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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended September 30, 2022
OR
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☐ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to
Commission File Number 001-19514
Gulfport Energy Corporation
(Exact Name of Registrant As Specified in Its Charter)
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Delaware | 86-3684669 |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification Number) |
713 Market Drive | |
Oklahoma City, | Oklahoma | 73114 |
(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:
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Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, $0.0001 par value per share | | GPOR | | The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated filer ý Accelerated filer ¨ Non-accelerated filer ¨
Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes ý No ¨
As of October 27, 2022, 19,272,080 shares of the registrant’s common stock were outstanding.
GULFPORT ENERGY CORPORATION
TABLE OF CONTENTS
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DEFINITIONS
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Unless the context otherwise indicates, references to “us,” “we,” “our,” “ours,” “Gulfport,” the “Company” and “Registrant” refer to Gulfport Energy Corporation and its consolidated subsidiaries. All monetary values, other than per unit and per share amounts, are stated in thousands of U.S. dollars unless otherwise specified. In addition, the following are other abbreviations and definitions of certain terms used within this Quarterly Report on Form 10-Q: |
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1145 Indenture. Agreement dated May 17, 2021 between the Company, UMB Bank, National Association, as trustee, and the guarantors party thereto, under section 1145 of the Bankruptcy Code for our 8.000% Senior Notes due 2026. |
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2026 Senior Notes. 8.000% Senior Notes due 2026. |
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4(a)(2) Indenture. Certain eligible holders have made an election entitling such holders to receive senior notes issued pursuant to an indenture, dated as of May 17, 2021, by and among the Company, UMB Bank, National Association, as trustee, and the guarantors party thereto, under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) as opposed to its share of the up to $550 million aggregate principal amount of our Senior Notes due 2026. The 4(a)(2) Indenture’s terms are substantially similar to the terms of the 1145 Indenture. The primary differences between the terms of the 4(a)(2) Indenture and the terms of the 1145 Indenture are that (i) affiliates of the Issuer holding 4(a)(2) Notes are permitted to vote in determining whether the holders of the required principal amount of indenture securities have concurred in any direction or consent under the 4(a)(2) Indenture, while affiliates of the Issuer holding 1145 Notes will not be permitted to vote on such matters under the 1145 Indenture, (ii) the covenants of the 1145 Indenture (other than the payment covenant) require that the Issuer comply with the covenants of the 4(a)(2) Indenture, as amended, and (iii) the 1145 Indenture requires that the 1145 Securities be redeemed pro rata with the 4(a)(2) Securities and that the 1145 Indenture be satisfied and discharged if the 4(a)(2) Indenture is satisfied and discharged. |
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ASC. Accounting Standards Codification. |
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Bankruptcy Code. Chapter 11 of Title 11 of the United States Code. |
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Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used herein in reference to crude oil or other liquid hydrocarbons. |
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Btu. British thermal unit, which represents the amount of energy needed to heat one pound of water by one degree Fahrenheit and can be used to describe the energy content of fuels. |
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Chapter 11 Cases. Voluntary petitions filed on November 13, 2020 by Gulfport Energy Corporation, Gator Marine, Inc., Gator Marine Ivanhoe, Inc., Grizzly Holdings, Inc., Gulfport Appalachia, LLC, Gulfport Midcon, LLC, Gulfport Midstream Holdings, LLC, Jaguar Resources LLC, Mule Sky LLC, Puma Resources, Inc. and Westhawk Minerals LLC. |
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CODI. Cancellation of indebtedness income. |
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Completion. The process of treating a drilled well followed by the installation of permanent equipment for the production of natural gas, oil and NGL. |
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Credit Facility. The Third Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A. as administrative agent and various lender parties, providing for a new money senior secured reserve-based revolving credit facility effective as of October 14, 2021. |
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Current Successor Quarter. Period from July 1, 2022 through September 30, 2022. |
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Current Successor YTD Period. Period from January 1, 2022 through September 30, 2022. |
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DD&A. Depreciation, depletion and amortization. |
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Disputed Claims Reserve. Reserve used to settle any pending claims of unsecured creditors that were in dispute as of the effective date of the Plan. |
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Emergence Date. May 17, 2021. |
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GAAP. Accounting principles generally accepted in the United States of America. |
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Gross Acres or Gross Wells. Refers to the total acres or wells in which a working interest is owned. |
