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Equity Investments
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Sep. 30, 2013
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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 September 30, 2013 and December 31, 2012:
Tatex Thailand II, LLC
The Company has a 23.5% indirect ownership interest in Tatex Thailand II, LLC (“Tatex”). The remaining indirect interests in Tatex are owned by entities controlled by Wexford Capital LP ("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 approximately 243,000 acres which includes the Phu Horm Field. During the three and nine months ended September 30, 2013, Gulfport received $0.2 million and $0.6 million, respectively, in distributions from Tatex and recognized $0.2 million and $0.4 million in distribution income for the same periods, which is included in (income) loss from equity method investments in the consolidated statements of operations.
Tatex Thailand III, LLC
The Company has a 17.9% ownership interest in Tatex Thailand III, LLC ("Tatex III"). Approximately 68.7% of the remaining interests in Tatex III are owned by entities controlled by Wexford. During the nine months ended September 30, 2013, the Company paid cash cash calls of $2.4 million, and had a total net investment in Tatex III of $10.9 million at September 30, 2013. The Company recognized a loss on equity investment of $0.1 million and $0.2 million for the three and nine months ended September 30, 2013, respectively. The Company recognized an immaterial loss on equity investment related to Tatex III during the three months ended September 30, 2012 and a loss of $0.2 million for the nine months ended September 30, 2012, which is included in (income) 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 ("Grizzly"), a Canadian unlimited liability company. The remaining interest in Grizzly is owned by certain investment funds managed by Wexford. As of September 30, 2013, Grizzly had approximately 800,000 acres under lease in the Athabasca and Peace River oil sands regions of Alberta, Canada. During the nine months ended September 30, 2013, Gulfport paid $25.1 million in cash calls increasing its total net investment in Grizzly to $189.9 million at September 30, 2013. Grizzly’s functional currency is the Canadian dollar. The Company's investment in Grizzly was increased by $3.9 million as a result of a foreign currency translation gain and decreased by $5.8 million as a result of a foreign currency translation loss for the three and nine months ended September 30, 2013, respectively, and increased by $5.3 million and $3.4 million as a result of a foreign currency translation gain for the three and nine months ended September 30, 2012. The Company recognized a loss on equity investment of $0.8 million and $2.1 million for the three and nine months ended September 30, 2013, respectively, and a loss of $0.3 million and $0.9 million for the three and nine months ended September 30, 2012, respectively, which is included in (income) loss from equity method investments in the consolidated statements of operations.
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”). In April 2012, the Company increased its ownership interest in Bison to 40% for a payment of $6.2 million, The remaining interests in Bison are owned by entities controlled by Wexford. Bison owns and operates drilling rigs. During the nine months ended September 30, 2013, Gulfport paid $0.3 million in cash calls, increasing its total net investment in Bison to $12.6 million. The Company recognized a loss on its equity investment in Bison of $1.3 million and $1.3 million for the three and nine months ended September 30, 2013, respectively. The Company recognized a loss on equity investment of $0.1 million and a gain on equity investment of $0.2 million, for the three and nine months ended September 30, 2012, respectively, which is included in (income) 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 $1.6 million during the first nine months of 2012, all of which was repaid by Bison during the third quarter of 2012.
Muskie Holdings LLC
During the fourth quarter of 2011, the Company purchased a 25% ownership interest in Muskie Proppant LLC (“Muskie”), formerly known as Muskie Holdings LLC. The remaining interests in Muskie are owned by entities controlled by Wexford. Muskie holds certain rights in a lease covering land in Wisconsin for mining oil and natural gas fracture grade sand. During the nine months ended September 30, 2013, Gulfport paid $2.2 million in cash calls, increasing its total net investment in Muskie to $8.7 million. The Company recognized a loss on equity investment of $0.1 million and $0.9 million for the three and nine months ended September 30, 2013, respectively, and a loss of $0.1 million and $0.2 million for the three and nine months ended September 30, 2012, respectively, which is included in (income) loss from equity method investments in the consolidated statements of operations.
The Company entered into a loan agreement with Muskie effective July 1, 2013, for $0.9 million. Interest accrues at Prime plus 2.5%. The loan has a maturity date of July 31, 2014. As of September 30, 2013, the outstanding balance on the loan is included in notes receivable-related party on the accompanying consolidated balance sheets.
Timber Wolf Terminals LLC
During the first quarter of 2012, the Company and entities controlled by or affiliated with Wexford formed Timber Wolf Terminals LLC (“Timber Wolf”). The Company has a 50% interest in Timber Wolf and its initial investment during 2012 was $1.0 million. Timber Wolf will operate a crude/condensate terminal and a sand transloading facility in Ohio. The loss on equity investment related to Timber Wolf was immaterial for the three and nine months ended September 30, 2013 and 2012.
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 $7.0 million. 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 nine months ended September 30, 2013, Gulfport paid an immaterial amount in net cash calls to Midstream, bringing its total net investment in Midstream to $10.4 million. The Company recognized income on equity investment of $0.9 million for the nine months ended September 30, 2013, and income on equity investment of $0.1 million and $0.2 million for the three and nine months ended September 30, 2012, respectively, which is included in (income) loss from equity method investments in the consolidated statements of operations. Income on equity investment for the three months ended September 30, 2013, was immaterial.
