Gulfport Energy(GPOR) - 2021 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents Gulfport Energy Corporation's unaudited financial statements and management's analysis, detailing the impact of its Chapter 11 emergence and fresh start accounting Item 1. Consolidated Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements of Gulfport Energy Corporation, distinguishing between the 'Successor' (post-May 17, 2021, Chapter 11 emergence) and 'Predecessor' (prior to May 17, 2021) periods, reflecting the significant impact of fresh start accounting and the company's reorganization Consolidated Balance Sheets This section provides a snapshot of the company's financial position, highlighting assets, liabilities, and equity before and after its Chapter 11 emergence Consolidated Balance Sheet Highlights (in thousands) | Metric | September 30, 2021 (Successor) | December 31, 2020 (Predecessor) | | :-------------------------------- | :------------------------------- | :------------------------------- | | Total Assets | $2,088,208 | $2,539,871 | | Total Liabilities | $2,039,219 | $2,840,371 | | Total Stockholders' Equity (Deficit) | $(8,931) | $(300,500) | | Current Assets | $220,724 | $409,750 | | Property and Equipment, Net | $1,840,993 | $2,086,269 | | Current Liabilities | $1,056,928 | $510,287 | | Liabilities Subject to Compromise | $0 | $2,293,480 | - Current assets decreased significantly, primarily due to a reduction in cash and cash equivalents and prepaid expenses[28] - Current liabilities increased substantially, largely driven by a significant rise in short-term derivative instrument liabilities and accounts payable[31] - Liabilities subject to compromise were eliminated, reflecting the company's emergence from Chapter 11[31] Consolidated Statements of Operations This section details the company's revenues, expenses, and net income or loss across different reporting periods, reflecting the impact of reorganization Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2021 (Successor) | Three Months Ended Sep 30, 2020 (Predecessor) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Total Revenues | $(242,528) | $136,176 | | Net Loss | $(461,313) | $(380,963) | | Basic Net Loss Per Common Share | $(22.50) | $(2.37) | | Metric | May 18, 2021 - Sep 30, 2021 (Successor) | Jan 1, 2021 - May 17, 2021 (Predecessor) | Nine Months Ended Sep 30, 2020 (Predecessor) | | :------------------------------------ | :-------------------------------------- | :--------------------------------------- | :----------------------------------------- | | Total Revenues | $(236,804) | $273,037 | $621,815 | | Net (Loss) Income | $(670,898) | $250,996 | $(1,459,569) | | Basic Net (Loss) Income Per Common Share | $(32.87) | $1.56 | $(9.12) | - Total revenues for the three months ended September 30, 2021, showed a significant loss, primarily due to a net loss on natural gas, oil, and NGL derivatives[34] - The Successor period (May 18 - Sep 30, 2021) reported a substantial net loss, contrasting with the Predecessor period (Jan 1 - May 17, 2021) which showed net income[36] Consolidated Statements of Comprehensive Income (Loss) This section presents the comprehensive income or loss, including net income and other comprehensive income items, for various reporting periods Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands) | Metric | Three Months Ended Sep 30, 2021 (Successor) | Three Months Ended Sep 30, 2020 (Predecessor) | | :------------------------ | :------------------------------------------ | :------------------------------------------ | | Comprehensive Loss | $(461,313) | $(377,302) | | Metric | May 18, 2021 - Sep 30, 2021 (Successor) | Jan 1, 2021 - May 17, 2021 (Predecessor) | Nine Months Ended Sep 30, 2020 (Predecessor) | | :------------------------ | :-------------------------------------- | :--------------------------------------- | :----------------------------------------- | | Comprehensive (Loss) Income | $(670,898) | $250,996 | $(1,464,066) | Consolidated Statements of Stockholders' Equity (Deficit) This section outlines changes in stockholders' equity, reflecting the impact of the Chapter 11 reorganization, stock issuance, and accumulated deficit Total Stockholders' Equity (Deficit) (in thousands) | Date | Amount | | :------------------- | :------- | | September 30, 2021 (Successor) | $(8,931) | | December 31, 2020 (Predecessor) | $(300,500) | - The statements reflect the cancellation of Predecessor common stock and the issuance of New Common Stock and New Preferred Stock on the Emergence Date (May 17, 2021) as part of the Chapter 11 reorganization[43][63] - Additional paid-in capital saw significant adjustments due to the extinguishment of Predecessor paid-in capital and the issuance of new common stock[43][85] Consolidated Statements of Cash Flows This section details the cash inflows and outflows from operating, investing, and financing activities across different periods, post-reorganization Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | May 18, 2021 - Sep 30, 2021 (Successor) | Jan 1, 2021 - May 17, 2021 (Predecessor) | Nine Months Ended Sep 30, 2020 (Predecessor) | | :------------------------------------ | :-------------------------------------- | :--------------------------------------- | :----------------------------------------- | | Net Cash Provided by Operating Activities | $164,637 | $172,155 | $200,001 | | Net Cash Used in Investing Activities | $(116,144) | $(97,831) | $(290,696) | | Net Cash (Used in) Provided by Financing Activities | $(103,425) | $(104,768) | $135,678 | | Cash, Cash Equivalents and Restricted Cash at End of Period | $4,485 | $59,417 (at May 17, 2021) | $51,043 (at Sep 30, 2020) | Notes to Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements, including accounting policies and significant events 1. BASIS OF PRESENTATION This note describes the company's business, its Chapter 11 reorganization, and the application of fresh start accounting for financial reporting - Gulfport Energy Corporation is an independent natural gas-weighted exploration and production company with assets primarily in the Appalachia and Anadarko basins[49] - The Company filed for voluntary reorganization under Chapter 11 of the Bankruptcy Code on November 13, 2020, and emerged on May 17, 2021[49][53][54] - Financial statements distinguish between the 'Successor' (post-May 17, 2021) and 'Predecessor' (on or prior to May 17, 2021) periods, and the Company applied FASB ASC Topic 852 - Reorganizations and fresh start accounting[49][57] 2. CHAPTER 11 EMERGENCE This note details the company's emergence from Chapter 11, including the effective date, cancellation of old stock, and issuance of new securities - The Plan of Reorganization was confirmed on April 28, 2021, and became effective on May 17, 2021, marking the Company's emergence from Chapter 11[54][62] - All Predecessor common stock and outstanding obligations under Predecessor Senior Notes were cancelled[63] - The Company issued 19,845,780 shares of New Common Stock and 55,000 shares of New Preferred Stock[63] - A Second Amended and Restated Credit Agreement (Exit Credit Agreement) was entered into, providing for an Exit Facility and a First-Out Term Loan, and $550 million aggregate principal amount of 8.000% Successor Senior Notes due 2026 were issued[63][65] 3. FRESH START ACCOUNTING This note explains the application of fresh start accounting, revaluation of assets and liabilities, and the resulting non-comparability of financial statements - The Company qualified for and applied fresh start accounting on the Emergence Date (May 17, 2021), as existing voting shareholders received less than 50% of the Successor's equity and reorganization value was less than post-petition liabilities and allowed claims[67] - The enterprise value of the Successor was estimated between $1.3 billion and $1.9 billion, with management concluding $1.6 billion as the best estimate[69] - Assets and liabilities were revalued to their estimated fair values, making post-May 17, 2021, financial statements not comparable to prior periods[68] Reorganization Items, Net (Predecessor Period Jan 1, 2021 - May 17, 2021, in thousands) | Item | Amount | | :------------------------------------------ | :------- | | Net gain on liabilities subject to compromise | $575,182 | | Legal and professional advisory fees | $(81,565) | | Fresh start adjustments, net | $(160,756) | | Elimination of predecessor accumulated other comprehensive income | $(40,430) | | Debt issuance costs | $(3,150) | | Other items, net | $(22,383) | | Total reorganization items, net | $266,898 | 4. PROPERTY AND EQUIPMENT This note details the company's property and equipment, including oil and natural gas properties, impairment charges, and