Annual report pursuant to Section 13 and 15(d)

Supplemental Information On Oil And Gas Exploration And Production Activities (Unaudited)

v3.3.1.900
Supplemental Information On Oil And Gas Exploration And Production Activities (Unaudited)
12 Months Ended
Dec. 31, 2015
Extractive Industries [Abstract]  
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES (UNAUDITED)
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES (UNAUDITED)
As discussed above in Note 4, the Company did not own any of Diamondback's common stock at December 31, 2015 or December 31, 2014. However, at December 31, 2013, the Company owned a 7.2% equity interest in Diamondback, which interest is shown below. The Company also owns a 24.9999% interest in Grizzly, which interest is shown below. Grizzly achieved first production in 2014, therefore, interest in Grizzly is shown only for 2014 and 2015.
The following is historical revenue and cost information relating to the Company’s oil and gas operations located entirely in the United States:
Capitalized Costs Related to Oil and Gas Producing Activities
 
 
2015
 
2014
 
(In thousands)
Proven properties
$
3,606,641

 
$
2,457,616

Unproven properties
1,817,701

 
1,465,538

 
5,424,342

 
3,923,154

Accumulated depreciation, depletion, amortization and impairment reserve
(2,820,113
)
 
(1,044,273
)
Net capitalized costs
$
2,604,229

 
$
2,878,881

 
 
 
 
Equity investment in Grizzly Oil Sands ULC
 
 
 
Proven properties
$
81,473

 
$
96,859

Unproven properties
82,388

 
103,160

 
163,861

 
200,019

Accumulated depreciation, depletion, amortization and impairment reserve
(1,531
)
 
(1,248
)
Net capitalized costs
$
162,330

 
$
198,771


Costs Incurred in Oil and Gas Property Acquisition and Development Activities
 
 
2015
 
2014
 
2013
 
(In thousands)
Acquisition
$
810,755

 
$
440,288

 
$
338,153

Development of proved undeveloped properties
642,811

 
864,511

 
408,121

Exploratory

 
2,249

 
26,174

Recompletions
13,894

 
45,658

 
44,633

Capitalized asset retirement obligation
8,800

 
2,095

 
3,556

Total
$
1,476,260

 
$
1,354,801

 
$
820,637

 
 
 
 
 
 
Equity investment in Diamondback Energy, Inc.
 
 
 
 
 
Acquisition
$

 
$

 
$
44,534

Development of proved undeveloped properties

 

 
6,369

Exploratory

 

 
17,491

Capitalized asset retirement obligation

 

 
50

Total
$

 
$

 
$
68,444

 
 
 
 
 
 
Equity investment in Grizzly Oil Sands ULC
 
 
 
 
 
Acquisition
$
396

 
$
1,230

 
$

Development of proved undeveloped properties
47

 
7,107

 

Exploratory


 

 

Capitalized asset retirement obligation
282

 
1,055

 

Total
$
725

 
$
9,392

 
$


Results of Operations for Producing Activities
The following schedule sets forth the revenues and expenses related to the production and sale of oil and gas. The income tax expense is calculated by applying the current statutory tax rates to the revenues after deducting costs, which include depreciation, depletion and amortization allowances, after giving effect to the permanent differences. The results of operations exclude general office overhead and interest expense attributable to oil and gas production.
 
 
2015
 
2014
 
2013
 
(In thousands)
Revenues
$
708,990

 
$
670,762

 
$
262,225

Production costs
(222,805
)
 
(140,664
)
 
(64,666
)
Depletion
(335,288
)
 
(263,946
)
 
(118,118
)
Impairment
(1,440,418
)
 



 
(1,289,521
)
 
266,152

 
79,441

Income tax (benefit) expense
 
 
 
 
 
Current

 

 

Deferred
(220,201
)
 
96,061

 
49,447

 
(220,201
)
 
96,061

 
49,447

Results of operations from producing activities
$
(1,069,320
)
 
$
170,091

 
$
29,994

Depletion per Mcf of gas equivalent (Mcfe)
$
1.68

 
$
3.01

 
$
4.78

 
 
 
 
 
 
Results of Operations from equity method investment in Diamondback Energy, Inc.
 
