Gulfport Energy Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

EQUITY INVESTMENTS

EQUITY INVESTMENTS

6 Months Ended

Jun. 30, 2019

Equity Method Investments and Joint Ventures [Abstract]

Investments accounted for by the equity method consist of the following as of June 30, 2019 and December 31, 2018:



			Carrying value				Loss (income) from equity method investments
	Approximate ownership %		June 30, 2019		December 31, 2018		Three months ended June 30,						Six months ended June 30,
	Approximate ownership %		June 30, 2019		December 31, 2018		2019			2018			2019			2018
			(In thousands)
Investment in Tatex Thailand II, LLC	23.5	%	$	—	$	—	$	(1,945	)	$	(63	)	$	(2,085	)	$	(104	)
Investment in Grizzly Oil Sands ULC	24.9999	%	51,607		44,259		(54		)	228			339			558
Investment in Timber Wolf Terminals LLC⁽¹⁾	—	%	—		—		—			534			—			536
Investment in Windsor Midstream LLC	22.5	%	39		39		—			(9		)	—			(9		)
Investment in Mammoth Energy Services, Inc.	21.8	%	67,661		191,823		127,581			(9,242		)	123,055			(22,712		)
Investment in Strike Force Midstream LLC⁽²⁾	—	%	—		—		—			(336		)	—			(693		)
			$	119,307	$	236,121	$	125,582		$	(8,888	)	$	121,309		$	(22,424	)



(1)	On June 5, 2018, the Company received its final distribution from Timber Wolf Terminals LLC ("Timber Wolf"). See below under Timber Wolf Terminals LLC for information regarding the subsequent dissolution of Timber Wolf.
(2)	On May 1, 2018, the Company sold its 25% interest in Strike Force Midstream LLC ("Strike Force") to EQT Midstream Partners, LP. See below under Strike Force Midstream LLC for information regarding this transaction.

The tables below summarize financial information for the Company’s equity investments as of June 30, 2019 and December 31, 2018.

Summarized balance sheet information:



	June 30, 2019		December 31, 2018
	June 30, 2019		December 31, 2018
	(In thousands)
Current assets	$	477,559	$	471,733
Noncurrent assets	$	1,353,113	$	1,302,488
Current liabilities	$	167,901	$	239,975
Noncurrent liabilities	$	190,200	$	94,575

Summarized results of operations:



	Three months ended June 30,					Six months ended June 30,
	2019			2018		2019		2018
	(In thousands)
Gross revenue	$	179,114		$	566,404	$	443,958	$	1,067,537
Net (loss) income	$	(4,072	)	$	49,018	$	20,684	$	113,470

Tatex Thailand II, LLC

The Company has an indirect ownership interest in Tatex Thailand II, LLC ("Tatex II"). Tatex II held an 8.5% interest in APICO, LLC (“APICO”), an international oil and gas exploration company, before selling its interest in June 2019. APICO has a reserve base located in Southeast Asia through its ownership of concessions covering approximately 108,000 acres which includes the Phu Horm Field. The Company received $2.1 million in distributions from Tatex II during the six months ended June 30, 2019, of which $1.9 million related to proceeds from the sale of its interest in APICO.

Grizzly Oil Sands ULC

The Company, through its wholly owned subsidiary Grizzly Holdings Inc. (“Grizzly Holdings”), owns an approximate 24.9999% 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 June 30, 2019, Grizzly had approximately 830,000 acres under lease in the Athabasca, Peace River and Cold Lake oil sands regions of Alberta, Canada. The Company reviewed its investment in Grizzly for impairment at June 30, 2019 and 2018 and determined no impairment was required. If commodity prices decline in the future however, impairment of the Company's investment in Grizzly may be necessary. During the six months ended June 30, 2019, Gulfport paid $0.4 million in cash calls. Grizzly’s functional currency is the Canadian dollar. The Company’s investment in Grizzly was increased by $3.5 million and $7.3 million for the three and six months ended June 30, 2019, respectively, as a result of a foreign currency translation gain. The Company's investment in Grizzly was decreased by $3.4 million and $8.7 million for the three and six months ended June 30, 2018, respectively, as a result of a foreign currency translation loss.

Timber Wolf Terminals LLC

During 2012, the Company invested in Timber Wolf. Timber Wolf was formed to operate a crude/condensate terminal and a sand transloading facility in Ohio. Timber Wolf was dissolved in 2018.

Windsor Midstream LLC

At June 30, 2019, the Company held a 22.5% interest in Windsor Midstream LLC (“Midstream”), an entity controlled and managed by an unrelated third party. The Company received no distributions from Midstream during the six months ended June 30, 2019.

As of June 30, 2019, the Company determined that Midstream was a variable interest entity ("VIE") but was not the primary beneficiary because it does not have a controlling financial interest in Midstream. This entity is considered a VIE because the limited partners lack substantive kick-out or participating rights over the general partner. The general partner has power to direct the activities that most significantly impact Midstream's economic performance. The Company accounts for its investment in VIEs following the equity method of accounting. The carrying amounts of the Company’s equity investments are classified as other non-current assets on the accompanying consolidated balance sheets. The Company’s maximum exposure to loss as a result of its involvement with VIEs is based on the Company’s capital contributions and the economic performance of the VIEs, and is equal to the carrying value of the Company’s investments which is the maximum loss the Company could be required to record in the consolidated statements of operations

Mammoth Energy Services, Inc.

At June 30, 2019, the Company owned 9,829,548 shares, or approximately 21.8%, of the outstanding common stock of Mammoth Energy Services, Inc. ("Mammoth Energy"). The Company reviewed its investment in Mammoth Energy as of June 30, 2019 for impairment based on certain qualitative and quantitative factors. As a result of the calculated fair values and other qualitative factors, the Company concluded that an other than temporary impairment was indicated. This resulted in recording an aggregate impairment loss of $125.4 million for the six months ended June 30, 2019, which is included in loss (income) from equity method investments, net in the accompanying consolidated statements of operations. If Mammoth Energy's common stock continues to trade below the Company's carrying value for a prolonged period of time, further impairment of the Company's investment in Mammoth Energy may be necessary. The Company’s investment in Mammoth Energy was increased by $0.1 million and $0.2 million foreign currency gains resulting from Mammoth Energy's foreign subsidiary for the three and six months ended June 30, 2019, respectively. The Company’s investment in Mammoth Energy was decreased by a $0.1 million and $0.3 million foreign currency loss resulting from Mammoth Energy’s foreign subsidiary for the three and six months ended June 30, 2018, respectively. During the six months ended June 30, 2019, Gulfport received distributions of $2.5 million from Mammoth Energy as a result of $0.125 per share dividends in February 2019 and May 2019. The approximate fair value of the Company's investment in Mammoth Energy's common stock at June 30, 2019 was $67.7 million based on the quoted market price of Mammoth Energy's common stock. The loss (income) from equity method investments presented in the table above reflects any intercompany profit eliminations.

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”), then a subsidiary of Rice Energy Inc., to

develop natural gas gathering assets in eastern Belmont County and Monroe County, Ohio through Strike Force. In 2017, Rice was acquired by EQT Corporation ("EQT"). The Company owned a 25% interest in Strike Force, which was sold to EQT Midstream Partners, LP in May 2018. The loss (income) from equity method investments presented in the table above reflects any intercompany profit eliminations.