unevaluated properties by area Property and Equipment, Net (in thousands) | Date | Amount | | :------------------- | :------- | | September 30, 2021 (Successor) | $1,840,993 | | December 31, 2020 (Predecessor) | $2,086,269 | - No impairment of oil and natural gas properties was recorded during the third quarter of 2021, as the net book value was below the calculated ceiling[94] - The Company recorded impairment charges of $117.8 million for its oil and natural gas properties during the Current Combined YTD Period[94] Unevaluated Properties by Area at September 30, 2021 (in thousands) | Area | Amount | | :----- | :------- | | Utica | $179,449 | | SCOOP | $36,905 | | Other | $3 | | Total | $216,357 | 5. LONG-TERM DEBT This note outlines the company's long-term debt structure post-emergence, including the Exit Facility, Term Loan, and Senior Notes, and prior debt termination Total Debt (in thousands) | Date | Amount | | :------------------- | :------- | | September 30, 2021 (Successor) | $749,502 | | December 31, 2020 (Predecessor) | $2,258,962 | - Post-emergence debt at September 30, 2021, included $35.6 million outstanding under the Exit Facility, $165.0 million under the First-Out Term Loan, and $550.0 million in 8.000% senior unsecured notes due 2026[106][107] - The Exit Credit Facility was subsequently amended and refinanced with the New Credit Facility on October 14, 2021[101][102] - Predecessor Senior Notes, the DIP Credit Facility, and the Pre-Petition Revolving Credit Facility were terminated or converted upon the Emergence Date[112][113][114] 6. EQUITY This note describes the changes in equity due to the Chapter 11 reorganization, including the cancellation of old stock and issuance of new common and preferred shares - On the Emergence Date, all existing shares of Predecessor common stock were cancelled, and approximately 19.8 million shares of New Common Stock and 55,000 shares of New Preferred Stock were issued[119][120] - Holders of New Preferred Stock are entitled to cumulative quarterly dividends at a rate of 10% per annum for cash dividends and 15% per annum for PIK Dividends, with PIK dividends required if the Total Net Funded Debt to EBITDAX ratio is equal to or greater than 1.50[121] - New Preferred Stock is convertible into New Common Stock at the holder's option[122] New Preferred Stock Outstanding | Date | Shares | | :------------------- | :----- | | May 18, 2021 (Successor) | 55,000 | | September 30, 2021 (Successor) | 57,920 | 7. STOCK-BASED COMPENSATION This note details the impact of Chapter 11 on stock-based awards, the adoption of a new incentive plan, and related compensation expenses - Predecessor stock-based compensation awards were cancelled upon emergence, resulting in the recognition of $4.4 million of previously unamortized expense[127] - The Company adopted the Gulfport Energy Corporation 2021 Stock Incentive Plan, reserving 2,828,123 shares of New Common Stock for issuance[65][128] - Stock-based compensation expense for the Current Successor Quarter was $1.4 million, with $0.5 million capitalized[128] - Unrecognized compensation expense as of September 30, 2021, was $12.2 million for restricted stock units (expected over 3.05 years) and $6.3 million for performance vesting restricted shares (expected over 2.8 years)[131][132] 8. EARNINGS (LOSS) PER SHARE This note presents the basic and diluted earnings per share for various periods, considering the impact of the company's net loss and preferred stock Net (Loss) Income Per Common Share | Period | Basic EPS | Diluted EPS | | :------------------------------------------ | :-------- | :---------- | | Three Months Ended Sep 30, 2021 (Successor) | $(22.50) | $(22.50) | | May 18, 2021 - Sep 30, 2021 (Successor) | $(32.87) | $(32.87) | | Jan 1, 2021 - May 17, 2021 (Predecessor) | $1.56 | $1.56 | | Nine Months Ended Sep 30, 2020 (Predecessor) | $(9.12) | $(9.12) | - New Preferred Stock is considered a participating security but was anti-dilutive for the Current Successor YTD Period due to the Company's net loss[139][140] 9. COMMITMENTS AND CONTINGENCIES This note outlines the company's future firm transportation and gathering commitments, along with details of significant settlement agreements Future Firm Transportation and Gathering Commitments (in thousands) | Period | Amount | | :------------- | :--------- | | Remaining 2021 | $61,609 | | 