Annual report pursuant to Section 13 and 15(d)

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

v3.10.0.1
Supplemental Information on Oil and Gas Exploration and Production Activities (Unaudited)
 12 Months Ended
Dec. 31, 2018
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
 
2018
 
2017
 
(In thousands)
Proven properties
$
7,153,799

 
$
6,256,182

Unproven properties
2,873,037

 
2,912,974

 
10,026,836

 
9,169,156

Accumulated depreciation, depletion, amortization and impairment reserve
(4,613,293
)
 
(4,136,777
)
Net capitalized costs
$
5,413,543

 
$
5,032,379

 
 
 
 
Equity investment in Grizzly Oil Sands ULC
 
 
 
Proven properties
$
67,475

 
$
73,818

Unproven properties
79,605

 
86,540

 
147,080

 
160,358

Accumulated depreciation, depletion, amortization and impairment reserve
(1,553
)
 
(1,693
)
Net capitalized costs
$
145,527

 
$
158,665


Costs Incurred in Oil and Gas Property Acquisition and Development Activities
 
2018
 
2017
 
2016
 
(In thousands)
Acquisition
$
124,558

 
$
1,951,281

 
$
152,887

Development
603,676

 
994,237

 
423,998

Exploratory
21,840

 
—

 
—

Recompletions
7,915

 
14,289

 
16,386

Capitalized asset retirement obligation
1,452

 
42,270

 
10,971

Total
$
759,441

 
$
3,002,077

 
$
604,242

 
 
 
 
 
 
Equity investment in Grizzly Oil Sands ULC
 
 
 
 
 
Acquisition
$
238

 
$
503

 
$
357

Development
—

 
—

 
—

Exploratory
—

 
—

 
—

Capitalized asset retirement obligation
(285
)
 
(524
)
 
784

Total
$
(47
)
 
$
(21
)
 
$
1,141


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.
 
2018
 
2017
 
2016
 
(In thousands)
Revenues
$
1,355,044

 
$
1,320,303

 
$
385,910

Production costs
(415,308
)
 
(350,367
)
 
(248,125
)
Depletion
(476,517
)
 
(358,792
)
 
(243,098
)
Impairment
—

 
—

 
(715,495
)
 
463,219

 
611,144

 
(820,808
)
Income tax expense (benefit)
 
 
 
 
 
Current
254

 
3,362

 
—

Deferred
(322
)
 
(3,602
)
 
—

 
(68
)
 
(240
)
 
—

Results of operations from producing activities
$
463,287

 
$
611,384

 
$
(820,808
)
Depletion per Mcf of gas equivalent (Mcfe)
$
0.96

 
$
0.90

 
$
0.92

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

 
$
—

 
$
—

Production costs
—

 
—

 
(13
)
Depletion
—

 
—

 
—

 
—

 
—

 
(13
)
Income tax expense
—

 
—

 
—

Results of operations from producing activities
$
—

 
$
—

 
$
(13
)

Oil and Gas Reserves
The following table presents estimated volumes of proved developed and undeveloped oil and gas reserves as of December 31, 2018, 2017 and 2016 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, 2018, 2017 and 2016, 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 2018 reserve report are $65.56 per barrel of oil, $3.10 per MMbtu and $32.02 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, 2017 and 2016 for reserve report purposes are $51.34 per barrel, $2.98 per MMbtu and $18.40 per barrel for NGLs and $42.75 per barrel, $2.48 per MMbtu and $9.91 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.
 
2018
 
2017
 
2016
 
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
19,157

 
4,825,310

 
75,766

 
5,546

 
2,167,068

 
20,127

 
6,458

 
1,560,145

 
17,736

Purchases in oil and natural gas reserves in place
—

 
—

 
—

 
15,132

 
1,098,644

 
53,617

 
—

 
—

 
—

Extensions and discoveries
5,205

 
622,271

 
9,631

 
951

 
1,594,734

 
4,619

 
1,217

 
1,082,220

 
7,677

Sales of oil and natural gas reserves in place
(134
)
 
(43,444
)
 
(112
)
 
—

 
—

 
—

 
—

 
—

 
—

Revisions of prior reserve estimates
(377
)
 
(826,506
)
 
1,228

 
107

 
314,925

 
2,737

 
(3
)
 
(247,703
)
 
(1,439
)
Current production
(2,801
)
 
(443,742
)
 
(5,993
)
 
(2,579
)
 
(350,061
)
 
(5,334
)
 
(2,126
)
 
(227,594
)
 
