gpor-20230331

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 March 31, 2023


☐			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		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:

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 April 26, 2023, 18,531,707 shares of the registrant’s common stock were outstanding.

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GULFPORT ENERGY CORPORATION

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		Page
PART I FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited):	4

	Consolidated Balance Sheets	4

	Consolidated Statements of Operations	5

	Consolidated Statements of Comprehensive Income (Loss)	6

	Consolidated Statements of Stockholders’ Equity (Deficit)	7

	Consolidated Statements of Cash Flows	8

	Notes to Consolidated Financial Statements	9

	1. Basis of Presentation	9

	2. Property and Equipment	10

	3. Debt	11

	4. Mezzanine Equity	13

	5. Equity	14

	6. Stock-Based Compensation	15

	7. Restructuring Costs	16

	8. Earnings Per Share	16

	9. Commitments and Contingencies	17

	10. Derivative Instruments	19

	11. Fair Value Measurements	23

	12. Revenue from Contracts with Customers	23

	13. Leases	24

	14. Income Taxes	25

	15. Subsequent Events	26

Item 2.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	27

	2022 Operation and Financial Highlights	28

	2022 Production and Drilling Activity	29

	Comparison of Quarter-to-Date	30



	Liquidity and Capital Resources	35

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4.	Controls and Procedures	40

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	41

Item 1A.	Risk Factors	41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41

Item 3.	Defaults Upon Senior Securities	41

Item 4.	Mine Safety Disclosures	41

Item 5.	Other Information	41

Item 6.	Exhibits	42

Signatures		44

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DEFINITIONS


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:

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 8.0% Senior Notes due 2026.

2026 Senior Notes. 8.0% Senior Notes due 2026.

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.

ASC. Accounting Standards Codification.

Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used herein in reference to crude oil or other liquid hydrocarbons.

Board of Directors (Board). The board of directors of Gulfport Energy Corporation.

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.

Completion. The process of treating a drilled well followed by the installation of permanent equipment for the production of natural gas, oil and NGL.

Credit Facility. The Existing Credit Facility, as amended by the Borrowing Base Redetermination Agreement and Second Amendment to Credit Agreement dated as of October 31, 2022.

DD&A. Depreciation, depletion and amortization.

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.

Emergence Date. 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.

Existing 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, as amended to date.

GAAP. Accounting principles generally accepted in the United States of America.

Gross Acres or Gross Wells. Refers to the total acres or wells in which a working interest is owned.

Guarantors. All existing consolidated subsidiaries that guarantee the Company's Credit Facility or certain other debt.

Incentive Plan. Gulfport Energy Corporation Stock Incentive Plan effective on the Emergence Date.

Indentures. Collectively, the 1145 Indenture and the 4(a)(2) Indenture governing the 2026 Senior Notes.

IRC. The Internal Revenue Code of 1986, as amended.

LIBOR. London Interbank Offered Rate.

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LOE. Lease operating expenses.

Marcellus. Refers to the Marcellus Play that includes the hydrocarbon bearing rock formations commonly referred to as the Marcellus formation located in the Appalachian Basin of the United States and Canada. Our acreage is located primarily in Belmont County in eastern Ohio.

MBbl. One thousand barrels of crude oil, condensate or natural gas liquids.

Mcf. One thousand cubic feet of natural gas.

Mcfe. One thousand cubic feet of natural gas equivalent, with one barrel of NGL and crude oil being equivalent to 6,000 cubic feet of natural gas.

MMBtu. One million British thermal units.

MMcf. One million cubic feet of natural gas.

MMcfe. One million cubic feet of natural gas equivalent, with one barrel of NGL and crude oil being equivalent to 6,000 cubic feet of natural gas.

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.

Net Acres or Net Wells. Refers to the sum of fractional working interests owned in gross acres or gross wells.

NYMEX. New York Mercantile Exchange.

Parent. Gulfport Energy Corporation.

Plan. The Amended Joint Chapter 11 Plan of Reorganization of Gulfport Energy Corporation and Its Debtor Subsidiaries.

Repurchase Program. A stock repurchase program to acquire up to $400 million of Gulfport's outstanding common stock. It is authorized to extend through March 31, 2024, and may be suspended from time to time, modified, extended or discontinued by the Board of Directors at any time.

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.

SEC. The United States Securities and Exchange Commission.

Section 382. Internal Revenue Code Section 382.

SOFR. Secured Overnight Financing Rate.

Successor. The post-emergence from bankruptcy reorganized organization for periods subsequent to May 17, 2021.

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.

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.

WTI. Refers to West Texas Intermediate.

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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 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, 2022 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.

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GULFPORT ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)


	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	3,460	$	7,259
Accounts receivable—oil, natural gas, and natural gas liquids sales	119,863		278,404
Accounts receivable—joint interest and other	23,315		21,478
Prepaid expenses and other current assets	6,388		7,621
Short-term derivative instruments	137,869		87,508
Total current assets	290,895		402,270
Property and equipment:
Oil and natural gas properties, full-cost method
Proved oil and natural gas properties	2,564,378		2,418,666
Unproved properties	183,456		178,472
Other property and equipment	7,174		6,363
Total property and equipment	2,755,008		2,603,501
Less: accumulated depletion, depreciation and amortization	(625,019)		(545,771)
Total property and equipment, net	2,129,989		2,057,730
Other assets:
Long-term derivative instruments	62,834		26,525
Operating lease assets	23,682		26,713
Other assets	19,739		21,241
Total other assets	106,255		74,479
Total assets	$	2,527,139	$	2,534,479


Liabilities, Mezzanine Equity and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	378,037	$	437,384

Short-term derivative instruments	80,858		343,522
Current portion of operating lease liabilities	12,583		12,414

Total current liabilities	471,478		793,320
Non-current liabilities:
Long-term derivative instruments	90,044		118,404
Asset retirement obligation	32,851		33,171
Non-current operating lease liabilities	11,099		14,299
Long-term debt	549,210		694,155
Total non-current liabilities	683,204		860,029

Total liabilities	$	1,154,682	$	1,653,349
Commitments and contingencies (Note 9)
Mezzanine Equity:
Preferred stock - $0.0001 par value, 110.0 thousand shares authorized, 52.3 thousand issued and outstanding at March 31, 2023, and 52.3 thousand issued and outstanding at December 31, 2022	52,295		52,295
Stockholders’ Equity:
Common stock - $0.0001 par value, 42.0 million shares authorized, 18.6 million issued and outstanding at March 31, 2023, and 19.1 million issued and outstanding at December 31, 2022	2		2
Additional paid-in capital	419,024		449,243
Common stock held in reserve, 62 thousand shares at March 31, 2023, and 62 thousand shares at December 31, 2022	(1,996)		(1,996)
Retained earnings	903,619		381,872
Treasury stock, at cost - 6.1 thousand shares at March 31, 2023, and 3.9 thousand shares at December 31, 2022	(487)		(286)
Total stockholders’ equity	$	1,320,162	$	828,835
Total liabilities, mezzanine equity and stockholders’ equity	$	2,527,139	$	2,534,479

See accompanying notes to consolidated financial statements.

