UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE
ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1999
Commission File Number 1-10192
Gulfport Energy Corporation
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(Exact name of registrant as specified in its charter)
Delaware 73-1521290
------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification Number)
6307 Waterford Blvd., 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)
Securities registered pursuant to Section 12(b) of the Act:
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
Preferred Stock, $0.01 par value None
Common Stock, $0.01 par value None
Indicate by a 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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X ] No [ ].
<PAGE>
Indicate by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
All shares of common and preferred stock outstanding prior to the
Effective Date of the Plan of Reorganization (July 11, 1997) were canceled on
the Effective Date. The number of shares of the registrant's Common Stock, $0.01
par value, outstanding at March 31, 2000 was 10,145,400. The aggregate market
value of the voting stock held by non-affiliates of the Company using an average
trading price in December 1999 was $5,979,735.30.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING 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
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Common Stock Issued Outstanding December 31, 1999: 10,145,400
Common Stock Issued Outstanding February 1, 2000: 10,145,400
DOCUMENTS INCORPORATED BY REFERENCE
2
<PAGE>
TABLE OF CONTENTS
Page
Disclosure Regarding Forward-Looking Statements........................... 4
Part I
Item 1.Business ........................................................ 4
Item 2.Properties ........................................................ 5
Item 3.Legal Proceedings.................................................. 16
Item 4.Submission of Matters to a Vote of Security Holders................ 17
PART II
Item 5.Market for the Registrant's Common Stock and Related
Shareholder Matters............................................. 17
Item 6.Selected Financial Data ........................................... 18
Item 7.Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 19
Item 8.Financial Statements and Supporting Data........................... F-1
Item 9.Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure........................................ 49
PART III
Item 10.Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.............. 49
Item 11.Executive Compensation............................................ 50
Item 12.Security Ownership of Certain Beneficial Owners and Management.... 54
Item 13.Certain Relationships and Related Transactions.................... 55
PART IV
Item 14.Exhibits and Reports on Form 8-K.................................. 57
Signatures...................................................... 58
3
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-K includes "forward-looking statements" within the meaning
of Section 27A of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). All statements other than statements of historical facts, included in
this Form 10-K that address activities, events or developments that Gulfport
Energy Corporation, formerly known as WRT Energy Corporation ("Gulfport" or
"Company"), a Delaware 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 strength, goals, expansion and growth of
Gulfport's business and operations, plans, references to future success,
reference 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 forwardlooking statements made in the Form 10-K are qualified by these
cautionary statements and there can be no assurances 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, its business
or operations.
PART I
Item 1. Business
Description of Business
The Company owns and operates mature oil and gas properties in the
Louisiana Gulf Coast area. The Company seeks to achieve reserve growth and
increased cash flow from operations through low risk development activities on
its existing properties and acquiring additional Louisiana Gulf Coast properties
with exploitation and exploration potential.
Background
On February 14, 1996, Gulfport's predecessor, WRT Energy Corporation
("WRT"), filed a voluntary petition in the United States Bankruptcy Court for
the Western District of Louisiana (the "Bankruptcy Court") for protection under
Chapter 11 of the Federal Bankruptcy Code. Upon filing of the voluntary petition
for relief, WRT, as debtor-in-possession, was authorized to operate its business
for the benefit of claim holders and interest holders, and continued to do so,
without objection or request for appointment of a trustee. All debts of WRT as
of the petition date were stayed by the Bankruptcy Court and were subject to
compromise pursuant to such proceedings. WRT operated its business and managed
its assets in the ordinary course as debtor-in-possession, and obtained court
approval for transactions outside the ordinary course of business. Based on
these actions, all liabilities of the Company outstanding at February 14, 1996
were reclassified to estimated pre-petition liabilities.
By order dated May 5, 1997, the Bankruptcy Court confirmed the Second
Amended Plan of Reorganization (the "Plan") sponsored by Wexford and DLB Oil &
Gas, Inc. The Plan was consummated and became effective on July 11, 1997 (the
"Effective Date"). On the Effective Date, WRT was merged with and into Gulfport.
For detailed information regarding events leading to the reorganization and the
bankruptcy proceedings, see the Company's 1997 and 1998 Form 10-K on file with
the Securities and Exchange Commission.