2022 | $224,537 | | 2023 | $222,730 | | 2024 | $215,865 | | 2025 | $137,116 | | Thereafter | $977,616 | | Total | $1,839,473 | - The Company finalized a settlement agreement with TC Energy Corporation in September 2021, rejecting firm transportation contracts for a $43.8 million cash payment, with substantially all of this amount expected to be recovered through assigned claims[148][233] - An agreement in principle was reached with Stingray Pressure Pumping LLC in September 2021, fully resolving the litigation between the parties[153][237] - Settlements were reached with Muskie for $3.1 million and Bryon Lefort for approximately $0.7 million, resolving respective claims[155][156] 10. DERIVATIVE INSTRUMENTS This note describes the company's use of derivative instruments to manage commodity price volatility and details the net loss on these derivatives - The Company uses fixed price swaps, sold natural gas call options, costless collars, and natural gas basis swaps to mitigate commodity price volatility for natural gas, oil, and NGL[161][162][164][166][169] Total Commodity Derivative Position (in thousands) | Date | Amount | | :------------------- | :----------- | | September 30, 2021 (Successor) | $(830,554) | | December 31, 2020 (Predecessor) | $(20,777) | Net Loss on Natural Gas, Oil and NGL Derivatives (in thousands) | Period | Amount | | :------------------------------------------ | :----------- | | Three Months Ended Sep 30, 2021 (Successor) | $(622,476) | | May 18, 2021 - Sep 30, 2021 (Successor) | $(762,134) | 11. FAIR VALUE MEASUREMENTS This note explains the fair value measurements for derivative instruments and other assets and liabilities, including the impact of fresh start accounting - Derivative instruments are classified as Level 2 fair value measurements, utilizing industry-standard models with observable inputs[181] - The contingent consideration arrangement from the SCOOP water infrastructure sale is a Level 3 fair value measurement, valued at $5.3 million as of September 30, 2021, based on unobservable inputs[182] - The application of fresh start accounting on the Emergence Date resulted in assets and liabilities being recorded at fair value, with oil and natural gas properties and asset retirement obligations primarily using Level 3 unobservable inputs[186] 12. REVENUE FROM CONTRACTS WITH CUSTOMERS This note details the company's revenue recognition policies for natural gas, oil, and NGL sales, and presents receivables from customer contracts - Revenues are primarily derived from the sale of natural gas, oil, and NGL, recognized in the period that performance obligations are satisfied, generally upon transfer of control of the product[187] Receivables from Contracts with Customers (in thousands) | Date | Amount | | :------------------- | :------- | | September 30, 2021 | $185,900 | | December 31, 2020 | $119,900 | - The Company utilizes practical expedients for short-term contracts (one year or less) and variable consideration allocated to wholly unsatisfied performance obligations, exempting certain disclosures[189][190] 13. EQUITY INVESTMENTS This note discusses the revaluation of equity investments, specifically the interest in Grizzly Oil Sands, and the settlement of claims with previously owned shares - The Company's approximate 24.5% interest in Grizzly Oil Sands ULC was revalued to zero upon the Emergence Date due to suspended operations and no anticipated future funding, leading to the cessation of equity method accounting[196][197] - Previously owned shares of Mammoth Energy Services, Inc. were used to settle Class 4A claims as part of the Chapter 11 reorganization[198] 14. RESTRUCTURING AND LIABILITY MANAGEMENT This note details the restructuring and liability management charges, primarily due to workforce reductions, aligning with the company's operating environment Restructuring and Liability Management Charges (in thousands) | Period | Reduction in Workforce | Liability Management | Total | | :------------------------------------------ | :--------------------- | :------------------- | :------ | | Three Months Ended Sep 30, 2021 (Successor) | $2,858 | $0 | $2,858 | | May 18, 2021 - Sep 30, 2021 (Successor) | $2,858 | $0 | $2,858 | | Nine Months Ended Sep 30, 2020 (Predecessor) | $1,460 | $8,141 | $9,601 | - Restructuring charges in the Current Successor Quarter were primarily due to a