false000087449912/312020Q211P1YP1Y00008744992020-01-012020-06-30xbrli:shares00008744992020-07-31iso4217:USD00008744992020-06-3000008744992019-12-31iso4217:USDxbrli:sharesxbrli:pure00008744992019-01-012019-12-310000874499us-gaap:NaturalGasProductionMember2020-04-012020-06-300000874499us-gaap:NaturalGasProductionMember2019-04-012019-06-300000874499us-gaap:NaturalGasProductionMember2020-01-012020-06-300000874499us-gaap:NaturalGasProductionMember2019-01-012019-06-300000874499us-gaap:OilAndCondensateMember2020-04-012020-06-300000874499us-gaap:OilAndCondensateMember2019-04-012019-06-300000874499us-gaap:OilAndCondensateMember2020-01-012020-06-300000874499us-gaap:OilAndCondensateMember2019-01-012019-06-300000874499gpor:NaturalgasliquidsalesMember2020-04-012020-06-300000874499gpor:NaturalgasliquidsalesMember2019-04-012019-06-300000874499gpor:NaturalgasliquidsalesMember2020-01-012020-06-300000874499gpor:NaturalgasliquidsalesMember2019-01-012019-06-3000008744992020-04-012020-06-3000008744992019-04-012019-06-3000008744992019-01-012019-06-300000874499us-gaap:CommonStockMember2019-12-310000874499us-gaap:AdditionalPaidInCapitalMember2019-12-310000874499us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310000874499us-gaap:RetainedEarningsMember2019-12-310000874499us-gaap:RetainedEarningsMember2020-01-012020-03-3100008744992020-01-012020-03-310000874499us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-03-310000874499us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-310000874499us-gaap:CommonStockMember2020-01-012020-03-310000874499us-gaap:CommonStockMember2020-03-310000874499us-gaap:AdditionalPaidInCapitalMember2020-03-310000874499us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-310000874499us-gaap:RetainedEarningsMember2020-03-3100008744992020-03-310000874499us-gaap:RetainedEarningsMember2020-04-012020-06-300000874499us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-012020-06-300000874499us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300000874499us-gaap:CommonStockMember2020-04-012020-06-300000874499us-gaap:CommonStockMember2020-06-300000874499us-gaap:AdditionalPaidInCapitalMember2020-06-300000874499us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300000874499us-gaap:RetainedEarningsMember2020-06-300000874499us-gaap:CommonStockMember2018-12-310000874499us-gaap:AdditionalPaidInCapitalMember2018-12-310000874499us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310000874499us-gaap:RetainedEarningsMember2018-12-3100008744992018-12-310000874499us-gaap:RetainedEarningsMember2019-01-012019-03-3100008744992019-01-012019-03-310000874499us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-03-310000874499us-gaap:AdditionalPaidInCapitalMember2019-01-012019-03-310000874499us-gaap:CommonStockMember2019-01-012019-03-310000874499us-gaap:CommonStockMember2019-03-310000874499us-gaap:AdditionalPaidInCapitalMember2019-03-310000874499us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-310000874499us-gaap:RetainedEarningsMember2019-03-3100008744992019-03-310000874499us-gaap:RetainedEarningsMember2019-04-012019-06-300000874499us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-04-012019-06-300000874499us-gaap:AdditionalPaidInCapitalMember2019-04-012019-06-300000874499us-gaap:CommonStockMember2019-04-012019-06-300000874499us-gaap:CommonStockMember2019-06-300000874499us-gaap:AdditionalPaidInCapitalMember2019-06-300000874499us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-300000874499us-gaap:RetainedEarningsMember2019-06-3000008744992019-06-300000874499us-gaap:SubsequentEventMember2020-08-050000874499gpor:MisclassificationbetweenOperationandFinancingActivitiesMember2019-01-012019-06-30gpor:usd_per_mcf0000874499gpor:UticaPropertiesMember2020-06-300000874499gpor:MidConMember2020-06-300000874499gpor:OtherNonProducingPropertiesMember2020-06-3000008744992020-01-022020-01-020000874499gpor:GrizzlyOilSandsUlcMember2020-06-300000874499gpor:GrizzlyOilSandsUlcMember2019-12-310000874499gpor:GrizzlyOilSandsUlcMember2020-04-012020-06-300000874499gpor:GrizzlyOilSandsUlcMember2019-04-012019-06-300000874499gpor:GrizzlyOilSandsUlcMember2020-01-012020-06-300000874499gpor:GrizzlyOilSandsUlcMember2019-01-012019-06-300000874499gpor:MammothEnergyServicesLPMember2020-06-300000874499gpor:MammothEnergyServicesLPMember2019-12-310000874499gpor:MammothEnergyServicesLPMember2020-04-012020-06-300000874499gpor:MammothEnergyServicesLPMember2019-04-012019-06-300000874499gpor:MammothEnergyServicesLPMember2020-01-012020-06-300000874499gpor:MammothEnergyServicesLPMember2019-01-012019-06-300000874499gpor:WindsorMidstreamLlcMember2020-06-300000874499gpor:WindsorMidstreamLlcMember2019-12-310000874499gpor:WindsorMidstreamLlcMember2020-04-012020-06-300000874499gpor:WindsorMidstreamLlcMember2019-04-012019-06-300000874499gpor:WindsorMidstreamLlcMember2020-01-012020-06-300000874499gpor:WindsorMidstreamLlcMember2019-01-012019-06-300000874499gpor:TatexThailandIiLlcMember2020-06-300000874499gpor:TatexThailandIiLlcMember2019-12-310000874499gpor:TatexThailandIiLlcMember2020-04-012020-06-300000874499gpor:TatexThailandIiLlcMember2019-04-012019-06-300000874499gpor:TatexThailandIiLlcMember2020-01-012020-06-300000874499gpor:TatexThailandIiLlcMember2019-01-012019-06-300000874499us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMember2020-06-300000874499us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMember2019-12-310000874499us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMember2020-04-012020-06-300000874499us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMember2019-04-012019-06-300000874499us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMember2020-01-012020-06-300000874499us-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMember2019-01-012019-06-30utr:acre0000874499gpor:GrizzlyOilSandsUlcMembergpor:AthabascaPeaceRiverAndColdLakeOilSandsRegionsMember2020-01-012020-06-300000874499gpor:MammothEnergyServicesLPMember2020-06-300000874499gpor:MammothEnergyServicesLPMember2019-02-012019-02-280000874499gpor:MammothEnergyServicesLPMember2019-05-012019-05-310000874499gpor:ApicoLlcMembergpor:TatexThailandIiLlcMember2019-06-300000874499gpor:PhuHormFieldMembergpor:ApicoLlcMember2020-01-012020-06-300000874499gpor:NovaScotiaAmegyKeybankMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMember2020-06-300000874499gpor:NovaScotiaAmegyKeybankMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMember2019-12-310000874499gpor:A6.625SeniorNotesMemberus-gaap:SeniorNotesMember2020-06-300000874499gpor:A6.625SeniorNotesMemberus-gaap:SeniorNotesMember2019-12-310000874499gpor:A6.000SeniorNotesMemberus-gaap:SeniorNotesMember2020-06-300000874499gpor:A6.000SeniorNotesMemberus-gaap:SeniorNotesMember2019-12-310000874499gpor:A6.375SeniorNotesMemberus-gaap:SeniorNotesMember2020-06-300000874499gpor:A6.375SeniorNotesMemberus-gaap:SeniorNotesMember2019-12-310000874499us-gaap:SeniorNotesMembergpor:A6.375SeniorNotesDue2026Member2020-06-300000874499us-gaap:SeniorNotesMembergpor:A6.375SeniorNotesDue2026Member2019-12-310000874499gpor:InterBankMemberus-gaap:ConstructionLoansMemberus-gaap:LetterOfCreditMember2020-06-300000874499gpor:InterBankMemberus-gaap:ConstructionLoansMemberus-gaap:LetterOfCreditMember2019-12-310000874499gpor:NovaScotiaAmegyKeybankMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMember2019-11-250000874499gpor:NovaScotiaAmegyKeybankMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMember2020-03-310000874499gpor:NovaScotiaAmegyKeybankMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMember2020-05-010000874499gpor:NovaScotiaAmegyKeybankMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMember2020-05-012020-05-010000874499srt:ScenarioForecastMembergpor:NovaScotiaAmegyKeybankMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMember2021-09-302021-09-300000874499us-gaap:SubsequentEventMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMember2020-07-270000874499gpor:NovaScotiaAmegyKeybankMemberus-gaap:LetterOfCreditMembergpor:AmendedAndRestatedCreditAgreementMember2020-06-300000874499gpor:NovaScotiaAmegyKeybankMemberus-gaap:LineOfCreditMember2020-01-012020-06-300000874499us-gaap:ConstructionLoansMember2020-06-300000874499us-gaap:RevolvingCreditFacilityMember2020-04-012020-06-300000874499us-gaap:RevolvingCreditFacilityMember2020-01-012020-06-300000874499gpor:A6.625SeniorNotesMemberus-gaap:SeniorNotesMember2020-04-012020-06-300000874499gpor:A6.000SeniorNotesMemberus-gaap:SeniorNotesMember2020-04-012020-06-300000874499gpor:A6.375SeniorNotesMemberus-gaap:SeniorNotesMember2020-04-012020-06-300000874499us-gaap:SeniorNotesMembergpor:A6.375SeniorNotesDue2026Member2020-04-012020-06-300000874499us-gaap:SeniorNotesMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2020-06-300000874499us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:SeniorNotesMemberus-gaap:FairValueInputsLevel1Member2020-06-3000008744992019-01-012019-01-310000874499us-gaap:CommonStockMembergpor:ShareRepurchaseProgramMember2019-04-012019-06-300000874499us-gaap:CommonStockMembergpor:ShareRepurchaseProgramMember2019-01-012019-06-300000874499us-gaap:CommonStockMembergpor:ShareRepurchaseProgramMember2020-04-012020-06-300000874499us-gaap:CommonStockMembergpor:ShareRepurchaseProgramMember2020-01-012020-06-300000874499us-gaap:RestrictedStockMember2019-12-310000874499us-gaap:PerformanceSharesMember2019-12-310000874499us-gaap:RestrictedStockMember2020-01-012020-06-300000874499us-gaap:PerformanceSharesMember2020-01-012020-06-300000874499us-gaap:RestrictedStockMember2020-06-300000874499us-gaap:PerformanceSharesMember2020-06-300000874499us-gaap:RestrictedStockMembersrt:MinimumMember2020-01-012020-06-300000874499srt:MaximumMemberus-gaap:RestrictedStockMember2020-01-012020-06-300000874499gpor:IncentiveAwardsMember2020-06-300000874499gpor:IncentiveAwardsMember2020-01-012020-06-30utr:MMBTU0000874499gpor:TransportationCommitmentMember2020-06-300000874499us-gaap:LossOnLongTermPurchaseCommitmentMembergpor:MuskieProppantLLCMember2020-04-012020-06-300000874499us-gaap:LossOnLongTermPurchaseCommitmentMembergpor:MuskieProppantLLCMember2020-01-012020-06-300000874499us-gaap:LossOnLongTermPurchaseCommitmentMembergpor:MuskieProppantLLCMember2019-04-012019-06-300000874499us-gaap:LossOnLongTermPurchaseCommitmentMembergpor:MuskieProppantLLCMember2019-01-012019-06-30gpor:complaint00008744992020-06-302020-06-3000008744992020-04-012020-04-3000008744992013-12-112013-12-1100008744992018-10-012018-10-31gpor:violation00008744992017-01-042017-01-0400008744992019-04-152019-04-150000874499gpor:NYMEXHenryHubRemaining2020Member2020-01-012020-06-30iso4217:USDutr:MMBTU0000874499gpor:NYMEXHenryHubRemaining2020Member2020-06-30utr:bbl0000874499gpor:NYMEXWTIRemaining2020Member2020-01-012020-06-30iso4217:USDutr:bbl0000874499gpor:NYMEXWTIRemaining2020Member2020-06-300000874499gpor:MontBelvieuC3Remaining2020Member2020-01-012020-06-300000874499gpor:MontBelvieuC3Remaining2020Member2020-06-300000874499gpor:NYMEXHenryHub2022Memberus-gaap:ShortMemberus-gaap:CallOptionMember2020-01-012020-06-300000874499gpor:NYMEXHenryHub2022Memberus-gaap:ShortMemberus-gaap:CallOptionMember2020-06-300000874499gpor:NYMEXHenryHub2023Memberus-gaap:ShortMemberus-gaap:CallOptionMember2020-01-012020-06-300000874499gpor:NYMEXHenryHub2023Memberus-gaap:ShortMemberus-gaap:CallOptionMember2020-06-300000874499gpor:NYMEXHenryHub2021Member2020-01-012020-06-300000874499gpor:NYMEXHenryHub2021Member2020-06-300000874499gpor:TranscoZone4Remaining2020Memberus-gaap:LongMember2020-01-012020-06-300000874499gpor:TranscoZone4Remaining2020Memberus-gaap:LongMember2020-06-300000874499us-gaap:LongMembergpor:FixedSpreadRemaining2020Member