Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2019
OR



☐	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)



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)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	GPOR	Nasdaq Global Select Market

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 July 26, 2019, 159,396,017 shares of the registrant’s common stock were outstanding.

Table of Contents

GULFPORT ENERGY CORPORATION

TABLE OF CONTENTS



		Page
PART I FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited):	2

	Consolidated Balance Sheets at June 30, 2019 and December 31, 2018	2

	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018	3

	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2019 and 2018	4

	Consolidated Statements of Stockholders’ Equity for the Six Months Ended June 30, 2019 and 2018	5

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018	7

	Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	36

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50

Item 4.	Controls and Procedures	52

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	53

Item 1A.	Risk Factors	54

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 3.	Defaults Upon Senior Securities	54

Item 4.	Mine Safety Disclosures	54

Item 5.	Other Information	54

Item 6.	Exhibits	56

Signatures		58

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GULFPORT ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)



	June 30, 2019			December 31, 2018
	(In thousands, except share data)
Assets
Current assets:
Cash and cash equivalents	$	20,777		$	52,297
Accounts receivable—oil and natural gas sales	131,675			210,200
Accounts receivable—joint interest and other	46,645			22,497
Prepaid expenses and other current assets	9,474			10,607
Short-term derivative instruments	134,920			21,352
Total current assets	343,491			316,953
Property and equipment:
Oil and natural gas properties, full-cost accounting, $2,836,441 and $2,873,037 excluded from amortization in 2019 and 2018, respectively	10,510,427			10,026,836
Other property and equipment	96,413			92,667
Accumulated depletion, depreciation, amortization and impairment	(4,882,729		)	(4,640,098		)
Property and equipment, net	5,724,111			5,479,405
Other assets:
Equity investments	119,307			236,121
Long-term derivative instruments	5,036			—
Deferred tax asset	179,331			—
Inventories	9,001			4,754
Operating lease assets	19,334			—
Operating lease assets - related parties	53,579			—
Other assets	12,280			13,803
Total other assets	397,868			254,678
Total assets	$	6,465,470		$	6,051,036
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	493,830		$	518,380
Short-term derivative instruments	198			20,401
Current portion of operating lease liabilities	17,999			—
Current portion of operating lease liabilities - related parties	20,817			—
Current maturities of long-term debt	615			651
Total current liabilities	533,459			539,432
Long-term derivative instruments	210			13,992
Asset retirement obligation—long-term	88,491			79,952
Deferred tax liability	3,127			3,127
Non-current operating lease liabilities	1,335			—
Non-current operating lease liabilities - related parties	32,762			—
Long-term debt, net of current maturities	2,198,678			2,086,765
Total liabilities	2,858,062			2,723,268
Commitments and contingencies (Note 7)
Preferred stock, $0.01 par value; 5,000,000 shares authorized (30,000 authorized as redeemable 12% cumulative preferred stock, Series A), and none issued and outstanding	—			—
Stockholders’ equity:
Common stock - $0.01 par value, 200,000,000 shares authorized, 159,396,017 issued and outstanding at June 30, 2019 and 162,986,045 at December 31, 2018	1,594			1,630
Paid-in capital	4,202,599			4,227,532
Accumulated other comprehensive loss	(48,615		)	(56,026		)
Accumulated deficit	(548,170		)	(845,368		)
Total stockholders’ equity	3,607,408			3,327,768
Total liabilities and stockholders’ equity	$	6,465,470		$	6,051,036

See accompanying notes to consolidated financial statements.