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Guarantors. All existing consolidated subsidiaries that guarantee the Company's revolving credit facility or certain other debt. |
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Incentive Plan. Gulfport Energy Corporation Stock Incentive Plan effective on the Emergence Date. |
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Indentures. Collectively, the 1145 Indenture and the 4(a)(2) Indenture governing the 2026 Senior Notes. |
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IRC. The Internal Revenue Code of 1986, as amended. |
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LIBOR. London Interbank Offered Rate. |
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LOE. Lease operating expenses. |
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MBbl. One thousand barrels of crude oil, condensate or natural gas liquids. |
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Mcf. One thousand cubic feet of natural gas. |
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Mcfe. One thousand cubic feet of natural gas equivalent. |
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MMBtu. One million British thermal units. |
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MMcf. One million cubic feet of natural gas. |
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MMcfe. One million cubic feet of natural gas equivalent. |
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Natural Gas Liquids (NGL). Hydrocarbons in natural gas that are separated from the gas as liquids through the process of absorption, condensation, adsorption or other methods in gas processing or cycling plants. Natural gas liquids primarily include ethane, propane, butane, isobutene, pentane, hexane and natural gasoline. |
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NYMEX. New York Mercantile Exchange. |
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Plan. The Amended Joint Chapter 11 Plan of Reorganization of Gulfport Energy Corporation and Its Debtor Subsidiaries. |
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Prior Combined YTD Period. Period from January 1, 2021 through September 30, 2021. |
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Prior Predecessor YTD Period. Period from January 1, 2021 through May 17, 2021. |
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Prior Successor Period. Period from May 18, 2021 through September 30, 2021. |
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Prior Successor Quarter. Period from July 1, 2021 through September 30, 2021 |
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Repurchase Program. A stock repurchase program to acquire up to $300 million of Gulfport's outstanding common stock. It is authorized to extend through June 30, 2023, and may be suspended from time to time, modified, extended or discontinued by the board of directors at any time. |
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SCOOP. Refers to the South Central Oklahoma Oil Province, a term used to describe a defined area that encompasses many of the top hydrocarbon producing counties in Oklahoma within the Anadarko basin. The SCOOP play mainly targets the Devonian to Mississippian aged Woodford, Sycamore and Springer formations. Our acreage is primarily in Garvin, Grady and Stephens Counties. |
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SEC. The United States Securities and Exchange Commission. |
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Section 382. Internal Revenue Code Section 382. |
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SOFR. Secured Overnight Financing Rate. |
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Utica. Refers to the Utica Play that includes the hydrocarbon bearing rock formations commonly referred to as the Utica formation located in the Appalachian Basin of the United States and Canada. Our acreage is located primarily in Belmont, Harrison, Jefferson and Monroe Counties in eastern Ohio. |
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Working Interest (WI). The operating interest which gives the owner the right to drill, produce and conduct operating activities on the property and a share of production. |
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WTI. Refers to West Texas Intermediate. |
Cautionary Note Regarding Forward-Looking Statements
This Form 10-Q may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995, that are subject to risks and uncertainties. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-looking statements. All statements, other than statements of historical facts, included in this Form 10-Q that address activities, events or developments that we expect or anticipate will or may occur in the future, including the expected impact of the novel coronavirus disease (COVID-19) pandemic and the war in Ukraine on our business, our industry and the global economy, estimated future net revenues from oil and gas reserves and the present value thereof, future capital expenditures (including the amount and nature thereof), share repurchases, business strategy and measures to implement strategy, competitive strength, goals, expansion and growth of our business and operations, plans, references to future success, reference to intentions as to future matters and other such matters are forward-looking statements.
These forward-looking statements are largely based on our expectations and beliefs concerning future events, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control.
Although we believe our estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management's assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this Form 10-Q are not guarantees of future performance, and we cannot assure any reader that those statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to the factors listed in Item 1A. “Risk Factors” and Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021 and elsewhere in this Form 10-Q. All forward-looking statements speak only as of the date of this Form 10-Q.