2020-01-012020-06-300000874499us-gaap:LongMembergpor:FixedSpreadRemaining2020Member2020-06-300000874499gpor:DerivativeThresholdOneMember2020-06-300000874499gpor:DerivativeThresholdOneMember2020-01-012020-06-300000874499srt:MinimumMembergpor:DerivativeThresholdTwoMember2020-06-300000874499srt:MaximumMembergpor:DerivativeThresholdTwoMember2020-06-300000874499gpor:DerivativeThresholdThreeMember2020-06-300000874499gpor:DerivativeThresholdThreeMember2020-01-012020-06-300000874499gpor:DerivativeThresholdTwoMember2020-01-012020-06-300000874499gpor:CommodityDerivativeInstrumentsMember2020-06-300000874499gpor:CommodityDerivativeInstrumentsMember2019-12-310000874499gpor:ContingentLAConsiderationMember2019-12-310000874499gpor:ContingentLAConsiderationMember2020-06-300000874499gpor:GasMember2020-04-012020-06-300000874499gpor:GasMember2019-04-012019-06-300000874499gpor:GasMember2020-01-012020-06-300000874499gpor:GasMember2019-01-012019-06-300000874499srt:OilReservesMember2020-04-012020-06-300000874499srt:OilReservesMember2019-04-012019-06-300000874499srt:OilReservesMember2020-01-012020-06-300000874499srt:OilReservesMember2019-01-012019-06-300000874499srt:NaturalGasReservesMember2020-04-012020-06-300000874499srt:NaturalGasReservesMember2019-04-012019-06-300000874499srt:NaturalGasReservesMember2020-01-012020-06-300000874499srt:NaturalGasReservesMember2019-01-012019-06-300000874499gpor:ContingentLAConsiderationMember2020-04-012020-06-300000874499gpor:ContingentLAConsiderationMember2019-04-012019-06-300000874499gpor:ContingentLAConsiderationMember2020-01-012020-06-300000874499gpor:ContingentLAConsiderationMember2019-01-012019-06-300000874499us-gaap:FairValueInputsLevel1Member2020-06-300000874499us-gaap:FairValueInputsLevel2Member2020-06-300000874499us-gaap:FairValueInputsLevel3Member2020-06-300000874499us-gaap:FairValueInputsLevel1Member2019-12-310000874499us-gaap:FairValueInputsLevel2Member2019-12-310000874499us-gaap:FairValueInputsLevel3Member2019-12-310000874499us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2020-01-012020-06-300000874499us-gaap:OtherNoncurrentAssetsMember2020-01-012020-06-300000874499srt:MaximumMember2020-01-012020-06-300000874499srt:MinimumMembergpor:DrillingRigCommitmentsMember2020-06-300000874499srt:MaximumMembergpor:DrillingRigCommitmentsMember2020-06-300000874499srt:MinimumMember2020-06-300000874499srt:MaximumMember2020-06-3000008744992020-04-300000874499srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2020-06-300000874499srt:GuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2020-06-300000874499srt:ReportableLegalEntitiesMembersrt:NonGuarantorSubsidiariesMember2020-06-300000874499srt:ConsolidationEliminationsMember2020-06-300000874499srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2019-12-310000874499srt:GuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2019-12-310000874499srt:ReportableLegalEntitiesMembersrt:NonGuarantorSubsidiariesMember2019-12-310000874499srt:ConsolidationEliminationsMember2019-12-310000874499srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2020-04-012020-06-300000874499srt:GuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2020-04-012020-06-300000874499srt:ReportableLegalEntitiesMembersrt:NonGuarantorSubsidiariesMember2020-04-012020-06-300000874499srt:ConsolidationEliminationsMember2020-04-012020-06-300000874499srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2019-04-012019-06-300000874499srt:GuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2019-04-012019-06-300000874499srt:ReportableLegalEntitiesMembersrt:NonGuarantorSubsidiariesMember2019-04-012019-06-300000874499srt:ConsolidationEliminationsMember2019-04-012019-06-300000874499srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2020-01-012020-06-300000874499srt:GuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2020-01-012020-06-300000874499srt:ReportableLegalEntitiesMembersrt:NonGuarantorSubsidiariesMember2020-01-012020-06-300000874499srt:ConsolidationEliminationsMember2020-01-012020-06-300000874499srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2019-01-012019-06-300000874499srt:GuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2019-01-012019-06-300000874499srt:ReportableLegalEntitiesMembersrt:NonGuarantorSubsidiariesMember2019-01-012019-06-300000874499srt:ConsolidationEliminationsMember2019-01-012019-06-300000874499srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2018-12-310000874499srt:GuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2018-12-310000874499srt:ReportableLegalEntitiesMembersrt:NonGuarantorSubsidiariesMember2018-12-310000874499srt:ConsolidationEliminationsMember2018-12-310000874499srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2019-06-300000874499srt:GuarantorSubsidiariesMembersrt:ReportableLegalEntitiesMember2019-06-300000874499srt:ReportableLegalEntitiesMembersrt:NonGuarantorSubsidiariesMember2019-06-300000874499srt:ConsolidationEliminationsMember2019-06-300000874499us-gaap:SubsequentEventMembergpor:LevelOneCreditFacilityApplicableRateMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMember2020-07-272020-07-270000874499us-gaap:SubsequentEventMembergpor:LevelOneCreditFacilityApplicableRateMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMemberus-gaap:EurodollarMember2020-07-272020-07-270000874499us-gaap:BaseRateMemberus-gaap:SubsequentEventMembergpor:LevelOneCreditFacilityApplicableRateMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMember2020-07-272020-07-270000874499us-gaap:SubsequentEventMembergpor:LevelTwoCreditFacilityApplicableRateMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMember2020-07-272020-07-270000874499us-gaap:SubsequentEventMembergpor:LevelTwoCreditFacilityApplicableRateMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMemberus-gaap:EurodollarMember2020-07-272020-07-270