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GULFPORT ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
	(In thousands, except share data)
Revenues:
Natural gas sales	$	225,257		$	232,695		$	501,273		$	482,094
Oil and condensate sales	36,910			49,319			69,392			95,005
Natural gas liquid sales	25,687			41,271			57,812			88,107
Net gain (loss) on natural gas, oil and NGLs derivatives	171,140			(70,545		)	151,095			(87,074		)
	458,994			252,740			779,572			578,132
Costs and expenses:
Lease operating expenses	22,388			22,912			42,195			41,818
Production taxes	8,098			7,659			16,019			14,513
Midstream gathering and processing expenses	72,015			71,440			142,297			135,633
Depreciation, depletion and amortization	124,951			121,915			243,384			232,933
General and administrative expenses	13,265			14,008			24,823			27,107
Accretion expense	1,359			1,015			2,426			2,019
	242,076			238,949			471,144			454,023
INCOME FROM OPERATIONS	216,918			13,791			308,428			124,109
OTHER EXPENSE (INCOME):
Interest expense	34,880			33,704			69,000			67,669
Interest income	(159		)	(33		)	(311		)	(70		)
Insurance proceeds	(83		)	(231		)	(83		)	(231		)
Gain on sale of equity method investments	—			(122,035		)	—			(122,035		)
Loss (income) from equity method investments, net	125,582			(8,888		)	121,309			(22,424		)
Other expense (income)	1,073			(45		)	646			(140		)
	161,293			(97,528		)	190,561			(77,231		)
INCOME BEFORE INCOME TAXES	55,625			111,319			117,867			201,340
INCOME TAX BENEFIT	(179,331		)	—			(179,331		)	(69		)
NET INCOME	$	234,956		$	111,319		$	297,198		$	201,409
NET INCOME PER COMMON SHARE:
Basic	$	1.47		$	0.64		$	1.85		$	1.14
Diluted	$	1.47		$	0.64		$	1.84		$	1.13
Weighted average common shares outstanding—Basic	159,324,909			173,623,630			161,064,787			177,158,230
Weighted average common shares outstanding—Diluted	159,506,826			174,140,627			161,590,087			177,737,282

See accompanying notes to consolidated financial statements.

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GULFPORT ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	Three months ended June 30,					Six months ended June 30,
	2019		2018			2019		2018
	(In thousands)
Net income	$	234,956	$	111,319		$	297,198	$	201,409
Foreign currency translation adjustment	3,610		(3,364		)	7,411		(8,867		)
Other comprehensive income (loss)	3,610		(3,364		)	7,411		(8,867		)
Comprehensive income	$	238,566	$	107,955		$	304,609	$	192,542

See accompanying notes to consolidated financial statements.

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GULFPORT ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)



						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
Net Income	—		—			—			—			62,242			62,242
Other Comprehensive Income	—		—			—			3,801			—			3,801
Stock Compensation	—		—			2,785			—			—			2,785
Shares Repurchased	(3,618,634	)	(37		)	(28,293		)	—			—			(28,330		)
Issuance of Restricted Stock	54,554		1			(1		)	—			—			—
Balance at March 31, 2019	159,421,965		$	1,594		$	4,202,023		$	(52,225	)	$	(783,126	)	$	3,368,266
Net Income	—		—			—			—			234,956			234,956
Other Comprehensive Income	—		—			—			3,610			—			3,610
Stock Compensation	—		—			2,846			—			—			2,846
Shares Repurchased	(296,587	)	(3		)	(2,267		)	—			—			(2,270		)
Issuance of Restricted Stock	270,639		3			(3		)	—			—			—
Balance at June 30, 2019	159,396,017		$	1,594		$	4,202,599		$	(48,615	)	$	(548,170	)	$	3,607,408

(Continued on next page)

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GULFPORT ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

(Unaudited)



						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, 2018	183,105,910		$	1,831		$	4,416,250		$	(40,539	)	$	(1,275,928	)	$	3,101,614
Net Income	—		—			—			—			90,090			90,090
Other Comprehensive Loss	—		—			—			(5,503		)	—			(5,503		)
Stock Compensation	—		—			2,685			—			—			2,685
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
Net Income	—		—			—			—			111,319			111,319
Other Comprehensive Loss	—		—			—			(3,364		)	—			(3,364		)
Stock Compensation	—		—			3,355			—			—			3,355
Shares Repurchased	(412,516	)	(4		)	(4,996		)	—			—			(5,000		)
Issuance of Restricted Stock	191,084		2			(2		)	—			—			—
Balance at June 30, 2018	173,302,055		$	1,733		$	4,317,391		$	(49,406	)	$	(1,074,519	)	$	3,195,199

See accompanying notes to consolidated financial statements.