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GULFPORT ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)


	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
REVENUES:
Natural gas sales	$	282,534	$	405,212
Oil and condensate sales	30,714		30,239
Natural gas liquid sales	39,912		45,284
Net gain (loss) on natural gas, oil and NGL derivatives	378,061		(788,551)
Total revenues	731,221		(307,816)
OPERATING EXPENSES:
Lease operating expenses	19,862		17,644
Taxes other than income	10,695		12,468
Transportation, gathering, processing and compression	87,617		84,792
Depreciation, depletion and amortization	79,094		62,284
General and administrative expenses	8,733		7,105
Restructuring costs	1,869		—
Accretion expense	764		692
Total operating expenses	208,634		184,985
INCOME (LOSS) FROM OPERATIONS	522,587		(492,801)
OTHER (INCOME) EXPENSE:
Interest expense	13,756		13,984
Other, net	(14,223)		(14,810)
Total other (income) expense	(467)		(826)
INCOME (LOSS) BEFORE INCOME TAXES	523,054		(491,975)
Income tax expense	—		—
NET INCOME (LOSS)	$	523,054	$	(491,975)
Dividends on preferred stock	(1,307)		(1,447)
Participating securities - preferred stock	(86,221)		—
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	435,526	$	(493,422)

NET INCOME (LOSS) PER COMMON SHARE:
Basic	$	23.08	$	(23.23)
Diluted	$	22.90	$	(23.23)
Weighted average common shares outstanding—Basic	18,868		21,242
Weighted average common shares outstanding—Diluted	19,049		21,242

See accompanying notes to consolidated financial statements.

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GULFPORT ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)


	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Net income (loss)	$	523,054	$	(491,975)
Foreign currency translation adjustment	—		—
Other comprehensive income	—		—
Comprehensive income (loss)	$	523,054	$	(491,975)

See accompanying notes to consolidated financial statements.

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GULFPORT ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands)

(Unaudited)


				Common Stock Held in Reserve			Treasury Stock		Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Accumulated Deficit)		Total Stockholders’ Equity
	Common Stock
	Shares	Amount		Shares	Amount
Balance at January 1, 2022	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	21,162	$	2	(62)	$	(1,996)	$	(5,318)	$	662,573	$	—	$	(604,804)	$	50,457


				Common Stock Held in Reserve			Treasury Stock		Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
	Common Stock
	Shares	Amount		Shares	Amount
Balance at January 1, 2023	19,097	$	2	(62)	$	(1,996)	$	(286)	$	449,243	$	—	$	381,872	$	828,835
Net income	—	—		—	—		—		—		—		523,054		523,054
Stock compensation	—	—		—	—		—		3,069		—		—		3,069
Repurchase of common stock under Repurchase Program	(457)	—		—	—		(201)		(33,001)		—		—		(33,202)
Issuance of restricted stock, net of shares withheld for income taxes	3	—		—	—		—		(287)		—		—		(287)
Dividends on preferred stock	—	—		—	—		—		—		—		(1,307)		(1,307)
Balance at March 31, 2023	18,643	$	2	(62)	$	(1,996)	$	(487)	$	419,024	$	—	$	903,619	$	1,320,162

See accompanying notes to consolidated financial statements.

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GULFPORT ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022

Cash flows from operating activities:
Net income (loss)	$	523,054	$	(491,975)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depletion, depreciation and amortization	79,094		62,284
Net (gain) loss on derivative instruments	(378,061)		788,551
Net cash receipts (payments) on settled derivative instruments	367		(125,046)
Other, net	4,842		2,690
Changes in operating assets and liabilities, net	74,759		17,192
Net cash provided by operating activities	304,055		253,696
Cash flows from investing activities:
Additions to oil and natural gas properties	(130,400)		(80,271)
Proceeds from sale of oil and natural gas properties	2,463		—
Other, net	(644)		(7)
Net cash used in investing activities	(128,581)		(80,278)
Cash flows from financing activities:
Principal payments on Credit Facility	(313,000)		(456,000)
Borrowings on Credit Facility	168,000		317,000
Debt issuance costs and loan commitment fees	(7)		(61)
Dividends on preferred stock	(1,307)		(1,447)
Repurchase of common stock under Repurchase Program	(32,672)		(30,192)
Other, net	(287)		(80)
Net cash used in financing activities	(179,273)		(170,780)
Net (decrease) increase in cash, cash equivalents and restricted cash	(3,799)		2,638
Cash, cash equivalents and restricted cash at beginning of period	7,259		3,260
Cash, cash equivalents and restricted cash at end of period	$	3,460	$	5,898

See accompanying notes to consolidated financial statements.

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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 Marcellus and in central Oklahoma targeting the SCOOP Woodford and Springer formations.

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 March 31, 2023, and the three months ended March 31, 2022. The Company's annual report on Form 10-K for the year ended December 31, 2022, 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.

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consisted of the following at March 31, 2023 and December 31, 2022 (in thousands):


	March 31, 2023		December 31, 2022
Revenue payable and suspense	$	195,318	$	222,721
Accounts payable	55,417		37,807
Accrued capital expenditures	50,972		36,464
Accrued transportation, gathering, processing and compression	30,754		56,138
Accrued contract rejection damages and shares held in reserve	1,996		40,996
Other accrued liabilities	43,580		43,258
Total accounts payable and accrued liabilities	$	378,037	$	437,384

Other, net (in thousands)

Other, net in the Company's consolidated statements of operations for the three months ended March 31, 2023, included $17.8 million related to the interim TC claim distribution as discussed in Note 9. The timing and amount of any future distributions to Gulfport are not certain, and the total amount will be impacted by the liquidating trust's distributions and resolution of other remaining bankruptcy claims. Additionally, as discussed in Note 9, Other, net includes a $1 million cash payment to satisfy the Rover administrative claim.