All forward-looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.
Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report.
We may use the Investors section of our website (www.gulfportenergy.com) to communicate with investors. It is possible that the financial and other information posted there could be deemed to be material information. The information on our website is not part of this Quarterly Report on Form 10-Q.
GULFPORT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
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| Successor |
| September 30, 2022 | | December 31, 2021 |
Assets | (Unaudited) | | |
Current assets: | | | |
Cash and cash equivalents | $ | 8,287 | | | $ | 3,260 | |
Accounts receivable—oil, natural gas, and natural gas liquids sales | 317,528 | | | 232,854 | |
Accounts receivable—joint interest and other | 35,480 | | | 20,383 | |
Prepaid expenses and other current assets | 9,273 | | | 12,359 | |
Short-term derivative instruments | 53,342 | | | 4,695 | |
Total current assets | 423,910 | | | 273,551 | |
Property and equipment: | | | |
Oil and natural gas properties, full-cost method | | | |
Proved oil and natural gas properties | 2,303,728 | | | 1,917,833 | |
Unproved properties | 184,075 | | | 211,007 | |
Other property and equipment | 6,153 | | | 5,329 | |
Total property and equipment | 2,493,956 | | | 2,134,169 | |
Less: accumulated depletion, depreciation and amortization | (467,485) | | | (278,341) | |
Total property and equipment, net | 2,026,471 | | | 1,855,828 | |
Other assets: | | | |
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Long-term derivative instruments | 24,335 | | | 18,664 | |
Operating lease assets | 3,060 | | | 322 | |
Other assets | 21,570 | | | 19,867 | |
Total other assets | 48,965 | | | 38,853 | |
Total assets | $ | 2,499,346 | | | $ | 2,168,232 | |
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Liabilities, Mezzanine Equity and Stockholders’ Equity | | | |
Current liabilities: | | | |
Accounts payable and accrued liabilities | $ | 466,563 | | | $ | 394,011 | |
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Short-term derivative instruments | 817,384 | | | 240,735 | |
Current portion of operating lease liabilities | 831 | | | 182 | |
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Total current liabilities | 1,284,778 | | | 634,928 | |
Non-current liabilities: | | | |
Long-term derivative instruments | 299,150 | | | 184,580 | |
Asset retirement obligation | 30,367 | | | 28,264 | |
Non-current operating lease liabilities | 2,229 | | | 140 | |
Long-term debt | 728,101 | | | 712,946 | |
Total non-current liabilities | 1,059,847 | | | 925,930 | |
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Total liabilities | $ | 2,344,625 | | | $ | 1,560,858 | |
Commitments and contingencies (Note 7) | | | |
Mezzanine Equity: | | | |
Preferred stock - $0.0001 par value, 110.0 thousand shares authorized, 52.3 thousand issued and outstanding at September 30, 2022, and 57.9 thousand issued and outstanding at December 31, 2021 | 52,345 | | | 57,896 | |
Stockholders’ Equity: | | | |
Common stock - $0.0001 par value, 42.0 million shares authorized, 19.4 million issued and outstanding at September 30, 2022, and 20.6 million issued and outstanding at December 31, 2021 | 2 | | | 2 | |
Additional paid-in capital | 472,846 | | | 692,521 | |
Common stock held in reserve, 62 thousand shares at September 30, 2022, and 938 thousand shares at December 31, 2021 | (1,996) | | | (30,216) | |
Accumulated deficit | (366,696) | | | (112,829) | |
Treasury stock, at cost - 20.4 thousand shares at September 30, 2022, and no shares at December 31, 2021 | (1,780) | | | — | |
Total stockholders’ equity | $ | 102,376 | | | $ | 549,478 | |
Total liabilities, mezzanine equity and stockholders’ equity | $ | 2,499,346 | | | $ | 2,168,232 | |
See accompanying notes to consolidated financial statements.
