UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-10753
GULFPORT ENERGY CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 73-1521290
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6307 Waterford Blvd.
Building D, Suite 100
Oklahoma City, Oklahoma 73118
(405) 848-8807
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive office)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Issuer was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes[X] No[ ]
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEEDING FIVE YEARS.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities and
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]
The number of shares of the Registrant's Common Stock, $0.01 par value,
outstanding as of March 31, 1999 was 3,445,206.
<PAGE>
GULFPORT ENERGY CORPORATION
TABLE OF CONTENTS
FORM 10-Q QUARTERLY REPORT
PART I FINANCIAL INFORMATION PAGE
Item 1 Financial Statements
Consolidated Balance Sheets at March 31, 1999 (unaudited)
and December 31, 1998....................................... 4
Consolidated Statements of Operations for the Three Months
Ended March 31, 1999 and 1998 (unaudited)................... 5
Consolidated Statements of Cash Flow for the Three
Months Ended March 31, 1999 and 1998 (unaudited)............ 6
Notes to Consolidated Financial Statements.................. 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 20
Signatures......................................................... 29
<PAGE>
GULFPORT ENERGY CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
March 31, December 31,
ASSETS 1999 1998
---------------- ----------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,657,000 $ 2,778,000
Cash, restricted 936,000 936,000
Accounts receivable, net of allowance for doubtful accounts
of $4,696,000 1,727,000 1,656,000
Prepaid expenses and other 58,000 110,000
---------------- ----------------
4,378,000 5,480,000
---------------- ----------------
Property and equipment:
Properties subject to depletion 78,695,000 77,042,000
Other property, plant and equipment 1,876,000 1,867,000
---------------- ----------------
80,571,000 78,909,000
Accumulated depreciation, depletion and amortization (59,804,000) (58,919,000)
---------------- ----------------
20,767,000 19,990,000
---------------- ----------------
Other assets 2,096,000 2,098,000
---------------- ----------------
$ 27,241,000 $ 27,568,000
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 4,716,000 $ 3,890,000
Current maturities of long-term debt 4,830,000 4,794,000
---------------- ----------------
9,546,000 8,684,000
---------------- ----------------
Long- term liabilities: 377,000 381,000
---------------- ----------------
Shareholders' equity (deficit):
Preferred stock - $.01 par value, 1,000,000
authorized, none issued - -
Common stock - $.50 par value, 250,000,000
authorized, 3,445,206 issued and outstanding 1,723,000 1,723,000
Paid-in capital 77,555,000 77,598,000
Accumulated deficit (61,960,000) (60,818,000)
---------------- ----------------
Total shareholders' equity 17,318,000 18,503,000
---------------- ----------------
Commitments and contingencies - -
---------------- ----------------
$ 27,241,000 $ 27,568,000
================ ================
</TABLE>
- See accompanying notes to consolidated financial statements -
<PAGE>
GULFPORT ENERGY CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
For the Three Months Ended March 31,
1999 1998
---------------- ----------------
<S> <C> <C>
Revenues:
Gas sales $ 77,000 $ 1,019,000
Oil and condensate sales 1,632,000 2,303,000
Other income 7,000 200,000
---------------- ----------------
Total revenues 1,716,000 3,522,000
---------------- ----------------
Expenses:
Lease operating 1,417,000 2,720,000
Depreciation, depletion and amortization 871,000 1,878,000
General and administrative expenses 452,000 662,000
---------------- ----------------
2,740,000 5,260,000
---------------- ----------------
Loss from operations (1,024,000) (1,738,000)
---------------- ----------------
Other (income) expense:
Interest expense 154,000 386,000
Interest income (36,000) -
---------------- ----------------
118,000 386,000
---------------- ----------------
Loss before income tax (1,142,000) (2,124,000)
Income tax expense - -
---------------- ----------------
Net loss $ (1,142,000) $ (2,124,000)
================ ================
Per common share:
Income per common and common equivalent share $ (0.33) $ (4.81)
================ ================
Average common and common equivalent
shares outstanding 3,445,206 441,520
================ ================
</TABLE>
- See accompanying notes to consolidated financial statements -
<PAGE>
GULFPORT ENERGY CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Common
Stock Additional
Preferred ------------------------------- Paid-In Accumulated Treasury
Stock Shares Amount Capital Deficit Stock
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1996 $ 27,677,000 9,539,207 $ 95,000 $ 39,571,000 $(157,562,000) $ (332,000)
Net income - - - - 79,108,000 -
Effect of fresh
start reporting (27,677,000) 12,537,108 126,000 32,201,000 78,454,000 332,000
------------------------------------------------------------------------------------------------
Balance,
July 11, 1997 - 22,076,315 221,000 71,772,000 - -
Net loss - - - - (1,713,000) -
Reverse stock split - (21,634,789) - - - -
------------------------------------------------------------------------------------------------
Balance,
December 31, 1997 - 441,526 221,000 71,772,000 (1,713,000) -
Stock Rights offering - 3,003,680 1,502,000 5,826,000 - -
Net loss - - - - (59,105,000) -
------------------------------------------------------------------------------------------------
Balance,
December 31, 1998 $ - 3,445,206 $ 1,723,000 $ 77,598,000 $ (60,818,000) $ -
================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
GULFPORT ENERGY CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
For the Three Months Ended March 31,
1999 1998
---------------- ----------------
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (1,142,000) $ (2,124,000)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation, depletion, and amortization 871,000 1,878,000
Amortization of debt issuance costs 48,000 32,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (70,000) 1,346,000
Decrease in prepaid expenses and other 52,000 71,000
Increase (decrease) in accounts payable, distribution
payables and accrued liabilities 825,000 (97,000)
---------------- ----------------
Net cash provided (used) by operating activities 584,000 1,106,000
---------------- ----------------
Cash flow from investing activities:
Additions to cash held in escrow (46,000) -
Additions to oil and gas properties (1,648,000) (679,000)
---------------- ----------------
Net cash used in investing activities (1,694,000) (679,000)
---------------- ----------------
Cash flow from financing activities:
Other (43,000) -
Borrowings on note payable 36,000 -
Principal payments on borrowings (4,000) (7,000)
---------------- ----------------
Net cash provided by (used in) financing activities (11,000) (7,000)
---------------- ----------------
Net increase (decrease) in cash and cash equivalents (1,121,000) 420,000
Cash and cash equivalents - beginning of period 3,714,000 3,263,000
---------------- ----------------
Cash and cash equivalents - end of period $ 2,593,000 $ 3,683,000
================ ================
Supplemental Disclosures Of Cash Flow Information:
Interest paid $ 154,000 $ 339,000
</TABLE>
- See accompanying notes to consolidated financial statements -
<PAGE>
GULFPORT ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Reorganization Proceedings
Gulfport Energy Corporation (the "Company"), formerly known as WRT Energy
Corporation ("WRT"), is a domestic independent energy company engaged in the
production of oil and natural gas. On July 11, 1997, the Company's subsidiaries
were merged into the Company. On the Effective Date of the reorganization, the
state of incorporation of the Company was changed from the State of Texas to the
State of Delaware. Prior to July 11, 1997, the financial statements represented
the consolidated financial statements of the Company and its subsidiaries.