Other, net in the Company's consolidated statements of operations for the three months ended March 31, 2022, included $11.5 million related to the initial TC claim distribution as discussed in Note 9.

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Supplemental Cash Flow and Non-Cash Information (in thousands)


	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Supplemental disclosure of cash flow information:
Interest payments, net of amounts capitalized	$	2,353	$	2,110
Changes in operating assets and liabilities:
Decrease in accounts receivable - oil and natural gas sales	$	158,541	$	25,985
Increase in accounts receivable - joint interest and other	(1,837)		(17,722)
(Decrease) increase in accounts payable and accrued liabilities	(82,671)		2,135
Decrease in prepaid expenses	764		6,811
Increase in other assets	(38)		(17)
Total changes in operating assets and liabilities	$	74,759	$	17,192
Supplemental disclosure of non-cash transactions:
Capitalized stock-based compensation	$	864	$	597
Asset retirement obligation capitalized	$	—	$	16
Asset retirement obligation removed due to divestiture	$	(919)	$	—
Release of common stock held in reserve	$	—	$	28,220
Interest capitalized	$	824	$	—

2.PROPERTY AND EQUIPMENT

The major categories of property and equipment and related accumulated DD&A as of March 31, 2023 and December 31, 2022, are as follows (in thousands):


	March 31, 2023		December 31, 2022
Proved oil and natural gas properties	$	2,564,378	$	2,418,666
Unproved properties	183,456		178,472
Other depreciable property and equipment	6,788		5,977
Land	386		386
Total property and equipment	2,755,008		2,603,501
Accumulated DD&A	(625,019)		(545,771)
Property and equipment, net	$	2,129,989	$	2,057,730

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 March 31, 2023 and 2022, the net book value of the Company's oil and gas properties was below the calculated ceiling. As a result, the Company did not record an impairment of its oil and natural gas properties for the three months ended March 31, 2023 or 2022.

Certain general and administrative costs are capitalized to the full cost pool and represent management’s estimate of costs incurred directly related to exploration and development activities. All general and administrative costs not capitalized are charged to expense as they are incurred. Capitalized general and administrative costs were approximately $5.1 million and $4.7 million for the three months ended March 31, 2023 and 2022, respectively.

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.

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The following table summarizes the Company’s non-producing properties excluded from amortization by area as of March 31, 2023 and December 31, 2022 (in thousands):


	March 31, 2023		December 31, 2022
Utica	$	153,435	$	147,370
SCOOP	30,021		31,102
Total unproved properties	$	183,456	$	178,472

Asset Retirement Obligation

The following table provides a reconciliation of the Company’s asset retirement obligation for the three months ended March 31, 2023 and 2022 (in thousands):


	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Asset retirement obligation, beginning of period	$	33,171	$	28,264
Liabilities incurred	—		16
Liabilities settled	(165)		—
Liabilities removed due to divestitures	(919)		—
Accretion expense	764		692
Total asset retirement obligation as of end of period	$	32,851	$	28,972

3.DEBT

Debt consisted of the following items as of March 31, 2023 and December 31, 2022 (in thousands):


	March 31, 2023		December 31, 2022
8.0% senior unsecured notes due 2026	$	550,000	$	550,000
Credit Facility due 2025	—		145,000
Net unamortized debt issuance costs	(790)		(845)
Total debt, net	549,210		694,155
Less: current maturities of long-term debt	—		—
Total long-term debt, net	$	549,210	$	694,155

Credit Facility

On October 14, 2021, the Company entered into the Existing Credit Facility with JPMorgan Chase Bank, N.A., as administrative agent, and various lender parties. The Existing Credit Facility provided for an aggregate maximum principal amount of up to $1.5 billion, an initial borrowing base of $850 million and an initial aggregate elected commitment amount of $700 million. The Existing Credit Facility also provides for a $175.0 million sublimit of the aggregate commitments that is available for the issuance of letters of credit. The Credit Facility matures October 14, 2025.

The borrowing base is redetermined semiannually on or around May 1 and November 1 of each year.

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On May 2, 2022, the Company completed its semi-annual borrowing base redetermination and entered into the Amendment to Borrowing Base Redetermination Agreement and First Amendment to our Credit Agreement, which amended the Existing Credit Facility. The amendment, among other things, (a) increased the borrowing base under the Credit Facility from $850 million to $1.0 billion with the elected commitments remaining at $700 million, (b) amended certain covenants related to hedging to ease certain requirements and limitations, (c) amended the covenants governing restricted payments to (i) increased the Net Leverage Ratio allowing unlimited restricted payments from 1.00 to 1.00 to 1.25 to 1.00 and (ii) permitted additional restricted payments to redeem preferred equity until December 31, 2022, provided certain leverage, no event of default or borrowing base deficiency and availability tests were met, and (d) provided for the transition from a LIBOR to a SOFR benchmark, with a 10 basis point credit spread adjustment for all tenors.

On October 31, 2022, the Company completed its semi-annual borrowing base redetermination and entered into the Borrowing Base Reaffirmation Agreement and Second Amendment to our Credit Agreement ("Amendment"), which amended the Existing Credit Facility (as amended, the "Credit Facility"). The Amendment, among other things, reconfirmed the borrowing base under the Credit Facility at $1.0 billion and the elected commitments at $700 million.

On May 1, 2023, the Company completed its semi-annual Credit Facility borrowing base redetermination as discussed in Note 1 5.

The Credit Facility bears interest at a rate equal to, at the Company’s election, either (a) SOFR benchmark plus an applicable margin that varies from 2.75% to 3.75% per annum or (b) a base rate plus an applicable margin that varies from 1.75% to 2.75% per annum, based on borrowing base utilization. The Company is required to pay a commitment fee of 0.50% per annum on the average daily unused portion of the current aggregate commitments under the Credit Facility. The Company is also required to pay customary letter of credit and fronting fees.

The Credit Facility requires the Company to maintain as of the last day of each fiscal quarter (i) a net funded leverage ratio of less than or equal to 3.25 to 1.00, and (ii) a current ratio of greater than or equal to 1.00 to 1.00.

The obligations under the Credit Facility, certain swap obligations and certain cash management obligations, are guaranteed by the Company and the wholly-owned domestic material subsidiaries of the Borrower (collectively, the “Guarantors” and, together with the Borrower, the “Loan Parties”) and secured by substantially all of the Loan Parties’ assets (subject to customary exceptions).