4
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Item 2. Properties
Principal Oil and Gas Properties
Gulfport owns interests in a number of producing oil and gas properties
located along the Louisiana Gulf Coast. The following is a map showing the
locations of the Company's principal oil and gas properties.
(Map Omitted)
The Company serves as the operator of all the properties in which it holds a
working interest with the exception of the Texaco well and deep rights at West
Cote Blanche Bay. The following table presents certain information as of January
1, 2000, reflecting the Company's net interest in its producing oil and gas
properties.
5
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<TABLE>
<CAPTION>
NET PROVED
RESERVES
ACTIVE WELLS SHUT-IN WELLS(1) ACREAGE(2) AS OF 1/1/00
FIELD NRI/WI GROSS NET GROSS NET GROSS NET GAS OIL TOTAL
PERCENTAGE MBOE MBOE MBOE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
E. Hackberry 78.7/100 12 12 81 81 3,147 3,147 784 3,074 3,858
W. Hackberry 87.5/100 4 4 23 23 592 592 0 98 98
West Cote 78.7/100 42 41 333 330 4,590 4,590 99 22,468 22,567
Blanche Bay (3)
Overrides &
Royalty Various 17 1.50 1 1 403 403 161 283 444
-- ----- --- --- ----- ----- ----- ------ ------
Total(4) 75 58.50 438 435 8,732 8,732 1,044 25,923 26,967
== ===== === === ===== ===== ===== ====== ======
</TABLE>
(1) The following wells produce on an intermittent basis: East Hackberry -
7; West Hackberry - 0; and West Cote Blanche Bay - 37.
(2) All of the Company's acreage is Developed Acreage.
(3) Includes 1 producing well and 3 shut-in wells attributable to depths
below the Rob "C" Marker ("Deep Rights"). The Company has a 7.45% non-
operated working interest (5.84% NRI) in the Deep Rights. The Deep
Rights are operated by Texaco Exploration and Production, Inc.
(4) In the future, the Company will have to plug and abandon almost 500
wellbores. The Company's strategy to meet this obligation is to plug at
least twenty wells a year and to invest in plugging escrow accounts. The
Company continually deposits money in the West Cote Blanche Bay Escrow
Account which currently has a balance in excess of $1.5 million dollars.
Additionally, the Company has a $200,000 letter of credit dedicated to
the plugging operations at East Hackberry.
All of the oil and gas leases in which the Company owns an interest have
been perpetuated by production. The operator may surrender the leases at any
time by notice to the lessors, or by the cessation of production.
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<PAGE>
EAST HACKBERRY FIELD
- --------------------
(Map Omitted)
Location and Land
- -----------------
The East Hackberry Field is located along the western shore of Lake
Calcasieu in Cameron Parish, Louisiana approximately 80 miles west of Lafayette
and 15 miles inland from the Gulf of Mexico. In February 1994, the Company
purchased a 100% working interest (approximately 79% average NRI) in certain
producing oil and gas properties situated in the East Hackberry Field. The
purchase included two separate lease blocks, the Erwin Heirs Block which is
located on land originally developed by Gulf Oil Company (now Chevron
Corporation), and the adjacent State Lease 50 Block which is located primarily
in the shallow waters of Lake Calcasieu, originally developed by Texaco. The two
lease blocks together contain 3,147 acres.
In September 1994, the Company sold an overriding royalty interest equal
to a 50% working interest in certain producing oil and gas wells situated in the
East Hackberry Field to Milam Royalty Corporation a subsidiary of J. P. Morgan
and Company. In April 1999, Gulfport purchased the overriding royalty interest
back from the then current owner, Queen Sand Resources, Inc. giving the Company
a 100% working interest in the field.
Geology
- -------
The Hackberry Field is a major salt intrusive feature, elliptical in
shape as opposed to a classic "dome," divided into East and West field entities
by a saddle. Structurally, the Company's East Hackberry acreage is located on
the eastern end of the Hackberry salt ridge. There are over 30 pay zones at this
7
<PAGE>
field. The salt intrusion trapped Oligocene through Lower Miocene rocks in a
series of complex, steeply dipping fault blocks. The Camerina sand series is a
prolific producer with 1-2 MMBL per well of oil potential. The Company's wells
currently produce from perforations found between 5,100' and 12,200'.
