Gulfport Energy Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Property and Equipment

Property and Equipment

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

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



	December 31,
	2016			2015
	(In thousands)
Oil and natural gas properties	$	6,071,920		$	5,424,342
Office furniture and fixtures	21,204			12,589
Building	42,530			16,915
Land	5,252			3,667
Total property and equipment	6,140,906			5,457,513
Accumulated depletion, depreciation, amortization and impairment	(3,789,780		)	(2,829,110		)
Property and equipment, net	$	2,351,126		$	2,628,403

At December 31, 2016 and 2015, 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 during the years ended December 31, 2016 and 2015, respectively. As a result, the Company recorded an impairment of its oil and natural gas properties under the full cost method of accounting in the amount of $715.5 million and $1.4 billion for the years ended December 31, 2016 and 2015, respectively. No impairment of oil and natural gas properties was required under the ceiling test for the year ended December 31, 2014.

Included in oil and natural gas properties at December 31, 2016 and 2015 is the cumulative capitalization of $129.9 million and $100.6 million, respectively, 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 $29.3 million, $27.9 million and $25.2 million for the years ended December 31, 2016, 2015 and 2014, respectively.

The following is a summary of Gulfport’s oil and gas properties not subject to amortization as of December 31, 2016:



	Costs Incurred in
	2016		2015			2014			Prior to 2014		Total
	(In thousands)
Acquisition costs	$	147,382	$	515,905		$	314,077		$	571,924	$	1,549,288
Exploration costs	—		—			—			—		—
Development costs	18,853		5,067			3,248			1,533		28,701
Capitalized interest	3,632		(876		)	(2,504		)	2,064		2,316
Total oil and gas properties not subject to amortization	$	169,867	$	520,096		$	314,821		$	575,521	$	1,580,305

The following table summarizes the Company’s non-producing properties excluded from amortization by area as of December 31, 2016:



	December 31, 2016
	(In thousands)
Utica	$	1,577,207
Niobrara	2,172
Southern Louisiana	462
Bakken	96
Other	368
	$	1,580,305

As of 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 years ended December 31, 2016 and 2015 is as follows:



	December 31,
	2016			2015
	(In thousands)
Asset retirement obligation, beginning of period	$	26,437		$	17,938
Liabilities incurred	10,971			8,800
Liabilities settled	(4,189		)	(1,121		)
Accretion expense	1,057			820
Asset retirement obligation as of end of period	34,276			26,437
Less current portion	195			75
Asset retirement obligation, long-term	$	34,081		$	26,362