Annual report pursuant to Section 13 and 15(d)

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

v3.8.0.1
Supplemental Information on Oil and Gas Exploration and Production Activities (Unaudited)
 12 Months Ended
Dec. 31, 2017
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
 
2017
 
2016
 
(In thousands)
Proven properties
$
6,256,182

 
$
4,491,615

Unproven properties
2,912,974

 
1,580,305

 
9,169,156

 
6,071,920

Accumulated depreciation, depletion, amortization and impairment reserve
(4,136,777
)
 
(3,778,043
)
Net capitalized costs
$
5,032,379

 
$
2,293,877

 
 
 
 
Equity investment in Grizzly Oil Sands ULC
 
 
 
Proven properties
$
73,818

 
$
70,266

Unproven properties
86,540

 
80,892

 
160,358

 
151,158

Accumulated depreciation, depletion, amortization and impairment reserve
(1,693
)
 
(1,578
)
Net capitalized costs
$
158,665

 
$
149,580


Costs Incurred in Oil and Gas Property Acquisition and Development Activities
 
2017
 
2016
 
2015
 
(In thousands)
Acquisition
$
1,951,281

 
$
152,887

 
$
810,755

Development of proved undeveloped properties
994,237

 
423,998

 
642,811

Exploratory
—

 
—

 
—

Recompletions
14,289

 
16,386

 
13,894

Capitalized asset retirement obligation
42,270

 
10,971

 
8,800

Total
$
3,002,077

 
$
604,242

 
$
1,476,260

 
 
 
 
 
 
Equity investment in Grizzly Oil Sands ULC
 
 
 
 
 
Acquisition
$
503

 
$
357

 
$
396

Development of proved undeveloped properties
—

 
—

 
47

Exploratory
—

 
—

 
—

Capitalized asset retirement obligation
(524
)
 
784

 
282

Total
$
(21
)
 
$
1,141

 
$
725


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.
 
2017
 
2016
 
2015
 
(In thousands)
Revenues
$
1,320,303

 
$
385,910

 
$
708,990

Production costs
(350,367
)
 
(248,125
)
 
(222,805
)
Depletion
(358,792
)
 
(243,098
)
 
(335,288
)
Impairment
—

 
(715,495
)
 
(1,440,418
)
 
611,144

 
(820,808
)
 
(1,289,521
)
Income tax expense (benefit)
 
 
 
 
 
Current
3,362

 
—

 
—

Deferred
(3,602
)
 
—

 
(220,201
)
 
(240
)
 
—

 
(220,201
)
Results of operations from producing activities
$
611,384

 
$
(820,808
)
 
$
(1,069,320
)
Depletion per Mcf of gas equivalent (Mcfe)
$
0.90

 
$
0.92

 
$
1.68

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

 
$
—

 
$
1,436

Production costs
—

 
(13
)
 
(1,549
)
Depletion
—

 
—

 
(625
)
 
—

 
(13
)
 
(738
)
Income tax expense
—

 
—

 
—

Results of operations from producing activities
$
—

 
$
(13
)
 
$
(738
)

Oil and Gas Reserves
The following table presents estimated volumes of proved developed and undeveloped oil and gas reserves as of December 31, 2017, 2016 and 2015 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, 2017, 2016 and 2015, in accordance with guidelines of the SEC applicable to reserves estimates. Volumes for oil are stated in thousands of barrels (MBbls) and volumes for natural gas are stated in millions of cubic feet (MMcf). The prices used for the 2017 reserve report are $51.34 per barrel of oil, $2.98 per MMbtu and $18.40 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, 2016 and 2015 for reserve report purposes are $42.75 per barrel, $2.48 per MMbtu and $9.91 per barrel for NGLs and $50.28 per barrel, $2.59 per MMbtu and $13.21 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.
 
2017
 
2016
 
2015
 
Oil
 
Natural Gas
 
Natural Gas Liquids
 
Oil
 
Natural Gas
 
Natural Gas Liquids
 
Oil
 
Natural Gas
 
Natural Gas Liquids
 
(MBbls)
 
(MMcf)
 
(MBbls)
 
(MBbls)
 
(MMcf)
 
(MBbls)
 
(MBbls)
 
(MMcf)
 
(MBbls)
Proved Reserves
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of the period
5,546

 
2,167,068

 
20,127

 
6,458

 
1,560,145

 
17,736

 
9,497

 
719,006

 
26,268

Purchases in oil and natural gas reserves in place
15,132

 
1,098,644

 
53,617

 
—

 
—

 
—

 
—

 
371,663

 
—

Extensions and discoveries
951

 
1,594,734

 
4,619

 
1,217

 
1,082,220

 
7,677

 
2,413

 
997,057

 
5,486

Revisions of prior reserve estimates
107

 
314,925

 
2,737

 
(3
)
 
(247,703
)
 
(1,439
)
 
(2,553
)
 
(371,430
)
 
(9,594
)
Current production
(2,579
)
 
(350,061
)
 
(5,334
)
 
(2,126
)
 
(227,594
)
 
(3,847
)
 
(2,899
)
 
(156,151
)
 