Area History and Production
- ---------------------------
The East Hackberry field was discovered in 1926 by Gulf Oil Company (now
Chevron Corporation) by gravitational anomaly survey. The massive shallow salt
stock presented an easily recognizable gravity anomaly indicating a productive
field. Initial production began in 1927 and has continued to the present. The
estimated cumulative oil and condensate production through 1999 was 111 million
barrels of oil with casinghead gas production being 60 billion cubic feet of
gas. There have been a total of 170 wells drilled on the Company's portion of
the field with 12 having current daily production; seven produce intermittently;
and 71 wells shut-in and five wells have been converted to salt water disposal
wells. The remaining 72 wells have been plugged and abandoned. As of January 1,
2000 daily net production averages 370 barrels of oil and 4970 barrels of water
with a limited amount of natural gas.
Facilities
- ----------
The Company has land-based production and processing facilities located
at the East Hackberry Field. The facility is comprised of two dehydrating units,
four disposal pumps and two compressors with a total of 1,700 horsepower. The
Company also has a field office that serves both the East and West Hackberry
fields.
WEST HACKBERRY FIELD
Location and Land
- -----------------
The West Hackberry Field is located on land and is five miles West of
Lake Calcasieu in Cameron Parish, Louisiana approximately 85 miles west of
Lafayette and 15 miles inland from the Gulf of Mexico. In November 1992, the
Company purchased a 100% working interest (approximately 80% average NRI,
subsequently increased to approximately 87.5% NRI) in 592 acres within the West
Hackberry Field.
Geology
- -------
Structurally, the Company's West Hackberry acreage is located on the
western end of the Hackberry salt ridge. (See graphic above.) There are over 30
pay zones at this field. West Hackberry consists of a series of fault-bounded
traps in the Oligocene-age Vincent and Keough sands associated with the
Hackberry Salt Ridge. Recoveries from these thick, porous, water-drive
reservoirs have resulted in per well cumulatives of almost 700 BOE.
Area History and Production
- ---------------------------
The first discovery well at West Hackberry was drilled in 1938 and was
developed by Superior Oil Company (now Exxon-Mobil Corporation) between 1938 and
1988. The estimated cumulative oil and condensate production through 1999 was
170 million barrels of oil with casinghead gas production of 120 billion cubic
feet of gas. There have been 36 wells drilled to date on the Company's portion
of West Hackberry and currently four are producing, 22 are shut-in and one has
been converted to a salt water disposal well. The remaining eight wells have
been plugged and abandoned. The Company plugged one saltwater disposal well in
1999. As of January 1, 2000 daily net production averages 125 barrels of oil,
100 MCF of gas and 670 barrels of water.
Facilities
- ----------
The Company has land-based production and processing facilities located
at the West Hackberry field. The Company has two dehydrating units, one disposal
pump and one 650-horsepower compressor. The Company maintains a field office
that serves both the East and West Hackberry fields.
8
<PAGE>
WEST COTE BLANCHE BAY FIELD
- ---------------------------
(Map Omitted) (Type Log Omitted)
Location and Land
- -----------------
The West Cote Blanche Bay (WCBB) Field lies approximately five miles off
the coast of Louisiana primarily in St. Mary Parish in a shallow bay, with water
depths averaging eight to ten feet. The Company originally acquired from Texaco
a 6.25% working interest in all zones in the WCBB field in July 1988. In April
1995, the Company completed the purchase of an additional 43.75% working
interest in the WCBB field from an affiliate of Benton Oil and Gas Company and
two affiliates of Tenneco, Inc. as to those rights lying above the base of the
Rob "C" marker, located at approximately 10,500'. The sellers retained their
interests in all depths below the base of the Rob "C" marker. Pursuant to the
Plan of Reorganization, at the Effective Date, the Company acquired the
remaining 50% working interest in the WCBB field in depths above the Rob "C"
marker from Texaco and became the operator of the field. In 1999 the Company
exercised a preferential right to purchase an additional 1.00% working interest
in the rights below the Rob "C" marker. Currently the Company owns a 100%
working interest (80.20% NRI) and is the operator in the depths above the Rob
"C" marker and owns a 7.45% non-operated working interest (5.84% NRI) in depths
below the Rob "C" marker. Texaco is the operator below the base of the Rob "C"
marker. The Company's leasehold at WCBB covers a portion of Louisiana State
Lease 340 and contains 4,590 acres.