As discussed in Note 3, on February 14, 1996, (the "Petition Date"), the
Company filed a voluntary petition with the Bankruptcy Court for the Western
District of Louisiana (the "Bankruptcy Court") for protection under Chapter 11
of the Bankruptcy Code. On May 2, 1997, the Bankruptcy Court confirmed an
Amended Plan of Reorganization (the "Plan") for the Company and on the Effective
Date an order of substantial consummation regarding the Plan became final and
nonappealable. On the Effective Date, the Debtor was merged with and into a
newly formed Delaware corporation named "WRT Energy Corporation" which on March
30, 1998 underwent a name change to "Gulfport Energy Corporation". Effective
July 11, 1997 (the "Election Date"), the Company implemented fresh start
reporting, as defined by the Accounting Standards Division of the American
Institute of Certified Public Accountants Statement of Position Number 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
("SOP 90-7").
Principles of Consolidation
In November 1995, the Company formed a wholly owned subsidiary, WRT
Technologies, Inc., which was established to own and operate the Company's
proprietary, radioactive, cased-hole logging technology. Prior to July 11, 1997,
the financial statements were consolidated and include the accounts of the
Company and its wholly owned subsidiary, WRT Technologies, Inc., which was
merged into the Company on that date. All significant intercompany transactions
were eliminated during the consolidation periods.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents for purposes of the
statement of cash flows.
Fair Value of Financial Instruments
At March 31, 1999 and December 31, 1998, the carrying amounts of all
financial instruments approximate their fair market values.
Oil and Natural Gas Properties
Before July 11, 1997, the Company used the successful efforts method for
reporting oil and gas operations. Commencing with the reorganization, the
Company converted to the full cost pool method of accounting.
Commencing July 11, 1997
In connection with the implementation of fresh start reporting, as
described in Note 3, the Company implemented the full cost pool method of
accounting for oil and gas operations. Accordingly, all costs including
nonproductive costs and certain general and administrative costs associated with
acquisition, exploration and development of oil and natural gas properties are
capitalized. Net capitalized costs are limited to the estimated future net
revenues, after income taxes, discounted at 10% per year, from proven oil and
natural gas reserves and the cost of the properties not subject to amortization.
Such capitalized costs, including the estimated future development costs and
site remediation costs, if any, are depleted by an equivalent
units-of-production method, converting natural gas to barrels at the ratio
<PAGE>
of six MCF of natural gas to one barrel of oil. No gain or loss is recognized
upon the disposal of oil and gas properties, unless such dispositions
significantly alter the relationship between capitalized costs and proven oil
and natural gas reserves.
During 1998, the Company recorded a loss impairment on its oil and gas
properties of $50,130,000. This impairment reduced the carrying value of the oil
and gas properties to $18,405,000, which is $9,018,000 less than the 10%
discounted present value of these properties. Management elected to reduce the
carrying value of the properties below the 10% discounted present value due to
the significant amount of undeveloped reserves included in total proven
reserves.
Included in costs capitalized to the full cost pool are $417,000 in general
and administrative costs incurred in 1997. General and administrative costs
capitalized to the full cost pool are those incurred directly related to
exploration and development activities such as geological costs 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. During 1998, no general and administrative costs were capitalized to
the full cost pool.
Oil and natural gas properties not subject to amortization consist of the
cost of undeveloped leaseholds. These costs are reviewed periodically by
management for impairment, with the impairment provision included in the cost of
oil and natural gas properties subject to amortization. Factors considered by
management in its impairment assessment include drilling results by the Company
and other operators, the terms of oil and gas leases not held by production, and
available funds for exploration and development. During 1998, $5,097,000 of
undeveloped leasehold cost was determined to be impaired and was included in the
cost of oil and gas properties subject to amortization, and in the $5,130,000
improvement of oil and gas properties. At March 31, 1999 and December 31, 1998,
the Company had no oil and gas properties not subject to amortization.
Prior to July 11, 1997
Prior to July 11, 1997, the Company followed the successful efforts method
of accounting for its oil and gas operations. Under the successful efforts
method, costs of productive wells, development dry holes and productive leases
are capitalized and amortized on a unit-of-production basis over the life of the
remaining proven reserves as estimated by the Company's independent engineers.
The Company's estimate of future dismantlement and abandonment costs was
considered in computing the aforementioned amortization.
Cost centers for amortization purposes were determined based on a
reasonable aggregation of properties with common geological structures or
stratigraphic conditions, such as a reservoir or field. The Company performed a
review for impairment of proven oil and gas properties on a depletable unit
basis when circumstances suggest the need for such a review. For each depletable
unit determined to be impaired, an impairment loss equal to the difference
between the carrying value and the fair value of the depletable unit was
recognized. Fair value, on a depletable unit basis, was estimated to be the
present value of expected future net cash flows computed by applying estimated
future oil and gas prices, as determined by management, to estimated future
production of oil and gas reserves over the economic lives of the reserves.