GULFPORT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
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| Successor |
| Three Months Ended September 30, 2022 | | Three Months Ended September 30, 2021 |
REVENUES: | | | |
Natural gas sales | $ | 585,596 | | | $ | 301,516 | |
Oil and condensate sales | 36,050 | | | 33,279 | |
Natural gas liquid sales | 44,351 | | | 45,153 | |
Net loss on natural gas, oil and NGL derivatives | (474,895) | | | (622,476) | |
Total revenues | 191,102 | | | (242,528) | |
OPERATING EXPENSES: | | | |
Lease operating expenses | 15,363 | | | 13,864 | |
Taxes other than income | 16,529 | | | 11,844 | |
Transportation, gathering, processing and compression | 89,234 | | | 84,435 | |
Depreciation, depletion and amortization | 64,419 | | | 62,573 | |
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General and administrative expenses | 8,752 | | | 16,691 | |
Restructuring and liability management expenses | — | | | 2,858 | |
Accretion expense | 673 | | | 488 | |
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Total operating expenses | 194,970 | | | 192,753 | |
LOSS FROM OPERATIONS | (3,868) | | | (435,281) | |
OTHER EXPENSE (INCOME): | | | |
Interest expense | 15,461 | | | 16,351 | |
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Other, net | (857) | | | 9,031 | |
Total other expense | 14,604 | | | 25,382 | |
LOSS BEFORE INCOME TAXES | (18,472) | | | (460,663) | |
Income tax expense | — | | | 650 | |
NET LOSS | $ | (18,472) | | | $ | (461,313) | |
Dividends on preferred stock | $ | (1,309) | | | $ | (2,095) | |
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NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | (19,781) | | | $ | (463,408) | |
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NET LOSS PER COMMON SHARE: | | | |
Basic | $ | (1.01) | | | $ | (22.50) | |
Diluted | $ | (1.01) | | | $ | (22.50) | |
Weighted average common shares outstanding—Basic | 19,635 | | | 20,598 | |
Weighted average common shares outstanding—Diluted | 19,635 | | | 20,598 | |
See accompanying notes to consolidated financial statements.
GULFPORT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
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| Successor | | | Predecessor |
| Nine Months Ended September 30, 2022 | | Period from May 18, 2021 through September 30, 2021 | | | Period from January 1, 2021 through May 17, 2021 |
REVENUES: | | | | | | |
Natural gas sales | $ | 1,529,898 | | | $ | 413,234 | | | | $ | 344,390 | |
Oil and condensate sales | 111,298 | | | 50,866 | | | | 29,106 | |
Natural gas liquid sales | 143,741 | | | 61,230 | | | | 36,780 | |
Net loss on natural gas, oil and NGL derivatives | (1,436,317) | | | (762,134) | | | | (137,239) | |
Total revenues | 348,620 | | | (236,804) | | | | 273,037 | |
OPERATING EXPENSES: | | | | | | |
Lease operating expenses | 47,246 | | | 17,980 | | | | 19,524 | |
Taxes other than income | 45,679 | | | 16,900 | | | | 12,349 | |
Transportation, gathering, processing and compression | 261,778 | | | 125,811 | | | | 161,086 | |
Depreciation, depletion and amortization | 189,305 | | | 94,935 | | | | 62,764 | |
Impairment of oil and natural gas properties | — | | | 117,813 | | | | — | |
Impairment of other property and equipment | — | | | — | | | | 14,568 | |
General and administrative expenses | 24,128 | | | 23,209 | | | | 19,175 | |
Restructuring and liability management expenses | — | | | 2,858 | | | | — | |
Accretion expense | 2,057 | | | 714 | | | | 1,229 | |
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Total operating expenses | 570,193 | | | 400,220 | | | | 290,695 | |
LOSS FROM OPERATIONS | (221,573) | | | (637,024) | | | | (17,658) | |
OTHER EXPENSE (INCOME): | | | | | | |
Interest expense | 43,679 | | | 25,245 | | | | 4,159 | |
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Loss from equity method investments, net | — | | | — | | | | 342 | |
Reorganization items, net | — | | | — | | | | (266,898) | |
Other, net | (11,385) | | | 7,980 | | | | 1,713 | |
Total other expense (income) | 32,294 | | | 33,225 | | | | (260,684) | |
(LOSS) INCOME BEFORE INCOME TAXES | (253,867) | | | (670,249) | | | | 243,026 | |
Income tax expense (benefit) | — | | | 650 | | | | (7,968) | |
NET (LOSS) INCOME | $ | (253,867) | | | $ | (670,899) | | | | $ | 250,994 | |
Dividends on preferred stock | $ | (4,136) | | | $ | (3,126) | | | | $ | — | |
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NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | (258,003) | | | $ | (674,025) | | | | $ | 250,994 | |
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NET (LOSS) INCOME PER COMMON SHARE: | | | | | | |
Basic | $ | (12.58) | | | $ | (32.87) | | | | $ | 1.56 | |
Diluted | $ | (12.58) | | | $ | (32.87) | | | | $ | 1.56 | |
Weighted average common shares outstanding—Basic | 20,514 | | | 20,507 | | | | 160,834 | |
Weighted average common shares outstanding—Diluted | 20,514 | | | 20,507 | | | | 160,834 | |
See accompanying notes to consolidated financial statements.