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GULFPORT ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Six months ended June 30,
	2019			2018
	(In thousands)
Cash flows from operating activities:
Net income	$	297,198		$	201,409
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion expense	2,426			2,019
Depletion, depreciation and amortization	243,384			232,933
Stock-based compensation expense	3,379			3,624
Loss (income) from equity investments	121,449			(22,322		)
Change in fair value of derivative instruments	(152,589		)	102,248
Deferred income tax benefit	(179,331		)	(69		)
Amortization of loan costs	3,191			3,006
Gain on sale of equity investments and other assets	(112		)	(122,035		)
Distributions from equity method investments	2,457			—
Changes in operating assets and liabilities:
Decrease in accounts receivable—oil and natural gas sales	78,525			6,564
Increase in accounts receivable—joint interest and other	(24,148		)	(16,385		)
Increase in accounts receivable—related parties	—			(110		)
Decrease (increase) in prepaid expenses and other current assets	1,133			(5,786		)
Increase in other assets	(296		)	(1,517		)
(Decrease) increase in accounts payable, accrued liabilities and other	(87,560		)	28,184
Settlement of asset retirement obligation	(117		)	(719		)
Net cash provided by operating activities	308,989			411,044
Cash flows from investing activities:
Additions to other property and equipment	(4,298		)	(6,252		)
Additions to oil and natural gas properties	(417,535		)	(579,734		)
Proceeds from sale of oil and natural gas properties	745			3,762
Proceeds from sale of other property and equipment	130			167
Proceeds from sale of equity method investments	—			221,965
Contributions to equity method investments	(432		)	(1,569		)
Distributions from equity method investments	1,945			1,196
Net cash used in investing activities	(419,445		)	(360,465		)
Cash flows from financing activities:
Principal payments on borrowings	(345,350		)	(150,285		)
Borrowings on line of credit	455,000			225,000
Debt issuance costs and loan commitment fees	(114		)	(624		)
Payments for repurchase of stock	(30,600		)	(104,997		)
Net cash provided by (used in) financing activities	78,936			(30,906		)
Net (decrease) increase in cash, cash equivalents and restricted cash	(31,520		)	19,673
Cash, cash equivalents and restricted cash at beginning of period	52,297			99,557
Cash, cash equivalents and restricted cash at end of period	$	20,777		$	119,230
Supplemental disclosure of cash flow information:
Interest payments	$	67,472		$	59,915
Income tax receipts	$	(1,794	)	$	—
Supplemental disclosure of non-cash transactions:
Capitalized stock-based compensation	$	2,252		$	2,416
Asset retirement obligation capitalized	$	6,230		$	535
Interest capitalized	$	1,771		$	2,351
Foreign currency translation gain (loss) on equity method investments	$	7,411		$	(8,867	)

See accompanying notes to consolidated financial statements.

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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 that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods in all material respects, 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 included in the Company’s most recent annual report on Form 10-K. Results for the three and six months ended June 30, 2019 are not necessarily indicative of the results expected for the full year.


1.	PROPERTY AND EQUIPMENT

The major categories of property and equipment and related accumulated depletion, depreciation, amortization and impairment as of June 30, 2019 and December 31, 2018 are as follows:



	June 30, 2019			December 31, 2018
	(In thousands)
Oil and natural gas properties	$	10,510,427		$	10,026,836
Office furniture and fixtures	46,327			42,581
Building	44,565			44,565
Land	5,521			5,521
Total property and equipment	10,606,840			10,119,503
Accumulated depletion, depreciation, amortization and impairment	(4,882,729		)	(4,640,098		)
Property and equipment, net	$	5,724,111		$	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 Company's oil and natural gas properties. At June 30, 2019, the calculated ceiling was greater than the net book value of the Company’s oil and natural gas properties, and no ceiling test impairment was required for the three and six months ended June 30, 2019. No impairment was required for oil and natural gas properties for the three and six months ended June 30, 2018.