Exploration expenses, including geological, geophysical and costs of
carrying and retaining undeveloped properties were charged to expense as
incurred.
Unproven properties were assessed periodically and a loss was recognized to
the extent, if any, that the cost of the property had been impaired. If proven
reserves were not discovered within one year after drilling was completed, costs
were charged to expense.
<PAGE>
Other Property and Equipment
Depreciation of other property and equipment is provided on a straight-line
basis over estimated useful lives of the related assets, which range from 7 to
30 years.
Implementation of Statement of Accounting Standards No. 121
During 1998, the Company abandoned $271,000 in software costs.
Earnings (Loss) per Share
Earnings (loss) per share computations are calculated on the
weighted-average of common shares and common share equivalents outstanding
during the year. Common stock options and warrants are considered to be common
share equivalents and are used to calculate earnings per common and common share
equivalents except when they are anti-dilutive. See Note 11 for effects of
reverse stock split.
Income Taxes
The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts and the tax basis of existing
assets and liabilities and operating loss and tax credit carryforwards. Deferred
income tax assets and liabilities are based on enacted tax rates applicable to
the future period when those temporary differences are expected to be recovered
or settled. The effect of a change in tax rates on deferred tax assets and
liabilities is recognized in income during the period the rate change is
enacted. Deferred tax assets are recognized in income in the year in which
realization becomes determinable.
Revenue Recognition
Natural gas revenues are recorded in the month produced using the
entitlement method, whereby any production volumes received in excess of the
Company's ownership percentage in the property are recorded as a liability. If
less than the Company's entitlement is received, the underproduction is recorded
as a receivable. Oil revenues are recognized in the month produced.
Concentration of Credit Risk
The Company operates in the oil and natural gas industry principally in the
state of Louisiana with sales to refineries, re-sellers such as pipeline
companies, and local distribution companies. While certain of these customers
are affected by periodic downturns in the economy in general or in their
specific segment of the natural gas industry, the Company believes that its
level of credit-related losses due to such economic fluctuations has been
immaterial and will continue to be immaterial to the Company's results of
operations in the long term.
The Company maintains cash balances at several banks. Accounts at each
institution are insured by the Federal Deposit Insurance Corporation up to
$100,000. At March 31, 1999 and December 31, 1998, the Company held cash in
excess of insured limits in these banks totaling $1,550,000 and $3,983,000,
respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates, judgments
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the financial statements and revenues and expenses during the
reporting period. The financial statements are highly dependent on oil and gas
reserve estimates, which are inherently imprecise. Actual results could differ
materially from those estimates.
Stock Options and Warrant Agreements
Effective at the date of reorganization, all previously issued stock option
plans of the Company were terminated and all outstanding options were canceled.
On that date, a Warrant Agreement, mandated under the Plan, went into effect.
These warrants are exercisable at $10 per share and will expire on July 11,
2002. The Plan authorized the issuance of up to 1,104,000 warrants. As of March
31, 1999 and December 31, 1998, there were 221,000 warrants issued and
outstanding.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments,
litigation or other sources are recorded when it is probable that a liability
has been incurred and the amount can be reasonably estimated.
2. RELATED PARTY TRANSACTIONS
DLB Oil & Gas, Inc. ("DLB") and Wexford Management LLC ("Wexford") were,
along with the Company, co-proponents in the Plan of Reorganization. As of March
31, 1998, DLB and Wexford owned approximately 49% and 8%, respectively, of the
Company's outstanding common stock. During April of 1998, DLB distributed all of
its shares in the Company to its shareholders prior to its acquisition by
Chesapeake Energy Corporation.
Administrative Service Agreement
Pursuant to the terms and conditions of the Administrative Services
Agreement, DLB Oil & Gas, Inc. agreed to make available to the Company
personnel, services, facilities, supplies, and equipment as the Company may
need, including executive and managerial, accounting, auditing and tax,
engineering, geological and geophysical, legal, land and administrative and
clerical services. The initial term was one year beginning on the date of the
Administrative Services Agreement. The Administrative Services Agreement
continues for successive one-year periods unless terminated by either party by
written notice no less than 60 days prior to the anniversary date of the
Administrative Services Agreement. On April 28, 1998, in connection with the
acquisition of DLB Oil & Gas, Inc. by Chesapeake Energy Corporation, the
obligations of DLB Oil & Gas, Inc. under the Administrative Services Agreement
were assigned to DLB Equities, L.L.C. Currently, the services of Mike Liddell,
Chief Executive Officer, and Mark Liddell, President, are provided under the
Administrative Services Agreement. DLB Equities, L.L.C. is owned equally by Mike
and Mark Liddell.
In return for the services rendered under the Administrative Services
Agreement, the Company pays a monthly service charge based on the pro rata
proportion of the Company's use of services, personnel, facilities, supplies and
equipment provided by DLB Equities, L.L.C. as determined by DLB Equities, L.L.C.
in a good-faith, reasonable manner. The service charge was calculated as the sum
of (i) DLB Equities, L.L.C.'s fully allocated internal costs of providing
personnel and/or performing services, (ii) the actual costs to DLB Equities,
L.L.C. of any third-party services required, (iii) the equipment, occupancy,
rental, usage, or depreciation and interest charges, and (iv) the actual cost to
DLB Equities, L.L.C. of supplies. The fees provided for in the Administrative
Services Agreement were approved by the Bankruptcy Court as part of the Plan and
the Company believes that such fees are comparable to those that would be
charged by an independent third party. The Company paid fees totaling $267,000
during the three months ended March 31, 1999 and $969,000 the year ended
December 31, 1998.
At December 31, 1997, Gulfport owed DLB approximately $1,600,000 for
services rendered pursuant to the Administrative Services Agreement. In March
1998, in order to facilitate the acquisition of DLB by Chesapeake Energy Corp.,
Mike Liddell, Mark Liddell and Charles Davidson purchased the receivable from
DLB for its then outstanding amount of approximately $1,600,000. Each of Messrs.
