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

3 Months Ended

Mar. 31, 2017

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 March 31, 2017 and December 31, 2016 are as follows:



	March 31, 2017			December 31, 2016
	(In thousands)
Oil and natural gas properties	$	8,146,321		$	6,071,920
Office furniture and fixtures	24,649			21,204
Building	45,204			42,530
Land	5,254			5,252
Total property and equipment	8,221,428			6,140,906
Accumulated depletion, depreciation, amortization and impairment	(3,855,629		)	(3,789,780		)
Property and equipment, net	$	4,365,799		$	2,351,126

Under the full cost method of accounting, the Company is required to perform a ceiling test each quarter. The test determines a limit, or ceiling, on the book value of the oil and gas properties. At March 31, 2017, the calculated ceiling was greater than the net book value of the Company’s oil and natural gas properties, thus no ceiling test impairment was required for the three months ended March 31, 2017. An impairment of $219.0 million was required for oil and natural gas properties for the three months ended March 31, 2016.

Included in oil and natural gas properties at March 31, 2017 is the cumulative capitalization of $138.3 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 $8.4 million and $7.1 million for three months ended March 31, 2017 and 2016, respectively.

The following table summarizes the Company’s non-producing properties excluded from amortization by area at March 31, 2017:



	March 31, 2017
	(In thousands)
Utica	$	1,592,683
MidCon	1,477,643
Niobrara	2,172
Southern Louisiana	484
Bakken	98
Other	368
	$	3,073,448

At December 31, 2016, approximately $1.6 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 three months ended March 31, 2017 and 2016 is as follows:



	March 31, 2017		March 31, 2016
	(In thousands)
Asset retirement obligation, beginning of period	$	34,276	$	26,437
Liabilities incurred	6,779		1,914
Liabilities settled	—		(52		)
Accretion expense	282		247
Asset retirement obligation as of end of period	41,337		28,546
Less current portion	195		75
Asset retirement obligation, long-term	$	41,142	$	28,471