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Commitments
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Sep. 30, 2014
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| Commitments and Contingencies Disclosure [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 September 30, 2014, the plugging and abandonment trust totaled approximately $3.1 million. At September 30, 2014, the Company had plugged 404 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 Messrs. James Palm, Mike Liddell and Michael Moore, 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. As of September 30, 2014, the minimum commitment under Mr. Palm's separation agreement was approximately $0.6 million. 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 September 30, 2014 was approximately $0.6 million. Subsequent to September 30, 2014, Mr. Liddell terminated his consulting agreement with the Company and will cease to provide consulting services as of January 1, 2015.
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 September 30, 2014 under the April 22, 2014 amended and restated employment agreement was approximately $1.0 million.
Operating Leases
The Company leases office facilities under non-cancellable operating leases exceeding one year. Future minimum lease commitments under these leases at September 30, 2014 are as follows:
Litigation
Gulfport has previously provided disclosure regarding a lawsuit 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. On September 25, 2014, the Court entered an order approving the settlement agreement by and among Gulfport and the plaintiffs. Under the terms of the settlement agreement, Gulfport paid $16.0 million and has agreed to pay an additional $2.0 million on the first anniversary of such payment plus pay the cost of a plan of remediation to be approved by the appropriate governmental authority. The aggregate $18.0 million settlement is included in litigation settlement in the accompanying consolidated statements of operations.
Gulfport has previously disclosed that in November 2012, it and other entities involved in Gulfport's WCBB field operations received a government subpoena for the production of documents and other information related primarily to discharge of produced water identified by the U.S. Coast Guard in March 2012. Gulfport completed its response to that subpoena in January 2013 and has been working with the Department of Justice, Environmental Protection Agency and Louisiana Department of Environmental Quality to resolve the issue. Gulfport entered into an agreement to plead guilty to one count of a misdemeanor violation of the Clean Water Act for negligent discharge of pollutants and pay a fine of $1,125,000 and community service in the amount of $375,000. The plea agreement was approved by the United States District Court for the Western District of Louisiana on October 27, 2014 in case number 6:14-CR-00180-01. The Company has accrued $1.5 million related to the plea agreement as of September 30, 2014, which is included in litigation settlement in the accompanying consolidated statements 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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