000874499us-gaap:BaseRateMemberus-gaap:SubsequentEventMembergpor:LevelTwoCreditFacilityApplicableRateMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMember2020-07-272020-07-270000874499us-gaap:SubsequentEventMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMembergpor:LevelThreeCreditFacililtyApplicableRateMember2020-07-272020-07-270000874499us-gaap:SubsequentEventMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMembergpor:LevelThreeCreditFacililtyApplicableRateMemberus-gaap:EurodollarMember2020-07-272020-07-270000874499us-gaap:BaseRateMemberus-gaap:SubsequentEventMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMembergpor:LevelThreeCreditFacililtyApplicableRateMember2020-07-272020-07-270000874499gpor:LevelFourCreditFacilityApplicableRateMemberus-gaap:SubsequentEventMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMember2020-07-272020-07-270000874499gpor:LevelFourCreditFacilityApplicableRateMemberus-gaap:SubsequentEventMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMemberus-gaap:EurodollarMember2020-07-272020-07-270000874499us-gaap:BaseRateMembergpor:LevelFourCreditFacilityApplicableRateMemberus-gaap:SubsequentEventMembergpor:AmendedAndRestatedCreditAgreementMemberus-gaap:LineOfCreditMember2020-07-272020-07-270000874499us-gaap:SubsequentEventMembergpor:AmendedAndRestatedCreditAgreementMembergpor:LevelFiveCreditFacilityApplicableRateMemberus-gaap:LineOfCreditMember2020-07-272020-07-270000874499us-gaap:SubsequentEventMembergpor:AmendedAndRestatedCreditAgreementMembergpor:LevelFiveCreditFacilityApplicableRateMemberus-gaap:LineOfCreditMemberus-gaap:EurodollarMember2020-07-272020-07-270000874499us-gaap:BaseRateMemberus-gaap:SubsequentEventMembergpor:AmendedAndRestatedCreditAgreementMembergpor:LevelFiveCreditFacilityApplicableRateMemberus-gaap:LineOfCreditMember2020-07-272020-07-270000874499gpor:FixedPriceSwap2020Memberus-gaap:SubsequentEventMember2020-08-012020-08-050000874499gpor:FixedPriceSwap2020Memberus-gaap:SubsequentEventMember2020-08-05
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, 2020
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 ¨ Accelerated filer ý
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 31, 2020, 160,115,829 shares of the registrant’s common stock were outstanding.
GULFPORT ENERGY CORPORATION
TABLE OF CONTENTS
| | | | | | | | |
| | Page |
| | |
| | |
Item 1. | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Item 2. | | |
| | |
Item 3. | | |
| | |
Item 4. | | |
| | |
| | |
| | |
Item 1. | | |
| | |
Item 1A. | | |
| | |
Item 2. | | |
| | |
Item 3. | | |
| | |
Item 4. | | |
| | |
Item 5. | | |
| | |
Item 6. | | |
| | |
| | |
GULFPORT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| June 30, 2020 | | December 31, 2019 |
| (Unaudited) | | |
| (In thousands, except share data) | | |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 2,817 | | | $ | 6,060 | |
| | | |
| | | |
Accounts receivable—oil and natural gas sales | 65,645 | | | 121,210 | |
Accounts receivable—joint interest and other | 19,389 | | | 47,975 | |
| | | |
Prepaid expenses and other current assets | 10,862 | | | 4,431 | |
Short-term derivative instruments | 53,188 | | | 126,201 | |
Total current assets | 151,901 | | | 305,877 | |
Property and equipment: | | | |
Oil and natural gas properties, full-cost accounting, $1,564,189 and $1,686,666 excluded from amortization in 2020 and 2019, respectively | 10,730,992 | | | 10,595,735 | |
Other property and equipment | 96,838 | | | 96,719 | |
Accumulated depletion, depreciation, amortization and impairment | (8,457,464) | | | (7,228,660) | |
Property and equipment, net | 2,370,366 | | | 3,463,794 | |
Other assets: | | | |
Equity investments | 13,052 | | | 32,044 | |
Long-term derivative instruments | 4,298 | | | 563 | |
Deferred tax asset | — | | | 7,563 | |
| | | |
Operating lease assets | 3,640 | | | 14,168 | |
Operating lease assets—related parties | — | | | 43,270 | |
Other assets | 37,000 | | | 15,540 | |
Total other assets | 57,990 | | | 113,148 | |
Total assets | $ | 2,580,257 | | | $ | 3,882,819 | |
Liabilities and Stockholders’ Equity | | | |
Current liabilities: | | | |
Accounts payable and accrued liabilities | $ | 315,575 | | | $ | 415,218 | |
| | | |
Short-term derivative instruments | 8,540 | | | 303 | |
Current portion of operating lease liabilities | 3,356 | | | 13,826 | |
Current portion of operating lease liabilities—related parties | — | | | 21,220 | |
Current maturities of long-term debt | 649 | | | 631 | |
Total current liabilities | 328,120 | | | 451,198 | |
Long-term derivative instruments | 45,615 | | | 53,135 | |
Asset retirement obligation | 61,371 | | | 60,355 | |
Uncertain tax position liability | 3,209 | | | 3,127 | |
| | | |
Non-current operating lease liabilities | 284 | | | 342 | |
Non-current operating lease liabilities—related parties | — | | | 22,050 | |
Long-term debt, net of current maturities | 1,910,318 | | | 1,978,020 | |
Total liabilities | 2,348,917 | | | 2,568,227 | |
Commitments and contingencies (Note 9) | | | |
Preferred stock, $0.01 par value; 5.0 million shares authorized (30 thousand authorized as redeemable 12% cumulative preferred stock, Series A), and none issued and outstanding | — | | | — | |
Stockholders’ equity: | | | |
Common stock - $0.01 par value, 200.0 million shares authorized, 160.1 million issued and outstanding at June 30, 2020 and 159.7 million at December 31, 2019 | 1,601 | | | 1,597 | |
Paid-in capital | 4,211,062 | | | 4,207,554 | |
Accumulated other comprehensive loss | (54,991) | | | (46,833) | |
Accumulated deficit | (3,926,332) | | | (2,847,726) | |
Total stockholders’ equity | 231,340 | | | 1,314,592 | |
Total liabilities and stockholders’ equity | $ | 2,580,257 | | | $ | 3,882,819 | |
See accompanying notes to consolidated financial statements.