(3,847
)
End of period
21,050

 
4,133,889

 
80,520

 
19,157

 
4,825,310

 
75,766

 
5,546

 
2,167,068

 
20,127

Proved developed reserves
9,570

 
1,813,184

 
40,810

 
10,245

 
1,616,930

 
36,247

 
4,882

 
744,797

 
14,299

Proved undeveloped reserves
11,480

 
2,320,705

 
39,710

 
8,912

 
3,208,380

 
39,519

 
664

 
1,422,271

 
5,828

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

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Purchases in oil and natural gas reserves in place
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Extensions and discoveries
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Revisions of prior reserve estimates
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Current production
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

End of period
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Proved developed reserves
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Proved undeveloped reserves
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—


In 2018, the Company experienced extensions and discoveries of 711.2 Bcfe of estimated proved reserves, which were primarily attributable to the Company's continued development of its Utica Shale and SCOOP acreages. Of the total extensions and discoveries, 556.3 Bcfe was attributable to the addition of 75 PUD locations in the Utica field, 90.1 Bcfe was attributable to the addition of 11 PUD locations in the SCOOP field and 3.0 Bcfe was attributable to the addition of 13 PUD locations in the Southern Louisiana fields as a result of the Company's current development plan that refocused some activity within existing fields. This change reflects the Company's ongoing efforts to optimize the development program with well selection based on economic returns, commodity mix and surface considerations.
In 2018, the Company experienced downward revisions of 1.0 Tcfe in estimated proved reserves with the exclusion of 127 PUD locations in the Company's Utica field and 12 PUD locations in the Company's SCOOP field, which was primarily the result of changes in the Company's development schedule moving development in excess of five years from initial booking. The development plan change, as approved by the Company's senior management and board of directors, is a result of continued focus on free cash flow generation. This downward revision was partially offset by upward revisions of 82.4 Bcfe in estimated proved reserves in 2018 due to changes in wellbore lateral length, 67.6 Bcfe due to changes in ownership interest, 27.9 Bcfe due to an increase in pricing and 8.3 Bcfe due to changes in well performance. In addition, the Company sold approximately 44.9 Bcfe of proved undeveloped oil and natural gas reserves associated with various non-operated interests, the majority of which were in the Company's Utica field.
In 2017, the Company purchased 1.5 Tcfe through its 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.
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, 2018, 2017 and 2016 using an unweighted average first-of-the-month price for the period January through December 31, 2018, 2017 and 2016.
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves  
 
Year ended December 31,
 
2018
 
2017
 
2016
 
(In thousands)
Future cash flows
$
14,483,197

 
$
11,202,692

 
$
3,354,168

Future development and abandonment costs
(2,437,853
)
 
(3,005,217
)
 
(1,165,025
)
Future production costs
(5,067,554
)
 
(2,152,821
)
 
(924,167
)
Future production taxes
(455,840
)
 
(289,944
)
 
(69,447
)
Future income taxes
(943,293
)
 
(573,965
)
 
(14,545
)
Future net cash flows
5,578,657

 
5,180,745

 
1,180,984

10% discount to reflect timing of cash flows
(2,595,932
)
 
(2,537,181
)
 
(492,944
)
Standardized measure of discounted future net cash flows
$
2,982,725

 
$
2,643,564

 
$
688,040

 
 
 
 
 
 
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
$
—

 
$
—

 
$
—



Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
 
Year ended December 31,
 
2018
 
2017
 
2016
 
(In thousands)
Sales and transfers of oil and gas produced, net of production costs
$
(1,063,215
)
 
$
(756,257
)
 
$
(312,291
)
Net changes in prices, production costs, and development costs
590,519

 
913,714

 
(146,518
)
Acquisition of oil and gas reserves in place
—

 
703,866

 
—

Extensions and discoveries
519,137

 
618,039

 
186,909

Previously estimated development costs incurred during the period
402,156

 
390,673

 
176,218

Revisions of previous quantity estimates, less related production costs
(356,933
)
 
155,200

 
(38,448
)
Sales of oil and gas reserves in place
(25,882
)
 
—

 
—

Accretion of discount
264,356

 
68,804

 
76,433

Net changes in income taxes
(185,157
)
 
(231,545
)
 
(6,495
)
Change in production rates and other
194,180

 
93,030

 
(12,099
)
Total change in standardized measure of discounted future net cash flows
$
339,161

 
$
1,955,524

 
$
(76,291
)
 
 
 
 
 
 
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
$
—

 
$
—

 
$
—

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
—

 
—

 
—

Revisions of previous quantity estimates, less related production costs
—

 
—

 
—

Accretion of discount
—

 
—

 
—

Net changes in income taxes
—

 
—

 
—

Change in production rates and other
—

 
—

 
—

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

 
$
—

 
$
—