 
 
 
 
Revenues
$

 
$

 
$
14,976

Production costs

 

 
(2,518
)
Depletion

 

 
(4,754
)
 

 

 
7,704

Income tax expense

 

 
2,286

Results of operations from producing activities
$

 
$

 
$
5,418

 
 
 
 
 
 
Results of Operations from equity method investment in Grizzly Oil Sands ULC
 
 
 
 
 
Revenues
$
1,436

 
$
5,449

 
$

Production costs
(1,549
)
 
(10,113
)
 

Depletion
(625
)
 
(1,195
)
 

 
(738
)
 
(5,859
)
 

Income tax expense

 

 

Results of operations from producing activities
$
(738
)
 
$
(5,859
)
 
$

 
 
 
 
 
 

Oil and Gas Reserves
The following table presents estimated volumes of proved developed and undeveloped oil and gas reserves as of December 31, 2015, 2014 and 2013 and changes in proved reserves during the last three years. The reserve reports use an average price equal to the unweighted arithmetic average of hydrocarbon prices received on a field-by-field basis on the first day of each month within the 12-month period ended December 31, 2015, 2014 and 2013, in accordance with guidelines of the SEC applicable to reserves estimates. Volumes for oil are stated in thousands of barrels (MBbls) and volumes for gas are stated in millions of cubic feet (MMcf). The prices used for the 2015 reserve report are $50.28 per barrel of oil, $2.59 per MMbtu and $13.21 per barrel for NGLs, adjusted by lease for transportation fees and regional price differentials, and for oil and gas reserves, respectively. The prices used at December 31, 2014 and 2013 for reserve report purposes are $94.99 per barrel, $4.35 per MMbtu and $44.84 per barrel for NGLs and $96.78 per barrel, $3.67 per MMbtu and $41.23 per barrel for NGLs, respectively.
Gulfport emphasizes that the volumes of reserves shown below are estimates which, by their nature, are subject to revision. The estimates are made using all available geological and reservoir data, as well as production performance data. These estimates are reviewed annually and revised, either upward or downward, as warranted by additional performance data.
 
 
2015
 
2014
 
2013
 
Oil
 
Gas
 
NGL
 
Oil
 
Gas
 
NGL
 
Oil
 
Gas
 
NGL
 
(MBbls)
 
(MMcf)
 
(MBbls)
 
(MBbls)
 
(MMcf)
 
(MBbls)
 
(MBbls)
 
(MMcf)
 
(MBbls)
Proved Reserves
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of the period
9,497

 
719,006

 
26,268

 
8,346

 
146,446

 
5,675

 
8,106

 
33,771

 
145

Purchases in oil and gas reserves in place

 
371,663

 

 
173

 
8,863

 
353

 

 

 

Extensions and discoveries
2,413

 
997,057

 
5,486

 
4,975

 
629,151

 
22,594

 
2,765

 
123,597

 
5,850

Revisions of prior reserve estimates
(2,553
)
 
(371,430
)
 
(9,594
)
 
(1,313
)
 
(6,136
)
 
(304
)
 
(208
)
 
(2,031
)
 

Current production
(2,899
)
 
(156,151
)
 
(4,424
)
 
(2,684
)
 
(59,318
)
 
(2,050
)
 
(2,317
)
 
(8,891
)
 
(320
)
End of period
6,458

 
1,560,145

 
17,736

 
9,497

 
719,006

 
26,268

 
8,346

 
146,446

 
5,675

Proved developed reserves
6,120

 
652,961

 
12,910

 
5,719

 
345,166

 
12,379

 
5,609

 
94,552

 
3,527

Proved undeveloped reserves
338

 
907,184

 
4,826

 
3,778

 
373,840

 
13,889

 
2,737

 
51,894

 
2,148

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity investment in Diamondback Energy, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proved Reserves
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of the period