GULFPORT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
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| Successor |
| Three Months Ended September 30, 2022 | | Three Months Ended September 30, 2021 |
Net loss | $ | (18,472) | | | $ | (461,313) | |
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Other comprehensive income | — | | | — | |
Comprehensive loss | $ | (18,472) | | | $ | (461,313) | |
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| Successor | | | Predecessor |
| Nine Months Ended September 30, 2022 | | Period from May 18, 2021 through September 30, 2021 | | | Period from January 1, 2021 through May 17, 2021 |
Net (loss) income | $ | (253,867) | | | $ | (670,899) | | | | $ | 250,994 | |
Foreign currency translation adjustment | — | | | — | | | | 2,570 | |
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Other comprehensive income | — | | | — | | | | 2,570 | |
Comprehensive (loss) income | $ | (253,867) | | | $ | (670,899) | | | | $ | 253,564 | |
See accompanying notes to consolidated financial statements.
GULFPORT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands)
(Unaudited)
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| | | | | Common Stock Held in Reserve | | Treasury Stock | | Paid-in Capital | | Accumulated Other Comprehensive (Loss) Income | | Retained Earnings (Accumulated Deficit) | | Total Stockholders’ Equity (Deficit) |
| Common Stock | | | | | | |
| Shares | | Amount | | Shares | | Amount | | | | | |
Balance at January 1, 2021 (Predecessor) | 160,762 | | | $ | 1,607 | | | — | | | $ | — | | | $ | — | | | $ | 4,213,752 | | | $ | (43,000) | | | $ | (4,472,859) | | | $ | (300,500) | |
Net income | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 8,780 | | | 8,780 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | — | | | 2,570 | | | — | | | 2,570 | |
Stock compensation | — | | | — | | | — | | | — | | | — | | | 1,419 | | | — | | | — | | | 1,419 | |
Shares repurchased | (86) | | | (1) | | | — | | | — | | | — | | | (7) | | | — | | | — | | | (8) | |
Issuance of restricted stock | 203 | | | 3 | | | — | | | — | | | — | | | (2) | | | — | | | — | | | 1 | |
Balance at March 31, 2021 (Predecessor) | 160,879 | | | $ | 1,609 | | | — | | | $ | — | | | $ | — | | | $ | 4,215,162 | | | $ | (40,430) | | | $ | (4,464,079) | | | $ | (287,738) | |
Net income | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 242,214 | | | 242,214 | |
Issuance of restricted stock | 25 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Shares repurchased | (10) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Stock compensation | — | | | — | | | — | | | — | | | — | | | 5,095 | | | — | | | — | | | 5,095 | |
Accumulated other comprehensive income extinguishment | — | | | — | | | — | | | — | | | — | | | — | | | 40,430 | | | — | | | 40,430 | |
Cancellation of predecessor equity | (160,894) | | | (1,609) | | | — | | | — | | | — | | | (4,220,256) | | | — | | | 4,221,865 | | | — | |
Issuance of common stock | 21,525 | | | 2 | | | — | | | — | | | — | | | 693,773 | | | — | | | — | | | 693,775 | |
Shares of common stock held in reserve | — | | | — | | | (1,679) | | | (54,109) | | | — | | | — | | | — | | | — | | | (54,109) | |
Balance at May 17, 2021 (Predecessor) | 21,525 | | | $ | 2 | | | (1,679) | | | $ | (54,109) | | | $ | — | | | $ | 693,774 | | | $ | — | | | $ | — | | | $ | 639,667 | |
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Balance at May 18, 2021 (Successor) | 21,525 | | | $ | 2 | | | (1,679) | | | $ | (54,109) | | | $ | — | | | $ | 693,774 | | | $ | — | | | $ | — | | | $ | 639,667 | |
Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (209,586) | | | (209,586) | |