GULFPORT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2020 | | 2019 | | 2020 | | 2019 |
| (In thousands) | | | | | | |
REVENUES: | | | | | | | |
Natural gas sales | $ | 86,797 | | | $ | 225,257 | | | $ | 195,344 | | | $ | 501,273 | |
Oil and condensate sales | 8,390 | | | 36,910 | | | 31,541 | | | 69,392 | |
Natural gas liquid sales | 10,252 | | | 25,687 | | | 27,165 | | | 57,812 | |
Net gain on natural gas, oil and NGL derivatives | 26,971 | | | 171,140 | | | 125,237 | | | 151,095 | |
Total Revenues | 132,410 | | | 458,994 | | | 379,287 | | | 779,572 | |
OPERATING EXPENSES: | | | | | | | |
Lease operating expenses | 15,686 | | | 22,388 | | | 31,672 | | | 42,195 | |
Production taxes | 3,605 | | | 8,098 | | | 8,404 | | | 16,019 | |
Midstream gathering and processing expenses | 59,974 | | | 72,015 | | | 117,870 | | | 142,297 | |
Depreciation, depletion and amortization | 64,790 | | | 124,951 | | | 142,818 | | | 243,384 | |
Impairment of oil and natural gas properties | 532,880 | | | — | | | 1,086,225 | | | — | |
General and administrative expenses | 10,470 | | | 11,727 | | | 26,639 | | | 21,784 | |
Accretion expense | 755 | | | 1,359 | | | 1,496 | | | 2,426 | |
| | | | | | | |
Total Operating Expenses | 688,160 | | | 240,538 | | | 1,415,124 | | | 468,105 | |
(LOSS) INCOME FROM OPERATIONS | (555,750) | | | 218,456 | | | (1,035,837) | | | 311,467 | |
OTHER EXPENSE (INCOME): | | | | | | | |
Interest expense | 32,366 | | | 36,418 | | | 65,356 | | | 72,039 | |
Interest income | (78) | | | (159) | | | (230) | | | (311) | |
Gain on debt extinguishment | (34,257) | | | — | | | (49,579) | | | — | |
| | | | | | | |
Loss from equity method investments, net | 45 | | | 125,582 | | | 10,834 | | | 121,309 | |
Other expense | 7,242 | | | 990 | | | 9,098 | | | 563 | |
Total Other Expense | 5,318 | | | 162,831 | | | 35,479 | | | 193,600 | |
(LOSS) INCOME BEFORE INCOME TAXES | (561,068) | | | 55,625 | | | (1,071,316) | | | 117,867 | |
Income Tax Expense (Benefit) | — | | | (179,331) | | | 7,290 | | | (179,331) | |
NET (LOSS) INCOME | $ | (561,068) | | | $ | 234,956 | | | $ | (1,078,606) | | | $ | 297,198 | |
NET (LOSS) INCOME PER COMMON SHARE: | | | | | | | |
Basic | $ | (3.51) | | | $ | 1.47 | | | $ | (6.75) | | | $ | 1.85 | |
Diluted | $ | (3.51) | | | $ | 1.47 | | | $ | (6.75) | | | $ | 1.84 | |
Weighted average common shares outstanding—Basic | 159,934 | | | 159,325 | | | 159,847 | | | 161,065 | |
Weighted average common shares outstanding—Diluted | 159,934 | | | 159,507 | | | 159,847 | | | 161,590 | |
See accompanying notes to consolidated financial statements.
GULFPORT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | | | Six months ended June 30, | | |
| 2020 | | 2019 | | 2020 | | 2019 |
| (In thousands) | | | | | | |
Net (loss) income | $ | (561,068) | | | $ | 234,956 | | | $ | (1,078,606) | | | $ | 297,198 | |
Foreign currency translation adjustment | 6,872 | | | 3,610 | | | (8,158) | | | 7,411 | |
| | | | | | | |
Other comprehensive income (loss) | 6,872 | | | 3,610 | | | (8,158) | | | 7,411 | |
Comprehensive (loss) income | $ | (554,196) | | | $ | 238,566 | | | $ | (1,086,764) | | | $ | 304,609 | |
See accompanying notes to consolidated financial statements.