The Credit Facility also contains customary affirmative and negative covenants, including, among other things, as to compliance with laws (including environmental laws and anti-corruption laws), delivery of quarterly and annual financial statements and borrowing base certificates, conduct of business, maintenance of property, maintenance of insurance, entry into certain derivatives contracts, restrictions on the incurrence of liens, indebtedness, asset dispositions, restricted payments, and other customary covenants. These covenants are subject to a number of limitations and exceptions.

As of March 31, 2023, the Company had no outstanding borrowings under the Credit Facility, $74.4 million in letters of credit outstanding and was in compliance with all covenants under the credit agreement.

For the three months ended March 31, 2023, the Credit Facility bore interest at a weighted average rate of 7.58%.

2026 Senior Notes

On the Emergence Date, pursuant to the terms of the Plan, the Company issued $550 million aggregate principal amount of its 8.0% senior notes due 2026. The notes are guaranteed on a senior unsecured basis by each of the Company's subsidiaries that guarantee the Credit Facility. Interest on the 2026 Senior Notes is payable semi-annually, on June 1 and December 1 of each year. The 2026 Senior Notes were issued under the Indentures, dated as of May 17, 2021, by and among the Issuer, UMB Bank, National Association, as trustee, and the Guarantors and mature on May 17, 2026.

The covenants of the 1145 Indenture (other than the payment covenant) require that the Company comply with the covenants of the 4(a)(2) Indenture, as amended. The 4(a)(2) Indenture contains covenants limiting the Issuer’s and its restricted subsidiaries’ ability to (i) incur additional debt, (ii) pay dividends or distributions in respect of certain equity interests or redeem, repurchase or retire certain equity interests or subordinated indebtedness, (iii) make certain investments, (iv) create restrictions on distributions from restricted subsidiaries, (v) engage in specified sales of assets, (vi) enter into certain transactions among affiliates, (vii) engage in certain lines of business, (viii) engage in consolidations, mergers and acquisitions,

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(ix) create unrestricted subsidiaries and (x) incur or create liens. These covenants contain important exceptions, limitations and qualifications. At any time that the 2026 Senior Notes are rated investment grade, certain covenants will be terminated and cease to apply.

Capitalization of Interest

The Company capitalized $0.8 million in interest expense for the three months ended March 31, 2023 and did not capitalize interest expense for the three months ended March 31, 2022.

Fair Value of Debt

At March 31, 2023, the carrying value of the outstanding debt represented by the 2026 Senior Notes was $549.2 million. Based on the quoted market prices (Level 1), the fair value of the 2026 Senior Notes was determined to be $549.5 million at March 31, 2023.

4.MEZZANINE EQUITY

On the Emergence Date, the Company filed an amended and restated certificate of incorporation with the Delaware Secretary of State to provide for, among other things, (i) the authority to issue 42 million shares of common stock with a par value of $0.0001 per share and (ii) the designation of 110,000 shares of preferred stock, with a par value of $0.0001 per share and a liquidation preference of $1,000 per share (the "Liquidation Preference").

Preferred Stock

On the Emergence Date, the Successor issued 55,000 shares of preferred stock.

Holders of preferred stock are entitled to receive cumulative quarterly dividends at a rate of 10% per annum of the Liquidation Preference with respect to cash dividends and 15% per annum of the Liquidation Preference with respect to dividends paid in kind as additional shares of preferred stock (“PIK Dividends”). Gulfport currently has the option to pay either cash dividends or PIK Dividends on a quarterly basis.

Each holder of shares of preferred stock has the right (the “Conversion Right”), at its option and at any time, to convert all or a portion of the shares of preferred stock that it holds into a number of shares of common stock equal to the quotient obtained by dividing (x) the product obtained by multiplying (i) the Liquidation Preference times (ii) an amount equal to one (1) plus the Per Share Makewhole Amount (as defined in the Preferred Terms) on the date of conversion, by (y) $14.00 per share (as may be adjusted under the Preferred Terms). The shares of preferred stock outstanding at March 31, 2023, would convert to approximately 3.7 million shares of common stock if all holders of preferred stock exercised their Conversion Right.

Gulfport shall have the right, but not the obligation, to redeem all, but not less than all, of the outstanding shares of preferred stock by notice to the holders of preferred stock, at the greater of (i) the aggregate value of the preferred stock, calculated by the Current Market Price (as defined in the Preferred Terms) of the number of shares of common stock into which, subject to redemption, such preferred stock would have been converted if such shares were converted pursuant to the Conversion Right at the time of such redemption and (ii) (y) if the date of such redemption is on or prior to the three year anniversary of the Emergence Date, the sum of the Liquidation Preference plus the sum of all unpaid PIK Dividends through the three year anniversary of the Emergence Date, or (x) if the date of such redemption is after the three year anniversary of the Emergence Date, the Liquidation Preference (the “Redemption Price”).

Following the Emergence Date, if there is a Fundamental Change (as defined in the Preferred Terms), Gulfport is required to redeem all, but not less than all, of the outstanding shares of preferred stock by cash payment of the Redemption Price per share of preferred stock within three (3) business days of the occurrence of such Fundamental Change. Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if Gulfport lacks sufficient cash to redeem all outstanding shares of preferred stock, the Company is required to redeem a pro rata portion of each holder’s shares of preferred stock.

The preferred stock has no stated maturity and will remain outstanding indefinitely unless repurchased or redeemed by Gulfport or converted into common stock.

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The preferred stock has been classified as mezzanine equity in the accompanying consolidated balance sheets due to the redemption features noted above.

Dividends and Conversions

During the three months ended March 31, 2023, the Company paid $1.3 million of cash dividends to holders of our preferred stock.

There were no conversions of preferred stock during the three months ended March 31, 2023. Preferred stock outstanding as of March 31, 2023, totaled 52,295 shares.

5.EQUITY

Common Stock

On the Emergence Date, Gulfport issued approximately 19.8 million shares of common stock and 1.7 million shares of common stock were issued to the Disputed Claims Reserve.

In January 2022, approximately 876,000 shares in the Disputed Claims Reserve at December 31, 2021 were issued to certain claimants. As of March 31, 2023, approximately 62,000 shares continue to be held in the Disputed Claims Reserve and may be issued upon finalization of remaining claims.

