Quarterly report pursuant to Section 13 or 15(d)

Equity Investments

v2.4.0.8
Equity Investments
 9 Months Ended
Sep. 30, 2014
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, 2014 and December 31, 2013:
 
 
 
 
Carrying Value
 
(Income) loss from equity method investments
 
Approximate Ownership %
 
September 30, 2014
 
December 31, 2013
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
 
 
2014
2013
 
2014
2013
 
 
 
(In thousands)
Investment in Tatex Thailand II, LLC
23.5
%
 
$
—

 
$
—

 
$
(475
)
$
(170
)
 
$
(475
)
$
(375
)
Investment in Tatex Thailand III, LLC
17.9
%
 
12,190

 
10,774

 
47

64

 
217

157

Investment in Grizzly Oil Sands ULC
24.9999
%
 
189,182

 
191,473

 
4,633

862

 
8,862

2,125

Investment in Bison Drilling and Field Services LLC
40.0
%
 
28,950

 
12,318

 
(1,273
)
1,258

 
331

1,281

Investment in Muskie Proppant LLC
25.0
%
 
8,056

 
7,544

 
55

53

 
488

869

Investment in Timber Wolf Terminals LLC
50.0
%
 
995

 
1,001

 
7

—

 
7

8

Investment in Windsor Midstream LLC
22.5
%
 
13,531

 
10,632

 
(301
)
(14
)
 
(504
)
(872
)
Investment in Stingray Pressure Pumping LLC
50.0
%
 
20,040

 
19,624

 
(351
)
(293
)
 
1,792

(677
)
Investment in Stingray Cementing LLC
50.0
%
 
2,970

 
3,291

 
(12
)
(31
)
 
189

38

Investment in Blackhawk Midstream LLC
50.0
%
 
—

 
—

 
—

174

 
(84,787
)
296

Investment in Stingray Logistics LLC
50.0
%
 
1,316

 
903

 
(256
)
(78
)
 
(413
)
(24
)
Investment in Diamondback Energy, Inc.
1.7
%
 
70,443

 
178,708

 
32,412

(52,945
)
 
(89,300
)
(165,402
)
Investment in Stingray Energy Services LLC
50.0
%
 
4,854

 
3,800

 
(9
)
(202
)
 
26

(64
)
Investment in Sturgeon Acquisitions LLC
25.0
%
 
20,688

 
—

 
—

—

 
—

—

 
 
 
$
373,215


$
440,068


$
34,477

$
(51,322
)

$
(163,567
)
$
(162,640
)

The tables below summarize financial information for the Company's equity investments as of September 30, 2014 and December 31, 2013.
Summarized balance sheet information:
 
September 30, 2014
 
December 31, 2013
 
 
 
(In thousands)
Current assets
$
275,332

 
$
146,075

Noncurrent assets
$
3,817,264

 
$
2,567,225

Current liabilities
$
326,477

 
$
233,726

Noncurrent liabilities
$
870,243

 
$
664,848


Summarized results of operations:    
 
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
 
(In thousands)
Gross revenue
$
247,525

 
$
105,684

 
$
625,819

 
$
244,118

Net income (loss)
$
35,212

 
$
19,869

 
$
242,816

 
$
35,211


Tatex Thailand II, LLC
The Company has an indirect ownership interest in Tatex Thailand II, LLC (“Tatex”). 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, 2014, Gulfport received $0.5 million in distributions from Tatex and recognized $0.5 million in distribution income for the same periods, which is included in loss (income) from equity method investments in the consolidated statements of operations.
Tatex Thailand III, LLC
The Company has an ownership interest in Tatex Thailand III, LLC ("Tatex III"). Tatex III owns a concession covering approximately 245,000 acres in Southeast Asia. During the nine months ended September 30, 2014, the Company paid $1.6 million in cash calls related to Tatex III.
Grizzly Oil Sands ULC
The Company, through its wholly owned subsidiary Grizzly Holdings Inc. ("Grizzly Holdings"), owns an 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 September 30, 2014, Grizzly had approximately 830,000 acres under lease in the Athabasca and Peace River oil sands regions of Alberta, Canada. Initiation of steam injection at its first project, Algar Lake Phase 1, commenced in January 2014 and first bitumen production was achieved during the second quarter of 2014. During the nine months ended September 30, 2014, Gulfport paid $16.6 million in cash calls. Grizzly’s functional currency is the Canadian dollar. The Company's investment in Grizzly was decreased by $9.5 million and by $10.0 million for the three and nine months ended September 30, 2014, respectively, as a result of a foreign currency translation loss. 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.
Bison Drilling and Field Services LLC
During 2011, the Company invested in Bison Drilling and Field Services LLC (“Bison”). Bison owns and operates drilling rigs. During the nine months ended September 30, 2014, Gulfport paid $17.0 million in cash calls to Bison.
Muskie Proppant LLC
During 2011, the Company invested in Muskie Proppant LLC (“Muskie”). Muskie processes and sells sand for use in hydraulic fracturing by the oil and natural gas industry and 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, 2014, Gulfport paid $1.0 million in cash calls to Muskie.
The Company entered into a loan agreement with Muskie effective July 1, 2013, under which it loaned Muskie $0.9 million. Interest accrues at the prime rate plus 2.5% and the loan had an original maturity date of July 31, 2014. Effective July 31, 2014, an amendment was made to the loan agreement which changed the maturity date of the loan to July 31, 2015. At September 30, 2014, the outstanding balance on the loan is included in notes receivable-related party on the accompanying consolidated balance sheets.
Timber Wolf Terminals LLC
During 2012, the Company invested in Timber Wolf Terminals LLC (“Timber Wolf”). The Company's initial investment during 2012 was $1.0 million. Timber Wolf will operate a crude/condensate terminal and a sand transloading facility in Ohio. During the nine months ended September 30, 2014, Gulfport did not pay any cash calls related to Timber Wolf.
Windsor Midstream LLC