workforce reduction, aligning the workforce and leadership structure to the current operating environment[199] 15. LEASES This note provides information on the company's operating leases, including remaining lease terms, maturities of liabilities, and total lease costs - The Company has operating leases on certain equipment and field offices, with a weighted-average remaining lease term of 0.89 years as of September 30, 2021[201][206] Maturities of Operating Lease Liabilities at September 30, 2021 (in thousands) | Period | Amount | | :------------- | :----- | | Remaining 2021 | $10 | | 2022 | $25 | | Total Lease Payments | $35 | | Less: Imputed interest | $(1) | | Total | $34 | Total Lease Cost (in thousands) | Period | Amount | | :------------------------------------------ | :----- | | Three Months Ended Sep 30, 2021 (Successor) | $2,883 | | May 18, 2021 - Sep 30, 2021 (Successor) | $5,051 | | Jan 1, 2021 - May 17, 2021 (Predecessor) | $4,537 | | Nine Months Ended Sep 30, 2020 (Predecessor) | $16,373 | 16. INCOME TAXES This note discusses the impact of cancellation of indebtedness income on tax attributes, the valuation allowance against deferred tax assets, and income tax expense - The estimated cancellation of indebtedness income (CODI) of approximately $708.8 million, resulting from debt discharge during Chapter 11, will reduce the Company's tax attributes[207] - The Company maintains a full valuation allowance against its net deferred tax assets as of May 17, 2021, and September 30, 2021, indicating that it is more likely than not that some or all of the benefit from these assets will not be realized[209] - An income tax expense of $0.7 million was recognized for the Current Successor Quarter, attributable to an adjustment related to an Oklahoma refund claim[211] 17. SUBSEQUENT EVENTS This note discloses significant events occurring after the reporting period, including a new credit facility, stock repurchase program, and additional derivative contracts - On October 14, 2021, the Company entered into a Third Amended and Restated Credit Agreement (New Credit Facility) with an initial borrowing base of $850.0 million and an initial aggregate elected commitment amount of $700.0 million, maturing in October 2025[212][213][214] - On November 1, 2021, the Board of Directors approved a stock repurchase program to acquire up to $100.0 million of its New Common Stock through December 31, 2022[218] - Subsequent to September 30, 2021, the Company entered into additional natural gas derivative contracts, including basis swaps and fixed price swaps for 2021-2023[220] Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations This section provides management's perspective on Gulfport's financial condition, results of operations, and liquidity, highlighting the impact of its Chapter 11 emergence and fresh start accounting Introduction This introduction outlines Gulfport's business, strategic focus, and management's approach to presenting financial results post-reorganization - Gulfport is an independent natural gas-weighted exploration and production company with principal properties in Eastern Ohio (Utica formation) and central Oklahoma (SCOOP Woodford and Springer formations)[223] - The Company's strategy focuses on developing assets to generate sustainable cash flow, improve margins and operating efficiencies, and enhance Environmental, Social and Governance (ESG) and safety performance[223] - Management views operating results for the nine months ended September 30, 2021, by combining the Successor and Predecessor periods ('Current Combined YTD Period') for a more meaningful comparison to prior periods, despite not complying with GAAP[224] Recent Developments This section highlights key recent events, including the company's Chapter 11 emergence, leadership changes, new credit facility, and stock repurchase program - The Company emerged from Chapter 11 voluntary reorganization on May 17, 2021, reducing total indebtedness by $1.4 billion and strengthening its balance sheet[225][227] - Timothy Cutt fully assumed the role of Chief Executive Officer, dropping the 'Interim' designation, effective September 2, 2021[228] - A New Credit Facility was entered into on October 14, 2021, with an aggregate maximum principal amount of up to $1.5 billion, an initial borrowing base of $850.0 million, and an initial elected commitment of $700.0 million[229] - A $100.0 million stock repurchase program for New Common Stock was approved on November 1, 2021, authorized to extend through December 31, 2022[230] 2021 Operational and Financial Highlights This section summarizes significant operational and financial achievements in 2021, including settlement agreements, drilling activities, and enhanced liquidity - Finalized a settlement agreement with TC Energy Corporation in September 2021, rejecting firm transportation contracts for a $43.8 million cash payment, with substantially all of this amount expected to be recovered through assigned claims[233][234] - Reached an agreement in principle with Stingray Pressure Pumping LLC in September 2021, fully resolving longstanding litigation[237] - Completed the six-well Angelo pad in the Utica in September 2021, which came online in early October at a combined gross production rate of 250 MMcfe per day[237] - The New Credit Facility, effective October 14, 2021, increased the elected commitment from $580 million to $700 million, enhancing liquidity by over $160 million[237] 2021 Production and Drilling Activity This section details the company's net production volumes and drilling activities in the Utica and SCOOP regions for the current and prior periods Total Net Production (MMcfe/day) | Period | Amount | | :------------------------------------------ | :----- | | Current Successor Quarter (Q3 2021) | 973.3 | | Prior Predecessor Quarter (Q3 2020) | 992.0 | | Current Combined YTD Period (2021) | 981.7 | | Prior Predecessor YTD Period (2020) | 1,024.2 | - The 2% decrease in Q3 2021 production and 4% decrease in Current Combined YTD production were largely due to the timing of development activity in the Utica[235][238] - During the Current Combined YTD Period, the Company spud 12 gross (11.6 net) wells in the Utica and 4 gross (3.9 net) wells in the SCOOP[239][240] - As of October 28, 2021, the Company had two operated drilling rigs running in the Utica and one in the SCOOP, with plans to add another SCOOP rig in the fourth quarter of 2021[240][241] Current Successor Quarter Compared to Prior Predecessor Quarter This section compares key financial and operational metrics for the third quarter of 2021 (Successor) against the third quarter of 2020 (Predecessor) Key Financial and Operational Metrics (Q3 2021 vs Q3 2020) | Metric | Q3 2021 (Successor) | Q3 2020 (Predecessor) | Change (%) | | :------------------------------------------ | :------------------ | :------------------ | :--------- | | Natural Gas Sales (without derivatives, $k) | $301,516 | $155,163 | +94.3% | | Oil and Condensate Sales (without derivatives, $k) | $33,279 | $16,012 | +107.8% | | NGL Sales (without derivatives, $k) | $45,153 | $18,824 | +139.9% | | Total Sales (without derivatives, $k) | $379,948 | $189,999 | +100.0% | | Net Loss on Derivatives ($k) | $(622,476) | $(53,823) | -1056.6% | | Transportation, Gathering, Processing and Compression ($/Mcfe) | $0.94 | $1.21 | -22.3% | | General and Administrative Expenses, net ($k) | $16,691 | $20,331 | -17.8% | - The significant increase in sales revenues (without derivatives) was driven by a substantial increase in realized commodity prices across natural gas (+102%), oil and condensate (+87%), and NGL (+94%)[245][246][247] - Net loss on natural gas, oil, and NGL derivatives increased significantly due to the rise in both realized and futures pricing for commodities[248] - Transportation, gathering, processing, and compression costs decreased primarily due to savings associated with rejected midstream contracts and renegotiation through the bankruptcy process[251] Current Successor YTD Period and Current Predecessor YTD Period Compared to Prior Predecessor YTD Period This section analyzes combined year-to-date financial and operational performance for 2021 against the prior year, highlighting significant changes Key Financial and Operational Metrics (Current Combined YTD 2021 vs Prior Predecessor YTD 2020) | Metric | Current Combined YTD 2021 | Prior Predecessor YTD 2020 | Change (%) | | :------------------------------------------ | :------------------------ | :------------------------- | :--------- | | Natural Gas Sales (without derivatives, $k) | $757,624 | $456,859 | +65.8% | | Oil and Condensate Sales (without derivatives, $k) | $79,972 | $47,553 | +68.1% | | NGL Sales (without derivatives, $k) | $98,010 | $45,989 | +113.1% | | Total Sales (without derivatives, $k) | $935,606 | $550,401 | +70.0% | | Net (Loss) Gain on Derivatives ($k) | $(899,373) | $71,414 | N/A (shift from gain to loss) | | Lease Operating Expenses ($/Mcfe) | $0.14 | $0.15 | -6.7% | | Transportation, Gathering, Processing and Compression ($/Mcfe) | $1.07 | $1.19 | -10.1% | | Impairment of Oil and Gas Properties ($k) | $117,813 | $1,357,099 | -91.3% | - Total sales revenues (without derivatives) increased significantly due to higher realized commodity prices, despite a slight decrease in sales volumes[261][262][263] - The Company experienced a significant shift from a net gain to a net loss on natural gas, oil, and NGL derivatives, primarily due to a substantial increase in futures pricing[264] - Lease operating expenses and transportation, gathering, processing, and compression costs decreased due to ongoing cost reduction initiatives, rejected midstream contracts, and lower production[265][267] Liquidity and Capital Resources This section discusses the company's liquidity strategy, funded debt, and capital expenditure plans, emphasizing cash flow and borrowing capacity - The Company aims to maintain sufficient liquidity through internally generated cash flows from operations, derivative contracts, and borrowing capacity under the New Credit Facility[280][282] Funded Debt and Liquidity (in thousands) | Metric | September 30, 2021 | October 28, 2021 (Post New Credit Facility) | | :------------------------------------------ | :----------------- | :------------------------------------------ | | Cash and Cash Equivalents | $4,485 | $6,200 | | Borrowings under Exit/New Credit Facility | $35,600 | $246,000 | | Borrowings under First-Out Term Loan | $165,000 | N/A (refinanced) | | Letters of Credit Outstanding | $115,500 | $97,100 | | Outstanding 2026 Notes | $550,000 | $550,000 | | Total Principal Amount of Funded Debt | $750,600 | $796,000 | - Estimated capital expenditures for drilling and completion activities in 2021 are in the range of $270 million to $290 million[298] - A $100.0 million stock repurchase program was approved on November 1, 2021, to opportunistically acquire New Common Stock[304] Critical Accounting Policies and Estimates This section confirms that there have been no significant changes to the company's critical accounting policies and estimates since the last annual report - There have been no significant changes in the Company's critical accounting policies from those disclosed in its 2020 Annual Report on Form 10-K[308] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses Gulfport's exposure to market risks, primarily commodity price volatility for natural gas, oil, and NGL, and interest rate risk on its floating-rate debt Natural Gas, Oil and Natural Gas Liquids Derivative Instruments This section details the company's use of derivative instruments to manage commodity price volatility and quantifies the potential impact of price changes - The Company uses various derivative instruments, including swaps, basis swaps, call options, and costless collars, to mitigate exposure to adverse market price changes for natural gas, oil, and NGL[316][318][322] Net Liability Derivative Position (in millions) | Date | Amount | | :------------------- | :------- | | September 30, 2021 | $(830.6) | | September 30, 2020 | $(80.6) | - A 10% increase in underlying commodity prices would increase the Company's derivative liability by approximately $231.5 million, while a 10% decrease would decrease it by approximately $220.3 million[323] Interest Rate Risk This section addresses the company's exposure to interest rate fluctuations on its floating-rate debt and the absence of hedging instruments - The Company's revolving credit agreement is structured under floating rate terms, making its interest expense sensitive to fluctuations in prime rates or Eurodollar rates[324] Borrowings Outstanding and Weighted Average Interest Rates at September 30, 2021 | Facility | Amount (in millions) | Weighted Average Rate | | :-------------------- | :------------------- | :-------------------- | | Exit Facility | $35.6 | 4.50% | | First-Out Term Loan | $165.0 | 5.50% | - As of September 30, 2021, the Company did not have any interest rate swaps to hedge interest rate risks[324] Item 4. Controls and Procedures This section confirms the effectiveness of