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Commitments
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Jun. 30, 2014
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| Commitments [Abstract] | |||||||||||||||||||||||||||||||||||||
| Commitments |
COMMITMENTS
Plugging and Abandonment Funds
In connection with the Company's acquisition in 1997 of the remaining 50% interest in its WCBB properties, the Company assumed the seller’s (Chevron) obligation to contribute approximately $18,000 per month through March 2004 to a plugging and abandonment trust and the obligation to plug a minimum of 20 wells per year for 20 years commencing March 11, 1997. Chevron retained a security interest in production from these properties until the Company's abandonment obligations to Chevron have been fulfilled. Beginning in 2009, the Company could access the trust for use in plugging and abandonment charges associated with the property, although it has not yet done so. As of June 30, 2014, the plugging and abandonment trust totaled approximately $3.1 million. At June 30, 2014, the Company had plugged 378 wells at WCBB since it began its plugging program in 1997, which management believes fulfills its current minimum plugging obligation.
Employment Agreements
Effective November 1, 2012, the Company entered into an employment agreement with each of its three executive officers, each with an initial three-year term expiring on November 1, 2015 subject to automatic one-year extensions unless terminated by either party to the agreement at least 90 days prior to the end of the then current term. These agreements provided for minimum salary and bonus levels, subject to review and potential increase by the Compensation Committee and/or the Board of Directors, as well as participation in the Company's incentive plans and other employee benefits.
Effective February 15, 2014, Gulfport's former Chief Executive Officer, James D. Palm, retired and his employment agreement with the company terminated. The Company entered into a separation agreement with Mr. Palm, under which agreement certain benefits are provided to, and obligations imposed on, Mr. Palm. Gulfport's former Chairman, Mr. Liddell, resigned effective June 2013 at which date his employment agreement with Gulfport terminated. At that same date, the Company entered into a consulting agreement with Mr. Liddell. The minimum commitment under Mr. Liddell's consulting agreement at June 30, 2014 was approximately $0.7 million and the minimum commitment under Mr. Palm's separation agreement at June 30, 2014 was approximately $0.6 million.
On April 22, 2014, the Board of Directors appointed Michael G. Moore as Chief Executive Officer of the Company. The Company and Mr. Moore entered into an amended and restated employment agreement. The agreement has a three-year term commencing effective April 22, 2014. This agreement provides, among other things, for a minimum salary level, subject to review and potential increase by the Compensation Committee and/or the Board of Directors, as well as participation in the Company's incentive plans and other employee benefits. The aggregate minimum commitment for future salary at June 30, 2014 under the April 22, 2014 amended and restated employment agreement was approximately $1.1 million.
Operating Leases
The Company leases office facilities under non-cancellable operating leases exceeding one year. Future minimum lease commitments under these leases at June 30, 2014 are as follows:
Litigation
Gulfport has previously provided disclosure regarding three separate lawsuits filed by the Louisiana Department of Revenue (“LDR”) disputing Gulfport’s severance tax payments to the State of Louisiana from the sale of oil under fixed price contracts during the years 2005 through 2010. In June 2014, Gulfport and LDR entered into a settlement agreement under which Gulfport paid $6.0 million, which is included in litigation settlement in the accompanying consolidated statements of operations, and LDR released all claims for severance taxes for tax years 2005 to 2010 and dismissed all three lawsuits with prejudice.
Gulfport has previously provided disclosure regarding a lawsuit filed entitled Reeds et al. v. BP American Production Company et al., in the 38th Judicial District Court of Louisiana, Case No. 10-18714, filed against 15 oil and gas defendants on July 30, 2010 by six individuals and one limited liability company in Cameron Parish Louisiana for surface contamination in areas where Gulfport and other defendants operated. In 2014, Gulfport and the plaintiffs have had settlement discussions focused on Gulfport's payment of approximately $18.0 million plus the cost of a plan of remediation to be approved by the Court and the Louisiana Department of Natural Resources. The settlement has not yet been finalized and there can be no assurance that a settlement will be reached on these or any other terms. The Company has accrued the $18.0 million proposed settlement as of June 30, 2014, which is included in litigation settlement in the accompanying consolidated statements of operations. The case was set for trial in July 2014, but plaintiffs’ counsel filed a motion to continue the trial, which was granted, so the parties could work on settlement of the matter. There is no new trial date set at this time, and the lawsuit is not being actively litigated.
Due to the current stage of the Reeds lawsuit and settlement discussions, the outcome is uncertain and management cannot determine the amount of loss that may result. An adverse decision in the matter could have a material adverse effect on the Company's financial condition or results of operations.
The Company has been named as a defendant in various other lawsuits related to its business. The resolution of these matters is not expected to have a material adverse effect on the Company's financial condition or results of operations in future periods.
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