GULFPORT ENERGY CORPGPOR
GULFPORT ENERGY CORP PP&E Disclosure
PROPERTY AND EQUIPMENT
The major categories of property and equipment and related accumulated depletion, depreciation, amortization and impairment as of December 31, 2018 and 2017 are as follows:
December 31, | |||||||
2018 | 2017 | ||||||
(In thousands) | |||||||
Oil and natural gas properties | $ | 10,026,836 | $ | 9,169,156 | |||
Office furniture and fixtures | 42,581 | 37,369 | |||||
Buildings | 44,565 | 44,565 | |||||
Land | 5,521 | 4,820 | |||||
Total property and equipment | 10,119,503 | 9,255,910 | |||||
Accumulated depletion, depreciation, amortization and impairment | (4,640,098 | ) | (4,153,733 | ) | |||
Property and equipment, net | $ | 5,479,405 | $ | 5,102,177 | |||
No impairment of oil and natural gas properties was required under the ceiling test for the years ended December 31, 2018 and 2017. At December 31, 2016, the net book value of the Company's oil and natural gas properties was above the calculated ceiling as a result of the reduced commodity prices during the year ended December 31, 2016. As a result, the Company recorded an impairment of its oil and natural gas properties under the full cost method of accounting in the amount of $715.5 million for the year ended December 31, 2016.
Included in oil and natural gas properties at December 31, 2018 and 2017 is the cumulative capitalization of $203.3 million and $165.6 million, respectively, in general and administrative costs incurred and capitalized to the full cost pool. General and administrative costs capitalized to the full cost pool represent management’s estimate of costs incurred directly related to exploration and development activities such as geological and other administrative costs associated with overseeing the exploration and development activities. All general and administrative costs not directly associated with exploration and development activities were charged to expense as they were incurred. Capitalized general and administrative costs were approximately $37.7 million, $35.7 million and $29.3 million for the years ended December 31, 2018, 2017 and 2016, respectively. The average depletion rate per Mcfe, which is a function of capitalized costs, future development costs and the related underlying reserves in the periods presented, was $0.96, $0.90 and $0.92 per Mcfe for the years ended December 31, 2018, 2017 and 2016, respectively.
The following is a summary of Gulfport’s oil and natural gas properties not subject to amortization as of December 31, 2018:
Costs Incurred in | |||||||||||||||||||
2018 | 2017 | 2016 | Prior to 2016 | Total | |||||||||||||||
(In thousands) | |||||||||||||||||||
Acquisition costs | $ | 128,415 | $ | 1,469,820 | $ | 122,399 | $ | 1,128,975 | $ | 2,849,609 | |||||||||
Exploration costs | 9,027 | — | — | — | 9,027 | ||||||||||||||
Development costs | 548 | 869 | 4,536 | 5,789 | 11,742 | ||||||||||||||
Capitalized interest | 2,120 | 2,915 | (657 | ) | (1,719 | ) | 2,659 | ||||||||||||
Total oil and natural gas properties not subject to amortization | $ | 140,110 | $ | 1,473,604 | $ | 126,278 | $ | 1,133,045 | $ | 2,873,037 | |||||||||
The following table summarizes the Company’s non-producing properties excluded from amortization by area as of December 31, 2018:
December 31, 2018 | |||
(In thousands) | |||
Utica | $ | 1,483,194 | |
MidContinent | 1,388,706 | ||
Niobrara | 451 | ||
Southern Louisiana | 586 | ||
Bakken | 100 | ||
$ | 2,873,037 | ||
As of December 31, 2017, approximately $2.9 billion of non-producing leasehold costs was not subject to amortization.
The Company evaluates the costs excluded from its amortization calculation at least annually. Subject to industry conditions and the level of the Company’s activities, the inclusion of most of the above referenced costs into the Company’s amortization calculation typically occurs within three to five years. However, the majority of the Company's non-producing leases in the Utica Shale have five year extension terms which could extend this time frame beyond five years.
A reconciliation of the Company's asset retirement obligation for the years ended December 31, 2018 and 2017 is as follows:
December 31, | |||||||
2018 | 2017 | ||||||
(In thousands) | |||||||
Asset retirement obligation, beginning of period | $ | 75,100 | $ | 34,276 | |||
Liabilities incurred | 1,827 | 16,300 | |||||
Liabilities settled | (719 | ) | (3,057 | ) | |||
Accretion expense | 4,119 | 1,611 | |||||
Revisions in estimated cash flows | (375 | ) | 25,970 | ||||
Asset retirement obligation as of end of period | 79,952 | 75,100 | |||||
Less current portion | — | 120 | |||||
Asset retirement obligation, long-term | $ | 79,952 | $ | 74,980 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2018 | Feb 28, 2019 | Showing above |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 15, 2017 | |
| 2015 | Feb 19, 2016 | |
About PP&E Disclosures
The PP&E disclosure details a company's physical asset base — land, buildings, machinery, and equipment — along with the depreciation methods and useful life assumptions that determine how these costs flow through the income statement. Capitalization policy thresholds reveal management's judgment on the boundary between expense and asset, directly affecting both reported earnings and asset values.
Key signals: changes in estimated useful lives or depreciation methods can materially shift reported earnings without any operational change. Compare capital expenditures against depreciation expense — when capex consistently trails depreciation, the asset base may be aging and underinvested. Watch for large asset impairments or write-downs that signal overvalued carrying amounts. Asset retirement obligations reveal future environmental or decommissioning costs that are often underappreciated. Compare PP&E intensity (PP&E-to-revenue) against industry peers to assess capital efficiency and competitive positioning.