | (729 | ) | | 10,312,124 |
|
Other property and equipment | 92,135 |
| | 4,069 |
| | — |
| | — |
| | 96,204 |
|
Accumulated depletion, depreciation, amortization and impairment | (4,757,774 | ) | | (40 | ) | | — |
| | — |
| | (4,757,814 | ) |
Property and equipment, net | 2,572,992 |
| | 3,078,251 |
| | — |
| | (729 | ) | | 5,650,514 |
|
Other assets: | | | | | | | | | |
Equity investments and investments in subsidiaries | 2,963,629 |
| | — |
| | 48,004 |
| | (2,767,514 | ) | | 244,119 |
|
Inventories | 9,264 |
| | 1,754 |
| | — |
| | — |
| | 11,018 |
|
Operating lease assets | 29,795 |
| | — |
| | — |
| | — |
| | 29,795 |
|
Operating lease assets - related parties | 58,659 |
| | — |
| | — |
| | — |
| | 58,659 |
|
Other assets | 12,187 |
| | 1,127 |
| | — |
| | — |
| | 13,314 |
|
Total other assets | 3,073,534 |
| | 2,881 |
| | 48,004 |
| | (2,767,514 | ) | | 356,905 |
|
Total assets | $ | 6,482,754 |
| | $ | 3,545,826 |
| | $ | 48,005 |
| | $ | (3,851,076 | ) | | $ | 6,225,509 |
|
| | | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Accounts payable and accrued liabilities | $ | 449,459 |
| | $ | 118,725 |
| | $ | — |
| | $ | — |
| | $ | 568,184 |
|
Accounts payable - intercompany | 388,879 |
| | 693,826 |
| | 129 |
| | (1,082,834 | ) | | — |
|
Short-term derivative instruments | 25,921 |
| | — |
| | — |
| | — |
| | 25,921 |
|
Current portion of operating lease liabilities | 27,983 |
| | — |
| | — |
| | — |
| | 27,983 |
|
Current portion of operating lease liabilities - related parties | 20,618 |
| | — |
| | — |
| | — |
| | 20,618 |
|
Current maturities of long-term debt | 656 |
| | — |
| | — |
| | — |
| | 656 |
|
Total current liabilities | 913,516 |
| | 812,551 |
| | 129 |
| | (1,082,834 | ) | | 643,362 |
|
Long-term derivative instruments | 287 |
| | — |
| | — |
| | — |
| | 287 |
|
Asset retirement obligation - long-term | 69,991 |
| | 12,909 |
| | — |
| | — |
| | 82,900 |
|
Deferred tax liability | 3,127 |
| | — |
| | — |
| | — |
| | 3,127 |
|
Non-current operating lease liabilities | 1,812 |
| | — |
| | — |
| | — |
| | 1,812 |
|
Non-current operating lease liabilities - related parties | 38,041 |
| | — |
| | — |
| | — |
| | 38,041 |
|
Long-term debt, net of current maturities | 2,087,714 |
| | — |
| | — |
| | — |
| | 2,087,714 |
|
Total liabilities | 3,114,488 |
| | 825,460 |
| | 129 |
| | (1,082,834 | ) | | 2,857,243 |
|
| | | | | | | | | |
Stockholders’ equity: | | | | | | | | | |
Common stock | 1,594 |
| | — |
| | — |
| | — |
| | 1,594 |
|
Paid-in capital | 4,202,023 |
| | 1,915,598 |
| | 262,059 |
| | (2,177,657 | ) | | 4,202,023 |
|
Accumulated other comprehensive loss | (52,225 | ) | | — |
| | (50,076 | ) | | 50,076 |
| | (52,225 | ) |
(Accumulated deficit) retained earnings | (783,126 | ) | | 804,768 |
| | (164,107 | ) | | (640,661 | ) | | (783,126 | ) |
Total stockholders’ equity | 3,368,266 |
| | 2,720,366 |
| | 47,876 |
| | (2,768,242 | ) | | 3,368,266 |
|
Total liabilities and stockholders’ equity | $ | 6,482,754 |
| | $ | 3,545,826 |
| | $ | 48,005 |
| | $ | (3,851,076 | ) | | $ | 6,225,509 |
|
CONDENSED CONSOLIDATING BALANCE SHEETS
(Amounts in thousands) |
| | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| Parent | | Guarantors | | Non-Guarantor | | Eliminations | | Consolidated |
Assets | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash and cash equivalents | $ | 25,585 |
| | $ | 26,711 |
| | $ | 1 |
| | $ | — |
| | $ | 52,297 |
|
Accounts receivable - oil and natural gas sales | 146,075 |
| | 64,125 |
| | — |
| | — |
| | 210,200 |
|
Accounts receivable - joint interest and other | 16,212 |
| | 6,285 |
| | — |
| | — |
| | 22,497 |
|
Accounts receivable - intercompany | 671,633 |
| | 319,464 |
| | — |
| | (991,097 | ) | | — |
|
Prepaid expenses and other current assets | 8,433 |
| | 2,174 |
| | — |
| | — |
| | 10,607 |
|
