gpor-20200930

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 September 30, 2020


☐			TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-19514

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 November 5, 2020, 160,762,186 shares of the registrant’s common stock were outstanding.

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GULFPORT ENERGY CORPORATION

TABLE OF CONTENTS


		Page
PART I FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited):	2

	Consolidated Balance Sheets at September 30, 2020 and December 31, 2019	2

	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019	3

	Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2020 and 2019	4

	Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2020 and 2019	5

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019	7

	Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	42

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64

Item 4.	Controls and Procedures	66

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	67

Item 1A.	Risk Factors	69

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72

Item 3.	Defaults Upon Senior Securities	72

Item 4.	Mine Safety Disclosures	72

Item 5.	Other Information	73

Item 6.	Exhibits	74

Signatures		76

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GULFPORT ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS


	September 30, 2020		December 31, 2019
	(Unaudited)
	(In thousands, except share data)
Assets
Current assets:
Cash and cash equivalents	$	51,043	$	6,060


Accounts receivable—oil and natural gas sales	92,443		121,210
Accounts receivable—joint interest and other	15,421		47,975

Prepaid expenses and other current assets	51,187		4,431
Short-term derivative instruments	6,245		126,201
Total current assets	216,339		305,877
Property and equipment:
Oil and natural gas properties, full-cost accounting, $1,526,941 and $1,686,666 excluded from amortization in 2020 and 2019, respectively	10,786,305		10,595,735
Other property and equipment	95,921		96,719
Accumulated depletion, depreciation, amortization and impairment	(8,779,704)		(7,228,660)
Property and equipment, net	2,102,522		3,463,794
Other assets:
Equity investments	16,560		32,044
Long-term derivative instruments	1,098		563
Deferred tax asset	—		7,563

Operating lease assets	2,012		14,168
Operating lease assets—related parties	—		43,270
Other assets	37,028		15,540
Total other assets	56,698		113,148
Total assets	$	2,375,559	$	3,882,819
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	295,359	$	415,218

Short-term derivative instruments	24,164		303
Current portion of operating lease liabilities	1,757		13,826
Current portion of operating lease liabilities—related parties	—		21,220
Current maturities of long-term debt	656		631
Total current liabilities	321,936		451,198
Long-term derivative instruments	63,803		53,135
Asset retirement obligation	62,935		60,355
Uncertain tax position liability	3,371		3,127

Non-current operating lease liabilities	255		342
Non-current operating lease liabilities—related parties	—		22,050
Long-term debt, net of current maturities	2,068,036		1,978,020
Total liabilities	2,520,336		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, 160.8 million issued and outstanding at September 30, 2020 and 159.7 million at December 31, 2019	1,607		1,597
Paid-in capital	4,212,241		4,207,554
Accumulated other comprehensive loss	(51,330)		(46,833)
Accumulated deficit	(4,307,295)		(2,847,726)
Total stockholders’ equity	(144,777)		1,314,592
Total liabilities and stockholders’ equity	$	2,375,559	$	3,882,819

See accompanying notes to consolidated financial statements.

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GULFPORT ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(In thousands)
REVENUES:
Natural gas sales	$	155,163	$	269,798	$	456,859	$	876,411
Oil and condensate sales	16,012		24,550		47,553		93,942
Natural gas liquid sales	18,824		20,324		45,989		78,136
Net (loss) gain on natural gas, oil and NGL derivatives	(53,823)		27,074		71,414		178,169
Total Revenues	136,176		341,746		621,815		1,226,658
OPERATING EXPENSES:
Lease operating expenses	15,274		22,473		46,946		64,668
Production taxes	4,028		6,565		12,432		22,584
Midstream gathering and processing expenses	110,567		135,006		334,789		382,643
Depreciation, depletion and amortization	51,551		163,270		194,369		406,654
Impairment of oil and natural gas properties	270,874		571,442		1,357,099		571,442
General and administrative expenses	20,524		13,198		46,546		34,982
Restructuring and liability management	8,984		—		9,601		—
Accretion expense	774		747		2,270		3,173

