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Equity Investments
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Jun. 30, 2012
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| Equity Method Investments and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity Investments |
EQUITY INVESTMENTS
Investments accounted for by the equity method consist of the following as of June 30, 2012 and December 31, 2011:
Tatex Thailand II, LLC
The Company has a 23.5% ownership interest in Tatex Thailand II, LLC (“Tatex”). The remaining interests in Tatex are owned by entities controlled by Wexford. Tatex holds 85,122 of the 1,000,000 outstanding shares of APICO, LLC (“APICO”), an international oil and gas exploration company. APICO has a reserve base located in Southeast Asia through its ownership of concessions covering two million acres which includes the Phu Horm Field. During the six months ended June 30, 2012, Gulfport received $200,000 in distributions, reducing its total net investment in Tatex to $829,000. The loss on equity investment related to Tatex was immaterial for the six months ended June 30, 2012 and 2011.
Tatex Thailand III, LLC
The Company has a 17.9% ownership interest in Tatex III. Approximately 68.7% of the remaining interests in Tatex III are owned by entities controlled by Wexford. During the six months ended June 30, 2012, Gulfport paid $626,000 in cash calls, increasing its total net investment in Tatex III to $8,840,000. The Company recognized a loss on equity investment of $68,000 and $138,000 for the six months ended June 30, 2012 and 2011, respectively, which is included in loss from equity method investments in the consolidated statements of operations.
Grizzly Oil Sands ULC
The Company, through its wholly owned subsidiary Grizzly Holdings Inc. (“Grizzly Holdings”), owns a 24.9999% interest in Grizzly Oil Sands ULC, a Canadian unlimited liability company (“Grizzly”). The remaining interest in Grizzly is owned by an entity controlled by Wexford. Since 2006, Grizzly has acquired leases in the Athabasca region located in the Alberta Province near Fort McMurray and other oil sands development projects. Grizzly has drilled core holes and water supply test wells in eleven separate lease blocks for feasibility of oil production and conducted a seismic program. In March 2010, Grizzly filed an application in Alberta, Canada for the development of a SAGD facility at Algar Lake. In November 2011, the Government of Alberta provided a formal Order-in Council authorizing the Alberta Energy Resources Conservation Board (ERCB) to issue formal regulatory approval of the project. Fabrication and onsite construction on the first phase of development at Algar Lake is currently underway. During the six months ended June 30, 2012, Gulfport paid $78,312,000 in cash calls, increasing Gulfport’s net investment in Grizzly to $144,810,000. Grizzly’s functional currency is the Canadian dollar. The Company’s investment in Grizzly was decreased by $2,865,000 and $1,926,000 as a result of a currency translation loss for the three months and six months ended June 30, 2012, respectively. The Company recognized a loss on equity investment of $306,000 and $584,000 for the three months and six months ended June 30, 2012, respectively, and $558,000 and $813,000 for the three months and six months ended June 30, 2011, respectively, which is included in loss from equity method investments in the consolidated statements of operations.
The Company, through Grizzly Holdings, entered into a loan agreement with Grizzly effective January 1, 2008, as amended from time-to-time, under which Grizzly borrowed funds from the Company. Interest was paid on a paid-in-kind basis by increasing the outstanding balance of the loan. The Company recognized interest income of approximately $40,000 and $76,000 for the three months and six months ended June 30, 2011, respectively, which is included in interest income in the consolidated statements of operations. Effective December 7, 2011, Grizzly Holdings entered into a debt settlement agreement with Grizzly under which Grizzly agreed to satisfy the entire outstanding debt by issuing additional common shares of Grizzly with no effect to the composition of the ownership structure of Grizzly. At such date, the Company’s investment in Grizzly increased by the total $22,325,000 of outstanding advances and accrued interest due from Grizzly, the cumulative $75,000 currency translation loss for the note receivable was adjusted through accumulated other comprehensive income and the note receivable was considered paid in full.
Bison Drilling and Field Services LLC
During the third quarter of 2011, the Company purchased a 25% ownership interest in Bison Drilling and Field Services LLC (“Bison”) at a cost of $6,009,000, subject to adjustment. In April 2012, the Company purchased an additional 15% ownership interest in Bison for $6,152,000, bringing its total ownership interest in Bison to 40%. The remaining interests in Bison are owned by entities controlled by Wexford. Bison owns and operates drilling rigs. During the six months ended June 30, 2012, Gulfport paid $1,373,000 in cash calls, increasing its total net investment in Bison to $14,228,000. The Company recognized income on equity investment of $342,000 and $337,000 for the three months and six months ended June 30, 2012, respectively, which is included in loss from equity method investments in the consolidated statements of operations.