Geology
- -------
WCBB overlies one of the largest salt dome structures on the Gulf Coast.
The field is characterized by a piercement salt dome, which created traps from
the Pleistocene through the Miocene. The relative movements affected deposition
and created a complex system of fault traps. The compensating fault sets
generally trend NW-SE and are intersected by sets having a major radial
component. Later-stage movement caused extension over the dome and a large
graben system was formed.
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<PAGE>
There are over 100 distinct sandstone reservoirs recognized throughout
most of the field and nearly 200 major and minor discrete intervals have been
tested. Within the over 800 wellbores that have been drilled to date in the
field, over 4,000 potential zones have been penetrated. These sands are highly
porous and permeable reservoirs primarily with a strong water drive.
Area History and Production
- ---------------------------
Texaco drilled the discovery well in 1940 based on a seismic and
gravitational anomaly. WCBB was subsequently developed on an even 160-acre
pattern for much of the reminder of the decade. Developmental drilling continued
and reached its peek in the 1970's when over 300 of the over 800 total wells
were drilled in the field. Of the over 800 wells drilled, only 80 were dry holes
and many of these were capable of hydrocarbon production. As a result, the field
has an historic success rate of over 90% for all wells drilled. The cumulative
gross production for the average producer in the field was 237 MBO, with over
100 of those wells (14% of total wells) producing in excess of 500 MBO. As of
June 30, 1997, field cumulative gross production was 188 MMBO and 224 BCF of
gas.
There have been 860 wells drilled in WCBB of this 42 are currently
producing, 333 are shut-in and four have been converted to salt water disposal
wells. The balance of the wells (or 481) have been plugged and abandoned. As of
January 1, 2000 the Company's net current daily production is 1,070 barrels of
oil, 200 MCF of gas and 15, 300 barrels of water at WCBB.
In 1991 Texaco conducted a 70 square mile 3-D seismic survey with 1,100
shot points per mile that processed out 100 fold. In 1993, an undershoot survey
around the crest and production facilities was added. The Company owns the
rights to the seismic data. In December of 1999 the Company completed the
re-processing of the seismic data and currently has its geophysicists developing
prospects from the data. The reprocessed data will enable the Company to
identify prospects in areas of the field that would otherwise remain obscure.
Facilities
- ----------
The Company owns and operates a production facility at WCBB. The
platform stretches over a mile and is equipped with a 30 MMCF capacity
dehydrating system, three compressors totaling 4000 horsepower and three 225
horsepower triplex saltwater disposal pumps. The Company has made continual
improvements to this facility to enable it to function more efficiently and
lower lease operating expense at WCBB. Some of the improvements in 1999 include
installing three free water knockouts to aid in the separation process, tuning
of the compressors and cleaning out the saltwater disposal wells. The Company
generates cash flow by handling other companies' saltwater and gas through the
facility for a fee. In 1999, the Company earned an average of $30,000 a month
from facility charges.
Texaco Operated Well
- --------------------
In June of 1999, the Company executed a sublease in favor of Texaco of
an approximate 72 acre block below the base of the 8 Sand, located at
approximately 9,060 feet, at WCBB and reserved a 25% back-in working interest
after the proceeds of the well totaled $1,000,000. Texaco has informed the
Company that the well reached the payout point in January of 2000. The subject
well is currently producing approximately 170 BOPD and 125 MCFPD net to the
Company with estimated net reserves to the Company of 84,000 MCF of gas and
123,000 barrels of oil. This well is located on the flank of West Cote Blanche
Bay salt dome. The Company believes that there are many locations further inside
the perimeter (owned 100% by Gulfport) that have equal to or greater potential
than this well.
OVERRIDES & ROYALTY
Overriding Royalty Interests
- ----------------------------
The Company owns overriding royalty interests in an additional 11
producing oil and gas wells lying in three fields. When the Company sold its
10
<PAGE>
interest in the Bayou Penchant Field to Castex Energy 1996 Limited Partnership
effective April 1, 1998, the Company retained a 10% overriding royalty interest
in this field. The Bayou Penchant field is located in Terrebonne Parish,
Louisiana and the 1999 average daily gross production from seven producing wells
was almost 4,500 MCF of gas.
