Gulfport Energy Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Property and Equipment

Property and Equipment

9 Months Ended

Sep. 30, 2016

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

The major categories of property and equipment and related accumulated depletion, depreciation, amortization and impairment as of September 30, 2016 and December 31, 2015 are as follows:



	September 30, 2016			December 31, 2015
	(In thousands)
Oil and natural gas properties	$	5,816,458		$	5,424,342
Office furniture and fixtures	13,862			12,589
Building	36,931			16,915
Land	3,667			3,667
Total property and equipment	5,870,918			5,457,513
Accumulated depletion, depreciation, amortization and impairment	(3,613,662		)	(2,829,110		)
Property and equipment, net	$	2,257,256		$	2,628,403

At September 30, 2016, the net book value of the Company's oil and natural gas properties was above the calculated ceiling as a result of the reduced commodity prices for the period leading up to September 30, 2016. As a result, the Company recorded an impairment of its oil and natural gas properties under the full cost method of accounting of $212.2 million and $601.8 million for the three and nine months ended September 30, 2016, respectively. An impairment of $594.8 million was required for oil and natural gas properties for the three and nine months ended September 30, 2015.

Included in oil and natural gas properties at September 30, 2016 is the cumulative capitalization of $122.8 million in general and administrative costs incurred and capitalized to the full cost pool. 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 $7.2 million and $22.2 million for the three and nine months ended September 30, 2016, respectively, and $7.3 million and $20.8 million for the three and nine months ended September 30, 2015, respectively.

The following table summarizes the Company’s non-producing properties excluded from amortization by area at September 30, 2016:



	September 30, 2016
	(In thousands)
Utica	$	1,718,379
Niobrara	4,857
Southern Louisiana	443
Bakken	97
Other	45
	$	1,723,821

At December 31, 2015, approximately $1.8 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 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 nine months ended September 30, 2016 and 2015 is as follows:



	September 30, 2016			September 30, 2015
	(In thousands)
Asset retirement obligation, beginning of period	$	26,437		$	17,938
Liabilities incurred	6,726			5,736
Liabilities settled	(955		)	(1,120		)
Accretion expense	777			594
Asset retirement obligation as of end of period	32,985			23,148
Less current portion	75			75
Asset retirement obligation, long-term	$	32,910		$	23,073