Quarterly report pursuant to Section 13 or 15(d)


6 Months Ended
Jun. 30, 2021
Accounting Policies [Abstract]  
Description of Company
Gulfport Energy Corporation (the "Company" or "Gulfport") is an independent natural gas-weighted exploration and production company with assets primarily located in the Appalachia and Anadarko basins. Gulfport filed for voluntary reorganization under Chapter 11 of the Bankruptcy Code on November 13, 2020 and subsequently operated as a debtor-in-possession, in accordance with applicable provisions of the Bankruptcy Code, until its emergence on May 17, 2021. The Company refers to the post-emergence reorganized organization in the condensed financial statements and footnotes as the "Successor" for periods subsequent to May 17, 2021 and the pre-emergence organization as "Predecessor" for periods on or prior to May 17, 2021.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Gulfport were prepared in accordance with GAAP and the rules and regulations of the SEC.
This Quarterly Report on Form 10-Q (this “Form 10-Q”) relates to the financial position and periods of May 18, 2021 through June 30, 2021 (“Successor Period”), April 1, 2021 through May 17, 2021 ("Current Predecessor Quarter"), January 1, 2021 through May 17, 2021 (“Current Predecessor YTD Period”), the three months ended June 30, 2020 (“Prior Predecessor Quarter”) and the six months ended June 30, 2020 ("Prior Predecessor YTD Period"). The Company's annual report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”) should be read in conjunction with this Form 10-Q. Except as disclosed herein, and with the exception of information in this report related to our emergence from Chapter 11 and fresh start accounting, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the 2020 Form 10-K. The accompanying unaudited consolidated financial statements reflect all normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of our condensed consolidated financial statements and accompanying notes and include the accounts of our wholly-owned subsidiaries. Intercompany accounts and balances have been eliminated. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.
Certain reclassifications have been made to prior period financial statements and related disclosures to conform to current period presentation. These reclassifications have no impact on previous reported total assets, total liabilities, net loss or total operating cash flows.
Voluntary Reorganization Under Chapter 11 of the Bankruptcy Code
On the Petition Date, the Debtors filed voluntary petitions of relief under the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas. The Chapter 11 Cases were administered jointly under the caption In re Gulfport Energy Corporation, et al., Case No. 20-35562 (DRJ).
The Bankruptcy Court confirmed the Plan and entered the confirmation order on April 28, 2021. The Debtors emerged from the Chapter 11 Cases on the Emergence Date. The Company's bankruptcy proceedings and related matters have been summarized below.
During the pendency of the Chapter 11 Cases, the Company continued to operate its business in the ordinary course as debtors-in-possession in accordance with the applicable provisions of the Bankruptcy Code. The Bankruptcy Court granted the first day relief requested by the Company that was designed primarily to mitigate the impact of the Chapter 11 Cases on its operations, vendors, suppliers, customers and employees. As a result, the Company was able to conduct normal business activities and satisfy all associated obligations for the period following the Petition Date and was also authorized to pay mineral interest owner royalties, employee wages and benefits, and certain vendors and suppliers in the ordinary course for goods and services provided prior to the Petition Date. During the pendency of the Chapter 11 Cases, all transactions outside the ordinary course of business required the prior approval of the Bankruptcy Court.
Subject to certain specific exceptions under the Bankruptcy Code, the filing of the Chapter 11 Cases automatically stayed all judicial or administrative actions against the Company and efforts by creditors to collect on or otherwise exercise rights or remedies with respect to pre-petition claims. Absent an order from the Bankruptcy Court, substantially all of the Debtors’ pre-petition liabilities were subject to compromise and discharge under the Bankruptcy Code. The automatic stay was lifted on the Emergence Date.
The Company applied FASB ASC Topic 852 - Reorganizations ("ASC 852") in preparing the consolidated financial statements for the period ended May 17, 2021. ASC 852 specifies the accounting and financial reporting requirements for entities reorganizing through Chapter 11 bankruptcy proceedings. These requirements include distinguishing transactions associated with the reorganization separate from activities related to the ongoing operations of the business. Accordingly, pre-petition liabilities that may be impacted by the Chapter 11 proceedings were classified as liabilities subject to compromise on the consolidated balance sheet as of December 31, 2020. Additionally, certain expenses, realized gains and losses and provisions for losses that are realized or incurred during the Chapter 11 Cases are recorded as reorganization items, net. Refer to Note 3 for more information regarding reorganization items.