Share Repurchase Program

In November 2021 the Company's Board of Directors approved the Repurchase Program to acquire up to $100 million of common stock and subsequently increased the authorization to $300 million in 2022, extending through June 30, 2023. On February 27, 2023, the Board of Directors approved an increase to the authorization up to $400 million. The additional $100 million authorization expires on March 31, 2024. Purchases under the Repurchase Program may be made from time to time in open market or privately negotiated transactions, and will be subject to available liquidity, market conditions, credit agreement restrictions, applicable legal requirements, contractual obligations and other factors. The Repurchase Program does not require the Company to acquire any specific number of shares of common stock. The Company intends to purchase shares under the Repurchase Program with available funds while maintaining sufficient liquidity to fund its capital development program. The Repurchase Program may be suspended from time to time, modified, extended or discontinued by the Board of Directors at any time. During the three months ended March 31, 2023, the Company repurchased 459,087 shares for $32.9 million at a weighted average price of $71.61 per share. As of March 31, 2023, the Company has repurchased 3.4 million shares for $283.6 million at a weighted average price of $84.44 per share since the inception of the Repurchase Program.

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6.STOCK-BASED COMPENSATION

As of the Emergence Date, the Board of Directors adopted the Incentive Plan with a share reserve equal to 2.8 million shares of common stock. The Incentive Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, dividend equivalents and performance awards or any combination of the foregoing. The Company has granted both restricted stock units and performance vesting restricted stock units to employees and directors pursuant to the Incentive Plan, as discussed below. During the three months ended March 31, 2023 and 2022, the Company's stock-based compensation expense was $2.6 million and $1.8 million, of which the Company capitalized $0.9 million and $0.6 million, respectively, relating to its exploration and development efforts. Stock compensation expense, net of the amounts capitalized, is included in general and administrative expenses in the accompanying consolidated statements of operations. As of March 31, 2023, the Company has awarded an aggregate of approximately 307,531 restricted stock units and approximately 259,530 performance vesting restricted stock units under the Incentive Plan.

The vesting for certain share-based awards was accelerated in the first three months of 2023 in conjunction with the restructuring activities described in Note 7 and is included in restructuring costs in the accompanying consolidated statement of operations.

The following tables summarizes activity for the three months ended March 31, 2023 and 2022:


	Number of Unvested Restricted Stock Units	Weighted Average Grant Date Fair Value		Number of Unvested Performance Vesting Restricted Stock Units	Weighted Average Grant Date Fair Value
Unvested shares as of January 1, 2023	197,772	$	77.49	190,804	$	52.15
Granted	43,415	77.84		68,726	56.57
Vested	(11,608)	70.86		—	—
Forfeited/canceled	(971)	87.68		(5,069)	47.67
Unvested shares as of March 31, 2023	228,608	$	77.85	254,461	$	53.43


	Number of Unvested Restricted Stock Units	Weighted Average Grant Date Fair Value		Number of Unvested Performance Vesting Restricted Stock Units	Weighted Average Grant Date Fair Value
Unvested shares as of January 1, 2022	198,413	$	66.04	153,138	$	48.54
Granted	2,154	73.83		—	—
Vested	(3,074)	65.75		—	—
Forfeited/canceled	(1,157)	66.89		—	—
Unvested shares as of March 31, 2022	196,336	$	67.16	153,138	$	48.54

Restricted Stock Units

Restricted stock units awarded under the Incentive Plan generally vest over a period of 3 to 4 years in the case of employees and 4 years in the case of directors upon the recipient meeting applicable service requirements. Stock-based compensation expense is recorded ratably over the service period. The grant date fair value of restricted stock units represents the closing market price of the Company's common stock on the date of the grant. Unrecognized compensation expense as of March 31, 2023, was $11.9 million. The expense is expected to be recognized over a weighted average period of 2.03 years.

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Performance Vesting Restricted Stock Units

The Company has awarded performance vesting restricted stock units to certain of its executive officers under the Incentive Plan. The number of shares of common stock issued pursuant to the award will be based on a combination of (i) the Company's total shareholder return ("TSR") and (ii) the Company's relative total shareholder return ("RTSR") for the performance period. Participants will earn from 0% to 200% of the target award based on the Company's TSR and RTSR ranking compared to the TSR of the companies in the Company's designated peer group at the end of the performance period. Awards will be earned and vested at the end of a three-year performance period, subject to earlier termination of the performance period in the event of a change in control. The grant date fair values were determined using the Monte Carlo simulation method and are being recorded ratably over the performance period.

The table below summarizes the assumptions used in the Monte Carlo simulation to determine the grant date fair value of awards granted during the three months ended March 31, 2023:


Grant date	January 24, 2023	March 3, 2023
Forecast period (years)	3	3
Risk-free interest rates	3.88%	4.64%
Implied equity volatility	87.2%	86.4%
Stock price on the date of grant	$72.99	$82.20

Unrecognized compensation expense as of March 31, 2023, related to performance vesting restricted shares was $6.2 million. The expense is expected to be recognized over a weighted average period of 1.73 years.

7.RESTRUCTURING COSTS

During the three months ended March 31, 2023, Gulfport recognized $1.9 million in personnel-related restructuring expenses associated with changes in the organizational structure and leadership team resulting from the appointment of Gulfport's new CEO in January 2023. Of these expenses, $0.5 million resulted from accelerated vesting of certain share-based grants, which are non-cash charges. As of March 31, 2023, there were no remaining employee termination liabilities for the impacted employees.

8.EARNINGS (LOSS) PER SHARE

Basic income or loss per share attributable to common stockholders is computed as (i) net income or loss less (ii) dividends paid to holders of preferred stock less (iii) net income or loss attributable to participating securities divided by (iv) weighted average basic shares outstanding. Diluted net income or loss per share attributable to common stockholders is computed as (i) basic net income or loss attributable to common stockholders plus (ii) diluted adjustments to income allocable to participating securities divided by (iii) weighted average diluted shares outstanding. The "if-converted" method is used to determine the dilutive impact for the Company's convertible preferred stock and the treasury stock method is used to determine the dilutive impact of unvested restricted stock.

There were 180,811 shares of restricted stock that were considered dilutive for the three months ended March 31, 2023. There were no shares of restricted stock that were considered dilutive for the three months ended March 31, 2022. There were 3.7 million and 4.1 million shares of potential common shares issuable due to the Company's preferred stock for the three months ended March 31, 2023 and 2022, respectively. There were 0.1 million shares of restricted stock that were considered anti-dilutive during the three months ended March 31, 2022.