Mike and Mark Liddell and Mr. Davidson subsequently transferred his portion of
the receivable to Liddell Investments, L.L.C., Liddell Holdings, L.L.C. and CD
Holdings, L.L.C., respectively. The receivable accrued interest at the rate of
LIBOR plus 3% per annum.
Liddell Investments, L.L.C., Liddell Holdings, L.L.C., and CD Holdings,
L.L.C., exercised 632,484 rights in the November 20, 1998 Rights Offering
through debt forgiveness.
During the three months ended March 31, 1998, the Company sold $877,128 in
oil to a DLB subsidiary, GEMCO. During the year ended December 31, 1998, the
Company sold $2,058,000 in oil to a DLB subsidiary, GEMCO. These sales occurred
at prices which the Company could be expected to obtain from an unrelated third
party.
Stockholder Credit Facility
On August 18, 1998, the Company entered into the Stockholder Credit
Facility, a $3,000,000 revolving credit facility with Liddell Investments,
L.L.C., Liddell Holdings, L.L.C., CD Holdings, L.L.C. and Wexford Entities
(collectively "Affiliated Stockholders"). Borrowing under the Stockholder Credit
Facility was due on August 17, 1999 and bore interest at LIBOR plus 3%. Pursuant
to the Stockholder Credit Facility, the Company paid the Affiliated Eligible
Stockholders an aggregate commitment fee equal to $60,000. The Company repaid
$2,000,000 of principal under the Amended ING Credit Agreement with borrowings
under the Stockholder Credit Facility. The remaining $1,000,000 was used for
working capital and general corporate purposes. The Affiliated Stockholders paid
the Subscription Price for 1,200,000 Shares in the Rights Offering through the
forgiveness of the amount owed to them under the Stockholder Credit Facility.
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Oil and gas properties $ 78,695,000 $ 77,042,000
Office furniture and fixtures 1,399,000 1,390,000
Building 217,000 217,000
Land 260,000 260,000
--------------- ---------------
Total property and equipment 80,571,000 78,909,000
Accumulated depreciation, depletion
Amortization and impairment reserve (59,804,000) (58,919,000)
--------------- ---------------
Property and equipment, net $ 20,767,000 $ 19,990,000
=============== ===============
</TABLE>
The major categories of property and equipment and related accumulated
depreciation, depletion and amortization as of March 31, 1999 and December 31,
1998 are as follows:
During the three months ended March 31, 1999, the Company had additions to
its oil and gas properties totaling $1,648,000.
During 1998, the Company sold oil and gas properties totaling $8,800,000,
which was treated as a reduction of the full cost pool.
4. LONG-TERM LIABILITIES
As of March 31, 1999 and December 31, 1998, a break down of long term debt
is as follows:
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Long-term debt:
Credit facility $ 4,815,000 $ 4,779,000
Priority tax claims 186,000 186,000
Building loan 206,000 210,000
--------------- ---------------
5,207,000 5,175,000
Less current portion 4,830,000 4,794,000
=============== ===============
$ 377,000 $ 381,000
=============== ===============
</TABLE>
Credit Facility
At December 31, 1996, WRT had borrowings outstanding of $15,000,000, the
maximum amount of borrowings available under the Nederlanden (U.S.) Capital
Corporation ("INCC") ("INCC Credit Facility"). Amounts outstanding under the
INCC Credit Facility bore interest at an annual rate selected by WRT of either
(I) the London Inter-Bank offered rate ("LIBOR") plus 3%, or (ii) the Lender's
prime lending rate plus 1.25%.
At December 31, 1996, WRT was in default under certain financial covenants
of the INCC Credit Facility. Accordingly, the Company classified the debt as
current at December 31, 1996. While in bankruptcy, INCC was stayed from
enforcing certain remedies provided for in the ING Credit Agreement and the
indenture. On the Effective Date, this loan was repaid in full along with
$3,154,000 in accrued interest and legal fees.
On the Effective Date, the Company entered into a new $15,000,000 Credit
Agreement (the "ING Credit Agreement") with ING (U.S.) Capital Corporation
(successor to INCC) ("ING") that was secured by substantially all of the
Company's assets. Initial loan fees of $188,000 were paid on or prior to closing
with two additional loan fee payments of $100,000; a $100,000 payment was made
on December 31, 1997 and a loan fee of $100,000 was due on or before December
31, 1998. The loan matures on July 11, 1999, with interest to be paid quarterly
and with three interim principal payments of $1,000,000 each to be made in
September 1998, December 1998, and March 1999. This loan bears interest at the
option of the Company at either (1) LIBOR plus 3% or (2) ING's fluctuating
"reference rate" plus 1.25%. This loan is collateralized by substantial all of
the Company's assets. At December 31, 1998 this rate was 8.6875%.
On August 18, 1998, the Company amended the ING Credit Agreement (the
"Amended ING Credit Agreement") to, among other things: (i) delete the coverage
ratio set forth in the ING Credit Agreement, and (ii) require interest payments
to be made by the Company on a monthly basis. The principal amount and the
interest rate set forth in the ING Credit Agreement remain unchanged. In
connection with the execution and delivery of the Amended ING Credit Agreement,
ING waived certain provisions of the ING Credit Agreement to permit certain
waivers, the Company and ING further agreed that (a) the Company will pay a
$250,000 amendment fee to ING on July 11, 1999, provided that such amendment fee
will be waived if the amounts owed to ING under the Amended ING Credit Agreement
have been paid in full by July 10, 1999; and (b) the Company shall issue
warrants to ING, in that such warrants will permit ING to purchase 2% of the
outstanding shares of Common Stock on a fully diluted basis after giving effect
to future Rights Offerings.
On November 20, 1998, the Company and ING entered into a letter agreement
wherein ING consented to the Castex sale and the Company agreed to issue ING
warrants to purchase .05% of the outstanding shares of Common Stock on a fully
diluted basis if (1) the Company elected not to complete the November 20, 1998
Rights Offering, (2) did not spend the proceeds from the Rights Offering as
specified in the letter agreement or (3) raise less than $10,000,000 in the
November 20, 1998 Rights Offering. The Rights Offering was completed and raised
$7,500,000. On November 20, 1998, ING was issued the additional warrants.
