Annual report pursuant to Section 13 and 15(d)

Supplemental Information On Oil And Gas Exploration And Production Activities

v2.4.1.9
Supplemental Information On Oil And Gas Exploration And Production Activities
12 Months Ended
Dec. 31, 2014
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 did not own any of Diamondback's common stock at December 31, 2014. However, at December 31, 2013 and December 31, 2012, the Company owned a 7.2% and 21.4% equity interest in Diamondback, respectively, 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.
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
 
 
2014
 
2013
 
(In thousands)
Proven properties
$
2,457,616

 
$
1,526,588

Unproven properties
1,465,538

 
950,590

 
3,923,154

 
2,477,178

Accumulated depreciation, depletion, amortization and impairment reserve
(1,044,273
)
 
(779,561
)
Net capitalized costs
$
2,878,881

 
$
1,697,617

 
 
 
 
Equity investment in Diamondback Energy, Inc.
 
 
 
Proven properties
$

 
$
92,074

Unproven properties

 
26,608

 

 
118,682

Accumulated depreciation, depletion, amortization and impairment reserve

 
(15,180
)
Net capitalized costs
$

 
$
103,502

 
 
 
 
Equity investment in Grizzly Oil Sand ULC
 
 
 
Proven properties
$
96,859

 
$

Unproven properties
103,160

 

 
200,019

 

Accumulated depreciation, depletion, amortization and impairment reserve
(1,248
)
 

Net capitalized costs
$
198,771

 
$


Costs Incurred in Oil and Gas Property Acquisition and Development Activities
 
 
2014
 
2013
 
2012
 
(In thousands)
Acquisition
$
440,288

 
$
338,153

 
$
513,904

Development of proved undeveloped properties
864,511

 
408,121

 
121,787

Exploratory
2,249

 
26,174

 
93,397

Recompletions
45,658

 
44,633

 
24,643

Capitalized asset retirement obligation
2,095

 
3,556

 
2,195

Total
$
1,354,801

 
$
820,637

 
$
755,926

 
 
 
 
 
 
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

 
 
 
 
 
 
Equity investment in Grizzly Oil Sands ULC
 
 
 
 
 
Acquisition
$
1,230

 
$

 
$

Development of proved undeveloped properties
7,107

 

 

Exploratory

 

 

Capitalized asset retirement obligation
1,055

 

 

Total
$
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.
 
 
2014
 
2013
 
2012
 
(In thousands)
Revenues
$
670,762

 
$
262,225

 
$
248,601

Production costs
(140,664
)
 
(64,666
)
 
(53,708
)
Depletion
(263,946
)
 
(118,118
)
 
(90,230
)
 
266,152

 
79,441

 
104,663

Income tax expense (benefit)
 
 
 
 
 
Current

 

 
730

Deferred
96,061

 
49,447

 
25,633

 
96,061

 
49,447

 
26,363

Results of operations from producing activities
$
170,091

 
$
29,994

 
$
78,300

Depletion per Mcf of gas equivalent (Mcfe)
$
3.01

 
$
4.78

 
$
5.85

 
 
 
 
 
 
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

 
2,286

 
2,158

Results of operations from producing activities
$

 
$
5,418

 
$
3,895

 
 
 
 
 
 
Results of Operations from equity method investment in Grizzly Oil Sands ULC
 
 
 
 
 
Revenues
$
5,449

 
$

 
$

Production costs
(10,113
)
 

 

Depletion
(1,195
)
 

 

 
(5,859
)
 

 

Income tax expense

 

 

Results of operations from producing activities
$
(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, 2014, 2013 and 2012 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, 2014, 2013 and 2012, 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 2014 reserve report are $94.99 per barrel of oil, $4.35 per MMbtu and $44.84 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, 2013 and 2012 for reserve report purposes are $96.78 per barrel, $3.67 per MMbtu and $41.23 per barrel for NGLs and $91.32 per barrel and $2.76 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.
 