Release of common stock held in reserve | — | | | — | | | 741 | | | 23,893 | | | — | | | — | | | — | | | — | | | 23,893 | |
Conversion of preferred stock | 10 | | | — | | | — | | | — | | | — | | | 147 | | | — | | | — | | | 147 | |
Dividends on preferred stock | — | | | — | | | — | | | — | | | — | | | (1,031) | | | — | | | — | | | (1,031) | |
Balance at June 30, 2021 (Successor) | 21,535 | | | $ | 2 | | | (938) | | | $ | (30,216) | | | $ | — | | | $ | 692,890 | | | $ | — | | | $ | (209,586) | | | $ | 453,090 | |
Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (461,313) | | | (461,313) | |
Stock Compensation | — | | | — | | | — | | | — | | | — | | | 1,387 | | | — | | | — | | | 1,387 | |
Dividends on preferred stock | — | | | — | | | — | | | — | | | — | | | (2,095) | | | — | | | — | | | (2,095) | |
Balance at September 30, 2021 (Successor) | 21,535 | | | $ | 2 | | | (938) | | | $ | (30,216) | | | $ | — | | | $ | 692,182 | | | $ | — | | | $ | (670,899) | | | $ | (8,931) | |
GULFPORT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) CONTINUED
(In thousands)
(Unaudited)
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| | | | | Common Stock Held in Reserve | | Treasury Stock | | Paid-in Capital | | Accumulated Other Comprehensive (Loss) Income | | Retained Earnings (Accumulated Deficit) | | Total Stockholders’ Equity (Deficit) |
| Common Stock | | | | | | |
| Shares | | Amount | | Shares | | Amount | | | | | |
Balance at January 1, 2022 (Successor) | 21,537 | | | $ | 2 | | | (938) | | | $ | (30,216) | | | $ | — | | | $ | 692,521 | | | $ | — | | | $ | (112,829) | | | $ | 549,478 | |
Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (491,975) | | | (491,975) | |
Conversion of preferred stock | 1 | | | — | | | — | | | — | | | — | | | 18 | | | — | | | — | | | 18 | |
Stock compensation | — | | | — | | | — | | | — | | | — | | | 1,755 | | | — | | | — | | | 1,755 | |
Repurchase of common stock under Repurchase Program | (378) | | | — | | | — | | | — | | | (5,318) | | | (30,194) | | | — | | | — | | | (35,512) | |
Issuance of common stock held in reserve | — | | | — | | | 876 | | | 28,220 | | | — | | | — | | | — | | | — | | | 28,220 | |
Issuance of restricted stock, net of shares withheld for income taxes | 2 | | | — | | | — | | | — | | | — | | | (80) | | | — | | | — | | | (80) | |
Dividends on preferred stock | — | | | — | | | — | | | — | | | — | | | (1,447) | | | — | | | — | | | (1,447) | |
Balance at March 31, 2022 (Successor) | 21,162 | | | $ | 2 | | | (62) | | | $ | (1,996) | | | $ | (5,318) | | | $ | 662,573 | | | $ | — | | | $ | (604,804) | | | $ | 50,457 | |
Net income | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 256,580 | | | 256,580 | |
Conversion of preferred stock | 342 | | | — | | | — | | | — | | | — | | | 4,706 | | | — | | | — | | | 4,706 | |
Stock compensation | — | | | — | | | — | | | — | | | — | | | 2,145 | | | — | | | — | | | 2,145 | |
Issuance of restricted stock, net of shares withheld for income taxes | 8 | | | — | | | — | | | — | | | — | | | (325) | | | — | | | — | | | (325) | |
Repurchase of common stock under Repurchase Program | (1,382) | | | — | | | — | | | — | | | (2,491) | | | (125,019) | | | — | | | — | | | (127,510) | |
Dividends on preferred stock | — | | | — | | | — | | | — | | | — | | | (1,380) | | | — | | | — | | | (1,380) | |
Balance at June 30, 2022 (Successor) | 20,130 | | | $ | 2 | | | (62) | | | $ | (1,996) | | | $ | (7,809) | | | $ | 542,700 | | | $ | — | | | $ | (348,224) | | | $ | 184,673 | |
Net loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (18,472) | | | (18,472) | |
Conversion of preferred stock | 60 | | | — | | | — | | | — | | | — | | | 827 | | | — | | | — | | | 827 | |
Stock compensation | — | | | — | | | — | | | — | | | — | | | 2,398 | | | — | | | — | | | 2,398 | |
