Annual report pursuant to Section 13 and 15(d)

Supplemental Information on Oil and Gas Exploration and Production Activities (Unaudited)

v3.6.0.2
Supplemental Information on Oil and Gas Exploration and Production Activities (Unaudited)
 12 Months Ended
Dec. 31, 2016
Extractive Industries [Abstract]  
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES (UNAUDITED)
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES (UNAUDITED)
The Company owns a 24.9999% interest in Grizzly, which interest is shown below.
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
 
2016
 
2015
 
(In thousands)
Proven properties
$
4,491,615

 
$
3,606,641

Unproven properties
1,580,305

 
1,817,701

 
6,071,920

 
5,424,342

Accumulated depreciation, depletion, amortization and impairment reserve
(3,778,043
)
 
(2,820,113
)
Net capitalized costs
$
2,293,877

 
$
2,604,229

 
 
 
 
Equity investment in Grizzly Oil Sands ULC
 
 
 
Proven properties
$
70,266

 
$
81,473

Unproven properties
80,892

 
82,388

 
151,158

 
163,861

Accumulated depreciation, depletion, amortization and impairment reserve
(1,578
)
 
(1,531
)
Net capitalized costs
$
149,580

 
$
162,330


Costs Incurred in Oil and Gas Property Acquisition and Development Activities
 
2016
 
2015
 
2014
 
(In thousands)
Acquisition
$
152,887

 
$
810,755

 
$
440,288

Development of proved undeveloped properties
423,998

 
642,811

 
864,511

Exploratory
—

 
—

 
2,249

Recompletions
16,386

 
13,894

 
45,658

Capitalized asset retirement obligation
10,971

 
8,800

 
2,095

Total
$
604,242

 
$
1,476,260

 
$
1,354,801

 
 
 
 
 
 
Equity investment in Grizzly Oil Sands ULC
 
 
 
 
 
Acquisition
$
357

 
$
396

 
$
1,230

Development of proved undeveloped properties
—

 
47

 
7,107

Exploratory
—

 
—

 
—

Capitalized asset retirement obligation
784

 
282

 
1,055

Total
$
1,141

 
$
725

 
$
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.
 
2016
 
2015
 
2014
 
(In thousands)
Revenues
$
385,910

 
$
708,990

 
$
670,762

Production costs
(248,125
)
 
(222,805
)
 
(140,664
)
Depletion
(243,098
)
 
(335,288
)
 
(263,946
)
Impairment
(715,495
)
 
(1,440,418
)
—

—

 
(820,808
)
 
(1,289,521
)
 
266,152

Income tax (benefit) expense
 
 
 
 
 
Current
—

 
—

 
—

Deferred
—

 
(220,201
)
 
96,061

 
—

 
(220,201
)
 
96,061

Results of operations from producing activities
$
(820,808
)
 
$
(1,069,320
)
 
$
170,091

Depletion per Mcf of gas equivalent (Mcfe)
$
0.92

 
$
1.68

 
$
3.01

 
 
 
 
 
 
Results of Operations from equity method investment in Grizzly Oil Sands ULC
 
 
 
 
 
Revenues
$
—

 
$
1,436

 
$
5,449

Production costs
(13
)
 
(1,549
)
 
(10,113
)
Depletion
—

 
(625
)
 
(1,195
)
 
(13
)
 
(738
)
 
(5,859
)
Income tax expense
—

 
—

 
—

Results of operations from producing activities
$
(13
)
 
$
(738
)
 
$
(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, 2016, 2015 and 2014 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, 2016, 2015 and 2014, 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 2016 reserve report are $42.75 per barrel of oil, $2.48 per MMbtu and $9.91 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, 2015 and 2014 for reserve report purposes are $50.28 per barrel, $2.59 per MMbtu and $13.21 per barrel for NGLs and $94.99 per barrel, $4.35 per MMbtu and $44.84 per barrel for NGLs, 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.
 
2016
 
2015
 
2014
 
Oil
 
Gas
 
NGL
 
Oil
 
Gas
 
NGL
 
Oil
 
Gas
 
NGL
 
(MBbls)
 
(MMcf)
 
(MBbls)
 
(MBbls)
 
(MMcf)
 
(MBbls)
 
(MBbls)
 
(MMcf)
 
(MBbls)
Proved Reserves
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of the period
6,458

 
1,560,145

 
17,736

 
9,497

 
719,006

 
26,268

 
8,346

 
146,446

 
5,675

Purchases in oil and gas reserves in place
—

 
—

 
—

 
—

 
371,663

 
—

 
173

 
8,863

 
353

Extensions and discoveries
1,217

 
1,082,220

 
7,677

 
2,413

 
997,057

 
5,486

 
4,975

 
629,151

 
22,594

Revisions of prior reserve estimates
(3
)
 
(247,703
)
 
(1,439
)
 
(2,553
)
 
(371,430
)
 
(9,594
)
 
(1,313
)
 
(6,136
)
 
(304
)
Current production
(2,126
)
 
(227,594
)
 
(3,847
)
 
(2,899
)
 
(156,151
)
 