Total Operating Expenses	482,576		912,701		2,004,052		1,486,146
LOSS FROM OPERATIONS	(346,400)		(570,955)		(1,382,237)		(259,488)
OTHER EXPENSE (INCOME):
Interest expense	34,321		35,556		99,677		107,595
Interest income	(52)		(338)		(282)		(649)
Gain on debt extinguishment	—		(23,600)		(49,579)		(23,600)

Loss from equity method investments, net	153		43,082		10,987		164,391
Other expense	141		3,194		9,239		3,757
Total Other Expense	34,563		57,894		70,042		251,494
LOSS BEFORE INCOME TAXES	(380,963)		(628,849)		(1,452,279)		(510,982)
Income Tax (Benefit) Expense	—		(144,047)		7,290		(323,378)
NET LOSS	$	(380,963)	$	(484,802)	$	(1,459,569)	$	(187,604)
NET LOSS PER COMMON SHARE:
Basic	$	(2.37)	$	(3.04)	$	(9.12)	$	(1.17)
Diluted	$	(2.37)	$	(3.04)	$	(9.12)	$	(1.17)
Weighted average common shares outstanding—Basic	160,683		159,548		160,053		160,554
Weighted average common shares outstanding—Diluted	160,683		159,548		160,053		160,554

See accompanying notes to consolidated financial statements.

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GULFPORT ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(In thousands)
Net loss	$	(380,963)	$	(484,802)	$	(1,459,569)	$	(187,604)
Foreign currency translation adjustment	3,661		(2,064)		(4,497)		5,347

Other comprehensive income (loss)	3,661		(2,064)		(4,497)		5,347
Comprehensive loss	$	(377,302)	$	(486,866)	$	(1,464,066)	$	(182,257)

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)
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
Net Loss	—	—		—		—		(380,963)		(380,963)
Other Comprehensive Income	—	—		—		3,661		—		3,661
Stock Compensation	—	—		1,314		—		—		1,314
Shares Repurchased	(136)	(2)		(127)		—		—		(129)
Issuance of Restricted Stock	782	8		(8)		—		—		—
Balance at September 30, 2020	160,762	$	1,607	$	4,212,241	$	(51,330)	$	(4,307,295)	$	(144,777)

(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)
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
Net Loss	—	—		—		—		(484,802)		(484,802)
Other Comprehensive Loss	—	—		—		(2,064)		—		(2,064)
Stock Compensation	—	—		2,651		—		—		2,651
Shares Repurchased	(36)	—		(89)		—		—		(89)
Issuance of Restricted Stock	349	3		(3)		—		—		—
Balance at September 30, 2019	159,709	$	1,597	$	4,205,158	$	(50,679)	$	(1,032,972)	$	3,123,104

See accompanying notes to consolidated financial statements.

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GULFPORT ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine months ended September 30,
	2020		2019
	(In thousands)
Cash flows from operating activities:
Net loss	$	(1,459,569)	$	(187,604)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depletion, depreciation and amortization	194,369		406,654
Impairment of oil and natural gas properties	1,357,099		571,442
Loss from equity investments	10,987		164,532
Gain on debt extinguishment	(49,579)		(23,600)
Net gain on derivative instruments	(71,414)		(178,169)
Net cash receipts on settled derivative instruments	225,364		80,744
Deferred income tax expense (benefit)	7,290		(323,378)

Other, net	12,753		15,242
Changes in operating assets and liabilities:
Decrease in accounts receivable—oil and natural gas sales	28,767		97,543
Decrease (increase) in accounts receivable—joint interest and other	32,827		(18,830)
(Increase) decrease in prepaid expenses and other current assets	(45,620)		4,359
(Decrease) increase in accounts payable and accrued liabilities	(40,552)		8,567
Other, net	(2,721)		(147)
Net cash provided by operating activities	200,001		617,355
Cash flows from investing activities:

Additions to oil and natural gas properties	(337,979)		(646,535)
Proceeds from sale of oil and natural gas properties	46,932		10,864
Additions to other property and equipment	(591)		(4,694)

Proceeds from sale of other property and equipment	942		204


Contributions to equity method investments	—		(432)
Distributions from equity method investments	—		1,945

Net cash used in investing activities	(290,696)		(638,648)
Cash flows from financing activities:
Principal payments on borrowings	(372,484)		(550,500)
Borrowings on line of credit	531,857		640,000