Included in oil and natural gas properties at June 30, 2019 is the cumulative capitalization of $219.8 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 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 $8.8 million and $16.5 million for the three and six months ended June 30, 2019, respectively, and $9.4 million and $18.2 million for the three and six months ended June 30, 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 $1.00 and $0.96 per Mcfe for the six months ended June 30, 2019 and 2018, respectively.

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The following table summarizes the Company’s non-producing properties excluded from amortization by area at June 30, 2019:



	June 30, 2019
	(In thousands)
Utica	$	1,475,997
MidContinent	1,359,279
Niobrara	454
Southern Louisiana	611
Bakken	100
	$	2,836,441

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 six months ended June 30, 2019 and 2018 is as follows:



	June 30, 2019			June 30, 2018
	(In thousands)
Asset retirement obligation, beginning of period	$	79,952		$	75,100
Liabilities incurred	5,153			909
Liabilities settled	(117		)	(719		)
Accretion expense	2,426			2,019
Revisions in estimated cash flows	1,077			(374		)
Asset retirement obligation as of end of period	88,491			76,935
Less current portion	—			120
Asset retirement obligation, long-term	$	88,491		$	76,815

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2.	EQUITY INVESTMENTS

Investments accounted for by the equity method consist of the following as of June 30, 2019 and December 31, 2018:



			Carrying value				Loss (income) from equity method investments
	Approximate ownership %		June 30, 2019		December 31, 2018		Three months ended June 30,						Six months ended June 30,
	Approximate ownership %		June 30, 2019		December 31, 2018		2019			2018			2019			2018
			(In thousands)
Investment in Tatex Thailand II, LLC	23.5	%	$	—	$	—	$	(1,945	)	$	(63	)	$	(2,085	)	$	(104	)
Investment in Grizzly Oil Sands ULC	24.9999	%	51,607		44,259		(54		)	228			339			558
Investment in Timber Wolf Terminals LLC⁽¹⁾	—	%	—		—		—			534			—			536
Investment in Windsor Midstream LLC	22.5	%	39		39		—			(9		)	—			(9		)
Investment in Mammoth Energy Services, Inc.	21.8	%	67,661		191,823		127,581			(9,242		)	123,055			(22,712		)
Investment in Strike Force Midstream LLC⁽²⁾	—	%	—		—		—			(336		)	—			(693		)
			$	119,307	$	236,121	$	125,582		$	(8,888	)	$	121,309		$	(22,424	)



(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 the subsequent dissolution of Timber Wolf.
(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 Strike Force Midstream LLC for information regarding this transaction.

The tables below summarize financial information for the Company’s equity investments as of June 30, 2019 and December 31, 2018.

Summarized balance sheet information:



	June 30, 2019		December 31, 2018
	June 30, 2019		December 31, 2018
	(In thousands)
Current assets	$	477,559	$	471,733
Noncurrent assets	$	1,353,113	$	1,302,488
Current liabilities	$	167,901	$	239,975
Noncurrent liabilities	$	190,200	$	94,575

Summarized results of operations:



	Three months ended June 30,					Six months ended June 30,
	2019			2018		2019		2018
	(In thousands)
Gross revenue	$	179,114		$	566,404	$	443,958	$	1,067,537
Net (loss) income	$	(4,072	)	$	49,018	$	20,684	$	113,470

Tatex Thailand II, LLC

The Company has an indirect ownership interest in Tatex Thailand II, LLC ("Tatex II"). Tatex II held an 8.5% interest in APICO, LLC (“APICO”), an international oil and gas exploration company, before selling its interest in June 2019. 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 $2.1 million in distributions from Tatex II during the six months ended June 30, 2019, of which $1.9 million related to proceeds from the sale of its interest in APICO.

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Grizzly Oil Sands ULC

The Company, through its wholly owned subsidiary Grizzly Holdings Inc. (“Grizzly Holdings”), owns an approximate 24.9999% 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 June 30, 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 June 30, 2019 and 2018 and determined no impairment was required. If commodity prices decline in the future however, impairment of the Company's investment in Grizzly may be necessary. During the six months ended June 30, 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 $3.5 million and $7.3 million for the three and six months ended June 30, 2019, respectively, as a result of a foreign currency translation gain. The Company's investment in Grizzly was decreased by $3.4 million and $8.7 million for the three and six months ended June 30, 2018, respectively, as a result of a foreign currency translation loss.

