Equity Investments |
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| Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EQUITY INVESTMENTS |
EQUITY INVESTMENTS
Investments accounted for by the equity method consist of the following as of December 31, 2016 and 2015:
The tables below summarize financial information for the Company's equity investments, as of December 31, 2016 and 2015.
Summarized balance sheet information:
Summarized results of operations:
Gross revenue and net loss presented above for 2014 include approximately one month of activity for Mammoth Energy Partners LP ("Mammoth") and approximately eleven months of activity for Stingray Pressure Pumping LLC ("Stingray Pressure"), Stingray Logistics LLC ("Stingray Logistics"), Muskie Proppant LLC ("Muskie") and Bison Drilling and Field Services LLC ("Bison"), which were contributed to Mammoth in November 2014. In October 2016, Mammoth converted into a limited liability company and the Company contributed its interest in that entity to Mammoth Energy Services, Inc. ("Mammoth Energy") in connection with Mammoth Energy's initial public offering. See further discussion of these contributions below.
Tatex Thailand II, LLC
The Company has an indirect ownership interest in Tatex Thailand II, LLC (“Tatex”). Tatex holds an 8.5% interest in APICO, LLC (“APICO”), an international oil and gas exploration company. APICO has a reserve base located in Southeast Asia through its ownership of concessions covering approximately 180,000 acres which includes the Phu Horm Field.
Tatex Thailand III, LLC
The Company has an ownership interest in Tatex Thailand III, LLC ("Tatex III"). Tatex III previously owned a concession covering approximately 245,000 acres in Southeast Asia. The Company paid cash calls of $1.6 million during the year ended December 31, 2014. As of December 31, 2014, the Company reviewed its investment in Tatex III and, together with Tatex III, made the decision to allow the concession to expire in January 2015. As such, the Company fully impaired the asset as of December 31, 2014, recognizing a loss of $12.1 million which is included in loss (income) from equity method investments in the accompanying consolidated statements of operations.
Grizzly Oil Sands ULC
The Company, through its wholly owned subsidiary Grizzly Holdings Inc. ("Grizzly Holdings"), owns an interest in Grizzly Oil Sands ULC ("Grizzly"), a Canadian unlimited liability company. The remaining interest in Grizzly is owned by Grizzly Oil Sands Inc. ("Oil Sands"). As of December 31, 2016, Grizzly had approximately 830,000 acres under lease in the Athabasca and Peace River oil sands regions of Alberta, Canada. Initiation of steam injection at its first project, Algar Lake Phase 1, commenced in January 2014 and first bitumen production was achieved during the second quarter of 2014. In April 2015, Grizzly determined to cease bitumen production at its Algar Lake facility due to the level of commodity prices. Grizzly continues to monitor market conditions as it assesses future plans for the facility. The Company reviewed its investment in Grizzly as of September 30, 2015 and December 31, 2015, and again at March 31, 2016 for impairment based on FASB ASC 323 due to certain qualitative factors and as such, engaged an independent third party to assist management in determining fair value calculations of its investment. As a result of the calculated fair values and other qualitative factors, the Company concluded that an other than temporary impairment was required under FASB ASC 323, resulting in an aggregate impairment loss of $101.6 million for the year ended December 31, 2015 and $23.1 million for the year ended December 31, 2016, which is included in loss (income) from equity method investments in the consolidated statements of operations. As of and during the period ended December 31, 2016, commodity prices had increased as compared to the quarter ended March 31, 2016, and there were no impairment indicators that required further evaluation for impairment. If commodity prices decline in the future however, further impairment of the investment in Grizzly may be necessary. During the years ended December 31, 2016 and 2015, Gulfport paid $15.5 million and $14.5 million, respectively, in cash calls. Grizzly’s functional currency is the Canadian dollar. The Company's investment in Grizzly was increased by $4.2 million as a result of a foreign currency translation gain and decreased by $28.5 million and $16.9 million as a result of a foreign currency translation loss for the years ended December 31, 2016, 2015, and 2014, respectively.