Stingray Pressure Pumping LLC
During the second quarter of 2012, the Company and certain individuals and entities primarily affiliated with Wexford formed Stingray Pressure Pumping LLC ("Stingray Pressure"). The Company's initial interest is 50%. Stingray Pressure provides well completion services. During the nine months ended September 30, 2013, the Company paid $1.8 million in cash calls, increasing its total net investment in Stingray Pressure to $17.8 million. After intercompany profit eliminations, the Company recognized income on equity investment of $0.3 million and $0.7 million for the three and nine months ended September 30, 2013. The Company recognized a loss on equity investment of $0.4 million and $0.5 million for the three and nine months ended September 30, 2012, respectively, which is included in (income) loss from equity method investments in the consolidated statements of operations.
Stingray Cementing LLC
During the second quarter of 2012, the Company and certain individuals and entities primarily affiliated with Wexford formed Stingray Cementing LLC ("Stingray Cementing"). The Company's initial interest is 50%. Stingray Cementing provides well cementing services. During the nine months ended September 30, 2013, the Company did not pay any cash calls related to Stingray Cementing. The Company recognized an immaterial loss, after intercompany profit eliminations, on equity investment related to Stingray Cementing during the three and nine months ended September 30, 2013. The loss on equity investment related to Stingray Cementing was immaterial for the three and nine months ended September 30, 2012.
Blackhawk Midstream LLC
During the second quarter of 2012, the Company and an entity controlled by Wexford formed Blackhawk Midstream LLC ("Blackhawk"). The Company has an initial 50% interest. Blackhawk coordinates gathering, compression, processing and marketing activities for the Company in connection with the development of its Utica Shale acreage. During the nine months ended September 30, 2013, the Company paid $0.3 million in cash calls related to Blackhawk. The Company recognized a loss on equity investment related to Blackhawk of $0.2 million and $0.3 million for the three and nine months ended September 30, 2013, respectively. The Company recognized a loss on equity investment of $0.1 million and $0.4 million for the three and nine months ended September 30, 2012, respectively, which is included in (income) loss from equity method investments in the consolidated statements of operations.
Stingray Logistics LLC
During the fourth quarter of 2012, the Company and certain individuals and entities affiliated with Wexford formed Stingray Logistics LLC ("Stingray Logistics"). The Company's initial interest is 50%. Stingray Logistics provides well services. The Company recognized an immaterial loss on equity investment related to Stingray Logistics during the three and nine months ended September 30, 2013, which is included in (income) loss from equity method investments in the consolidated statements of operations.
Diamondback Energy, Inc.
As noted above in Note 3, on May 7, 2012, the Company entered into a contribution agreement with Diamondback. Under the terms of the contribution agreement, the Company agreed to contribute to Diamondback, prior to the closing of the Diamondback IPO, all its oil and natural gas interests in the Permian Basin. The Contribution was completed on October 11, 2012. At the closing of the Contribution, Diamondback issued to the Company (i) 7,914,036 shares of Diamondback common stock and (ii) a promissory note for $63.6 million, which was repaid to the Company at the closing of the Diamondback IPO on October 17, 2012. Following the closing of the Diamondback IPO, the Company owned approximately 21.4% of Diamondback's outstanding common stock for an initial investment in Diamondback of $138.5 million. On June 24, 2013, the Company sold 1,951,781 shares of its Diamondback common stock for net proceeds of $65.1 million in an underwritten public offering in which certain entities controlled by Wexford also participated as selling stockholders. On July 5, 2013, the underwriters purchased an additional 282,755 shares of Diamondback common stock from Gulfport pursuant to an option to purchase additional shares from the selling stockholders granted to the underwriters resulting in net proceeds to the Company of $9.4 million. The shares were sold to the public at $34.75 per share. As of September 30, 2013, the Company owned approximately 12.1% of Diamondback's outstanding common stock.
The Company accounts for its interest in Diamondback as an equity method investment and has elected the fair value option of accounting for this investment. The Company valued its investment in Diamondback using the quoted closing market price of Diamondback's stock on September 30, 2013 of $42.64 per share multiplied by the number of outstanding shares of Diamondback's stock held by the Company. The value of the Company's investment in Diamondback was approximately $242.2 million at September 30, 2013. The Company recognized an aggregate gain of approximately $52.9 million and $165.4 million on its investment in Diamondback for the three and nine months ended September 30, 2013, respectively, which is included in (income) loss from equity method investments in the consolidated statements of operations.
The table below summarizes balance sheet information for Diamondback as of September 30, 2013 and December 31, 2012:
The table below summarizes the results of operations for Diamondback for the three and nine months ended September 30, 2013 and 2012, respectively:
Stingray Energy Services LLC
During the first quarter of 2013, the Company purchased a 50% ownership in Stingray Energy Services LLC ("Stingray Energy") at a cost of $2.2 million. The remaining interests in Stingray Energy are owned by certain individuals and entities primarily affiliated with Wexford. Stingray Energy provides rental tools for land-based oil and natural gas drilling, completion and workover activities as well as the transfer of fresh water to wellsites. Other than its initial investment, the Company paid cash calls of $0.7 million during the three and nine months ended September 30, 2013. After intercompany profit eliminations, the Company recognized income on equity investment of $0.2 million and $0.1 million for the three and nine months ended September 30, 2013, respectively, which is included in (income) loss from equity method investments in the consolidated statements of operations.
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