Overview

Lease Records

The Lease Records Department maintains land records and monitors payment of bonuses, damage settlements, delay rentals and minimum royalty payments through entering in to the company’s data base system, tracking and updating legal descriptions, remarks, special obligations, well references, tracts and leasehold ownership information. This information is necessary to provide reporting and analysis functions.

Division Orders

When a well begins producing oil or gas, the ownership for each owner of an interest in the well is determined. A division order is an instrument between the payor of production proceeds and the owner of an interest in a property. The division order will furnish:

• Property name
• Property number
• Description of the property
• Decimal interest owned in the property

Gulfport Energy Corporation’s division order is based on the Model Form Division Order, which was developed by the National Association of Division Order Analysts and was designed to meet the requirements of all the states where we operate.

Owner Numbers & Property Numbers

Gulfport Energy Corporation issues thousands of checks each month. In order to manage all the owners in our system, a unique owner number is assigned to each owner. This number uses the first three letters of the owner’s last name and three unique numbers. The owner number will appear on all correspondence, division orders and checks from Gulfport Energy Corporation.

Each well is also given a property number. This number will also be reflected on correspondence, payment details, checks and division orders sent by Gulfport Energy Corporation. So that we may better assist you, please include your owner number and property number in any correspondence addressed to the company.

Calculation of Interest

The net interest held by each owner is shown on the division order Gulfport Energy Corporation prepares. This decimal interest is determined by dividing the net acres the owner owns within the unit by the total number of unit acres and then multiplying that number by the royalty rate stated in the lease.

Payment Calculations

Payments made to an owner are determined by the owner’s decimal interest in the well, the amount or volume of production and the price paid for the production. The volume of production multiplied by the price paid for production determines the gross amount received from the sale of production. The total gross sales proceeds are then multiplied by each individual owner’s decimal interest in the well. Additionally, the gross amount paid to an owner may be reduced by a state or federal taxes and other third party cost deductions depending on each individual owner’s lease agreement.

The price for production sold each month may fluctuate due to market conditions. For instance, during 2005 the price paid for natural gas rose dramatically after Hurricane Katrina disrupted production in the Gulf of Mexico. Prices paid for production at that time were some of the highest ever received. Market conditions such as these can increase (or decrease) the amounts paid to owners of interests in wells from month to month. These same conditions have similarly influenced crude oil prices. Therefore, please realize that there are several different events or market conditions that may affect the prices received from the sale of production. If production amounts or sales prices change, the amount of your check will be affected accordingly.

Backup Withholding Tax

Gulfport Energy Corporation is required to report to the Internal Revenue Service all payments made to interest owners. In order to report the payments correctly, we request that you fill out and return a W-9 form providing your tax identification number. The tax identification number for individuals is your Social Security number. If you represent a company, it will be your company’s tax identification number. If Gulfport Energy Corporation does not receive your tax identification number, we are required to withhold a federal tax referred to as "backup withholding”. The backup withholding tax rate is 28 percent. Click here for a downloadable W-9 form to provide your tax identification number to Gulfport Energy Corporation.

Ownership Changes

During the life of a well or lease, there may be a need to update ownership records. This could be due to several types of transactions or occurrences, such as sale of the property or mineral interests therein or the death of an owner. In order for Gulfport Energy Corporation to update our records to reflect such changes in ownership, the company must be provided with the appropriate instrument reflecting the change in ownership that has been recorded in the real property records of the county or parish in which the well is located.

Retroactive Adjustments to Payments

Occasionally we have to make retroactive adjustments for prior months’ payments. If Gulfport Energy Corporation has to make such an adjustment, it will impact the amount of your check. While we certainly try to avoid these types of adjustments, many of the causes are outside of our control. We regret if this happens and will provide an explanation of the adjustment upon request.

Summary

If you have questions we will be glad to help you. You may contact us by e-mail at ownerrelations@gulfportenergy.com, or you may call Gulfport Energy Corporation at 1-405-252-4600.