 
2014
 
2013
 
2012
 
Oil
 
Gas
 
NGL
 
Oil
 
Gas
 
NGL
 
Oil
 
Gas
 
NGL
 
(MBbls)
 
(MMcf)
 
(MBbls)
 
(MBbls)
 
(MMcf)
 
(MBbls)
 
(MBbls)
 
(MMcf)
 
(MBbls)
Proved Reserves
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of the period
8,346

 
146,446

 
5,675

 
8,106

 
33,771

 
145

 
13,954

 
15,728

 
2,791

Purchases in oil and gas reserves in place
173

 
8,863

 
353

 

 

 

 

 

 

Extensions and discoveries
4,975

 
629,151

 
22,594

 
2,765

 
123,597

 
5,850

 
4,732

 
31,265

 
148

Sales of oil and gas reserves in place

 

 

 

 

 

 
(7,875
)
 
(11,757
)
 
(2,729
)
Revisions of prior reserve estimates
(1,313
)
 
(6,136
)
 
(304
)
 
(208
)
 
(2,031
)
 

 
(382
)
 
(357
)
 

Current production
(2,684
)
 
(59,318
)
 
(2,050
)
 
(2,317
)
 
(8,891
)
 
(320
)
 
(2,323
)
 
(1,108
)
 
(65
)
End of period
9,497

 
719,006

 
26,268

 
8,346

 
146,446

 
5,675

 
8,106

 
33,771

 
145

Proved developed reserves
5,719

 
345,166

 
12,379

 
5,609

 
94,552

 
3,527

 
5,175

 
18,482

 
44

Proved undeveloped reserves
3,778

 
373,840

 
13,889

 
2,737

 
51,894

 
2,148

 
2,931

 
15,289

 
101

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity investment in Grizzly Oil Sands ULC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of the period
13,637

 

 

 

 

 

 

 

 

Purchases in oil and gas reserves in place

 

 

 

 

 

 

 

 

Extensions and discoveries

 

 

 

 

 

 

 

 

Revisions of prior reserve estimates
990

 

 

 

 

 

 

 

 

Current production
(69
)
 

 

 

 

 

 

 

 

End of period
14,558

 

 

 

 

 

 

 

 

Proved developed reserves
1,632

 

 

 

 

 

 

 

 

Proved undeveloped reserves
12,926

 

 

 

 

 

 

 

 


In 2014, the Company experienced extensions and discoveries of 786,347 million cubic feet of gas equivalent (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. The Company contributed its Permian Basin assets to Diamondback in 2012, as discussed in Note 4, resulting in a decrease of 75,384 MMcfe in estimated proved reserves in 2012. The Company experienced extensions and discoveries of proved reserves of 40,049 MMcfe in 2012 attributable to the discovery and development of the Company's Utica Shale acreage. In addition, the Company experienced downward reserve revisions of 2,649 MMcfe in estimated proved reserves in 2012 primarily due to a change in the drilling schedule of its Niobrara 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, 2014, 2013 and 2012 using an unweighted average first-of-the-month price for the period January through December 31, 2014, 2013 and 2012.
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves  
 
Year ended December 31,
 
2014
 
2013
 
2012
 
(In thousands)
Future cash flows
$
4,667,678

 
$
1,657,708

 
$
954,833

Future development and abandonment costs
(719,898
)
 
(272,500
)
 
(159,113
)
Future production costs
(880,427
)
 
(274,428
)
 
(147,024
)
Future production taxes
(71,229
)
 
(78,647
)
 
(89,175
)
Future income taxes
(693,154
)
 
(172,691
)
 
(114,867
)
Future net cash flows
2,302,970

 
859,442

 
444,654

10% discount to reflect timing of cash flows
(875,803
)
 
(280,976
)
 
(96,013
)
Standardized measure of discounted future net cash flows
$
1,427,167

 
$
578,466

 
$
348,641

 
 
 
 
 
 
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

 
 
 
 
 
 
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 $221.0 million, $93.1 million and $215.4 million during years 2015, 2016 and 2017, respectively.
Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
 
 
Year ended December 31,
 
2014
 
2013
 
2012
 
(In thousands)
Sales and transfers of oil and gas produced, net of production costs
$
(530,098
)
 
$
(197,559
)
 
$
(194,893
)
Net changes in prices, production costs, and development costs
97,716

 
65,573

 
108,941

Acquisition of oil and gas reserves in place
14,266

 

 

Extensions and discoveries
790,533

 
130,826

 
151,654

Previously estimated development costs incurred during the period
68,227

 
43,478

 
10,211

Revisions of previous quantity estimates, less related production costs
(37,801
)
 
(3,591
)
 
(10,504
)
Sales of reserves in place

 

 
(214,867
)
Accretion of discount
57,847

 
34,864

 
37,668

Net changes in income taxes
(295,226
)
 
(30,239
)
 
25,585

Change in production rates and other
683,237

 
186,473

 
58,165

Total change in standardized measure of discounted future net cash flows
$
848,701

 
$
229,825

 
$
(28,040
)
 
 
 
 
 
 
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

 
 
 
 
 
 
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
$
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

 

 

Revisions of previous quantity estimates, less related production costs
10,659

 

 

Accretion of discount
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
$
(55,718
)
 
$

 
$