Gulfport's disclosure controls and procedures as of September 30, 2021, and reports that there have been no material changes in internal control over financial reporting during the last fiscal quarter Evaluation of Disclosure Control and Procedures This section reports on the evaluation of the company's disclosure controls and procedures, concluding their effectiveness as of September 30, 2021 - An evaluation of the effectiveness of the design and operation of disclosure controls and procedures was performed under the supervision of the Chief Executive Officer and Chief Financial Officer[325][326] - Based on the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of September 30, 2021[326] Changes in Internal Control over Financial Reporting This section confirms that no material changes occurred in internal control over financial reporting during the last fiscal quarter - There have been no changes in internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting[328] PART II OTHER INFORMATION This section covers additional information not included in the financial statements, such as legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings This section refers to the detailed discussion of legal proceedings and related contingencies provided in Note 9 to the consolidated financial statements Legal Proceedings This section directs readers to Note 9 for comprehensive information regarding the company's ongoing legal proceedings - Information regarding legal proceedings is set forth in Note 9 in the accompanying condensed consolidated financial statements[331] Item 1A. Risk Factors This section directs readers to the Company's Annual Report on Form 10-K for the year ended December 31, 2020, and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, for a comprehensive discussion of factors that could materially adversely affect the business Risk Factors This section refers to previous filings for a detailed discussion of factors that could materially adversely affect the company's business - Factors that could materially adversely affect the Company's business, financial condition, operating results, or liquidity are described in Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2020, and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2021[332] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or issuer repurchases of equity securities during the reporting period Unregistered Sales of Equity Securities This section confirms that no unregistered sales of equity securities occurred during the reporting period - None[333] Issuer Repurchases of Equity Securities This section confirms that no issuer repurchases of equity securities occurred during the reporting period - None[334] Item 3. Defaults Upon Senior Securities This section reports that there were no defaults upon senior securities during the reporting period Defaults Upon Senior Securities This section confirms that no defaults upon senior securities occurred during the reporting period - None[335] Item 4. Mine Safety Disclosures This section indicates that this item is not applicable to the Company Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company's operations - Not applicable[336] Item 5. Other Information This section states that there is no other information to report under this item Other Information This section confirms that no additional information is required to be reported under this item - None[337] Item 6. Exhibits This section provides a list of exhibits filed as part of the Form 10-Q, including key agreements and certifications INDEX OF EXHIBITS This section lists all exhibits accompanying the report, including organizational documents, credit agreements, and officer certifications - Exhibits include the Amended Joint Chapter 11 Plan of Reorganization, Amended and Restated Certificate of Incorporation and Bylaws, Third Amended and Restated Credit Agreement, CEO Agreement Amendment, and various certifications (CEO, CFO)[340] Signatures This section confirms the official signing of the Form 10-Q report by the authorized representative of Gulfport Energy Corporation SIGNATURES This section formally attests to the accuracy and completeness of the report through the signature of the Chief Financial Officer - The report was signed on November 3, 2021, by William Buese, Chief Financial Officer, on behalf of Gulfport Energy Corporation[345]