Repurchases of senior notes	(22,827)		(79,480)
Payments for repurchases of stock under approved stock repurchase program	—		(30,000)
Other, net	(868)		(900)

Net cash provided by (used in) financing activities	135,678		(20,880)
Net increase (decrease) in cash, cash equivalents and restricted cash	44,983		(42,173)
Cash, cash equivalents and restricted cash at beginning of period	6,060		52,297
Cash, cash equivalents and restricted cash at end of period	$	51,043	$	10,124
Supplemental disclosure of cash flow information:
Interest payments	$	73,979	$	85,272
Income tax receipts	$	—	$	(1,794)
Supplemental disclosure of non-cash transactions:
Capitalized stock-based compensation	$	2,189	$	3,313
Asset retirement obligation capitalized	$	2,343	$	6,846
Asset retirement obligation removed due to divestiture	$	(2,033)	$	(30,035)
Interest capitalized	$	907	$	2,782
Fair value of contingent consideration asset on date of divestiture	$	23,090	$	1,137
Foreign currency translation (loss) gain on equity method investments	$	(4,497)	$	5,347

See accompanying notes to consolidated financial statements.

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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 nine months ended September 30, 2020 are not necessarily indicative of the results expected for the full year.

Certain reclassifications have been made to prior period financial statements and related disclosures to conform to current period presentation. These reclassifications have no impact on previous reported total assets, total liabilities, net loss or total operating cash flows.

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 the vast majority of its employees back to the corporate office; however, the Company continues to provide a balanced work schedule that allows for a significant portion of the work week to be performed remotely. 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.

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. 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.

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Industry Conditions, Liquidity, Management's Plans and Going Concern

Decreased demand for oil and natural gas as a result of the COVID-19 pandemic has put further downward pressure on commodity pricing. In the current depressed commodity price environment and period of economic uncertainty, the Company has taken the following operational and financial measures in 2020 to improve its balance sheet and preserve liquidity:

•Reduced 2020 capital spending by more than 50% as compared to 2019

•Focused on operational efficiencies to reduce operating costs; including significant improvements in development and completion costs per lateral foot

•Repurchased $73.3 million of unsecured notes at a discount

•Evaluated economics across our portfolio and shut-in certain non-economical production in the second quarter of 2020

•Reduced corporate general and administrative costs significantly through pay reductions, furloughs and reductions in force.

Although management’s actions listed above have helped to improve the Company's 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. Additionally, subsequent to September 30, 2020, on October 8, 2020, the Company's borrowing base under its revolving credit facility was reduced for the second time during 2020. The October redetermination reduced the Company's borrowing base from $700 million to $580 million, thereby significantly reducing available liquidity.

Considering the factors above, there is substantial doubt about the Company’s ability to maintain, repay, refinance or restructure its $2.1 billion of long-term debt. The Company elected not to make an interest payment of $17.4 million due October 15, 2020 on its 6.000% senior unsecured notes maturing 2024 (the “2024 Notes”). The Company elected not to make an interest payment of $10.8 million due November 2, 2020 on its 6.625% senior unsecured notes maturing 2023 (the "2023 Notes"). The elections to defer the interest payments do not constitute an “Event of Default” as defined under the indentures governing the 2024 Notes and 2023 Notes (the “Indentures”) if the interest payments are made within 30 days of the due date. If the Company does not make such interest payments within such 30-day period, there will be an event of default under the Indentures upon expiration of the grace period and there can be no assurance that it will have sufficient funds to pay such interest payments prior to such time.