Effective October 5, 2012, Grizzly entered into a $125.0 million revolving credit facility, of which Grizzly paid the outstanding balance in full in July 2016. Gulfport paid its share of this amount on June 30, 2016.
Bison Drilling and Field Services LLC
During 2011, the Company invested in Bison. Bison owns and operates drilling rigs. During the year ended December 31, 2014, the Company paid $17.0 million in cash calls.
The Company contributed its investment in Bison to Mammoth during the fourth quarter of 2014. See below under "Mammoth Energy Partners LP/Mammoth Energy Services, Inc." for information regarding this contribution.
Muskie Proppant LLC
During 2011, the Company invested in Muskie. Muskie processes and sells sand for use in hydraulic fracturing by the oil and natural gas industry and holds certain rights in a lease covering land in Wisconsin for mining oil and natural gas fracture grade sand. During the year ended December 31, 2014, the Company paid $1.0 million in cash calls to Muskie. The loss (income) from equity method investments presented in the table above reflects any intercompany profit eliminations.
The Company entered into a loan agreement with Muskie effective July 1, 2013, under which it loaned Muskie $0.9 million. Interest accrued at the prime rate plus 2.5%. The loan had an original maturity date of July 31, 2014. Effective July 31, 2014, an amendment was made to the loan agreement which changed the maturity date of the loan to July 31, 2015. During the fourth quarter of 2014, Muskie repaid the outstanding balance and the loan agreement was terminated.
The Company contributed its investment in Muskie to Mammoth during the fourth quarter of 2014. See below under "Mammoth Energy Partners LP/Mammoth Energy Services, Inc." for information regarding this contribution.
Timber Wolf Terminals LLC
During 2012, the Company invested in Timber Wolf Terminals LLC (“Timber Wolf”). Timber Wolf will operate a crude/condensate terminal and a sand transloading facility in Ohio. During the years ended December 31, 2016 and 2015, the Company paid no cash calls to Timber Wolf.
Windsor Midstream LLC
During 2012, the Company purchased an ownership interest in Windsor Midstream LLC (“Midstream”). Midstream owned a 28.4% interest in Coronado Midstream LLC ("Coronado"), a gas processing plant in West Texas. In March 2015, Coronado was sold to Enlink Midstream Partners, LP ("Enlink") for proceeds of approximately $600.0 million, consisting of cash and units representing a limited partnership interest in Enlink. Midstream recorded an $81.6 million gain on the sale of its investment in Coronado. During the years ended December 31, 2016 and 2015, the Company received $15.8 million and $3.9 million, respectively, in distributions from Midstream.
Stingray Pressure Pumping LLC
During 2012, the Company invested in Stingray Pressure. Stingray Pressure provides well completion services. During the year ended December 31, 2014, the Company paid $2.5 million in cash calls. The loss (income) from equity method investments presented in the table above reflects any intercompany profit eliminations.
The Company contributed its investment in Stingray Pressure to Mammoth during the fourth quarter of 2014. See below under "Mammoth Energy Partners LP/Mammoth Energy Services, Inc." for information regarding this contribution.
Stingray Cementing LLC
During 2012, the Company invested in Stingray Cementing LLC ("Stingray Cementing"). Stingray Cementing provides well cementing services. During the years ended December 31, 2016 and 2015, the Company did not pay any cash calls related to Stingray Cementing. The loss (income) from equity method investments presented in the table above reflects any intercompany profit eliminations.