Restricted Cash
As of June 30, 2021, we had restricted cash of $29.1 million. The restricted funds were maintained primarily to pay debtor-related professional fees associated with the Chapter 11 Cases.
Impact on Previously Reported Results
During the third quarter of 2020, the Company identified that certain firm transportation costs incurred in prior periods were misclassified as deducts to "natural gas sales" while they should have been included in "transportation, gathering, processing and compression" on its consolidated statements of operations. The Company assessed the materiality of this presentation on prior periods’ consolidated financial statements in accordance with the SEC Staff Accounting Bulletin No. 99, “Materiality”, codified in FASB ASC Topic 250 - Accounting Changes and Error Corrections. Based on this assessment, the Company concluded that the correction is not material to any previously issued financial statements. The correction had no impact on its consolidated balance sheets, consolidated statements of comprehensive income, consolidated statements of stockholders' equity or consolidated statements of cash flows. Additionally, the error had no impact on net loss or net loss per share. The following tables present the effect of the correction on all affected line items of our previously issued consolidated statements of operations for the Prior Predecessor Quarter and the Prior Predecessor YTD Period.
Three months ended June 30, 2020
As Reported Adjustments As Revised
(In thousands)
Natural gas sales $ 86,797  $ 53,891  $ 140,688 
Total Revenues $ 132,410  $ 53,891  $ 186,301 
Transportation, gathering, processing and compression $ 59,974  $ 53,891  $ 113,865 
Total Operating Expenses $ 688,160  $ 53,891  $ 742,051 
Six months ended June 30, 2020
As Reported Adjustments As Revised
(In thousands)
Natural gas sales $ 195,344  $ 106,352  $ 301,696 
Total Revenues $ 379,287  $ 106,352  $ 485,639 
Transportation, gathering, processing and compression $ 117,870  $ 106,352  $ 224,222 
Total Operating Expenses $ 1,415,124  $ 106,352  $ 1,521,476 
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following at June 30, 2021 and December 31, 2020:
Successor Predecessor
June 30, 2021 December 31, 2020
Accounts payable and other accrued liabilities $ 147,852  $ 120,275 
Revenue payable and suspense 127,954  124,628 
Accrued contract rejection damages and shares held in reserve 121,994  — 
Total accounts payable and accrued liabilities $ 397,800  $ 244,903 
Recently Adopted Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This new standard simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments. It eliminates the treasury stock method for convertible instruments and requires application of the “if-converted” method for certain agreements. In addition, the standard eliminates the beneficial conversion and cash conversion accounting models that require separate accounting for embedded conversion features and the recognition of a debt discount and related amortization to interest expense of those embedded features.
The Company elected to early adopt this standard effective on the Emergence Date. The Company adopted the new standard using the modified retrospective approach transition method. No cumulative-effect adjustment to retained earnings was required upon adoption of the new standard. The consolidated financial statements for the Successor Period are presented under the new standard, while the predecessor periods and comparative periods are not adjusted and continue to be reported in accordance with the Company's historical accounting policy.
Supplemental Cash Flow and Non-Cash Information
Successor Predecessor
Period from May 18, 2021 through June 30, 2021 Period from January 1, 2021 through May 17, 2021 Six Months Ended June 30, 2020
Supplemental disclosure of cash flow information:
Cash paid for reorganization items, net $ 15,369  $ 87,199  $ — 
Interest payments $ 2,072  $ 7,272  $ 60,523 
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable - oil and natural gas sales $ 40,048  $ (60,832) $ 55,565 
(Increase) decrease in accounts receivable - joint interest and other $ 4,510  $ (3,005) $ 29,159 
Increase (decrease) in accounts payable and accrued liabilities $ (80,097) $ 79,193  $ (30,620)
(Increase) decrease in prepaid expenses $ 681  $ 135,471  $ (5,744)
(Increase) decrease in other assets $ 62  $ 3,067  $ 41 
Total changes in operating assets and liabilities $ (34,796) $ 153,894  $ 48,401 
Supplemental disclosure of non-cash transactions:
Capitalized stock-based compensation $ —  $ 930  $ 1,891 
Asset retirement obligation capitalized $ 36  $ 546  $ 1,553 
Asset retirement obligation removed due to divestiture $ —  $ —  $ (2,033)
Interest capitalized $ —  $ —  $ 710 
Fair value of contingent consideration asset on date of divestiture $ —  $ —  $ 23,090 
Release of New Common Stock Held in Reserve $ 23,893  $ —  $ — 
Foreign currency translation gain (loss) on equity method investments $ —  $ 2,570  $ (8,158)