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Reconciliations of the components of basic and diluted net income (loss) per common share are presented in the table below (in thousands):


	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022

Net income (loss)	$	523,054	$	(491,975)
Dividends on preferred stock	(1,307)		(1,447)
Participating securities - preferred stock(1)	(86,221)		—
Net income (loss) attributable to common stockholders	$	435,526	$	(493,422)
Re-allocation of participating securities	684		—
Diluted net income (loss) attributable to common stockholders	$	436,210	$	(493,422)
Basic Shares	18,868		21,242
Dilutive Shares	19,049		21,242
Basic EPS	$	23.08	$	(23.23)
Dilutive EPS	$	22.90	$	(23.23)

_____________________

(1) Preferred stock represents participating securities because it participates in any dividends on shares of common stock on a pari passu, pro rata basis. However, preferred stock does not participate in undistributed net losses.

9.COMMITMENTS AND CONTINGENCIES

Commitments

Firm Transportation and Gathering Agreements

The Company has contractual commitments with midstream and pipeline companies for future gathering and transportation of natural gas from the Company's producing wells to downstream markets. Under certain of these agreements, the Company has minimum daily volume commitments. The Company is also obligated under certain of these arrangements to pay a demand charge for firm capacity rights on pipeline systems regardless of the amount of pipeline capacity utilized by the Company. If the Company does not utilize the capacity, it often can release it to other counterparties, thus reducing the cost of these commitments. Working interest owners and royalty interest owners, where appropriate, will be responsible for their proportionate share of these costs. Commitments related to future firm transportation and gathering agreements are not recorded as obligations in the accompanying consolidated balance sheets; however, costs associated with utilized future firm transportation and gathering agreements are reflected in the Company's estimates of proved reserves.

A summary of these commitments at March 31, 2023, are set forth in the table below (in thousands):


Remaining 2023	$	169,573
2024	218,797
2025	137,795
2026	134,324
2027	136,492
Thereafter	737,104
Total	$	1,534,085

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Other Operational Commitments

During 2022, the Company entered into various contractual commitments to purchase inventory and other material to be used in future activities. The Company's commitment to purchase these materials spans 2023 and 2024, with approximately $52.7 million remaining in 2023 and $31.2 million for 2024.

Contingencies

The Company is involved in a number of litigation and regulatory proceedings including those described below. Many of these proceedings are in early stages, and many of them seek or may seek damages and penalties, the amount of which is indeterminate. The Company's total accrued liabilities in respect of litigation and regulatory proceedings is determined on a case-by-case basis and represents an estimate of probable losses after considering, among other factors, the progress of each case or proceeding, its experience and the experience of others in similar cases or proceedings, and the opinions and views of legal counsel. Significant judgment is required in making these estimates and their final liabilities may ultimately be materially different. In accordance with ASC Topic 450, Contingencies, an accrual is recorded for a material loss contingency when its occurrence is probable and damages are reasonably estimable based on the anticipated most likely outcome or the minimum amount within a range of possible outcomes.

Litigation and Regulatory Proceedings

As part of its Chapter 11 Cases and restructuring efforts, the Company filed motions to reject certain firm transportation agreements between the Company and affiliates of TC Energy Corporation ("TC") and Rover Pipeline LLC ("Rover"). During the third quarter of 2021, Gulfport finalized a settlement agreement with TC that was approved by the Bankruptcy Court on September 21, 2021. Pursuant to the settlement agreement, Gulfport and TC agreed that the firm transportation contracts between them would be rejected without any further payment or obligation by either party, and TC assigned its damages claims from such rejection to Gulfport. In exchange, Gulfport agreed to make a payment of $43.8 million in cash to TC. The $43.8 million was paid on October 7, 2021. Gulfport expects to receive distributions for a significant portion of such amounts through future distributions with respect to the assigned claims pursuant to the terms of the Plan that became effective in May 2021. Any future distributions will be recognized once received by Gulfport. In February 2022, Gulfport received an initial distribution of $11.5 million from the above-mentioned claim, which is included in Other, net in the accompanying consolidated statements of operations.

During the first quarter of 2023, Gulfport finalized a settlement agreement with Rover that was approved by the Bankruptcy Court on February 21, 2023. Pursuant to the settlement agreement, Gulfport and Rover agreed that the firm transportation contracts between them would be rejected. The Bankruptcy Court Order provided Rover will: (a) receive an allowed $85.9 million Class 4A General Unsecured Claim (the “Rover Unsecured Claim”), (b) receive an administrative claim of $1.0 million payable by Gulfport, and (c) draw the full amount of its credit assurance. Gulfport paid the $1.0 million administrative claim during the first quarter, and has no further obligations to Rover. The Rover Unsecured Claim will receive distributions under the Plan payable from the liquidating trust, not Gulfport. On February 24, 2023, Gulfport received an additional $17.8 million interim distribution for its TC claim. The timing and amount of any future distributions to Gulfport are not certain, and the total amount received will be impacted by the liquidating trust’s distributions and resolution of other remaining bankruptcy claims. These payments are included in Other, net in the accompanying consolidated statements of operations.

The Company has been named as a defendant in three separate complaints, two filed by Siltstone Resources, LLC, and the third filed by the Ohio Public Works Commission (OPWC) (together, the "Complaints"). The Complaints all arise from restrictive covenants in favor of OPWC generally prohibiting any transfer and any use inconsistent with a green park space. OPWC filed crossclaims against Gulfport in the Siltstone matters alleging that the transfer of the mineral rights and the development of oil and gas on the property violated these restrictive covenants. On June 19, 2018, October 25, 2019, and March 15, 2019, each trial court in the Complaints entered judgment in favor of the Company and other defendants, finding the restrictive covenants only applied to the surface estate. OPWC appealed each judgement to the respective Ohio Courts of Appeal where the trial court decisions were reversed in favor of OPWC. The Company and certain other parties to the Complaints appealed the appellate court decisions to the Ohio Supreme Court. On February 23, 2022, the Ohio Supreme Court affirmed the first appellate decision and remanded the case back to the trial court. On December 27, 2022, the Ohio Supreme Court affirmed the other two complaints and remanded the matters back to the trial court. OPWC is seeking both injunctive relief to enforce the restrictive covenants and equitable relief. Liquidated damages were successfully discharged in the Company’s Chapter 11 proceedings through May 17, 2021. The scope and consequence of any injunctive relief that may be

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granted is not certain, but may have an adverse impact on the Company's operations associated with the leases subject to the Complaints, including a potential order to plug and abandon the wells at issue.