Additionally, on October 15, 2020, the Company entered into the First Forbearance Agreement and Amendment to the Amended and Restated Credit Agreement (the "First Forbearance Agreement"). Pursuant to the First Forbearance Agreement, the lender parties have agreed to (i) temporarily waive any default in connection with the non-payment of interest on the 2024 Notes within 30 days of becoming due (the “Specified Default”) prior to its occurrence without any further action and (ii) forbear from exercising certain of their default-related rights and remedies against the Company and the other loan parties with respect to any default in connection with the Specified Default, in each case, until the earlier of October 29, 2020 or another event that would trigger the end of the forbearance period. On October 26, 2020, the Company entered into the Second Forbearance Agreement and Amendment to Amended and Restated Credit Agreement (the "Second Forbearance Agreement"), which extends the First Forbearance Agreement. Pursuant to the Second Forbearance Agreement, the lender parties have agreed to (i) temporarily waive any default in connection with the Specified Default prior to its occurrence without any further action, (ii) expand the definition of "Specified Default" to include the failure to make the interest payment on the 2023 Notes within 30 days of becoming due and (iii) extend the agreement to forbear from exercising certain of their default-related rights and remedies against the Company and the other loan parties with respect to any default in connection with the Specified Default, in each case, until the earlier of November 13, 2020 or another event that would trigger the end of the forbearance period.

Moreover, 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.

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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. 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 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 2020, the Company identified that certain transportation activities during the three and nine months ended September 30, 2019 were misclassified between "natural gas sales" and "midstream gathering and processing expenses" on its consolidated statements of operations. The Company assessed the materiality of this presentation on prior periods’ consolidated financial statements in accordance with the SEC Staff Accounting Bulletin No. 99, “Materiality”, codified in Accounting Standards Codification (“ASC”) Topic 250, “Accounting Changes and Error Corrections.” Based on this assessment, the Company concluded that the correction is not material to any previously issued financial statements. The correction had no impact on its consolidated balance sheets, consolidated statements of comprehensive income, consolidated statements of stockholders' equity or consolidated statements of cash flows. Additionally, the error had no impact on net loss or net loss per share. The Company will conform presentation of previously reported consolidated statements of operations and condensed consolidating statements of operations in future filings. The following tables present the effect of the correction on all affected line items of our previously issued consolidated financial statements of operations for the three and nine months ended September 30, 2019.


	Three months ended September 30, 2019
	As Reported		Adjustments		As Revised
	(In thousands)
Natural gas sales	$	213,227	$	56,571	$	269,798
Total Revenues	$	285,175	$	56,571	$	341,746
Midstream gathering and processing expenses	$	78,435	$	56,571	$	135,006
Total Operating Expenses(1)	$	856,130	$	56,571	$	912,701

	Nine months ended September 30, 2019
	As Reported		Adjustments		As Revised
	(In thousands)
Natural gas sales	$	714,500	$	161,911	$	876,411
Total Revenues	$	1,064,747	$	161,911	$	1,226,658
Midstream gathering and processing expenses	$	220,732	$	161,911	$	382,643
Total Operating Expenses(1)	$	1,324,235	$	161,911	$	1,486,146

(1)

Reflects additional immaterial presentation change made in the fourth quarter of 2019.

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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 collectability 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 September 30, 2020 and December 31, 2019 are as follows:


	September 30, 2020		December 31, 2019
	(In thousands)
Oil and natural gas properties	$	10,786,305	$	10,595,735
Accumulated DD&A and impairment	(8,735,750)		(7,191,957)
Oil and natural gas properties, net	2,050,555		3,403,778
Other depreciable property and equipment	91,101		91,198
Land	4,820		5,521
Accumulated DD&A	(43,954)		(36,703)
Other property and equipment, net	51,967		60,016
Property and equipment, net	$	2,102,522	$	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 September 30, 2020, the net book value of the Company's oil and gas properties was above the calculated ceiling primarily as a result of reduced commodity prices for the period leading up to September 30, 2020. As a result, the Company was required to record impairments of its oil and natural gas properties of $270.9 million and $1.4 billion for the three and nine months ended September 30, 2020, respectively. The Company was required to record impairments of its oil and natural gas properties of $571.4 million in each of the three and nine months ended September 30, 2019.

Based on prices for the last nine months and the short-term pricing outlook for the fourth quarter of 2020, recognition of an additional full cost impairment in the fourth quarter of 2020 is possible. 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 $6.2 million and $19.8 million for the three and nine months ended September 30, 2020, respectively, and $9.8 million and $26.3 million for the three and nine months ended September 30, 2019, respectively.