The Company also owns a 2.5% overriding royalty interest in three
producing wells at the Napoleonville Field retained when the Company sold its
interest to Plymouth Operating Company in 1998. The Napoleonville field is
located in Assumption Parish, Louisiana and averaged 150 barrels of oil per day
in 1999.
Additionally, Gulfport owns a net profits interest in one producing well
and all the leasehold rights in the South Atchafalaya Bay Field located in St.
Mary Parish, Louisiana. This well was placed on production in late 1999. These
interests provided $30,000 in revenue to the Company in 1999.
Fee Minerals and Surface Interest
- ---------------------------------
The Company owns 230 net acres of fee minerals and surface interest
adjacent to its West Hackberry Field in Cameron Parish, Louisiana. This property
currently contains six producing wells. The Company is in the process of
negotiating a surface lease to a local landowner.
OTHER INTERESTS
Castex Energy 1996 Limited Partnership
- --------------------------------------
In 1998 the Company sold a package of oil and gas properties to Castex
Energy 1996 LP for $8.8 million dollars. As additional consideration for the
sale, the Company was granted a 25% interest in the limited partnership that
vests once the investment in the partnership pays out. The Limited Partnership
owns and operates several oil and gas fields located along the Gulf Coast.
Litigation Trust
- ----------------
In connection with the Bankruptcy, the Bankruptcy Court appointed a
bankruptcy examiner to review the bankruptcy case to identify potential claims
the Company may have in bankruptcy. The Examiner filed a report recommending
numerous actions for recovery of property or damages for the Company's estate.
Pursuant to the Plan or Reorganization, all of the Company's possible causes of
action against third parties related to the Bankruptcy were transferred into a
Litigation Trust.
The Litigation Trust was funded by a $3,000,000 cash payment from the
Company on the Effective Date of the Bankruptcy. The Company owns a 12% interest
in the Litigation Trust with the other 88% being owned by the former unsecured
creditors of the Company.
The Litigation Trust filed approximately 400 preference actions and
several substantive actions alleging fraud, malpractice and other wrongdoings.
At this time, the Company cannot estimate what the potential future recovery
from the litigation will be.
Lafayette Office Building
- -------------------------
In 1996, the Company purchased a building in Lafayette, Louisiana to be
used as the Company's Louisiana headquarters. The 15 year old building contains
12,480 total square feet with 8,180 square feet of finished office area and
6,300 square feet of clear span warehouse area. The fair market value of the
building was recently calculated at approximately $300,000 with a mortgage
balance of about $177,000 as of January 1, 2000. This building allows the
Company to provide office space for Louisiana personnel, have access to meeting
space close to the fields and to maintain a corporate presence in Louisiana.
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Drilling and Recompletion Activities
The following table contains data with respect to certain of the
Company's field operations during the years ended December 31, 1999, 1998 and
1997. The Company drilled no exploratory wells during the periods presented.
<TABLE>
<CAPTION>
1999 1998 1997
Gross Net Gross Net Gross Net
----------- ---------- ----------
Recompletions,
Sidetracks and
Deepenings:
<S> <C> <C> <C> <C> <C> <C>
Oil 15 4.8 7 4.7 6 5.5
Gas 0 0.0 0 0 6 4.5
Non-Productive 12 0.8 0 0 6 5.5
-- --- -
TOTAL: 27 5.6 7 4.7 18 15.5
-- --- = === == ====
Development Wells:
Oil 5 0 0 0 1 1
Gas 0 0 0 0 0 0
Non-Productive 1 0 0 0 0 0
-- --- - --- -- ----
TOTAL 6 0 0 0 1 1
== === = === == ====
</TABLE>
Reserves
The oil and gas reserve information set forth below represents only
estimates. Reserve engineering is a subjective process of estimating volumes of
economically recoverable oil and gas that cannot be measured in an exact manner.
The accuracy of any reserve estimate is a function of the quality of available
data and of engineering and geological interpretation. As a result, the
estimates of different engineers often vary. In addition, the results of
drilling, testing, and production may justify revisions of such estimates.
Accordingly, reserve estimates often differ from the quantities of oil and gas
that are ultimately recovered. Estimates of economically recoverable oil and gas
and of future net revenues are based on a number of variables and assumptions,
all of which may vary from actual results, including geologic interpretation,
prices, and future production rates and costs.