(4,424
)
 
(2,684
)
 
(59,318
)
 
(2,050
)
End of period
5,546

 
2,167,068

 
20,127

 
6,458

 
1,560,145

 
17,736

 
9,497

 
719,006

 
26,268

Proved developed reserves
4,882

 
744,797

 
14,299

 
6,120

 
652,961

 
12,910

 
5,719

 
345,166

 
12,379

Proved undeveloped reserves
664

 
1,422,271

 
5,828

 
338

 
907,184

 
4,826

 
3,778

 
373,840

 
13,889

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity investment in Grizzly Oil Sands ULC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of the period
—

 
—

 
—

 
14,558

 
—

 
—

 
13,637

 
—

 
—

Purchases in oil and gas reserves in place
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Extensions and discoveries
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Revisions of prior reserve estimates
—

 
—

 
—

 
(14,530
)
 
—

 
—

 
990

 
—

 
—

Current production
—

 
—

 
—

 
(28
)
 
—

 
—

 
(69
)
 
—

 
—

End of period
—

 
—

 
—

 
—

 
—

 
—

 
14,558

 
—

 
—

Proved developed reserves
—

 
—

 
—

 
—

 
—

 
—

 
1,632

 
—

 
—

Proved undeveloped reserves
—

 
—

 
—

 
—

 
—

 
—

 
12,926

 
—

 
—


In 2016, the Company experienced extensions and discoveries of 1.1 Tcfe of estimated proved reserves attributable to the continued development of the Company's Utica Shale acreage. The Company experienced downward revisions of 227.9 Bcfe due to lower commodity prices on 67 PUD locations, including the loss of 35 of the 67 PUD locations as they were no longer economic, as well as downward revisions of 17.4 Bcfe due to rescheduling the drilling timeline of four PUD locations in excess of five years of initial booking resulting in the removal of these four PUD locations. In addition, the Company experienced upward revisions of 26.7 Bcfe attributable to improved performance of 34 PUD locations as a result of 14.5% production increases due to well performance of offset producers as well as lower lease operated and capital expenditures. In 2015, the Company experienced extensions and discoveries of 1,044.5 Bcfe of estimated proved reserves attributable to the continued development of the Company's Utica Shale acreage. In addition, the Company experienced downward revisions of 444,314 MMcfe in estimated proved reserves in 2015 primarily due to the exclusion of PUD locations in its Utica and Southern Louisiana fields that became uneconomic due to the continued decline in commodity prices. In 2015, the Company also purchased 371,663 MMcfe of proved reserves as a result of acquisitions from Paloma and AEU discussed above in Note 2. In 2014, the Company experienced extensions and discoveries of 786,347 MMcfe of estimated 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 Exploration LLC.
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, 2016, 2015 and 2014 using an unweighted average first-of-the-month price for the period January through December 31, 2016, 2015 and 2014.
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves  
 
Year ended December 31,
 
2016
 
2015
 
2014
 
(In thousands)
Future cash flows
$
3,354,168

 
$
3,043,450

 
$
4,667,678

Future development and abandonment costs
(1,165,025
)
 
(877,660
)
 
(719,898
)
Future production costs
(924,167
)
 
(941,243
)
 
(880,427
)
Future production taxes
(69,447
)
 
(58,169
)
 
(71,229
)
Future income taxes
(14,545
)
 
(2,648
)
 
(693,154
)
Future net cash flows
1,180,984

 
1,163,730

 
2,302,970

10% discount to reflect timing of cash flows
(492,944
)
 
(399,399
)
 
(875,803
)
Standardized measure of discounted future net cash flows
$
688,040

 
$
764,331

 
$
1,427,167

 
 
 
 
 
 
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 $401.5 million, $331.4 million and $192.7 million during years 2017, 2018 and 2019, respectively.
Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
 
Year ended December 31,
 
2016
 
2015
 
2014
 
(In thousands)
Sales and transfers of oil and gas produced, net of production costs
$
(312,291
)
 
$
(486,185
)
 
$
(530,098
)
Net changes in prices, production costs, and development costs
(146,518
)
 
(1,412,181
)
 
97,716

Acquisition of oil and gas reserves in place
—

 
83,340

 
14,266

Extensions and discoveries
186,909

 
262,895

 
790,533

Previously estimated development costs incurred during the period
176,218

 
117,540

 
68,227

Revisions of previous quantity estimates, less related production costs
(38,448
)
 
(98,162
)
 
(37,801
)
Accretion of discount
76,433

 
142,717

 
57,847

Net changes in income taxes
(6,495
)
 
412,240

 
(295,226
)
Change in production rates and other
(12,099
)
 
314,960

 
683,237

Total change in standardized measure of discounted future net cash flows
$
(76,291
)
 
$
(662,836
)
 
$
848,701

 
 
 
 
 
 
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
$
—

 
$
114

 
$
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
—

 
47

 
—

Revisions of previous quantity estimates, less related production costs
—

 
(103,282
)
 
10,659

Accretion of discount
—

 
9,375

 
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
$
—

 
$
(93,746
)
 
$
(55,718
)