(4,424
)
End of period
19,157

 
4,825,310

 
75,766

 
5,546

 
2,167,068

 
20,127

 
6,458

 
1,560,145

 
17,736

Proved developed reserves
10,245

 
1,616,930

 
36,247

 
4,882

 
744,797

 
14,299

 
6,120

 
652,961

 
12,910

Proved undeveloped reserves
8,912

 
3,208,380

 
39,519

 
664

 
1,422,271

 
5,828

 
338

 
907,184

 
4,826

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

 
—

 
—

 
—

 
—

 
—

 
14,558

 
—

 
—

Purchases in oil and natural gas reserves in place
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Extensions and discoveries
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Revisions of prior reserve estimates
—

 
—

 
—

 
—

 
—

 
—

 
(14,530
)
 
—

 
—

Current production
—

 
—

 
—

 
—

 
—

 
—

 
(28
)
 
—

 
—

End of period
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Proved developed reserves
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Proved undeveloped reserves
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—


In 2017, the Company purchased 1.5 Tcfe through our acquisition of SCOOP properties discussed in Note 2. Also in 2017, the Company experienced extensions and discoveries of 1.6 Tcfe of estimated proved reserves primarily attributable to the continued development of the Company's Utica Shale acreage. In 2017, the Company experienced upward revisions of 201.3 Bcfe in estimated proved reserves due to an increase in well performance, 214.1 Bcfe due to the increase in pricing and 95.9 Bcfe due to changes in its ownership interests. These positive revisions are partially offset by downward revisions of 133.0 Bcfe due to a decline in well performance specific to one area in the Company's Utica field and a decline of 45.7 Bcfe in estimated proved reserves in 2017 primarily due to the exclusion of ten PUD locations in the Company's Utica field, five of which are operated by the Company and five of which are operated by other operators, that were excluded due to changes in drilling schedules. Additional downward revision of 0.6 Bcfe was due to the removal of two PUD locations in the Company's Southern Louisiana fields that had not been drilled within five years of initial booking. 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.
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, 2017, 2016 and 2015 using an unweighted average first-of-the-month price for the period January through December 31, 2017, 2016 and 2015.
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves  
 
Year ended December 31,
 
2017
 
2016
 
2015
 
(In thousands)
Future cash flows
$
11,202,692

 
$
3,354,168

 
$
3,043,450

Future development and abandonment costs
(3,005,217
)
 
(1,165,025
)
 
(877,660
)
Future production costs
(2,152,821
)
 
(924,167
)
 
(941,243
)
Future production taxes
(289,944
)
 
(69,447
)
 
(58,169
)
Future income taxes
(573,965
)
 
(14,545
)
 
(2,648
)
Future net cash flows
5,180,745

 
1,180,984

 
1,163,730

10% discount to reflect timing of cash flows
(2,537,181
)
 
(492,944
)
 
(399,399
)
Standardized measure of discounted future net cash flows
$
2,643,564

 
$
688,040

 
$
764,331

 
 
 
 
 
 
Equity investment in Grizzly Oil Sands ULC Standardized measure of discounted cash flows
 
 
 
 
 
Future cash flows
$
—

 
$
—

 
$
—

Future development and abandonment costs
—

 
—

 
—

Future production costs
—

 
—

 
—

Future production taxes
—

 
—

 
—

Future income taxes
—

 
—

 
—

Future net cash flows
—

 
—

 
—

10% discount to reflect timing of cash flows


 


 


Standardized measure of discounted future net cash flows
$
—

 
$
—

 
$
—


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 $551.0 million, $458.8 million and $514.5 million during years 2018, 2019 and 2020, respectively.
Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
 
Year ended December 31,
 
2017
 
2016
 
2015
 
(In thousands)
Sales and transfers of oil and gas produced, net of production costs
$
(756,257
)
 
$
(312,291
)
 
$
(486,185
)
Net changes in prices, production costs, and development costs
913,714

 
(146,518
)
 
(1,412,181
)
Acquisition of oil and gas reserves in place
703,866

 
—

 
83,340

Extensions and discoveries
618,039

 
186,909

 
262,895

Previously estimated development costs incurred during the period
390,673

 
176,218

 
117,540

Revisions of previous quantity estimates, less related production costs
155,200

 
(38,448
)
 
(98,162
)
Accretion of discount
68,804

 
76,433

 
142,717

Net changes in income taxes
(231,545
)
 
(6,495
)
 
412,240

Change in production rates and other
93,030

 
(12,099
)
 
314,960

Total change in standardized measure of discounted future net cash flows
$
1,955,524

 
$
(76,291
)
 
$
(662,836
)
 
 
 
 
 
 
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

Net changes in prices, production costs, and development costs
—

 
—

 
—

Acquisition of oil and gas reserves in place
—

 
—

 
—

Extensions and discoveries
—

 
—

 
—

Previously estimated development costs incurred during the period
—

 
—

 
47

Revisions of previous quantity estimates, less related production costs
—

 
—

 
(103,282
)
Accretion of discount
—

 
—

 
9,375

Net changes in income taxes
—

 
—

 
—

Change in production rates and other
—

 
—

 
—

Total change in standardized measure of discounted future net cash flows
$
—

 
$
—

 
$
(93,746
)