The following table sets forth estimates of the proved oil and gas
reserves of the Company at December 31, 1999, as estimated by a non-employee
contract engineer.
<TABLE>
<CAPTION>
JANUARY 1, 2000
---------------------------------
Proved Reserves Developed Undeveloped Total
--------- ----------- -----
<S> <C> <C> <C>
Oil (MBBLS) 6,606 19,317 25,923
Gas (MMCF) 2,073 4,191 6,264
MBOE 6,938 20,016 26,967
Year-end present value (10%) of
estimated future net revenue $40,137,770 $104,765,500 $144,903,270
</TABLE>
Total proved reserves increased from 24,836 MBOE at January 1, 1999 to
26,967 MBOE at January 1, 2000. This increase in reserves is attributable to the
purchase of a 50% working interest in East Hackberry, additional reserves
located as a result of the drilling and recompletion activity at WCBB, and an
increased economic longevity of the properties due to higher oil prices.
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<PAGE>
The estimated future net revenues set forth above were determined by
using reserve quantities of proved reserves and the periods in which they are
expected to be developed and produced based on economic conditions prevailing at
December 31, 1999. The estimated future production is priced at December 31,
1999 without escalation using $ 25.61 per BBL and $2.41 per MCF.
In compliance with federal law, the Company files annual reports with
the Energy Information Agency of the U.S. Department of Energy with respect to
its production of oil and gas during each calendar year and its estimated oil
and gas reserves at the end of each year.
Title to Oil and Gas Properties
It is customary in the oil and gas industry to make only a cursory
review of title to undeveloped oil and gas leases at the time they are acquired
and to obtain more extensive title examinations when acquiring producing
properties. In future acquisitions, the Company will conduct title examinations
on material portions of such properties in a manner generally consistent with
industry practice. Certain of the Company's oil and gas properties may be
subject to title defects, encumbrances, easements, servitudes or other
restrictions, none of which, in management's opinion, will in the aggregate
materially restrict the Company's operations.
Production, Prices, and Costs
The Company sells its oil and gas at the wellhead and does not refine
petroleum products. Other than normal production facilities, the Company does
not own an interest in any bulk storage facilities or pipelines. As is customary
in the industry, the Company sells its production in any one area to relatively
few purchasers, including transmission companies that have pipelines near the
Company's producing wells. Gas purchase contracts are generally on a short-term
"spot market" basis and usually contain provisions by which the prices and
delivery quantities for future deliveries will be determined.
The majority of the Company's crude oil production is sold on contracts
based on postings plus a premium. These premiums are based on an average paid by
several purchasers minus a handling charge per barrel of oil. The following
table contains certain historical data reflecting the average production costs
incurred by the Company during the years ended December 31, 1999, 1998 and 1997.
In May 1999, the Company hedged 1,000 BOPD at a fixed price of $14.75
per barrel (f.o.b. WCBB) for the period beginning with June 1, 1999 and ending
November 30, 1999. This hedge is based on an average Merc price of $16.35 a
barrel. The difference between the $14.75 per barrel and the $16.35 per barrel
is the $1.00 WTI adjustment for the region and transportation and marketing
fees.
13
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The following is a table and graph of the Company's monthly net
production in 1999.
(Table and Graph Omitted)
The following table demonstrates the production volumes and prices
received for production years ended 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
Production Volumes: 1999 1998 1997
<S> <C> <C> <C>
Oil (MBBLS) 576 441 566
Gas (MMCF) 0.107 0.421 2.818
Oil Equivalents (MBOE) 594 512 1,036
Average Prices:
Oil (per BBL) $16.86 $15.48 $20.93
Gas (per MCF) $ 2.83 $ 2.30 $ 2.86
Oil Equivalents (per MBOE) $16.86 $15.18 $19.20
Average Production Costs (per BOE) $ 6.18 $14.01 $ 9.05
Average Production Taxes (per BOE) $ 1.64 $ 1.49 $ 1.48
</TABLE>
14
<PAGE>
During 1998, the sales to Equiva Trading Co., Gathering and Energy
Marketing Co., Black Hills Energy Resources, Inc., and Plains Marketing, L.P.
accounted for 25%, 16%, 23% and 10%, respectively for oil sales. Gas sales to
Prior Energy Company, Texaco Exploration and Production, Inc., and Burlington
Resources, Inc. accounted for 47%, 27% and 11% of the Company's gas revenues.