Issuance of restricted stock, net of shares withheld for income taxes | 39 | | | — | | | — | | | — | | | — | | | (1,192) | | | — | | | — | | | (1,192) | |
Repurchase of common stock under Repurchase Program | (827) | | | — | | | — | | | — | | | 6,029 | | | (70,578) | | | — | | | — | | | (64,549) | |
Dividends on preferred stock | — | | | — | | | — | | | — | | | — | | | (1,309) | | | — | | | — | | | (1,309) | |
Balance at September 30, 2022 (Successor) | 19,402 | | | $ | 2 | | | (62) | | | $ | (1,996) | | | $ | (1,780) | | | $ | 472,846 | | | $ | — | | | $ | (366,696) | | | $ | 102,376 | |
See accompanying notes to consolidated financial statements.
GULFPORT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | |
| Successor | | | Predecessor |
| Nine Months Ended September 30, 2022 | | Period from May 18, 2021 through September 30, 2021 | | | Period from January 1, 2021 through May 17, 2021 |
Cash flows from operating activities: | | | | | | |
Net (loss) income | $ | (253,867) | | | $ | (670,899) | | | | $ | 250,994 | |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | | | | | | |
Depletion, depreciation and amortization | 189,305 | | | 94,935 | | | | 62,764 | |
Impairment of oil and natural gas properties | — | | | 117,813 | | | | — | |
Impairment of other property and equipment | — | | | — | | | | 14,568 | |
Loss from equity investments | — | | | — | | | | 342 | |
| | | | | | |
Net loss on derivative instruments | 1,436,317 | | | 762,134 | | | | 137,239 | |
Net cash payments on settled derivative instruments | (799,416) | | | (99,574) | | | | (3,361) | |
Non-cash reorganization items, net | — | | | — | | | | (446,012) | |
| | | | | | |
Other, net | 8,303 | | | 1,488 | | | | 1,727 | |
Changes in operating assets and liabilities, net | (29,560) | | | (41,260) | | | | 153,894 | |
Net cash provided by operating activities | 551,082 | | | 164,637 | | | | 172,155 | |
Cash flows from investing activities: | | | | | | |
Additions to oil and natural gas properties | (331,994) | | | (119,306) | | | | (102,330) | |
Proceeds from sale of oil and natural gas properties | 3,210 | | | 600 | | | | 15 | |
Other, net | (536) | | | 2,562 | | | | 4,484 | |
Net cash used in investing activities | (329,320) | | | (116,144) | | | | (97,831) | |
Cash flows from financing activities: | | | | | | |
Principal payments on pre-petition revolving credit facility | — | | | — | | | | (318,961) | |
Borrowings on pre-petition revolving credit facility | — | | | — | | | | 26,050 | |
Principal payments on Credit Facility | (1,512,000) | | | — | | | | — | |
Borrowings on Credit Facility | 1,527,000 | | | — | | | | — | |
Borrowings on exit credit facility | — | | | 306,855 | | | | 302,751 | |
Principal payments on exit credit facility | — | | | (409,000) | | | | — | |
Principal payments on DIP credit facility | — | | | — | | | | (157,500) | |
Debt issuance costs and loan commitment fees | (211) | | | (1,225) | | | | (7,100) | |
Dividends on preferred stock | (4,136) | | | — | | | | — | |
Proceeds from issuance of preferred stock | — | | | — | | | | 50,000 | |
Repurchase of common stock under Repurchase Program | (225,791) | | | — | | | | — | |
Other, net | (1,597) | | | (55) | | | | (8) | |
Net cash used in financing activities | (216,735) | | | (103,425) | | | | (104,768) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | 5,027 | | | (54,932) | | | | (30,444) | |
Cash, cash equivalents and restricted cash at beginning of period | 3,260 | | | 59,417 | | | | 89,861 | |
Cash, cash equivalents and restricted cash at end of period | $ | 8,287 | | | $ | 4,485 | | | | $ | 59,417 | |
See accompanying notes to consolidated financial statements.