Priority Tax Claims
In accordance with the Plan of Reorganization, priority taxes totaling
$703,000 are to be paid in four annual installments without interest. The first
annual installment of $176,000 was made on the Effective Date. The second annual
installment of $186,091 was paid July 1998. During August 1998, priority taxes
for severance taxes totaling $150,251 were paid to the State of Louisiana to
release liens on the West Cote Blanche Bay field.
Building Loan
During early 1996, the Company entered into a loan agreement with MC Bank &
Trust Company to finance the acquisition of land and a building located in
Lafayette, Louisiana. The original loan balance was $215,000 and called for
monthly principal and interest payments totaling $3,000 per month through 2005
with the unpaid balance due at that time. The loan paid interest at 9.5% per
annum and was collateralized by the land and building.
During 1998, the Company renegotiated this loan agreement with MC Bank &
Trust Company. The Company borrowed an additional $35,000 for building
improvements. The loan agreement calls for monthly principal and interest
payments of $2,900 per month through March 2008. The loan bears interest at 9.5%
per annum and is collateralized by the land and building.
Long Term Debt Maturities
Following are the maturities of long-term liabilities for each of the next
five years:
<TABLE>
<CAPTION>
<S> <C>
1999 $4,830,000
2000 202,000
2001 18,000
2002 20,000
2003 22,000
Thereafter 115,000
------------
$5,207,000
============
</TABLE>
5. PREFERRED STOCK OFFERING
The Preferred Stock for WRT before bankruptcy had a liquidation preference
of $25 per share and was convertible, at the option of the holder, into 2.083
shares of the Company's Common Stock. The Preferred Stock was not redeemable
before October 20, 1995. Dividends on the Preferred Stock were to accrue and
were cumulative from October 20, 1993, and were payable quarterly in arrears
when declared by the Board of Directors. The Company was precluded under the
terms of the Senior Note Indenture and INCC Credit Facility from declaring any
dividends during 1996. As a result of this and the bankruptcy proceedings, the
Company did not accrue dividends payable on its Preferred Stock during 1996. In
addition, accrued and unpaid Preferred Stock dividends at December 31, 1995 have
been reversed in the 1996 financial statements. All outstanding Preferred Stock
issued by WRT was canceled effective July 11, 1997, and the former preferred
shareholders were given Warrants exercisable at a price of $10 per share for a
total of 221,000 shares in the Company Common Stock.
<PAGE>
6. COMMON STOCK OPTIONS AND WARRANTS
In connection with the Plan of Reorganization, new warrants for 221,000
shares of the Company Common Stock were issued to the former shareholders of
WRT. Under the warrant agreement, warrants are initially exercisable for one
share of Common Stock at an initial exercise price of $10.00 per share. The
warrants will expire on July 11, 2002.
The warrant agreement contains several antidilution provisions that provide
for adjustments to the terms of the warrants in case of an adjustment to the
outstanding shares. As a result of the 1998 Rights Offering, the 221,000
warrants had an adjusted exercise quantity of 7.3 with an exercise price of
$10.00. After giving effect to the March 5, 1999 reverse stock split, the
221,000 warrants have newly adjusted exercise quantity of .146 at an exercise
price of $10.00. For example a holder of 100 warrants could exercise the
warrants for $1,000 and receive 15 shares of the Company's Common Stock.
Pursuant to the Plan, the Company entered into a two-year employment
agreement with Ray Landry beginning on July 11, 1997. As part of that employment
agreement, Mr. Landry was granted 60,000 stock options with an exercise price of
$3.50 a share. No expiration term for the options was specified under the
employment agreement.
ING (US) Capital Corporation ("ING") posses warrants permitting ING to
purchase 2.5% of the outstanding shares of Common Stock on a fully diluted
basis. The exercise price for these warrants is $2.50 a share. ING received its
warrants in two traunches. On August 18, 1998, the Company issued warrants
entitling ING to purchase 2% of the outstanding shares of Common Stock as
partial consideration for the Amendment to the ING Credit Agreement (See "Recent
Events"). The remaining warrants were issued to ING pursuant to a letter
agreement dated November 20, 1998. In that letter agreement, the Company agreed
to issue ING warrants to purchase .05% of the outstanding shares of Common Stock
if 1) the Company elected not to complete the November 20, 1998 Rights Offering,
2) did not spend the proceeds from the 1998 Rights Offering as specified in the
letter agreement or 3) raised less than $10,000,000 in the November 20, 1998
Rights Offering. The Rights Offering was completed raising $7,500,000. On
November 20, 1998, ING was issued the additional warrants.
Rights Offering
On November 20, 1998, the Company completed a $7,500,000 Rights Offering.
The Company distributed 200,000,000 nontransferable rights at an exercise price
of $2.50 per right, after the effect of the reverse stock split, to the
Company's existing shareholders. Each right entitled the holder thereof to
subscribe to purchase one share of common stock at the exercise price. Each
shareholder who exercised in full his basic subscription privilege was entitled
to oversubscribe for additional rights. A total of 3,000,000 rights were
exercised for $7,509,000. As of the date of the Rights Offering, Affiliated
Shareholders were owed $4,600,000 by the Company. In the Rights Offering, the
Affiliated Shareholders exercised 1,752,195 rights through the forgiveness of
$4,380,000 of debt. (See Related Parties' Transactions.) The balance of $220,000
was repaid in cash prior to December 31, 1998.
Reverse Stock Split
On March 5, 1999, the Board of Directors authorized a 50-to-1 reverse stock
split, thereby decreasing the number of issued and outstanding shares to
3,445,206, and increasing the par value of each share to $.50.
<PAGE>
7. EARNINGS (LOSS) PER SHARE
Earnings (loss) per share for all periods were computed based on common
stock equivalents outstanding on that date during the applicable periods.
8. COMMITMENTS
Leases
As of March 31, 1999 and December 31, 1998, the Company had no long-term,
non-cancelable operating lease commitments.
Rental expense for all operating leases for the three months March 31, 199
and the year ended December 31, 1998, was $38,000 and $120,000, respectively.