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The following table summarizes the Company’s unevaluated properties excluded from amortization by area at September 30, 2020:


	September 30, 2020
	(In thousands)
Utica	$	850,643
SCOOP	674,280
Other	2,018
	$	1,526,941

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 nine months ended September 30, 2020 and 2019 is as follows:


	September 30, 2020		September 30, 2019
	(In thousands)
Asset retirement obligation, beginning of period	$	60,355	$	79,952
Liabilities incurred	2,343		5,769
Liabilities settled	—		(117)
Liabilities removed due to divestitures	(2,033)		(30,035)
Accretion expense	2,270		3,173
Revisions in estimated cash flows	—		1,077
Asset retirement obligation as of end of period	$	62,935	$	59,819

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.

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4.EQUITY INVESTMENTS

Investments accounted for by the equity method consist of the following as of September 30, 2020 and December 31, 2019:


			Carrying value				(Loss) income from equity method investments
	Approximate ownership %		September 30, 2020		December 31, 2019		Three months ended September 30,				Nine months ended September 30,
							2020		2019		2020		2019
			(In thousands)
Investment in Grizzly Oil Sands ULC	24.6	%	$	16,521	$	21,000	$	(153)	$	(41)	$	(341)	$	(380)
Investment in Mammoth Energy Services, Inc.	21.5	%	—		11,005		—		(43,041)		(10,646)		(166,096)
Investment in Windsor Midstream LLC	22.5	%	39		39		—		—				—
Investment in Tatex Thailand II, LLC	23.5	%	—		—		—		—		—		2,085
			$	16,560	$	32,044	$	(153)	$	(43,082)	$	(10,987)	$	(164,391)

The tables below summarize financial information for the Company’s equity investments as of September 30, 2020 and December 31, 2019.

Summarized balance sheet information:


	September 30, 2020		December 31, 2019

	(In thousands)
Current assets	$	463,853	$	421,326
Noncurrent assets	$	1,086,150	$	1,260,075
Current liabilities	$	115,976	$	132,569
Noncurrent liabilities	$	161,183	$	163,241

Summarized results of operations:


	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(In thousands)
Gross revenue	$	70,534	$	113,417	$	228,026	$	557,375
Net (loss) income	$	2,808	$	(35,730)	$	(97,145)	$	(15,046)

Grizzly Oil Sands ULC

The Company, through its wholly owned subsidiary Grizzly Holdings Inc. (“Grizzly Holdings”), owns an approximate 24.6% interest in Grizzly Oil Sands ULC (“Grizzly”), a Canadian unlimited liability company. The remaining interest in Grizzly is owned by Grizzly Oil Sands Inc. As of September 30, 2020, 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 September 30, 2020 and 2019 and determined no impairment was required. The Company paid $0.4 million in cash calls during the nine months ended September 30, 2019 prior to its election to cease funding further capital calls. Grizzly’s functional currency is the Canadian dollar. The Company’s investment in Grizzly increased by $3.7 million as a result of a foreign currency translation gain and decreased by $4.1 million as a result of a foreign currency translation loss for the three and nine months ended September 30, 2020, respectively. The Company's investment in Grizzly was decreased by a $2.0 million foreign currency translation loss and increased by a $5.2 million foreign currency translation gain for the three and nine months ended September 30, 2019, respectively.

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Mammoth Energy Services, Inc.

At September 30, 2020, the Company owned 9,829,548 shares, or approximately 21.5%, of the outstanding common stock of Mammoth Energy Services, Inc. ("Mammoth Energy"). The approximate fair value of the Company's investment in Mammoth Energy at September 30, 2020 was $15.7 million based on the quoted market price of Mammoth Energy's common stock.

At March 31, 2020, the Company's share of net loss of Mammoth was in excess of the carrying value of its investment. As such, the Company's investment value was reduced to zero at March 31, 2020. During the third quarter of 2020, the Company's share of net loss of Mammoth continued to be in excess of the carrying value of its investment and, therefore, the Company's investment value remained at zero at September 30, 2020.

The Company received no distributions from Mammoth Energy during the nine months ended September 30, 2020 and distributions of $2.5 million during the nine months ended September 30, 2019 as a result of $0.125 per share dividend in February 2019 and May 2019. The (loss) income from equity method investments presented in the table above reflects any intercompany profit eliminations.