The Company entered into a loan agreement with Bison effective May 15, 2012, under which Bison may borrow funds from the Company. Interest accrues at LIBOR plus 0.28% or 8%, whichever is lower, and shall be paid on a paid-in-kind basis by increasing the outstanding balance of the loan. The loan has a maturity date of January 31, 2015. The Company loaned Bison $1,594,000 during the six months ended June 30, 2012. The interest income recognized on the note was immaterial for the three months and six months ended June 30, 2012. The $1,595,000 balance due from Bison at June 30, 2012 is included in note receivable - related party on the accompanying consolidated balance sheets.
Muskie Holdings LLC
During the fourth quarter of 2011, the Company purchased a 25% ownership interest in Muskie Holdings LLC (“Muskie”) at a cost of $2,142,000, subject to adjustment. The remaining interests in Muskie are owned by entities controlled by Wexford. Muskie holds certain assets, real estate and rights in a lease covering land in Wisconsin that is prospective for mining oil and natural gas fracture grade sand. During the six months ended June 30, 2012, Gulfport paid $2,244,000 in cash calls, increasing its total net investment in Muskie to $4,310,000. The Company recognized a loss on equity investment of $63,000 and $72,000 for the three months and six months ended June 30, 2012, respectively, which is included in loss from equity method investments in the consolidated statements of operations.
Timber Wolf Terminals LLC
During the first quarter of 2012, the Company purchased a 50% ownership interest in Timber Wolf Terminals LLC (“Timber Wolf”) at a cost of $1,000,000. The remaining interests in Timber Wolf are owned by entities controlled by Wexford. Timber Wolf will operate a crude/condensate terminal and a sand transloading facility in Ohio. The Company recognized a loss on equity investment of $23,000 for the three months and six months months ended June 30, 2012, which is included in loss from equity method investments in the consolidated statements of operations.
Windsor Midstream LLC
During the first quarter of 2012, the Company purchased a 22.5% ownership interest in Windsor Midstream LLC (“Midstream”) at a cost of $7,021,000. The remaining interests in Midstream are owned by entities controlled by Wexford. Midstream owns a 28.4% interest in MidMar Gas LLC, a gas processing plant in West Texas. During the six months ended June 30, 2012, the Company paid $574,000 in cash calls, increasing its total net investment in Midstream to $7,710,000. The Company recognized income on equity investment of $56,000 and $115,000 for the three months and six months ended June 30, 2012, respectively, which is included in loss from equity method investments in the consolidated statements of operations.
Stingray Pressure Pumping LLC
During the second quarter of 2012, the Company purchased a 50% ownership interest in Stingray Pressure Pumping LLC ("Stingray Pressure"). The remaining interest in Stingray Pressure is owned by an entity controlled by Wexford. Stingray Pressure provides well completion services. During the six months ended June 30, 2012, the Company paid $4,027,000 in cash calls, increasing its total net investment in Stingray Pressure to $3,940,000. The Company recognized a loss on equity investment of $87,000 for the three months and six months ended June 30, 2012, which is included in loss from equity method investments in the consolidated statements of operations.
Stingray Cementing LLC
During the second quarter of 2012, the Company purchased a 50% ownership interest in Stingray Cementing LLC ("Stingray Cementing"). The remaining interest in Stingray Cementing is owned by an entity controlled by Wexford. Stingray Cementing provides well cementing services. During the six months ended June 30, 2012, the Company paid $291,000 in cash calls, increasing its net investment in Stingray Cementing to $290,000. The loss on equity investment related to Stingray Cementing was immaterial for the three months and six months ended June 30, 2012.
Blackhawk Midstream LLC
During the second quarter of 2012, the Company purchased a 50% ownership interest in Blackhawk Midstream LLC ("Blackhawk"). The remaining interest in Blackhawk is owned by an entity controlled by Wexford. Blackhawk provides gathering, compression, processing and marketing solutions for the Company's natural gas and natural gas liquids in the Utica Shale. During the six months ended June 30, 2012, the Company paid $244,000 in cash calls. The Company recognized a loss on equity investment of $244,000 for the three months and six months ended June 30, 2012, which is included in loss from equity method investments in the consolidated statements of operations.
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