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) | | | | | | | | | | |
Balance at January 1, 2020 | 159,711 | | | $ | 1,597 | | | $ | 4,207,554 | | | $ | (46,833) | | | $ | (2,847,726) | | | $ | 1,314,592 | |
Net Loss | — | | | — | | | — | | | — | | | (517,538) | | | (517,538) | |
Other Comprehensive Loss | — | | | — | | | — | | | (15,030) | | | — | | | (15,030) | |
Stock Compensation | — | | | — | | | 2,104 | | | — | | | — | | | 2,104 | |
Shares Repurchased | (80) | | | (1) | | | (78) | | | — | | | — | | | (79) | |
Issuance of Restricted Stock | 211 | | | 2 | | | (2) | | | — | | | — | | | — | |
Balance at March 31, 2020 | 159,842 | | | $ | 1,598 | | | $ | 4,209,578 | | | $ | (61,863) | | | $ | (3,365,264) | | | $ | 784,049 | |
Net Loss | — | | | — | | | — | | | — | | | (561,068) | | | (561,068) | |
Other Comprehensive Income | — | | | — | | | — | | | 6,872 | | | — | | | 6,872 | |
Stock Compensation | — | | | — | | | 1,515 | | | — | | | — | | | 1,515 | |
Shares Repurchased | (27) | | | — | | | (28) | | | — | | | — | | | (28) | |
Issuance of Restricted Stock | 301 | | | 3 | | | (3) | | | — | | | — | | | — | |
Balance at June 30, 2020 | 160,116 | | | $ | 1,601 | | | $ | 4,211,062 | | | $ | (54,991) | | | $ | (3,926,332) | | | $ | 231,340 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Paid-in Capital | | Accumulated Other Comprehensive (Loss) Income | | Accumulated Deficit | | Total Stockholders’ Equity |
| Common Stock | | | | | | | | | | |
| Shares | | Amount | | | | | | | | |
| (In thousands) | | | | | | | | | | |
Balance at January 1, 2019 | 162,986 | | | $ | 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 | (3,619) | | | (37) | | | (28,293) | | | — | | | — | | | (28,330) | |
Issuance of Restricted Stock | 55 | | | 1 | | | (1) | | | — | | | — | | | — | |
Balance at March 31, 2019 | 159,422 | | | $ | 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 | (297) | | | (3) | | | (2,267) | | | — | | | — | | | (2,270) | |
Issuance of Restricted Stock | 271 | | | 3 | | | (3) | | | — | | | — | | | — | |
Balance at June 30, 2019 | 159,396 | | | $ | 1,594 | | | $ | 4,202,599 | | | $ | (48,615) | | | $ | (548,170) | | | $ | 3,607,408 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
See accompanying notes to consolidated financial statements.
GULFPORT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | |
| Six months ended June 30, | | |
| 2020 | | 2019 |
| (In thousands) | | |
Cash flows from operating activities: | | | |
Net (loss) income | $ | (1,078,606) | | | $ | 297,198 | |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | | | |
Depletion, depreciation and amortization | 142,818 | | | 243,384 | |
Impairment of oil and natural gas properties | 1,086,225 | | | — | |
Loss (income) from equity investments | 10,834 | | | 121,449 | |
Gain on debt extinguishment | (49,579) | | | — | |
Net gain on derivative instruments | (125,237) | | | (151,095) | |
Net cash receipts (payments) on settled derivative instruments | 195,232 | | | (1,494) | |
Deferred income tax expense | 7,290 | | | (179,331) | |
| | | |
Other, net | 9,844 | | | 11,341 | |
Changes in operating assets and liabilities: | | | |
Decrease in accounts receivable—oil and natural gas sales | 55,565 | | | 78,525 | |
Decrease (increase) in accounts receivable—joint interest and other | 29,159 | | | (24,148) | |
| | | |
(Decrease) increase in accounts payable and accrued liabilities | (30,620) | | | 3,220 | |
Other, net | (5,703) | | | 720 | |
Net cash provided by operating activities | 247,222 | | | 399,769 | |
Cash flows from investing activities: | | | |
| | | |
Additions to oil and natural gas properties | (274,851) | | | (508,315) | |
Proceeds from sale of oil and natural gas properties | 45,185 | | | 745 | |
Additions to other property and equipment | (575) | | | (4,298) | |
| | | |
Proceeds from sale of other property and equipment | 151 | | | 130 | |
| | | |
| | | |
Contributions to equity method investments | — | | | (432) | |
Distributions from equity method investments | — | | | 1,945 | |
| | | |
Net cash used in investing activities | (230,090) | | | (510,225) | |
Cash flows from financing activities: | | | |
Principal payments on borrowings | (323,322) | | | (345,350) | |
Borrowings on line of credit | 326,000 | | | 455,000 | |
| | | |
Repurchases of senior notes | (22,827) | | | — | |
Payments for repurchases of stock under approved stock repurchase program | — | | | (30,000) | |
Other, net | (226) | | | (714) | |
| | | |
Net cash (used in) provided by financing activities | (20,375) | | | 78,936 | |
Net decrease in cash, cash equivalents and restricted cash | (3,243) | | | (31,520) | |
Cash, cash equivalents and restricted cash at beginning of period | 6,060 | | | 52,297 | |
Cash, cash equivalents and restricted cash at end of period | $ | 2,817 | | | $ | 20,777 | |
Supplemental disclosure of cash flow information: | | | |
Interest payments | $ | 60,523 | | | $ | 67,472 | |
Income tax receipts | $ | — | | | $ | (1,794) | |
Supplemental disclosure of non-cash transactions: | | | |
Capitalized stock-based compensation | $ | 1,891 | | | $ | 2,252 | |
Asset retirement obligation capitalized | $ | 1,553 | | | $ | 6,230 | |
Asset retirement obligation removed due to divestiture | $ | (2,033) | | | $ | — | |
Interest capitalized | $ | 710 | | | $ | 1,771 | |
Fair value of contingent consideration asset on date of divestiture | $ | 23,090 | | | $ | — | |
Foreign currency translation (loss) gain on equity method investments | $ | (8,158) | | | $ | 7,411 | |
See accompanying notes to consolidated financial statements.