GULFPORT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.BASIS OF PRESENTATION
Description of Company
Gulfport Energy Corporation (the "Company" or "Gulfport") is an independent natural gas-weighted exploration and production company focused on the production of natural gas, crude oil and NGL in the United States. The Company's principal properties are located in eastern Ohio targeting the Utica and in central Oklahoma targeting the SCOOP Woodford and SCOOP Springer formations. Gulfport filed for voluntary reorganization under Chapter 11 of the Bankruptcy Code on November 13, 2020, and subsequently operated as a debtor-in-possession, in accordance with applicable provisions of the Bankruptcy Code, until its emergence on May 17, 2021. The Company refers to the post-emergence reorganized organization in the condensed financial statements and footnotes as the "Successor" for periods subsequent to May 17, 2021, and the pre-emergence organization as "Predecessor" for periods on or prior to May 17, 2021.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Gulfport were prepared in accordance with GAAP and the rules and regulations of the SEC.
This Quarterly Report on Form 10-Q (this “Form 10-Q”) relates to the financial position and periods as of and for the three months ended September 30, 2022 ("Current Successor Quarter"), as of and for the nine months ended September 30, 2022 ("Current Successor YTD Period"), May 18, 2021 through September 30, 2021 (“Prior Successor Period”), the three months ended September 30, 2021 ("Prior Successor Quarter"), and January 1, 2021 through May 17, 2021 (“Prior Predecessor YTD Period”). The Company's annual report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”) should be read in conjunction with this Form 10-Q. The accompanying unaudited consolidated financial statements reflect all normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of our condensed consolidated financial statements and accompanying notes and include the accounts of our wholly-owned subsidiaries. Intercompany accounts and balances have been eliminated. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.
Voluntary Reorganization Under Chapter 11 of the Bankruptcy Code
In connection with the Company's emergence from bankruptcy and in accordance with ASC 852, the Company qualified for and applied fresh start accounting on the Emergence Date. For further information on the Company’s reorganization value and the resulting fresh start adjustments made on the Emergence Date, refer to the “Fresh Start Accounting” footnote in the notes to the consolidated financial statements in Item 8 of the Company’s 2021 Form 10-K.
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following at September 30, 2022 and December 31, 2021 (in thousands): | | | | | | | | | | | |
| Successor |
| September 30, 2022 | | December 31, 2021 |
Accounts payable and other accrued liabilities | $ | 202,838 | | | $ | 143,938 | |
Revenue payable and suspense | 222,729 | | | 180,857 | |
Accrued contract rejection damages and shares held in reserve | 40,996 | | | 69,216 | |
Total accounts payable and accrued liabilities | $ | 466,563 | | | $ | 394,011 | |
Reorganization Items, Net
In the Prior Predecessor YTD Period, the Company incurred significant expenses related to its Chapter 11 filing. The amount of these items, which were incurred in reorganization items, net within the Company's accompanying consolidated
statements of operations, significantly affected the Company's statements of operations. The Company also incurred adjustments for allowable claims related to its legal proceedings and executory contracts approved for rejection by the Bankruptcy Court.
The following table summarizes the components in reorganization items, net included in the Company's consolidated statements of operations for the Current Successor YTD Period, Prior Successor Period, and Prior Predecessor YTD Period (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| Successor | | | Predecessor |
| Nine Months Ended September 30, 2022 | | Period from May 18, 2021 through September 30, 2021 | | | Period from January 1, 2021 through May 17, 2021 |
Legal and professional advisory fees | $ | — | | | $ | — | | | | $ | 81,565 | |
Net gain on liabilities subject to compromise | — | | | — | | | |