Annual report pursuant to Section 13 and 15(d)

Supplemental Information On Oil And Gas Exploration And Production Activities

v2.4.0.8
Supplemental Information On Oil And Gas Exploration And Production Activities
12 Months Ended
Dec. 31, 2013
Extractive Industries [Abstract]  
Supplemental Information On Oil And Gas Exploration And Production Activities
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES (UNAUDITED)
As discussed above in Notes 4 and 5, the Company owned a 7.2% equity interest in Diamondback at December 31, 2013 which interest is shown below. At December 31, 2012, the Company owned a 21.4% equity interest in Diamondback. The Company did not own an equity interest in Diamondback at December 31, 2011.
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
 
 
2013
 
2012
 
(In thousands)
Proven properties
$
1,526,588

 
$
984,795

Unproven properties
950,590

 
626,295

 
2,477,178

 
1,611,090

Accumulated depreciation, depletion, amortization and impairment reserve
(779,561
)
 
(661,442
)
Net capitalized costs
$
1,697,617

 
$
949,648

 
 
 
 
Equity investment in Diamondback Energy, Inc.
 
 
 
Proven properties
$
92,074

 
$
123,370

Unproven properties
26,608

 
25,947

 
118,682

 
149,317

Accumulated depreciation, depletion, amortization and impairment reserve
$
(15,180
)
 
$
(31,052
)
Net capitalized costs
$
103,502

 
$
118,265

Costs Incurred in Oil and Gas Property Acquisition and Development Activities
 
 
2013
 
2012
 
2011
 
(In thousands)
Acquisition
$
338,153

 
$
513,904

 
$
119,522

Development of proved undeveloped properties
408,121

 
121,787

 
123,489

Exploratory
26,174

 
93,397

 
3,994

Recompletions
44,633

 
24,643

 
17,259

Capitalized asset retirement obligation
3,556

 
2,195

 
1,390

Total
$
820,637

 
$
755,926

 
$
265,654

 
 
 
 
 
 
Equity investment in Diamondback Energy, Inc.
 
 
 
 
 
Acquisition
$
44,534

 
$
49,895

 
$

Development of proved undeveloped properties
6,369

 
22,740

 

Exploratory
17,491

 
3,755

 

Capitalized asset retirement obligation
50

 
203

 

Total
$
68,444

 
$
76,593

 
$

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.
 
 
2013
 
2012
 
2011
 
(In thousands)
Revenues
$
262,225

 
$
248,601

 
$
228,953

Production costs
(64,666
)
 
(53,708
)
 
(47,230
)
Depletion
(118,118
)
 
(90,230
)
 
(61,965
)
 
79,441

 
104,663

 
119,758

Income tax expense (benefit)
 
 
 
 
 
Current

 
730

 
282

Deferred
49,447

 
25,633

 
(372
)
 
49,447

 
26,363

 
(90
)
Results of operations from producing activities
$
29,994

 
$
78,300

 
$
119,848

Depletion per barrel of oil equivalent (BOE)
$
28.68

 
$
35.07

 
$
26.56

 
 
 
 
 
 
Results of Operations from equity method investment in Diamondback Energy, Inc.
 
 
 
 
 
Revenues
$
14,976

 
$
16,042

 
$

Production costs
(2,518
)
 
(4,474
)
 

Depletion
(4,754
)
 
(5,515
)
 

 
7,704

 
6,053

 

Income tax expense (benefit)
2,286

 
2,158

 

 
 
 
 
 
 
Results of operations from producing activities
$
5,418

 
$
3,895

 
$

Oil and Gas Reserves
The following table presents estimated volumes of proved developed and undeveloped oil and gas reserves as of December 31, 2013, 2012 and 2011 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, 2013, 2012 and 2011, 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 2013 reserve report are $96.78 per barrel of oil, $3.67 per MMbtu and $41.23 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, 2012 and 2011 for reserve report purposes are $91.32 per barrel and $2.76 per MMbtu and $96.19 per barrel and $4.12 per MMbtu, 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.
 
 
2013
 
2012
 
2011
 
Oil
 
Gas
 
NGL
 
Oil
 
Gas
 
NGL
 
Oil
 
Gas
 
NGL
 
(MBbls)
 
(MMcf)
 
(MBbls)
 
(MBbls)
 
(MMcf)
 
(MBbls)
 
(MBbls)
 
(MMcf)
 
(MBbls)
Proved Reserves
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of the period
8,106

 
33,771

 
145

 
13,954

 
15,728

 
2,791

 
16,597

 
16,158

 
3,107

Purchases in oil and gas reserves in place

 

 

 

 

 

 
2

 
19

 

Extensions and discoveries
2,765

 
123,597

 
5,850

 
4,732

 
31,265

 
148

 
3,723

 
2,091

 
217

Sales of oil and gas reserves in place

 

 

 
(7,875
)
 
(11,757
)
 
(2,729
)
 

 

 

Revisions of prior reserve estimates
(208
)
 
(2,031
)
 

 
(382
)
 
(357
)
 

 
(4,240
)
 
(1,662
)
 
(474
)
Current production
(2,317
)
 
(8,891
)
 
(320
)
 
(2,323
)
 
(1,108
)
 
(65
)
 
(2,128
)
 
(878
)
 
(59
)
End of period
8,346

 
146,446

 
5,675

 
8,106

 
33,771

 
145

 
13,954

 
15,728

 
2,791

Proved developed reserves
5,609

 
94,552

 
3,527

 
5,175

 
18,482

 
44

 
6,780

 
6,152

 
705

Proved undeveloped reserves
2,737

 
51,894

 
2,148

 
2,931

 
15,289

 
101

 
7,174

 
9,576

 
2,086

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity investment in Diamondback Energy, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proved Reserves
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of the period
5,606