GULFPORT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.BASIS OF PRESENTATION, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND LIQUIDITY, MANAGEMENT'S PLANS AND GOING CONCERN
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared by Gulfport Energy Corporation (the “Company” or “Gulfport”) 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 reported 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.
The 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, 2020 are not necessarily indicative of the results expected for the full year.
COVID-19
In March 2020, the World Health Organization classified the outbreak of COVID-19 as a pandemic and recommended containment and mitigation measures worldwide. The measures have led to worldwide shutdowns and halting of commercial and interpersonal activity, as governments around the world have imposed regulations in efforts to control the spread of COVID-19 such as shelter-in-place orders, quarantines, executive orders and similar restrictions.
Gulfport remains focused on protecting the health and well-being of its employees and the communities in which it operates while assuring the continuity of its business operations. The Company implemented preventative measures and developed corporate and field response plans to minimize unnecessary risk of exposure and prevent infection. Additionally, the Company has a crisis management team for health, safety and environmental matters and personnel issues, and has established a COVID-19 Response Team to address various impacts of the situation, as they have been developing. Gulfport has modified certain business practices (including remote working for its corporate employees and restricted employee business travel) to conform to government restrictions and best practices encouraged by the Centers for Disease Control and Prevention, the World Health Organization and other governmental and regulatory authorities. In May 2020, the Company began its phased transition back to the office for its corporate employees. As part of this transition, the Company put into place preventative measures to focus on social distancing and minimizing unnecessary risk of exposure. As of the date of this filing, Gulfport has transitioned approximately 60% of its corporate employees back to the corporate office. The Company will continue to monitor trends and governmental guidelines and may adjust its return to office plans accordingly to ensure the health and safety of its employees. As a result of its business continuity measures, the Company has not experienced significant disruptions in executing its business operations in 2020.
Gulfport is closely monitoring the impact of COVID-19 on all aspects of its business and the current commodity price environment and is unable to predict the impact it will have on its future financial position or operating results. In response to the current commodity price environment, the Company voluntarily shut-in a portion of its production during the second quarter of 2020 and announced tiered salary reduction for most employees, senior management team and the Board of Directors beginning in June 2020 with such measures expected to last through December 2020. Additionally, select furloughs were implemented to reduce costs and preserve liquidity.
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act did not have a material impact on the Company’s consolidated financial statements.
Liquidity, Management's Plans and Going Concern
As noted above, decreased demand for oil and natural gas as a result of the COVID-19 pandemic and the accompanying decrease in commodity prices has significantly impaired the Company's ability to access capital markets and to refinance its
existing indebtedness. Further, these conditions have made amendments or waivers to its revolving credit facility more difficult to obtain and available on terms less favorable to the Company. If depressed commodity prices persist or decline further, the borrowing base under the Company's revolving credit facility could be further reduced at its next scheduled redetermination date in November 2020. Any such reduction would constrain the Company's liquidity and may impair its ability to fund its planned capital expenditures and meet its obligations under its existing indebtedness. Further, a reduction in the Company's capital expenditures would decrease its production, revenues, operating cash flow and EBITDA, which could limit its ability to comply with the restrictive covenants in its revolving credit facility and other existing indebtedness. Finally, the Company's existing revolving credit facility matures in December 2021 and therefore will become a current liability at year end 2020 unless the Company is able to refinance the credit facility with a new credit facility or other financing. Considering the current state of the first lien market and the Company's elevated leverage profile, there is substantial risk that a refinancing will not be available to the Company on reasonable terms. A current liability under the revolving credit facility at year end 2020 may result in a qualified audit opinion which could result in a default under the terms of the current revolving credit facility. As a result of these uncertainties and other factors, management has concluded that there is substantial doubt about the Company's ability to continue as a going concern. Failure to meet the Company's obligations under its existing indebtedness or failure to comply with any of its covenants, if not waived, would result in an event of default under such indebtedness and result in the potential acceleration of outstanding indebtedness thereunder and, with respect to the revolving credit facility, the potential foreclosure on the collateral securing such debt, and could cause a cross-default under its other outstanding indebtedness.
In the current depressed commodity price environment and period of economic uncertainty, the Company has taken various steps over the last several months to improve its balance sheet and preserve liquidity including (1) exercising capital discipline by reducing 2020 capital spending by 50% as compared to 2019, (2) focusing on operational efficiencies to reduce operating costs as evidenced by the recent reductions in Development and Completion costs per lateral foot, (3) reducing corporate general and administrative costs significantly, (4) and repurchasing unsecured notes at a deep discount.
Although management’s actions listed above have helped to improve our liquidity and leverage profile, continued macro headwinds including the depressed state of energy capital markets and the extraordinarily low commodity price environments present significant risks to the Company's ability to fund its operations going forward. Accordingly, management has determined there is substantial doubt about its ability to continue as a going concern over the next twelve months from the issuance of these financial statements. The Company has engaged financial and legal advisors to assist with the evaluation of a range of liability management alternatives. Additionally, the Company maintains an active dialogue with its senior lenders and bondholders regarding liability management alternatives to improve its balance sheet. There can be no assurances that the Company will be able to successfully complete a liability management transaction that materially improves the Company’s leverage profile or liquidity position.
The consolidated financial statements (i) have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and other commitments in the normal course of business and (ii) do not include any adjustments to reflect the possible future effects of the uncertainty on the recoverability or classification of recorded asset amounts or the amounts or classifications of liabilities.
Impact on Previously Reported Results
During the third quarter of 2019, the Company identified that certain activities were misclassified between cash flows from operating activities and cash flows from investing activities. These activities had been included in accounts payable, accrued liabilities and other and presented as cash flows from operating activities while they should have been presented as additions to oil and natural gas properties in cash flows from investing activities. The Company corrected the previously presented statements of cash flows for these additions and in doing so, for the six months ended June 30, 2019 contained herein, the consolidated statements of cash flows and the condensed consolidating statements of cash flows were adjusted to increase net cash flows provided by operating activities by $90.8 million with a corresponding increase in net cash flows used in investing activities. The Company has evaluated the effect of the previous presentation, both qualitatively and quantitatively, and concluded that it did not have a material impact on any previously filed annual or quarterly consolidated financial statements.