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. Timber Wolf was dissolved in 2018.

Windsor Midstream LLC

At June 30, 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 six months ended June 30, 2019.

As of June 30, 2019, the Company determined that Midstream was a variable interest entity ("VIE") but was not the primary beneficiary because it does not have a controlling financial interest in Midstream. This entity is considered a VIE because the limited partners lack substantive kick-out or participating rights over the general partner. The general partner has power to direct the activities that most significantly impact Midstream'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

Mammoth Energy Services, Inc.

At June 30, 2019, the Company owned 9,829,548 shares, or approximately 21.8%, of the outstanding common stock of Mammoth Energy Services, Inc. ("Mammoth Energy"). The Company reviewed its investment in Mammoth Energy as of June 30, 2019 for impairment based on certain qualitative and quantitative factors. As a result of the calculated fair values and other qualitative factors, the Company concluded that an other than temporary impairment was indicated. This resulted in recording an aggregate impairment loss of $125.4 million for the six months ended June 30, 2019, which is included in loss (income) from equity method investments, net in the accompanying consolidated statements of operations. If Mammoth Energy's common stock continues to trade below the Company's carrying value for a prolonged period of time, further impairment of the Company's investment in Mammoth Energy may be necessary. The Company’s investment in Mammoth Energy was increased by $0.1 million and $0.2 million foreign currency gains resulting from Mammoth Energy's foreign subsidiary for the three and six months ended June 30, 2019, respectively. The Company’s investment in Mammoth Energy was decreased by a $0.1 million and $0.3 million foreign currency loss resulting from Mammoth Energy’s foreign subsidiary for the three and six months ended June 30, 2018, respectively. During the six months ended June 30, 2019, Gulfport received distributions of $2.5 million from Mammoth Energy as a result of $0.125 per share dividends in February 2019 and May 2019. The approximate fair value of the Company's investment in Mammoth Energy's common stock at June 30, 2019 was $67.7 million based on the quoted market price of Mammoth Energy's common stock. The loss (income) 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

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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 loss (income) from equity method investments presented in the table above reflects any intercompany profit eliminations.


3.	LONG-TERM DEBT

Long-term debt consisted of the following items as of June 30, 2019 and December 31, 2018:



	June 30, 2019			December 31, 2018
	(In thousands)
Revolving credit agreement⁽¹⁾	$	155,000		$	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⁾	(28,426		)	(30,733		)
Construction loan	22,719			23,149
Less: current maturities of long term debt	(615		)	(651		)
Debt reflected as long term	$	2,198,678		$	2,086,765

(1) The Company has entered into a senior secured revolving credit facility, as amended (the "revolving credit facility"), with The Bank of Nova Scotia, as the lead arranger and administrative agent and other lenders. On June 3, 2019, the Company further amended its revolving credit facility to, among other things, allow the Company to designate certain of its subsidiaries as unrestricted subsidiaries and to include LIBOR replacement provisions. Additionally, the borrowing base was reaffirmed at $1.4 billion, and the Company’s elected commitment amount remained at $1.0 billion.

As of June 30, 2019, $155.0 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 $251.5 million letters of credit, was $593.5 million. The Company’s wholly owned subsidiaries have guaranteed the obligations of the Company under the revolving credit facility.

At June 30, 2019, amounts borrowed under the revolving credit facility bore interest at a weighted average rate of 3.93%.

The Company was in compliance with its financial covenants under the revolving credit facility at June 30, 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 June 30, 2019, total unamortized debt issuance costs were $4.0 million for the 2023 Notes, $8.1 million for the 2024 Notes, $11.7 million for the 2025 Notes and $4.7 million for the 2026 Notes. In addition, loan commitment fee costs for the Company's construction loan agreement were $0.1 million at June 30, 2019.

The Company capitalized approximately $1.0 million and $1.8 million in interest expense to undeveloped oil and natural gas properties during the three and six months ended June 30, 2019, respectively. The Company capitalized approximately $1.5 million and $2.4 million in interest expense to undeveloped oil and natural gas properties during the three and six months ended June 30, 2018, respectively.