Lac Blanc Escrow Account
During 1998, the Company sold the Lac Blanc field to an unrelated third
party. The Company maintained an escrow account related to the future plugging
and abandonment of oil and gas wells for the field. As part of the sale of the
field, this escrow is to be transferred to the purchaser. The Company and the
purchaser are working to cure a title defect in the field. Once that title
defect is cured, the escrow will be transferred to the purchaser and the
purchase price of $936,000 for the field will be released to ING. Accordingly,
the Company has treated the $936,000 as restricted cash.
Plugging and Abandonment Funds
In connection with the acquisition of the remaining 50% interest in the
WCBB properties, the Company assumed the 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. TEPI retained a security interest in production from these properties
and the plugging and abandonment trust until such time the Company's obligations
plugging and abandonment obligations to TEPI have been fulfilled. Once the
plugging and abandonment trust is fully funded, the Company can access it for
use in plugging and abandonment charges associated with the property. As of
March 31, 1999 and December 31, 1998, the plugging and abandonment trust totaled
$1,505,00 and $1,454,000, respectively.
Texaco Global Settlement
Pursuant to the terms of a global settlement between Texaco and the State
of Louisiana which includes the State Lease No. 50 portion of the Company's East
Hackberry Field, the Company was obligated to commence drilling a well or other
qualifying development operation on certain non-producing acreage in the field
prior to March 1998. Because of prevailing market conditions during the three
months ended Mach 31, 1999 and the year ended December 31, 1998, the Company
believed it was commercially impractical to shoot seismic or commence drilling
operations on the subject property. As a result, the Company has agreed to
surrender approximately 440 non-producing acres in this field to the State of
Louisiana.
Reimbursement of Employee Expenses & Contributions to 401(k) Plan
The Company sponsored a 401(k) savings plan under which eligible employees
chose to contribute up to 15% of salary income on a pre-tax basis, subject to
certain IRS limits. The Company contribution to the 401(k) plan was
discretionary and was 25% of employee contributions up to 6% of their salary.
This benefit vests to employees over a five-year employment period or at a rate
of 20% per each year of participation. During year ended December 31, 1998, the
Company incurred $4,000 in matching contributions expense associated with this
plan.
On February 17, 1999, the Company sponsored 401(k) savings plan was
terminated and all contributions were distributed to the participants.
9. CONTINGENCIES
During 1995, the Company entered into a marketing agreement with Tri-Deck
pursuant to which Tri-Deck would market all of the Company's oil and gas
production. Subsequent to the agreement, James Florence, who served as both
Tri-Deck's principal and WRT's Director of Marketing, assigned Tri-Deck's right
to market the Company's oil production to Plains Marketing and assigned
Tri-Deck's right to market the Company's gas production to Perry Gas. During
early 1996, Tri-Deck failed to make payments to the Company attributable to
several months of the Company's gas production. Consequently, on May 20, 1996,
the Company initiated an adversarial proceeding against Tri-Deck and Perry Gas.
Perry Gas was the party, which ultimately purchased the Company's gas production
for the months in question.
On January 20, 1998, Gulfport and the Litigation Entity entered into a
Clarification Agreement to clarify provisions of the Plan regarding the rights
of the Company and the Litigation Entity to prosecute certain causes of action
arising from the Tri-Deck matter. As a part of the Clarification Agreement, the
Litigation Entity will intervene or be substituted as the actual party in
interest in the Tri-Deck case and reimbursed the Company $100,000 for legal fees
incurred by the Company. As additional consideration for the contribution of
this claim to the Litigation Entity, the Company is entitled to receive 85% of
the recovery of all monies held in the court registry and 50% of the recovery
from all other Tri-Deck litigation pursued by the Litigation Entity. No
provision for the recognition of income concerning this matter has been
reflected in the financial statements.
On July 20, 1998, Sanchez Oil & Gas Corporation ("Sanchez") initiated
litigation against the Company in the fifteenth Judicial District court, Parish
of Lafayette, State of Louisiana. In its petition, Sanchez alleged, among other
things, that the Company was obligated, by virtue of the terms of a letter of
intent, to grant a sublease to Sanchez for an undivided 50% interest in two of
the Company's oil, gas and mineral leases covering lands located in the North
Bayou Penchant area of Terrebonne Parish, Louisiana. Pursuant to this lawsuit,
Sanchez is seeking specific performance by the Company of the contractual
obligation that Sanchez alleges to be present in the letter of intent and
monetary damages.
Other litigation
The Company has been named as a defendant on various other litigation
matters. The ultimate resolution of these matters is not expected to have a
material adverse effect on the Company's financial condition or results of
operations for the periods presented in the financial statements.
10. LITIGATION TRUST ENTITY
On August 13, 1996, the Bankruptcy Court executed and entered its Order
Appointing Examiner directing the United States Trustee to appoint a
disinterested person as examiner in the Company's bankruptcy case.
The Court ordered the appointed examiner ("Examiner") to file a report of
the investigation conducted, including any fact ascertained by the examiner
pertaining to fraud, dishonesty, incompetence, misconduct, mismanagement or
irregularity in the management of the affairs of the Company.
The Examiner's final report dated April 2, 1997, recommended numerous
actions for recovery of property or damages for the Company's estate which
appear to exist and should be pursued. Management does not believe the
resolution of the matters referred to in the Examiner's report will have a
material impact on the Company's consolidated financial statements or results of
operations.
Pursuant to the Plan of Reorganization, all of the Company's possible
causes of action against third parties (with the exception of certain litigation
related to recovery of marine and rig equipment assets and claims against
Tri-Deck), existing as of the effective date of the Plan, were transferred into
a "Litigation Trust" controlled by an independent party for the benefit of most
of the Company's existing unsecured creditors. The litigation related to
recovery of marine and rig equipment and the Tri-Deck claims were subsequently
transferred to the litigation trust as described below.