 
7,398

 
1,766

 
3,874

 
4,398

 
1,080

 

 

 

Change in ownership interest in Diamondback
(3,720
)
 
(4,909
)
 
(1,171
)
 

 

 

 

 

 

Purchases in oil and gas reserves in place
528

 
752

 
120

 
1,543

 
2,292

 
540

 

 

 

Extensions and discoveries
1,227

 
1,741

 
331

 
665

 
804

 
186

 

 

 

Revisions of prior reserve estimates
(428
)
 
(417
)
 
(249
)
 
(314
)
 
82

 
(1
)
 

 

 

Current production
(146
)
 
(124
)
 
(26
)
 
(162
)
 
(178
)
 
(39
)
 

 

 

End of period
3,067

 
4,441

 
771

 
5,606

 
7,398

 
1,766

 

 

 

Proved developed reserves
1,425

 
2,263

 
358

 
1,539

 
2,753

 
641

 

 

 

Proved undeveloped reserves
1,642

 
2,178

 
413

 
4,068

 
4,645

 
1,124

 

 

 


In 2013, the Company experienced extensions and discoveries of 27,805 thousand barrels of oil equivalent (MBOE) of proved reserves attributable to the development of the Company's Utica Shale acreage. The Company contributed its Permian Basin assets to Diamondback in 2012, as discussed in Note 4, resulting in a decrease of 12,564 MBOE in estimated proved reserves in 2012. The Company experienced extensions and discoveries of proved reserves of 6,675 MBOE in 2012 attributable to the discovery and development of the Company's Utica Shale acreage. In addition, the Company experienced downward reserve revisions of 442 MBOE in estimated proved reserves in 2012 primarily due to a change in the drilling schedule of its Niobrara acreage. The Company also experienced downward reserve revisions in 2011. These downward revisions were primarily the result of the drilling of PUDs during the Company’s 2011 drilling program and ethane takeaway issues in the Permian Basin.
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, 2013, 2012 and 2011 using an unweighted average first-of-the-month price for the period January through December 31, 2013, 2012 and 2011.
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves  
 
Year ended December 31,
 
2013
 
2012
 
2011
 
(In thousands)
Future cash flows
$
1,657,708

 
$
954,833

 
$
1,594,050

Future development and abandonment costs
(272,500
)
 
(159,113
)
 
(306,810
)
Future production costs
(274,428
)
 
(147,024
)
 
(295,383
)
Future production taxes
(78,647
)
 
(89,175
)
 
(124,739
)
Future income taxes
(172,691
)
 
(114,867
)
 
(229,649
)
Future net cash flows
859,442

 
444,654

 
637,469

10% discount to reflect timing of cash flows
(280,976
)
 
(96,013
)
 
(260,788
)
Standardized measure of discounted future net cash flows
$
578,466

 
$
348,641

 
$
376,681

 
 
 
 
 
 
Equity investment in Diamondback Energy, Inc. Standardized measure of discounted cash flows
 
 
 
 
 
Future cash flows
$
331,505

 
$
592,669

 
$

Future development and abandonment costs
(37,229
)
 
(115,869
)
 

Future production costs
(58,096
)
 
(165,553
)
 

Future production taxes
(22,925
)
 
(30,122
)
 

Future income taxes
(48,547
)
 
(71,669
)
 

Future net cash flows
164,708

 
209,456

 

10% discount to reflect timing of cash flows
(94,462
)
 
(130,871
)
 

Standardized measure of discounted future net cash flows
$
70,246

 
$
78,585

 
$

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 $135.4 million, $68.7 million and $8.5 million during years 2014, 2015 and 2016, respectively.
Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
 
 
Year ended December 31,
 
2013
 
2012
 
2011
 
(In thousands)
Sales and transfers of oil and gas produced, net of production costs
$
(197,559
)
 
$
(194,893
)
 
$
(181,723
)
Net changes in prices, production costs, and development costs
65,573

 
108,941

 
136,071

Acquisition of oil and gas reserves in place

 

 
72

Extensions and discoveries
130,826

 
151,654

 
107,110

Previously estimated development costs incurred during the period
43,478

 
10,211

 
41,193

Revisions of previous quantity estimates, less related production costs
(3,591
)
 
(10,504
)
 
(112,553
)
Sales of reserves in place

 
(214,867
)
 

Accretion of discount
34,864

 
37,668

 
31,549

Net changes in income taxes
(30,239
)
 
25,585

 
(36,674
)
Change in production rates and other
186,473

 
58,165

 
76,149

Total change in standardized measure of discounted future net cash flows
$
229,825

 
$
(28,040
)
 
$
61,194

 
 
 
 
 
 
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
)
 
(11,601
)
 

Net changes in prices, production costs, and development costs
3,312

 
(14,596
)
 

Acquisition of oil and gas reserves in place
21,968

 
23,090

 

Extensions and discoveries
39,776

 
16,969

 

Previously estimated development costs incurred during the period
5,517

 
19,014

 

Revisions of previous quantity estimates, less related production costs
(9,143
)
 
(4,897
)
 

Accretion of discount
4,175

 
7,803

 

Net changes in income taxes
(12,137
)
 
(26,866
)
 

Change in production rates and other
2,862

 
(8,358
)
 

Total change in standardized measure of discounted future net cash flows
$
(8,339
)
 
$
558

 
$