 

 

 

 

 

 
5,606

 
7,398

 
1,766

Change in ownership interest in Diamondback

 

 

 

 

 

 
(3,720
)
 
(4,909
)
 
(1,171
)
Purchases in oil and gas reserves in place

 

 

 

 

 

 
528

 
752

 
120

Extensions and discoveries

 

 

 

 

 

 
1,227

 
1,741

 
331

Revisions of prior reserve estimates

 

 

 

 

 

 
(428
)
 
(417
)
 
(249
)
Current production

 

 

 

 

 

 
(146
)
 
(124
)
 
(26
)
End of period

 

 

 

 

 

 
3,067

 
4,441

 
771

Proved developed reserves

 

 

 

 

 

 
1,425

 
2,263

 
358

Proved undeveloped reserves

 

 

 

 

 

 
1,642

 
2,178

 
413

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity investment in Grizzly Oil Sands ULC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of the period
14,558

 

 

 
13,637

 

 

 

 

 

Purchases in oil and gas reserves in place

 

 

 

 

 

 

 

 

Extensions and discoveries

 

 

 

 

 

 

 

 

Revisions of prior reserve estimates
(14,530
)
 

 

 
990

 

 

 

 

 

Current production
(28
)
 

 

 
(69
)
 

 

 

 

 

End of period

 

 

 
14,558

 

 

 

 

 

Proved developed reserves

 

 

 
1,632

 

 

 

 

 

Proved undeveloped reserves

 

 

 
12,926

 

 

 

 

 


In 2015, the Company experienced extensions and discoveries of 1,044.5 Bcfe of proved reserves attributable to the continued development of the Company's Utica Shale acreage. In addition, the Company experienced downward revisions of 444,314 MMcfe in estimated proved reserves in 2015 primarily due to the exclusion of PUD locations in our Utica and Southern Louisiana fields that became uneconomic due to the continued decline in commodity prices. In 2015, the Company also purchased 371,663 MMcfe of proved reserves as a result of acquisitions from Paloma and AEU discussed above in Note 2. In 2014, the Company experienced extensions and discoveries of 786,347 MMcfe of proved reserves attributable to the development of the Company's Utica Shale acreage. In addition, the Company experienced downward revisions of 15,837 MMcfe in estimated proved reserves in 2014 primarily due to the exclusion of PUD locations in our Southern Louisiana and Utica fields that were not expected to be drilled within five years of initial booking. The Company also purchased 12,019 MMcfe of proved reserves as a result of its acquisition from Rhino discussed in Note 2. In 2013, the Company experienced extensions and discoveries of 166,832 MMcfe of proved reserves attributable to the development of the Company's Utica Shale acreage.
Discounted Future Net Cash Flows
The following tables present the estimated future cash flows, and changes therein, from Gulfport’s proven oil and gas reserves as of December 31, 2015, 2014 and 2013 using an unweighted average first-of-the-month price for the period January through December 31, 2015, 2014 and 2013.
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves  
 
Year ended December 31,
 
2015
 
2014
 
2013
 
(In thousands)
Future cash flows
$
3,043,450

 
$
4,667,678

 
$
1,657,708

Future development and abandonment costs
(877,660
)
 
(719,898
)
 
(272,500
)
Future production costs
(941,243
)
 
(880,427
)
 
(274,428
)
Future production taxes
(58,169
)
 
(71,229
)
 
(78,647
)
Future income taxes
(2,648
)
 
(693,154
)
 
(172,691
)
Future net cash flows
1,163,730

 
2,302,970

 
859,442

10% discount to reflect timing of cash flows
(399,399
)
 
(875,803
)
 
(280,976
)
Standardized measure of discounted future net cash flows
$
764,331

 
$
1,427,167

 
$
578,466

 
 
 
 
 
 