The Litigation Entity was funded by a $3,000,000 cash payment from the
Company, which was made on the Effective Date. The Company owns a 12% interest
in the Litigation Trust with the other 88% being owned by the former general
unsecured creditors of the Company. For financial statement reporting purposes,
the Company has not recognized the potential value of recoveries which may
ultimately be obtained, if any, as a result of the actions of the Litigation
Trust, treating the entire $3,000,000 payment as a reorganization cost incurred
during the period commencing January 1, 1997 and ending on July 10, 1997.
On January 20, 1998, the Company and the Litigation Entity entered into a
Clarification Agreement whereby the rights to pursue various claims reserved by
the Company in the Plan of Reorganization were assigned to the Litigation Trust.
In connection with this agreement, the Litigation Trust agreed to reimburse the
Company $100,000 for legal fees the Company had incurred in connection these
claims. As additional consideration for the contribution of this claim to the
Litigation Trust, the Company is entitled to 20% to 80% of the net proceeds from
these claims.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL POSITION AND RESULTS OF OPERATIONS
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q includes "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). All
statements, other than statements of historical facts, included in this Form
10-Q that address activities, events or developments that Gulfport Energy
Corporation ("Gulfport" or the "Company"), a Delaware corporation formerly named
WRT Energy Corporation, expects or anticipates will or may occur in the future,
including such things as estimated future net revenues from oil and gas reserves
and the present value thereof, future capital expenditures (including the amount
and nature thereof), business strategy and measures to implement strategy,
competitive strengths, goals, expansion and growth of Gulfport's business and
operations, plans, references to future success, references to intentions as to
future matters and other such matters are forward-looking statements. These
statements are based on certain assumptions and analyses made by Gulfport in
light of its experience and its perception of historical trends, current
conditions and expected future developments as well as other factors it believes
are appropriate in the circumstances. However, whether actual results and
developments will conform with Gulfport's expectations and predictions is
subject to a number of risks and uncertainties; general economic, market or
business conditions; the opportunities (or lack thereof) that may be presented
to and pursued by Gulfport; competitive actions by other oil and gas companies;
changes in laws or regulations; and other factors, many of which are beyond the
control of Gulfport. Consequently, all of the forward-looking statements made in
this Form 10-Q are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by Gulfport will
be realized, or even if realized, that they will have the expected consequences
to or effects on Gulfport or its business or operations.
The following discussion is intended to assist in an understanding of the
Company's unaudited results of operations for the three month and the nine month
periods ended March 31, 1999 and 1998. The unaudited consolidated financial
statements and notes included in this report contain additional information and
should be referred to in conjunction with this discussion. It is presumed that
the readers have read or have access to Gulfport Energy Corporation's 1998
annual report on Form 10-K.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL DATA
(Unaudited)
Three Months Ended March 31,
1999 1998
------------- -------------
<S> <C> <C>
Revenues:
Gas sales $ 77,000 $ 1,019,000
Oil and condensate sales 1,632,000 2,303,000
Other income, net 43,000 200,000
------------- -------------
1,752,000 3,522,000
Expenses:
Production costs (1) 1,417,000 2,720,000
General & administrative 452,000 662,000
------------- -------------
1,869,000 3,382,000
EBITDA (2) (117,000) 140,000
Depreciation, depletion & amortization 871,000 1,878,000
------------- -------------
Loss before interest, reorganization costs and
taxes (988,000) (1,738,000)
Interest expense 154,000 386,000
------------- -------------
Loss before income taxes (1,142,000) (2,124,000)
Income taxes - -
------------- -------------
Net loss (1,142,000) (2,124,000)
Dividends on preferred stock (undeclared) - -
------------- -------------
Net loss available to common shareholders $ (1,142,000) $ (2,124,000)
============= =============
Per share data:
Net loss $ (0.33) $ (4.81)
============= =============
Weighted average common and common
equivalent shares 3,445,206 442,000
============= =============
</TABLE>
(1) The components of production costs may vary substantially among wells
depending on the methods of recovery employed and other factors, but
generally include maintenance, repairs, labor and utilities.
(2) EBITDA is defined as earnings before interest, taxes, depreciation,
depletion and amortization. EBITDA is an analytical measure frequently
used by securities analysts and is presented to provide additional
information about the Company's ability to meet its future debt service,
capital expenditure and working capital requirements. EBITDA should not be
considered as a better measure of liquidity than cash flow from
operations.
(3) Amounts not meaningful as a result of the reorganization.
<PAGE>
RESULTS OF OPERATIONS
Comparison of the Three Months Ended March 31, 1999 and 1998
During the three months ended March 31, 1999, the Company reported a net
loss of $1.1 million, a 46% decrease from a net loss before undeclared dividends
on preferred stock of $2.1 million for the corresponding period in 1998. This
decrease is primarily due to the following factors:
Oil and Gas Revenues. During the three months ended March 31, 1999, the
Company reported oil and gas revenues of $1.7 million, a 48% decrease from $3.3
million for the comparable period in 1998. This decrease was primarily
attributable to a decrease in production subsequent to the sale of gas producing
properties during the 2nd quarter of 1998. The following table summarizes the
Company's oil and gas production and related pricing for the three months ended
March 31, 1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
----------- -----------
<S> <C> <C>
Oil production volumes (Mbbls) 324 157
Gas production volumes (Mmcf) 4 383
Average oil price (per Bbl) $11.89 $14.63
Average gas price (per Mcf) $1.98 $2.66
</TABLE>
Production Costs. Production costs, including lease operating costs and
gross production taxes, decreased $1.3 million, or 48%, from $2.7 million for
the three months ended March 31, 1998 to $1.4 million for the comparable period
in 1999. This decrease is due primarily to the reduction of lease operating
expenses and the sale of various producing properties.
Depreciation, Depletion and Amortization. Decreciation, depletion and
amortization decreased $1.0 million, or 54%, from $1.9 million for the three
months ended March 31, 1998 to $0.9 million for the comparable period in 1999.
As discussed in production costs, depreciation, depletion and amortization
expense was reduced primarily to the sale of various producing properties.
General and Administrative Expenses. General and administrative expenses
decreased $0.2 million, or 32%, from $0.7 million for the three months ended
March 31, 1998 to $0.5 million for the comparable period in 1999. This decrease
was due primarily to the Company's change in business strategy to reduce
personnel and overall general and administrative costs.