The Company, along with other oil and gas companies, have been named as a defendant in a number of lawsuits where Plaintiffs assert their respective leases are limited to the Marcellus and Utica shale geological formations and allege that Defendants have willfully trespassed and illegally produced oil, natural gas, and other hydrocarbon products beyond these respective formations. Plaintiffs seek the full value of any production from below the Marcellus and Utica shale formations, unspecified damages from the diminution of value to their mineral estate, unspecified punitive damages, and the payment of reasonable attorney fees, legal expenses, and interest. On April 27, 2021, the Bankruptcy Court for the Southern District of Texas approved a settlement agreement in which the plaintiffs fully released the Company from all claims for amounts allegedly owed to the plaintiffs through the effective date of the Company’s Chapter 11 plan, which occurred on May 17, 2021. The plaintiffs are continuing to pursue alleged damages after May 17, 2021.

Business Operations

The Company is involved in various lawsuits and disputes incidental to its business operations, including commercial disputes, personal injury claims, royalty claims, property damage claims and contract actions.

Environmental Contingencies

The nature of the oil and gas business carries with it certain environmental risks for Gulfport and its subsidiaries. Gulfport and its subsidiaries have implemented various policies, programs, procedures, training and audits to reduce and mitigate environmental risks. The Company conducts periodic reviews, on a company-wide basis, to assess changes in its environmental risk profile. Environmental reserves are established for environmental liabilities for which economic losses are probable and reasonably estimable. The Company manages its exposure to environmental liabilities in acquisitions by using an evaluation process that seeks to identify pre-existing contamination or compliance concerns and address the potential liability. Depending on the extent of an identified environmental concern, it may, among other things, exclude a property from the transaction, require the seller to remediate the property to its satisfaction in an acquisition or agree to assume liability for the remediation of the property.

Other Matters

Based on management’s current assessment, they are of the opinion that no pending or threatened lawsuit or dispute relating to its business operations is likely to have a material adverse effect on their future consolidated financial position, results of operations or cash flows. The final resolution of such matters could exceed amounts accrued, however, and actual results could differ materially from management’s estimates.

10.DERIVATIVE INSTRUMENTS

Natural Gas, Oil and NGL Derivative Instruments

The Company seeks to mitigate risks related to unfavorable changes in natural gas, oil and NGL prices, which are subject to significant and often volatile fluctuation, by entering into over-the-counter fixed price swaps, basis swaps, costless collars and various types of option contracts. These contracts allow the Company to mitigate the impact of declines in future natural gas, oil and NGL prices by effectively locking in a floor price for a certain level of the Company’s production. However, these hedge contracts also limit the benefit to the Company in periods of favorable price movements.

The volume of production subject to commodity derivative instruments and the mix of the instruments are frequently evaluated and adjusted by management in response to changing market conditions. Gulfport may enter into commodity derivative contracts up to limitations set forth in its Credit Facility. The Company generally enters into commodity derivative contracts for approximately 50% to 75% of its forecasted current year annual production by the end of the first quarter of each fiscal year. The Company typically enters into commodity derivative contracts for the next 12 to 36 months. Gulfport does not enter into commodity derivative contracts for speculative purposes.

The Company does not currently have any commodity derivative transactions that have margin requirements or collateral provisions that would require payments prior to the scheduled settlement dates. The Company's commodity derivative contract counterparties are typically financial institutions and energy trading firms with investment-grade credit ratings. Gulfport

routinely monitors and manages its exposure to counterparty risk by requiring specific minimum credit standards for all counterparties, actively monitoring counterparties' public credit ratings and avoiding the concentration of credit exposure by transacting with multiple counterparties. The Company has master netting agreements with some counterparties that allow the offsetting of receivables and payables in a default situation.

Fixed price swaps require that the Company receive a fixed price and pay a floating market price to the counterparty for the hedged community. They are settled monthly based on differences between the fixed price specified in the contract and the referenced settlement price. When the referenced settlement price is less than the price specified in the contract, the Company receives an amount from the counterparty based on the price difference multiplied by the volume. Similarly, when the referenced settlement price exceeds the price specified in the contract, the Company pays the counterparty an amount based on the price difference multiplied by the volume.

The Company has entered into natural gas, crude oil and NGL fixed price swap contracts based off the NYMEX Henry Hub, NYMEX WTI and Mont Belvieu C3 indices. Below is a summary of the Company’s open fixed price swap positions as of March 31, 2023.


	Index	Daily Volume	Weighted Average Price
Natural Gas		(MMBtu/d)	($/MMBtu)
Remaining 2023	NYMEX Henry Hub	220,145	$	4.13
2024	NYMEX Henry Hub	234,973	$	4.26
2025	NYMEX Henry Hub	20,000	$	4.10

Oil		(Bbl/d)	($/Bbl)
Remaining 2023	NYMEX WTI	3,000	$	74.47

NGL		(Bbl/d)	($/Bbl)
Remaining 2023	Mont Belvieu C3	3,000	$	38.07

Each two-way price costless collar has a set floor and ceiling price for the hedged production. They are settled monthly based on differences between the floor and ceiling prices specified in the contract and the referenced settlement price. If the applicable monthly price indices are outside of the ranges set by the floor and ceiling prices in the collar contracts, the Company will cash-settle the difference with the hedge counterparty. When the referenced settlement price is less than the floor price in the contract, the Company receives an amount from the counterparty based on the price difference multiplied by the hedged contract volume. Similarly, when the referenced settlement price exceeds the ceiling price specified in the contract, the Company pays the counterparty an amount based on the price difference multiplied by the hedged contract volume. No payment is due from either party if the referenced settlement price is within the range set by the floor and ceiling prices.

The Company has entered into natural gas costless collars based off the NYMEX Henry Hub natural gas index. Below is a summary of the Company's costless collar positions as of March 31, 2023.