Short-term derivative instruments | 21,352 |
| | — |
| | — |
| | — |
| | 21,352 |
|
Total current assets | 889,290 |
| | 418,759 |
| | 1 |
| | (991,097 | ) | | 316,953 |
|
| | | | | | | | | |
Property and equipment: | | | | | | | | | |
Oil and natural gas properties, full-cost accounting, | 7,044,550 |
| | 2,983,015 |
| | — |
| | (729 | ) | | 10,026,836 |
|
Other property and equipment | 91,916 |
| | 751 |
| | — |
| | — |
| | 92,667 |
|
Accumulated depletion, depreciation, amortization and impairment | (4,640,059 | ) | | (39 | ) | | — |
| | — |
| | (4,640,098 | ) |
Property and equipment, net | 2,496,407 |
| | 2,983,727 |
| | — |
| | (729 | ) | | 5,479,405 |
|
Other assets: | | | | | | | | | |
Equity investments and investments in subsidiaries | 2,856,988 |
| | — |
| | 44,259 |
| | (2,665,126 | ) | | 236,121 |
|
Inventories | 3,620 |
| | 1,134 |
| | — |
| | — |
| | 4,754 |
|
Other assets | 12,624 |
| | 1,178 |
| | — |
| | 1 |
| | 13,803 |
|
Total other assets | 2,873,232 |
| | 2,312 |
| | 44,259 |
| | (2,665,125 | ) | | 254,678 |
|
Total assets | $ | 6,258,929 |
| | $ | 3,404,798 |
| | $ | 44,260 |
| | $ | (3,656,951 | ) | | $ | 6,051,036 |
|
| | | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Accounts payable and accrued liabilities | $ | 419,107 |
| | $ | 99,273 |
| | $ | — |
| | $ | — |
| | $ | 518,380 |
|
Accounts payable - intercompany | 320,259 |
| | 670,708 |
| | 130 |
| | (991,097 | ) | | — |
|
Short-term derivative instruments | 20,401 |
| | — |
| | — |
| | — |
| | 20,401 |
|
Current maturities of long-term debt | 651 |
| | — |
| | — |
| | — |
| | 651 |
|
Total current liabilities | 760,418 |
| | 769,981 |
| | 130 |
| | (991,097 | ) | | 539,432 |
|
Long-term derivative instruments | 13,992 |
| | — |
| | — |
| | — |
| | 13,992 |
|
Asset retirement obligation - long-term | 66,859 |
| | 13,093 |
| | — |
| | — |
| | 79,952 |
|
Deferred tax liability | 3,127 |
| | — |
| | — |
| | — |
| | 3,127 |
|
Long-term debt, net of current maturities | 2,086,765 |
| | — |
| | — |
| | — |
| | 2,086,765 |
|
Total liabilities | 2,931,161 |
|
| 783,074 |
|
| 130 |
|
| (991,097 | ) |
| 2,723,268 |
|
| | | | | | | | | |
Stockholders’ equity: | | | | | | | | | |
Common stock | 1,630 |
| | — |
| | — |
| | — |
| | 1,630 |
|
Paid-in capital | 4,227,532 |
| | 1,915,598 |
| | 261,626 |
| | (2,177,224 | ) | | 4,227,532 |
|
Accumulated other comprehensive loss | (56,026 | ) | | — |
| | (53,783 | ) | | 53,783 |
| | (56,026 | ) |
(Accumulated deficit) retained earnings | (845,368 | ) | | 706,126 |
| | (163,713 | ) | | (542,413 | ) | | (845,368 | ) |
Total stockholders’ equity | 3,327,768 |
| | 2,621,724 |
| | 44,130 |
| | (2,665,854 | ) | | 3,327,768 |
|
Total liabilities and stockholders’ equity | $ | 6,258,929 |
| | $ | 3,404,798 |
| | $ | 44,260 |
| | $ | (3,656,951 | ) | | $ | 6,051,036 |
|
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Amounts in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, 2019 |
| Parent | | Guarantors | | Non-Guarantor | | Eliminations | | Consolidated |
| | | | | | | | | |
Total revenues | $ | 186,246 |
| | $ | 134,332 |
| | $ | — |
| | $ | — |
| | $ | 320,578 |
|
| | | | | | | | | |
Costs and expenses: | | | | | | | | | |
Lease operating expenses | 14,893 |
| | 4,914 |
| | — |
| | — |
| | 19,807 |
|
Production taxes | 3,261 |
| | 4,660 |
| | — |
| | — |
| | 7,921 |
|
Midstream gathering and processing expenses | 43,299 |
| | 26,983 |
| | — |
| | — |
| | 70,282 |
|
Depreciation, depletion and amortization | 118,432 |
| | 1 |
| | — |
| | — |
| | 118,433 |
|
General and administrative expenses | 12,232 |
| | (675 | ) | | 1 |
| | — |
| | 11,558 |
|
Accretion expense | 951 |
| | 116 |
| | — |
| | — |
| | 1,067 |
|
| 193,068 |
|
| 35,999 |
|
| 1 |
|
| — |
|
| 229,068 |
|
| | | | | | | | | |
(LOSS) INCOME FROM OPERATIONS | (6,822 | ) |
| 98,333 |
|
| (1 | ) |
| — |
|