Equity investment in Diamondback Energy, Inc. Standardized measure of discounted cash flows
 
 
 
 
 
Future cash flows
$

 
$

 
$
331,505

Future development and abandonment costs

 

 
(37,229
)
Future production costs

 

 
(58,096
)
Future production taxes

 

 
(22,925
)
Future income taxes

 

 
(48,547
)
Future net cash flows

 

 
164,708

10% discount to reflect timing of cash flows

 

 
(94,462
)
Standardized measure of discounted future net cash flows
$

 
$

 
$
70,246

 
 
 
 
 
 
Equity investment in Grizzly Oil Sands ULC Standardized measure of discounted cash flows
 
 
 
 
 
Future cash flows
$

 
$
754,720

 
$

Future development and abandonment costs

 
(205,242
)
 

Future production costs

 
(291,988
)
 

Future production taxes

 

 

Future income taxes

 
(11,250
)
 

Future net cash flows

 
246,240

 

10% discount to reflect timing of cash flows


 
(152,494
)
 

Standardized measure of discounted future net cash flows
$

 
$
93,746

 
$


In order to develop its proved undeveloped reserves according to the drilling schedule used by the engineers in Gulfport’s reserve report, the Company will need to spend $170.3 million, $177.6 million and $158.4 million during years 2016, 2017 and 2018, respectively.
Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
 
 
Year ended December 31,
 
2015
 
2014
 
2013
 
(In thousands)
Sales and transfers of oil and gas produced, net of production costs
$
(486,185
)
 
$
(530,098
)
 
$
(197,559
)
Net changes in prices, production costs, and development costs
(1,412,181
)
 
97,716

 
65,573

Acquisition of oil and gas reserves in place
83,340

 
14,266

 

Extensions and discoveries
262,895

 
790,533

 
130,826

Previously estimated development costs incurred during the period
117,540

 
68,227

 
43,478

Revisions of previous quantity estimates, less related production costs
(98,162
)
 
(37,801
)
 
(3,591
)
Accretion of discount
142,717

 
57,847

 
34,864

Net changes in income taxes
412,240

 
(295,226
)
 
(30,239
)
Change in production rates and other
314,960

 
683,237

 
186,473

Total change in standardized measure of discounted future net cash flows
$
(662,836
)
 
$
848,701

 
$
229,825

 
 
 
 
 
 
Equity investment in Diamondback Energy, Inc. Changes in standardized measure of discounted cash flows
 
 
 
 
 
Change in ownership interest in Diamondback
$

 
$

 
$
(52,145
)
Sales and transfers of oil and gas produced, net of production costs

 

 
(12,524
)
Net changes in prices, production costs, and development costs

 

 
3,312

Acquisition of oil and gas reserves in place

 

 
21,968

Extensions and discoveries

 

 
39,776

Previously estimated development costs incurred during the period

 

 
5,517

Revisions of previous quantity estimates, less related production costs

 

 
(9,143
)
Accretion of discount

 

 
4,175

Net changes in income taxes

 

 
(12,137
)
Change in production rates and other

 

 
2,862

Total change in standardized measure of discounted future net cash flows
$

 
$

 
$
(8,339
)
 
 
 
 
 
 
Equity investment in Grizzly Oil Sands ULC Changes in standardized measure of discounted cash flows
 
 
 
 
 
Sales and transfers of oil and gas produced, net of production costs
$
114

 
$
4,664

 
$

Net changes in prices, production costs, and development costs

 
(76,518
)
 

Acquisition of oil and gas reserves in place

 

 

Extensions and discoveries

 
7,107

 

Previously estimated development costs incurred during the period
47

 

 

Revisions of previous quantity estimates, less related production costs
(103,282
)
 
10,659

 

Accretion of discount
9,375

 
14,946

 

Net changes in income taxes

 
9,162

 

Change in production rates and other

 
(25,738
)
 

Total change in standardized measure of discounted future net cash flows
$
(93,746
)
 
$
(55,718
)
 
$