Annual report pursuant to Section 13 and 15(d)

Property and Equipment

v3.19.3.a.u2
Property and Equipment
 12 Months Ended
Dec. 31, 2019
Property, Plant and Equipment [Abstract]  
Property and Equipment
PROPERTY AND EQUIPMENT
The major categories of property and equipment and related accumulated depletion, depreciation, amortization and impairment as of December 31, 2019 and 2018 are as follows:
 
December 31,
 
2019
 
2018
 
(In thousands)
Oil and natural gas properties
$
10,595,735

 
$
10,026,836

Other depreciable property and equipment
91,198

 
87,146

Land
5,521

 
5,521

Total property and equipment
10,692,454

 
10,119,503

Accumulated depletion, depreciation, amortization and impairment
(7,228,660
)
 
(4,640,098
)
Property and equipment, net
$
3,463,794

 
$
5,479,405


Under the full cost method of accounting, capitalized costs of oil and natural gas properties are subject to a quarterly full cost ceiling test, which is discussed in Note 1. During the year ended December 31, 2019, the Company incurred $2.0 billion of impairments as a result of its oil and natural gas properties exceeding its calculated ceiling. The lower ceiling values resulted primarily from significant decreases in the 12-month average trailing prices for natural gas, oil and NGL, which significantly reduced proved reserves values and, to a lesser degree, proved reserves. No impairment of oil and natural gas properties was required under the ceiling test for the years ended December 31, 2018 and 2017.
General and administrative costs capitalized to the full cost pool represent management’s estimate of costs incurred directly related to exploration and development activities such as geological and other administrative costs associated with overseeing the exploration and development activities. All general and administrative costs not directly associated with exploration and development activities were charged to expense as they were incurred. Capitalized general and administrative costs were approximately $30.1 million, $37.7 million and $35.7 million for the years ended December 31, 2019, 2018 and 2017, respectively. The average depletion rate per Mcfe, which is a function of capitalized costs, future development costs and the related underlying reserves in the periods presented, was $1.08, $0.96 and $0.90 per Mcfe for the years ended December 31, 2019, 2018 and 2017, respectively.
The following is a summary of Gulfport’s oil and natural gas properties not subject to amortization as of December 31, 2019:
 
Costs Incurred in
 
2019
 
2018
 
2017
 
Prior to 2017
 
Total
 
(In thousands)
Acquisition costs
$
9,089

 
$
98,870

 
$
756,963

 
$
806,982

 
$
1,671,904

Exploration costs
259

 
—

 
—

 
—

 
259

Development costs
1,213

 
548

 
869

 
10,325

 
12,955

Capitalized interest
888

 
413

 
247

 
—

 
1,548

Total oil and natural gas properties not subject to amortization
$
11,449

 
$
99,831

 
$
758,079

 
$
817,307

 
$
1,686,666


The following table summarizes the Company’s non-producing properties excluded from amortization by area as of December 31, 2019:
 
December 31, 2019
 
(In thousands)
Utica
$
976,593

MidContinent
709,739

Other
334

 
$
1,686,666


As of December 31, 2018, approximately $2.9 billion of non-producing leasehold costs was not subject to amortization.
The Company evaluates the costs excluded from its amortization calculation at least annually. Subject to industry conditions and the level of the Company’s activities, the inclusion of most of the above referenced costs into the Company’s amortization calculation typically occurs within three to five years. However, the majority of the Company's non-producing leases in the Utica Shale have five year extension terms which could extend this time frame beyond five years.
A reconciliation of the Company's asset retirement obligation for the years ended December 31, 2019 and 2018 is as follows:
 
December 31,
 
2019
 
2018
 
(In thousands)
Asset retirement obligation, beginning of period
$
79,952

 
$
75,100

Liabilities incurred
5,935

 
1,827

Liabilities settled
(273
)
 
(719
)
Liabilities removed due to divestitures
(30,146
)
 
—

Accretion expense
3,939

 
4,119

Revisions in estimated cash flows
948

 
(375
)
Asset retirement obligation as of end of period
$
60,355

 
$
79,952