Blackhawk Midstream LLC
During 2012, the Company invested in Blackhawk Midstream LLC ("Blackhawk"). Blackhawk coordinates gathering, compression, processing and marketing activities for the Company in connection with the development of its Utica Shale acreage. On January 28, 2014, Blackhawk closed on the sale of its equity interests in Ohio Gathering Company, LLC and Ohio Condensate Company, LLC for a purchase price of $190.0 million, of which $14.3 million was placed in escrow. Gulfport received $84.8 million in net proceeds from this transaction in the first quarter of 2014, which is included as income from equity method investments in the accompanying consolidated statements of operations. During the year ended December 31, 2015, the Company received net proceeds of approximately $7.2 million from the release of escrow from the Blackhawk sale, which is included in loss (income) from equity investments in the consolidated statements of operations.
Stingray Logistics LLC
During 2012, the Company invested in Stingray Logistics. Stingray Logistics provides well services.
The Company contributed its investment in Stingray Logistics to Mammoth during the fourth quarter of 2014. See below under "Mammoth Energy Partners LP/Mammoth Energy Services, Inc." for information regarding this contribution.
Diamondback Energy, Inc.
On May 7, 2012, the Company entered into a contribution agreement with Diamondback. Under the terms of the contribution agreement, the Company agreed to contribute to Diamondback, prior to the closing of the Diamondback initial public offering ("Diamondback IPO"), all its oil and natural gas interests in the Permian Basis (the "Contribution"). The Contribution was completed on October 11, 2012. Following the closing of the Diamondback IPO, the Company owned 7,914,036 shares of Diamondback's outstanding common stock for an initial investment in Diamondback valued at $138.5 million. In 2013, the Company sold an aggregate of 4,534,536 shares of its Diamondback common stock and received aggregate net proceeds of approximately $192.7 million. In June and September of 2014, the Company sold an aggregate of 2,437,500 shares of its Diamondback common stock and received aggregate net proceeds of approximately $197.6 million. On November 12, 2014, the Company sold its remaining 942,000 shares of Diamondback common stock for net proceeds of approximately $60.8 million, and therefore, did not own any shares of Diamondback common stock as of December 31, 2016 or 2015.
The Company accounted for its interest in Diamondback as an equity method investment and had elected the fair value option of accounting for this investment. While the Company's ownership interest in Diamondback was below 20% prior to the Company's sale of its remaining Diamondback common stock in November 2014, the Company had appointed a member of Diamondback's Board. The individual appointed by the Company continues to serve on Diamondback's board and the Company had influence through this board seat. The Company recognized a gain of approximately $79.7 million on its investment in Diamondback for year ended December 31, 2014, which is included as loss (income) from equity method investments in the consolidated statements of operations.
The Company has determined that for the 2014 period presented in its consolidated financial statements, Diamondback met the conditions of a significant subsidiary under Rule 1-02(w) of Regulation S-X, for which the Company is required, pursuant to Rule 3-09 of Regulation S-X, to attach separate financial statements as exhibits to its Annual Report on Form 10-K. During 2015 and 2016, the Company did not own any shares of Diamondback common stock and, as such, Rule 3-09 of Regulation S-X is not applicable and the 2015 and 2016 consolidated financial statements of Diamondback are not attached.
Stingray Energy Services LLC
During 2013, the Company invested in Stingray Energy Services LLC ("Stingray Energy"). Stingray Energy provides rental tools for land-based oil and natural gas drilling, completion and workover activities as well as the transfer of fresh water to wellsites. During the years ended December 31, 2016 and 2015, the Company did not pay any cash calls to Stingray Energy. The loss (income) from equity method investments presented in the table above reflects any intercompany profit eliminations.
Sturgeon Acquisitions LLC
During the third quarter of 2014, the Company invested $20.7 million and received an ownership interest of 25% in Sturgeon Acquisitions LLC ("Sturgeon"). Sturgeon owns and operates sand mines that produce hydraulic fracturing grade sand. During the years ended December 31, 2016 and 2015, the Company received approximately $1.3 million and $1.0 million, respectively, in distributions from Sturgeon.
Mammoth Energy Partners LP/Mammoth Energy Services, Inc.