	Index	Daily Volume	Weighted Average Floor Price		Weighted Average Ceiling Price
Natural Gas		(MMBtu/d)	($/MMBtu)		($/MMBtu)
Remaining 2023	NYMEX Henry Hub	285,000	$	2.93	$	4.78
2024	NYMEX Henry Hub	180,000	$	3.43	$	5.49

From time to time, the Company has sold natural gas call options in exchange for a premium, and used the associated premiums received to enhance the fixed price for a portion of the fixed price natural gas swaps. Each sold call option has an established ceiling price. If at the time of settlement the referenced settlement price exceeds the ceiling price, the Company pays its counterparty an amount equal to the difference between the referenced settlement price and the price ceiling multiplied by the hedged contract volumes. No payment is due from either party if the referenced settlement price is below the price ceiling. Below is a summary of the Company's open sold call option positions as of March 31, 2023.


	Index	Daily Volume	Weighted Average Price
Natural Gas		(MMBtu/d)	($/MMBtu)
Remaining 2023	NYMEX Henry Hub	407,925	$	3.21
2024	NYMEX Henry Hub	202,000	$	3.33
2025	NYMEX Henry Hub	193,315	$	5.80

In addition, the Company has entered into natural gas basis swap positions. These instruments are arrangements that guarantee a fixed price differential to NYMEX Henry Hub from a specified delivery point. The Company receives the fixed price differential and pays the floating market price differential to the counterparty for the hedged community. As of March 31, 2023, the Company had the following natural gas basis swap positions open:


	Gulfport Pays	Gulfport Receives	Daily Volume	Weighted Average Fixed Spread
Natural Gas			(MMBtu/d)	($/MMBtu)
Remaining 2023	Rex Zone 3	NYMEX Plus Fixed Spread	140,000	$	(0.22)
Remaining 2023	NGPL TXOK	NYMEX Plus Fixed Spread	80,000	$	(0.35)
Remaining 2023	TETCO M2	NYMEX Plus Fixed Spread	170,145	$	(0.91)
2024	Rex Zone 3	NYMEX Plus Fixed Spread	70,000	$	(0.15)
2024	NGPL TXOK	NYMEX Plus Fixed Spread	60,000	$	(0.31)
2024	TETCO M2	NYMEX Plus Fixed Spread	69,945	$	(0.89)

Balance Sheet Presentation

The Company reports the fair value of derivative instruments on the consolidated balance sheets as derivative instruments under current assets, noncurrent assets, current liabilities and noncurrent liabilities on a gross basis. The Company determines the current and noncurrent classification based on the timing of expected future cash flows of individual trades. The following table presents the fair value of the Company’s derivative instruments on a gross basis at March 31, 2023 and December 31, 2022 (in thousands):


	March 31, 2023		December 31, 2022
Short-term derivative asset	$	137,869	$	87,508
Long-term derivative asset	62,834		26,525
Short-term derivative liability	(80,858)		(343,522)
Long-term derivative liability	(90,044)		(118,404)
Total commodity derivative position	$	29,801	$	(347,893)

Gains and Losses

The following table presents the gain and loss recognized in net gain (loss) on natural gas, oil and NGL derivatives in the accompanying consolidated statements of operations for the three months ended March 31, 2023 and 2022 (in thousands):


	Net gain (loss) on derivative instruments
	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Natural gas derivatives - fair value gains (losses)	$	374,148	$	(619,319)
Natural gas derivatives - settlement losses	(173)		(111,157)
Total gains (losses) on natural gas derivatives	373,975		(730,476)

Oil derivatives - fair value gains (losses)	4,733		(29,853)
Oil derivatives - settlement losses	(443)		(8,144)
Total gains (losses) on oil derivatives	4,290		(37,997)

NGL derivatives - fair value losses	(1,186)		(14,333)
NGL derivatives - settlement gains (losses)	982		(5,745)
Total losses on NGL derivatives	(204)		(20,078)

Total gains (losses) on natural gas, oil and NGL derivatives	$	378,061	$	(788,551)

Offsetting of Derivative Assets and Liabilities

As noted above, the Company records the fair value of derivative instruments on a gross basis. The following tables present the gross amounts of recognized derivative assets and liabilities in the consolidated balance sheets and the amounts that are subject to offsetting under master netting arrangements with counterparties, all at fair value (in thousands):


	As of March 31, 2023
	Gross Assets (Liabilities) Presented in the Consolidated Balance Sheets		Gross Amounts Subject to Master Netting Agreements		Net Amount
Derivative assets	$	200,703	$	(79,841)	$	120,862
Derivative liabilities	$	(170,902)	$	79,841	$	(91,061)


	As of December 31, 2022
	Gross Assets (Liabilities) Presented in the Consolidated Balance Sheets		Gross Amounts Subject to Master Netting Agreements		Net Amount
Derivative assets	$	114,033	$	(80,345)	$	33,688
Derivative liabilities	$	(461,926)	$	80,345	$	(381,581)

Concentration of Credit Risk

By using derivative instruments that are not traded on an exchange, the Company is exposed to the credit risk of its counterparties. Credit risk is the risk of loss from counterparties not performing under the terms of the derivative instrument. When the fair value of a derivative instrument is positive, the counterparty is expected to owe the Company, which creates credit risk. To minimize the credit risk in derivative instruments, it is the Company’s policy to enter into derivative contracts only with counterparties that are creditworthy financial institutions deemed by management as competent and competitive market makers. The Company’s derivative contracts are spread between multiple counterparties to lessen its exposure to any individual counterparty. Additionally, the Company uses master netting agreements to minimize credit risk exposure. The creditworthiness of the Company’s counterparties is subject to periodic review. None of the Company’s derivative instrument contracts contain credit-risk related contingent features. Other than as provided by the Company’s revolving credit facility, the

Company is not required to provide credit support or collateral to any of its counterparties under its derivative instruments, nor are the counterparties required to provide credit support to the Company.

11.FAIR VALUE MEASUREMENTS

The Company records certain financial and non-financial assets and liabilities on the balance sheet at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. Market or observable inputs are the preferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. Fair value measurements are classified and disclosed in one of the following categories:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets and liabilities that the Company has the ability to access at the measurement date.

Level 2 – Quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 – Significant inputs to the valuation model are unobservable.

Valuation techniques that maximize the use of observable inputs are favored. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement of assets and liabilities within the levels of the fair value hierarchy. Reclassifications of fair value between Level 1, Level 2 and Level 3 of the fair value hierarchy, if applicable, are made at the end of each quarter.

Financial assets and liabilities

The following tables summarize the Company’s financial and non-financial assets and liabilities by valuation level as of March 31, 2023 and December 31, 2022 (in thousands):

March 31, 2023

Level 1

Level 2

Level 3