The company had no other purchasers that accounted for greater than 10% of its
oil and gas revenues in the year ended December 31, 1998.
Spring 2000 Field Work
West Cote Blanche Bay
The Company will use the 3-D seismic data that it has recently
reprocessed to delineate the locations of four new wells at the West Cote
Blanche Bay Field in St. Mary Parish, Louisiana and expects to commence drilling
operations on the initial well in April, 2000. Two of the wells will be drilled
to depths of about 2,500' and the remaining two wells will be drilled to depths
of approximately 9,000'. The Company feels these wells will access significant
oil and gas deposits and cover a variety of targets ranging from relatively low
risk proven undeveloped locations to higher potential exploratory targets.
Gulfport has filed a permit with the State of Louisiana to convert an
existing shut-in wellbore to a saltwater disposal well. In the near future, the
Company believes that its current disposal system will be at capacity and an
additional well will be needed to handle any additional water generated by its
drilling program. The Company hopes to begin the conversion process in the
second quarter of 2000.
In March 2000, the Company began to fulfill its yearly plugging
commitment by plugging 20 wells at WCBB. The Company has enlisted the services
of an experienced Gulf Coast plugging company to perform the work and estimates
these wells can be plugged for an average cost of about $15,000 per well for a
total cost of approximately $300,000.
East and West Hackberry
Gulfport is in the process of increasing production at both the East and
West Hackberry fields by performing low risk downhole remedial work on a series
of wells. The Company is also continuing its efforts to decrease its reliance on
gas lift in the Hackberry fields, and thereby lower lifting cost expenses by
converting the lifting method of selected wells to downhole submersible pumps or
pumping units.
Competition and Markets
Availability of Markets. The availability of a ready market for any oil
and/or gas produced by Gulfport depends on numerous factors beyond the control
of management, including but not limited to, the extent of domestic production
and imports of oil, the proximity and capacity of gas pipelines, the
availability of skilled labor, materials and equipment, the effect of state and
federal regulation of oil and gas production and federal regulation of gas sold
in interstate commerce. Oil and gas produced by Gulfport in Louisiana is sold to
various purchasers who service the areas where Gulfport's wells are located.
Gulfport's wells are not subject to any agreements that would prevent Gulfport
from either selling its production on the spot market or committing such gas to
a long-term contract; however, there can be no assurance that Gulfport will
continue to have ready access to suitable markets for its future oil and gas
production.
Impact of Energy Price Changes. Oil and gas prices can be extremely
volatile and are subject to substantial seasonal, political and other
fluctuations. The prices at which oil and gas produced by Gulfport may be sold
is uncertain and it is possible that under some market conditions the production
and sale of oil and gas from some or all of its properties may not be
economical. The availability of a ready market for oil and gas and the prices
15
<PAGE>
obtained for such oil and gas, depend upon numerous factors beyond the control
of Gulfport, including competition from other oil and gas suppliers and national
and international economic and political developments. Because of all of the
factors influencing the price of oil and gas, it is impossible to accurately
predict future prices.
Environmental Regulation
Operations of Gulfport are subject to numerous federal, state and local
laws and regulations governing environmental protection. Over the last several
years, state and federal environmental laws and regulations have become more
stringent and may continue to become more stringent in the future. These laws
and regulations may affect Gulfport's operations and costs as a result of their
affect on oil and gas development, exploration, and production operations. It is
not anticipated that Gulfport will be required in the near future to expend
amounts that are material in relation to its total capital expenditures program
by reason of environmental laws and regulations, but inasmuch as such laws and
regulations are frequently changed, Gulfport is unable to predict the ultimate
cost of compliance.
Operational Hazards and Insurance
Gulfport's operations are subject to all of the risks normally incident
to the production of oil and gas, including blowouts, cratering, pipe failure,
casing collapse, oil spills and fires, each of which could result in severe
damage to or destruction of oil and gas wells, production facilities or other
property, or injury to persons. The energy business is also subject to
environmental hazards, such as oil spills, gas leaks, and ruptures and discharge
of toxic substances or gases that could expose Gulfport to substantial liability
due to pollution and other environmental damage. Although Gulfport maintains
insurance coverage considered to be customary in the industry for a company its
size, it is not fully insured against certain of these risks, either because
such insurance is not available or because of high premium costs. The occurrence
of a significant event that is not fully insured against could have a material
adverse effect on Gulfport's financial position.