In the fourth quarter of 2014, the Company contributed its investments in four entities to Mammoth for a 30.5% interest in this entity. Mammoth originally intended to pursue its initial public offering in 2014 or 2015; however, due to low commodity prices, the offering was postponed. In October 2016, Mammoth converted from a limited partnership into a limited liability company named Mammoth Energy Partners LLC ("Mammoth LLC") and the Company and the other members of Mammoth LLC contributed their interests in Mammoth LLC to Mammoth Energy Services, Inc. ("Mammoth Energy"). The Company received 9,150,000 shares of Mammoth Energy common stock in return for its contribution. Following the contribution, Mammoth Energy completed its initial public offering (the "IPO") of 7,750,000 shares of its common stock at a public offering price of $15.00 per share, of which 7,500,000 shares were sold by Mammoth Energy and 250,000 shares were sold by certain selling stockholders, including 76,250 shares sold by the Company for which it received net proceeds of $1.1 million. At December 31, 2016, the Company owned an approximate 24.2% interest in Mammoth Energy. To reflect the dilution of the Company's shares of Mammoth Energy stock after the IPO, the Company recognized a gain of $3.4 million, which is included in loss (income) from equity method investments in the accompanying consolidated statements of operations. The Company's investment in Mammoth Energy was decreased by a $0.8 million foreign currency loss resulting from Mammoth Energy's foreign subsidiary for the year ended December 31, 2016. The loss (income) from equity method investments presented in the table above reflects any intercompany profit eliminations.
The Company accounted for the 2014 contribution to Mammoth as a sale of financial assets under FASB ASC 860. The Company estimated the fair market value of its investment in Mammoth as of the contribution date using an average of the market approach and the income approach, based on a independently prepared valuation of the contributed assets. The fair market value was reduced by a discount factor for lack of marketability due to the Company's minority interest, resulting in a fair value of $143.5 million for the Company's 30.5% interest. The fair value of the assets and liabilities acquired was estimated using assumptions that represent Level 3 inputs. See "Note 13 - Fair Value Measurements" for additional discussion of the measurement inputs. The Company recognized a gain of $84.5 million from its contribution of assets to Mammoth, which is included in gain on contribution of investments in the accompanying consolidated statements of operations.
The Company reviewed its investment in Mammoth Energy at December 31, 2016 and determined no impairment was needed. If commodity prices decline, an impairment of the investment in Mammoth Energy may result in the future.
Strike Force Midstream LLC
In February 2016, the Company, through its wholly owned subsidiary Gulfport Midstream Holdings, LLC ("Midstream Holdings"), entered into an agreement with Rice Midstream Holdings LLC ("Rice"), a subsidiary of Rice Energy Inc., to develop natural gas gathering assets in eastern Belmont County and Monroe County, Ohio (the "dedicated areas"). The Company contributed certain gathering assets for a 25% interest in the newly formed entity called Strike Force Midstream LLC ("Strike Force"). Rice acts as operator and owns the remaining 75% interest in Strike Force. Construction of the gathering assets, which is underway, is expected to provide gathering services for Gulfport operated wells and connectivity of existing dry gas gathering systems. During the year ended December 31, 2016, Gulfport paid $11.0 million in cash calls to Strike Force.
The Company accounted for its contribution to Strike Force at fair value under applicable codification guidance. The Company estimated the fair market value of its investment in Strike Force as of the contribution date using the discounted cash flow method under the income approach, based on an independently prepared valuation of the contributed assets. The fair market value was reduced by a discount factor for the lack of marketability due to the Company's minority interest, resulting in a fair value of $22.5 million for the Company's 25% interest. The fair value of the assets contributed was estimated using assumptions that represent Level 3 inputs. See Note 13 - Fair Value Measurements for additional discussion of the measurement inputs. The Company has elected to report its proportionate share of Strike Force's earnings on a one-quarter lag as permitted under FASB ASC 323. The loss (income) from equity method investments presented in the table above reflects any intercompany profit eliminations.
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