Recently Adopted Accounting Standards
On January 1, 2020, the Company adopted ASU No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectibility of the
reported amount. The Company adopted the new standard using the prospective transition method, and it did not have a material impact on the Company's consolidated financial statements and related disclosures.
2.PROPERTY AND EQUIPMENT
The major categories of property and equipment and related accumulated depletion, depreciation, amortization ("DD&A") and impairment as of June 30, 2020 and December 31, 2019 are as follows:
| | | | | | | | | | | |
| June 30, 2020 | | December 31, 2019 |
| (In thousands) | | |
Oil and natural gas properties | $ | 10,730,992 | | | $ | 10,595,735 | |
Accumulated DD&A and impairment | (8,415,756) | | | (7,191,957) | |
Oil and natural gas properties, net | 2,315,236 | | | 3,403,778 | |
Other depreciable property and equipment | 91,317 | | | 91,198 | |
Land | 5,521 | | | 5,521 | |
Accumulated DD&A | (41,708) | | | (36,703) | |
Other property and equipment, net | 55,130 | | | 60,016 | |
Property and equipment, net | $ | 2,370,366 | | | $ | 3,463,794 | |
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, 2020, the net book value of the Company's oil and gas properties, less related deferred income taxes, was above the calculated ceiling primarily as a result of reduced commodity prices for the period leading up to June 30, 2020. As a result, the Company was required to record impairments of its oil and natural gas properties of $532.9 million and $1.1 billion for the three and six months ended June 30, 2020, respectively. No impairments were required for oil and natural gas properties for the three and six months ended June 30, 2019.
Based on prices for the last nine months and the short-term pricing outlook for the third quarter of 2020, the Company expects to recognize additional full cost impairments in the third quarter of 2020. The amount of any future impairments is difficult to predict as it depends on future commodity prices, production rates, proved reserves, evaluation of costs excluded from amortization, future development costs and production costs. Any future full cost impairments are not expected to have an impact to the Company's future cash flows or liquidity.
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 costs associated with overseeing exploration and development activities. All general and administrative costs not directly associated with exploration and development activities are charged to expense as they are incurred. Capitalized general and administrative costs were approximately $8.2 million and $13.6 million for the three and six months ended June 30, 2020, respectively, and $8.8 million and $16.5 million for the three and six months ended June 30, 2019, 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 $0.73 and $1.00 per Mcfe for the six months ended June 30, 2020 and 2019, respectively.
The following table summarizes the Company’s unevaluated properties excluded from amortization by area at June 30, 2020:
| | | | | |
| June 30, 2020 |
| (In thousands) |
Utica | $ | 874,886 | |
MidContinent | 687,169 | |
Other | 2,134 | |
| $ | 1,564,189 | |
At December 31, 2019, approximately $1.7 billion of unevaluated properties were not subject to amortization.
The Company evaluates the costs excluded from its amortization calculation at least annually. Individually insignificant unevaluated properties are grouped for evaluation and periodically transferred to evaluated properties over a timeframe consistent with their expected development schedule.
Asset Retirement Obligation
A reconciliation of the Company’s asset retirement obligation for the six months ended June 30, 2020 and 2019 is as follows:
| | | | | | | | | | | |
| June 30, 2020 | | June 30, 2019 |
| (In thousands) | | |
Asset retirement obligation, beginning of period | $ | 60,355 | | | $ | 79,952 | |
Liabilities incurred | 1,553 | | | 5,153 | |
Liabilities settled | — | | | (117) | |
Liabilities removed due to divestitures | (2,033) | | | — | |
Accretion expense | 1,496 | | | 2,426 | |
Revisions in estimated cash flows | — | | | 1,077 | |
Asset retirement obligation as of end of period | 61,371 | | | 88,491 | |
| | | |
| | | |
3.DIVESTITURES
Sale of Water Infrastructure Assets
On January 2, 2020, the Company closed on the sale of its SCOOP water infrastructure assets to a third-party water service provider. The Company received $50.0 million in cash proceeds upon closing and has an opportunity to earn potential additional incentive payments over the next 15 years, subject to the Company's ability to meet certain thresholds which will be driven by, among other things, the Company's future development program and water production levels. The agreement contained no minimum volume commitments. The fair value of the contingent consideration as of the closing date was $23.1 million. The divested assets were included in the amortization base of the full cost pool and no gain or loss was recognized in the accompanying consolidated statements of operations as a result of the sale.
4.EQUITY INVESTMENTS
Investments accounted for by the equity method consist of the following as of June 30, 2020 and December 31, 2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Carrying value | | | | (Loss) income from equity method investments | | | | | | |
| Approximate ownership % | | June 30, 2020 | | December 31, 2019 | | Three months ended June 30, | | | | Six months ended June 30, | | |
| | | | | | | 2020 | | 2019 | | 2020 | | 2019 |
| | | (In thousands) | | | | | | | | | | |
Investment in Grizzly Oil Sands ULC | 24.6 | % | | $ | 13,013 | | | $ | 21,000 | | | $ | (45) | | | $ | 54 | | | (188) | | | $ | (339) | |
Investment in Mammoth Energy Services, Inc. | 21.5 | % | | — | | | 11,005 | | | — | | | (127,581) | | | (10,646) | | | (123,055) | |
Investment in Windsor Midstream LLC | 22.5 | % | | 39 | | | 39 | | | — | | | — | | | — | | | — | |
Investment in Tatex Thailand II, LLC | 23.5 | % | | — | | | — | | | — | | | 1,945 | | | — | | | 2,085 | |
| | | $ | 13,052 | | | $ | 32,044 | | | $ | (45) | | | $ | (125,582) | | | $ | ( |