During 2012, the Company purchased an ownership interest in Windsor Midstream LLC (“Midstream”). Midstream owns a 28.4% interest in Coronado Midstream LLC, a gas processing plant in West Texas. During the nine months ended September 30, 2014, Gulfport paid $2.4 million in cash calls to Midstream.

Stingray Pressure Pumping LLC

During 2012, the Company invested in Stingray Pressure Pumping LLC ("Stingray Pressure"). Stingray Pressure provides well completion services. During the nine months ended September 30, 2014, the Company paid $2.5 million in cash calls related to Stingray Pressure. The income from equity method investments presented in the table above reflects any intercompany profit eliminations.

Stingray Cementing LLC

During 2012, the Company invested in Stingray Cementing LLC ("Stingray Cementing"). Stingray Cementing provides well cementing services. During the nine months ended September 30, 2014, the Company did not pay any cash calls related to Stingray Cementing. The income from equity method investments presented in the table above reflects any intercompany profit eliminations.

Blackhawk Midstream LLC

During 2012, the Company invested in Blackhawk Midstream LLC ("Blackhawk"). Blackhawk coordinates gathering, compression, processing and marketing activities for the Company in connection with the development of its Utica Shale acreage. On January 28, 2014, Blackhawk closed on the sale of its equity interests in Ohio Gathering Company, LLC and Ohio Condensate Company, LLC for a purchase price of $190.0 million, of which $14.3 million was placed in escrow. Gulfport received $84.8 million in net proceeds from this transaction, which is included in loss (income) from equity method investments in the accompanying consolidated statements of operations.

Stingray Logistics LLC

During 2012, the Company invested in Stingray Logistics LLC ("Stingray Logistics"). Stingray Logistics provides well services. During the nine months ended September 30, 2014, the Company did not pay any cash calls.

Diamondback Energy, Inc.

As noted above in Note 2, on October 11, 2012, following the closing of the Diamondback IPO, the Company owned 7,914,036 shares of Diamondback's outstanding common stock for an initial investment in Diamondback valued at $138.5 million. In June and September of 2014, the Company sold 1,000,000 and 1,437,500 shares of its Diamondback common stock, respectively, and received aggregate net proceeds of approximately $197.6 million. In June and November of 2013, the Company sold 2,234,536 and 2,300,000 shares of its Diamondback common stock, respectively, and received aggregate net proceeds of approximately $192.7 million. As of September 30, 2014, the Company owned 942,000 shares representing approximately 1.7% 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. Although the Company's ownership in Diamondback was below 20% at September 30, 2014, and it no longer has the right to designate a director nominee to serve on Diamondback's Board, the Company's initial nominee still serves as a member of Diamondback's Board. As the Company continues to have influence through this board seat, the Company continues to account for its investment in Diamondback as an equity method investment. The Company valued its investment in Diamondback using the quoted closing market price of Diamondback's stock on September 30, 2014 of $74.78 per share multiplied by the number of outstanding shares of Diamondback's stock held by the Company. The Company recognized a loss of approximately $32.4 million and a gain of approximately $89.3 million on its investment in Diamondback for the three and nine months ended September 30, 2014, respectively, and an aggregate gain of approximately $52.9 million and $165.4 million on its investment in Diamondback for three and nine months ended September 30, 2013, respectively, which is included in loss (income) from equity method investments in the consolidated statements of operations.
Stingray Energy Services LLC

During 2013, the Company invested in Stingray Energy Services LLC ("Stingray Energy") at a cost of $2.9 million. 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. During the nine months ended September 30, 2014, the Company did not pay any cash calls to Stingray Energy. The income from equity method investments presented in the table above reflects any intercompany profit eliminations.

Sturgeon Acquisitions LLC

During the third quarter of 2014, the Company invested $20.7 million and received an ownership interest of 25% in Sturgeon Acquisitions LLC ("Sturgeon"). Sturgeon owns and operates sand mines that produce hydraulic fracturing grade sand.