Provision for Doubtful Accounts. Provision for doubtful accounts remained
consistent when comparing the three months ended March 31, 1998 with the
comparable period in 1999.
Interest Expense. Interest expense decreased $0.2 million, from $0.4
million to $0.2 million during the three months ended March 31, 1998 and 1999,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities. Net cash flow provided by operating activities for
the three months ended March 31, 1999 was $0.6 million, as compared to net cash
flow provided by operating activities of $1.1 million for the comparable period
in 1998. This decrease is due to changes in current assets and liabilities and
the significant difference in the net loss during the three months ended March
31, 1999 and to the sale of various oil and gas properties during the 1998.
The primary capital commitment faced by the Company is the payments due
under the ING Credit Facility.
At December 31, 1998, the outstanding principal balance under the ING
Credit Agreement was $4,779,000. Pursuant to the terms of the ING Credit
Agreement, the Company may elect to be charged at either (i) LIBOR plus 3% or
(ii) ING's fluctuating "reference rate" plus 1.25%. A principal payment of
$1,000,000 is due March 31, 1999 with the remaining principal balance due at
maturity on July 10, 1999. A loan commitment fee of $100,000 was due on December
31, 1998 with a final commitment fee of $250,000 due at July 10, 1999 if the
loan has not been paid off by that date.
The Company did not pay the December 31, 1998 loan commitment fee and did
not pay the March 31, 1999 principal payment. During a year of record
low product prices, the Company drastically reduced general and administration
expenses, production costs, taxes and decreased the outstanding loan balance
from $10,000,000 at December 31, 1997 to $4,779,000 at December 31, 1998. The
closing escrow of $936,000 from the Castex sale is expected to break in early
May further reducing the ING loan balance to $3,843,000.
At this point, the Company is confident in its ability to service the loan
and make monthly interest payments. Management has determined that it is in the
best interest of the Company to utilize its cash flow to develop undeveloped
reserves rather than making principal payments to ING. In the First Quarter of
1999, the Company completed seven workovers in WCBB adding approximately 900
BOPD and 1.8 MCFGPD. The gas production alone equates to a cost savings of an
average $60,000 a month since the Company no longer has to purchase gas lift gas
for the field. With only 1% of the Company's reserves currently producing,
Management believes that tapping into the non-producing reserves with the
limited cash flow available is in the best interest of the Company's
Stockholders.
The Company has requested ING to extend the Note for two years with
principal reduction payments beginning in the Fourth Quarter of 1999. ING has
agreed to extend the principal payment due on March 31, 1999 to April 30, 1999
to allow the parties time to negotiate the extension. The ability to negotiate
an extension or terms thereof are uncertain at the date of this filing.
COMMITMENTS
Leases
As of December 31, 1998, the Company had no long-term, non-cancelable
operating lease commitments.
Rental expense for all operating leases for the year ended December 31,
1998, the period commencing July 11, 1997 and ending December 31, 1997, the
period commencing January 1, 1997 and ending July 10, 1997, and for the year
ended December 31, 1996 was $120,000, $77,000, $109,000, and $207,000,
respectively.
During 1996, the Company terminated its office lease covering approximately
24,000 square feet in The Woodlands, Texas. The lessor asserted a secured claim
in connection with the Company's reorganization case in the amount of $250,000
and an unsecured claim in the amount of $127,000, attributable to rental
obligations and lease rejection damages associated with such lease. On April 22,
1997, the Bankruptcy Court granted the claimant an allowed secured claim of
$118,000 and an allowed unsecured claim in the amount of $150,000.
Lac Blanc Escrow Account
During 1998, the Company sold the Lac Blanc field to an unrelated third
party. The Company maintained an escrow account related to the future plugging
and abandonment of oil and gas wells for the field. As part of the sale of the
field, this escrow is to be transferred to the purchaser. The Company and the
purchaser are working to cure a title defect in the field. Once that title
defect is cured, the escrow will be transferred to the purchaser and the
purchase price of $936,000 for the field will be released to ING. Accordingly,
the Company has treated the $936,000 as restricted cash.
Plugging and Abandonment Funds
In connection with the acquisition of the remaining 50% interest in the
WCBB properties, the Company assumed the 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. TEPI retained a security interest in production from these properties
and the plugging and abandonment trust until such time the Company's obligations
plugging and abandonment obligations to TEPI have been fulfilled. Once the
plugging and abandonment trust is fully funded, the Company can access it for
use in plugging and abandonment charges associated with the property. As of
December 31, 1998, the plugging and abandonment trust totaled $1,454,000. The
Company was $37,000 in arrears on its escrow payments as of December 31, 1998.
Other Information
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various legal actions associated with the normal
conduct of its business operations. No other such actions involve known material
gain or loss contingencies not reflected in the consolidated financial
statements of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K are as follows:
27-1 Financial Data Schedule
(b) Reports on Form 8-K
(1) Form 8-K filed on January 12, 1999, reporting the termination
of the February 1, 1998 West Cote Blanche Bay Farmout
Agreement with Tri-C Resources, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GULFPORT ENERGY CORPORATION
Date: May 17, 1999 /s/ Mark Liddell
-----------------------
Mark Liddell
President & Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,593,000
<SECURITIES> 0
<RECEIVABLES> 1,727,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,378,000
<PP&E> 80,571,000
<DEPRECIATION> 59,804,000
<TOTAL-ASSETS> 27,241,000
<CURRENT-LIABILITIES> 9,546,000
<BONDS> 0
0
0
<COMMON> 1,723,000
<OTHER-SE> 15,595,000
<TOTAL-LIABILITY-AND-EQUITY> 27,241,000
<SALES> 1,709,000
<TOTAL-REVENUES> 1,752,000
<CGS> 1,417,000
<TOTAL-COSTS> 2,740,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 154,000
<INCOME-PRETAX> (1,142,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,142,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,142,000
<EPS-PRIMARY> 0.330
<EPS-DILUTED> 0.330
</TABLE>