Windsor Midstream LLC

At September 30, 2020, 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 nine months ended September 30, 2020.

Tatex Thailand II, LLC

The Company has an indirect ownership interest in Tatex Thailand II, LLC ("Tatex") and received no distributions and $2.1 million in distributions from Tatex during the nine months ended September 30, 2020 and 2019, respectively. Tatex previously 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.

5.LONG-TERM DEBT

Long-term debt consisted of the following items as of September 30, 2020 and December 31, 2019:


	September 30, 2020		December 31, 2019
	(In thousands)
Revolving credit agreement(1)	$	279,857	$	120,000
6.625% senior unsecured notes due 2023	324,583		329,467
6.000% senior unsecured notes due 2024	579,568		603,428
6.375% senior unsecured notes due 2025	507,870		529,525
6.375% senior unsecured notes due 2026	374,617		397,529
Net unamortized debt issuance costs(2)	(19,772)		(23,751)
Construction loan	21,969		22,453
Less: current maturities of long term debt	(656)		(631)
Debt reflected as long term	$	2,068,036	$	1,978,020

(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. The credit agreement provides for a maximum facility of $1.5 billion and matures on December 13, 2021. On May 1, 2020, the Company entered into the fifteenth amendment to the Amended and Restated Credit Agreement. As part of the amendment, the Company's borrowing base and elected commitment were reduced from $1.2 billion and $1.0 billion, respectively, to $700.0 million. Additionally, the amendment added a requirement to maintain a ratio of Net Secured Debt to EBITDAX (as defined under the revolving

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credit agreement) not exceeding 2.00 to 1.00, deferred the requirement to maintain a ratio of Net Funded Debt to EBITDAX of 4.00 to 1.00 until September 30, 2021, and added a limitation on the repurchase of unsecured notes, among other amendments.

On July 27, 2020, the Company entered into the sixteenth amendment to the Amended and Restated Credit Agreement. Among other changes, the Sixteenth Amendment amends the Credit Agreement to: (i) require that, in the event of any issuances of Senior Notes, including Second Lien Notes, after the effective date, the then effective borrowing base will be reduced by a variable amount prescribed in the Credit Agreement to the extent the proceeds are not used to satisfy previously issued senior notes within 90 days of such issuance; (ii) require that each Loan Notice specify the amount of the then effective Borrowing Base and Pro Forma Borrowing Base, the Aggregate Elected Commitment Amount, and the current Total Outstandings, both with and without regard to the requested Borrowing; (iii) permit the Borrower or any Restricted Subsidiary to enter into obligations in connection with a Permitted Bond Hedge Transaction or Permitted Warrant Transaction; (iv) permit the Borrower to make any payments of Senior Notes and Subordinated Obligation prior to their scheduled maturity, in any event not to exceed $750 million or, if lesser, the net cash proceeds of any Senior Notes issued within 90 days before such payment; (v) require that the Senior Notes have a stated maturity date of no earlier than March 13, 2024, as well as not require payment of principal prior to such date, in order for the Borrower to be permitted to secure indebtedness under the Senior Notes; (vi) permit certain additional liens securing obligations in respect of the incurrence or issuance of any Permitted Refinancing Notes (as such term is defined in the Credit Agreement) not to exceed $750 million, subject to the terms of an intercreditor agreement; and (vii) amend and restate the Applicable Rate Grid.

As of September 30, 2020, $279.9 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 $320.0 million letters of credit, was $100.1 million. The Company’s wholly owned subsidiaries have guaranteed the obligations of the Company under the revolving credit facility.

At September 30, 2020, amounts borrowed under the revolving credit facility bore interest at a weighted average rate of 2.90%. The Company was in compliance with its financial covenants under the revolving credit facility at September 30, 2020.

(2) Loan issuance costs related to the 2023 Notes, 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 principal amount of the Notes. At September 30, 2020, total unamortized debt issuance costs were $2.6 million for the 2023 Notes, $5.7 million for the 2024 Notes, $8.1 million for the 2025 Notes and $3.3 million for the 2026 Notes. In addition, loan commitment fee costs for the Company's construction loan agreement were $0.1 million at September 30, 2020.