4.	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

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specific number of shares. This repurchase program was authorized to extend through December 31, 2018 and the Company repurchased 20.7 million shares of common stock in 2018 for $200.0 million in aggregate consideration.

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, modified, extended or discontinued by the board of directors at any time. The Company repurchased approximately 0.2 million and 3.8 million shares for a cost of approximately $1.8 million and $30.0 million during the three and six months ended June 30, 2019, respectively. Additionally, during each of the three and six months ended June 30, 2019, the Company repurchased approximately 0.1 million shares for a cost of approximately $0.5 million and $0.6 million, respectively, 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.


5.	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 and six months ended June 30, 2019, the Company’s stock-based compensation cost was $2.8 million and $5.6 million, respectively, of which the Company capitalized $1.1 million and $2.3 million, respectively, relating to its exploration and development efforts. During the three and six months ended June 30, 2018, the Company's stock-based compensation cost was $3.3 million and $6.0 million, respectively, of which the Company capitalized $1.3 million and $2.4 million, respectively, relating to its exploration and development efforts. Stock compensation costs, net of the amounts capitalized, are included in general and administrative expenses in the accompanying consolidated statements of operations.

The following table summarizes restricted stock unit activity for the six months ended June 30, 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	770,661		6.96		228,659		9.66
Vested	(325,193	)	10.08		—		—
Forfeited	(8,776	)	12.44		—		—
Unvested shares as of June 30, 2019	1,972,503		$	10.01	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 costs are recorded 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 June 30, 2019 related to restricted stock units was $13.8 million. The expense is expected to be recognized over a weighted average period of 1.90 years.

Performance Vesting Restricted Stock Units

During the six months ended June 30, 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 36-month performance period. The grant date fair value was determined using the Monte Carlo simulation method and is being recorded ratably over the performance period. Expected volatilities utilized in the Monte Carlo 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

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value of performance vesting units granted during the six months ended June 30, 2019. Unrecognized compensation expense as of June 30, 2019 related to performance vesting restricted shares was $1.9 million. The expense is expected to be recognized over a weighted average period of 2.51 years.

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6.	EARNINGS PER SHARE

Reconciliations of the components of basic and diluted net income per common share are presented in the tables below:



	Three months ended June 30,
	2019					2018
	Income		Shares	Per Share		Income		Shares	Per Share
	(In thousands, except share data)
Basic:
Net income	$	234,956	159,324,909	$	1.47	$	111,319	173,623,630	$	0.64
Effect of dilutive securities:
Stock options and awards	—		181,917			—		516,997
Diluted:
Net income	$	234,956	159,506,826	$	1.47	$	111,319	174,140,627	$	0.64



	Six months ended June 30,
	2019					2018
	Income		Shares	Per Share		Income		Shares	Per Share
	(In thousands, except share data)
Basic:
Net income	$	297,198	161,064,787	$	1.85	$	201,409	177,158,230	$	1.14
Effect of dilutive securities:
Stock options and awards	—		525,300			—		579,052
Diluted:
Net income	$	297,198	161,590,087	$	1.84	$	201,409	177,737,282	$	1.13

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7.	COMMITMENTS AND CONTINGENCIES

Firm Transportation and Sales Commitments

The table below presents the firm sales commitments by year:



		(MMBtu per day)
Remaining 2019		493,000
2020		276,000
2021		179,000
2022		70,000
2023		42,000
Thereafter		25,000
Total		1,085,000

The table below presents the firm transportation commitments by year:



	(In thousands)
Remaining 2019	$	122,128
2020	273,973
2021	273,011
2022	273,011
2023	268,209
Thereafter	2,283,229
Total	$	3,493,561

Other Commitments

Effective October 1, 2014, the Company entered into a Sand Supply Agreement with Muskie Proppant LLC (“Muskie”), a subsidiary of Mammoth Energy and a related party. Pursuant to this agreement, as amended effective August 3, 2018, 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 through 2021. 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 ap