The Company capitalized approximately $0.2 million and $0.9 million in interest expense to its unevaluated oil and natural gas properties during the three and nine months ended September 30, 2020, respectively. The Company capitalized approximately $1.0 million and $2.8 million in interest expense to its unevaluated oil and natural gas properties during the three and nine months ended September 30, 2019, respectively.

Debt Repurchases

In 2019, the Company's Board of Directors authorized $200 million of cash to be used to repurchase its senior notes in the open market at discounted values to par. The Company used borrowings under its revolving credit facility to repurchase in the open market $73.3 million aggregate principal amount of its outstanding Notes for $22.8 million during the nine months ended September 30, 2020. The Company recognized a $49.6 million gain on debt extinguishment, which included retirement of unamortized issuance costs and fees associated with the repurchased debt, during the nine months ended September 30, 2020. This gain is included in gain on debt extinguishment in the accompanying consolidated statements of operations. On May 1, 2020, further repurchases under this program were limited due to the agreements entered into under the fifteenth amendment to the Amended and Restated Credit Agreement of the Company's credit facility. As such, there were no repurchases during the three months ended September 30, 2020.

Fair Value of Debt

At September 30, 2020, the carrying value of the outstanding debt represented by the Notes was approximately $1.8 billion. Based on the quoted market prices (Level 1), the fair value of the Notes was determined to be approximately $1.1 billion at September 30, 2020.

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Subsequent Event

On October 8, 2020, the Company's borrowing base under its revolving credit facility was reduced for the second time during 2020. The October redetermination reduced the Company's borrowing base from $700 million to $580 million, thereby significantly reducing available liquidity.

Additionally, the Company elected not to make an interest payment of $17.4 million due October 15, 2020 on the 2024 Notes. The Company elected not to make an interest payment of $10.8 million due November 2, 2020 on the 2023 Notes. The elections to defer the interest payments do not constitute an “Event of Default” as defined under the Indentures if the interest payments are made within 30 days of the due date. If the Company does not make such interest payments within such 30-day period, there will be an event of default under the Indentures upon expiration of the grace period and there can be no assurance that it will have sufficient funds to pay such interest payments prior to such time.

Additionally, on October 15, 2020, the Company entered into the First Forbearance Agreement. Pursuant to the First Forbearance Agreement, the lender parties have agreed to (i) temporarily waive any default in connection with the non-payment of interest on the 2024 Notes within 30 days of becoming due prior to its occurrence without any further action and (ii) forbear from exercising certain of their default-related rights and remedies against the Company and the other loan parties with respect to any default in connection with the Specified Default, in each case, until the earlier of October 29, 2020 or another event that would trigger the end of the forbearance period. On October 26, 2020, the Company entered into the Second Forbearance Agreement, which extends the First Forbearance Agreement. Pursuant to the Second Forbearance Agreement, the lender parties have agreed to (i) temporarily waive any default in connection with the Specified Default prior to its occurrence without any further action, (ii) expand the definition of "Specified Default" to include the failure to make the interest payment on the 2023 Notes within 30 days of becoming due and (iii) extend the agreement to forbear from exercising certain of their default-related rights and remedies against the Company and the other loan parties with respect to any default in connection with the Specified Default, in each case, until the earlier of November 13, 2020 or another event that would trigger the end of the forbearance period.

As of November 5, 2020, $355.5 million was outstanding under the revolving credit facility, after giving effect to an aggregate of $243.7 million letters of credit outstanding, the Company had no availability under its revolver. As of November 5, 2020, the Company had $61.7 million in cash on hand to fund ongoing operations.

6.CHANGES IN CAPITALIZATION

Stock Repurchases

In January 2019, the Company's Board of Directors approved a stock repurchase program to acquire a portion of the Company's outstanding common stock within a 24-month period. The program was suspended in the fourth quarter of 2019, and the May 1, 2020 amendment to the Company's revolving credit facility prohibits further stock repurchases. As a result, the Company did not repurchase any shares under the program during 2020, and repurchased approximately 3.8 million shares for a cost of approximately $30.0 million during the nine months ended September 30, 2019.

Additionally, during the three and nine months ended September 30, 2020, the Company repurchased approximately 136,000 and 243,000 shares, respectively, for a cost of $