Employees
At December 31, 1999, the Company had eight employees. A Louisiana well
servicing company serves as contract operator of the fields and provides all
necessary field personnel.
Item 3. Legal Proceedings
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 filed with the Bankruptcy Court a Motion to Reject the Tri-Deck
Marketing Agreement, and on May 29, 1996, the Company initiated an adversarial
proceeding against Tri-Deck and Perry Gas.
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 was 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
Tri-Deck monies held in the court registry and 50% of the recovery from all
other Tri-Deck litigation pursued by the Litigation Entity.
In June 1999, the Company received proceeds of $1,267,000 from the Trust
as its pro rata entitlement to settlement funds recovered by the Trust in an
16
<PAGE>
action assigned to the Trust by the Company under the Clarification Agreement.
Since the Company had no basis in the Litigation Trust, the Company recognized
the entire proceeds of $1,267,000 as income in the month in which it was
received. In addition, the Company received additional proceeds of $75,000 from
the Trust during the three months ended September 30, 1999.
On October 1, 1999, Plymouth Resources Group, 1998 LLC filed a complaint
in the Western District of Louisiana alleging breach of contract regarding
rework operations at West Cote Blanch Bay. Plymouth has challenged the Company's
right to conduct rework operations in late 1998 and 1999. Plymouth has requested
damages in excess of $100,000, specific performance and an accounting. The
Company does not believe that it breached any contract with Plymouth and is
vigorously defending this lawsuit. Management does not expect this litigation to
have a material impact on the financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
On October 18, 1999, an Information Statement was provided to holders of
Common Stock of the Company in connection with the election of five directors
and the approval of an amendment to the Company's Certificate of Incorporation.
On September 8, 1999, in accordance with Section 228 of the General Corporation
Laws of the State of Delaware, the Company received written consent of
stockholders holding over 50% of the outstanding and issued stock approving both
matters.
Election of Directors. On July 27, 1999, the Board of Directors
nominated five persons to serve on the Board of the Company. On September 8,
1999, the holders of a majority of the outstanding shares of the Company's
Common Stock executed a written consent electing the five nominated persons as
directors of the Company. Each director will serve until the next annual meeting
or until he is succeeded by another qualified director who has been elected.
Amendment to Certificate of Incorporation. On June 30, 1999, the Board
of the Company approved, declared it advisable and in the best interest of the
Company and voted to recommend to the stockholders that the number of authorized
shares of Common Stock be decreased from 250,000,000 to 15,000,000. On September
8, 1999 the holders of a majority of the outstanding shares of the Company's
Common Stock executed a written consent approving the amendment.
The annual shareholder meeting for the Company has not been scheduled as
of the date of this filing.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock is traded on the NASD OTC Bulletin Board
under the symbol GPOR. The following table sets forth the high and low sales
prices for the Common Stock in each quarter commencing with the Effective Date:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 LOW HIGH
- ---------------------------- ----- -----
<S> <C> <C>
First Quarter $1.50* $2.50*
Second Quarter $1.50* $2.50*
Third Quarter $0.875 $2.437
Fourth Quarter $1.875 $2.625
</TABLE>
*In March 1999, the Company effected a 50 to 1 Reverse Stock Split. The stock
prices shown for the first and second quarter of 1999 reflect the post-stock
split prices.
Prior to February 29, 1996, WRT's common stock was quoted on the NASDAQ
National Market under the symbol "WRTE". During the period January 1, 1996
through February 29, 1996, the high and low sale prices reported on the NASDAQ
National Market were $1.19 and $0.25, respectively. Effective February 29, 1996,
WRT's common stock was delisted from the NASDAQ National Market.
17
<PAGE>
Holders of Record
At the close of business on February 1, 2000 there were 10,145,400
shares of Common Stock outstanding held by 120 shareholders of record.
Dividend Policy
The Company has never paid dividends on the Common Stock. The Company
currently intends to retain all earnings to fund its operations. Therefore, the
Company does not intend to pay any cash dividends on the Common Stock in the
foreseeable future.
Item 6. Selected Financial Data
The following selected financial data as of and for the years ended
December 31, 1999 and 1998, and as of and for the five months 21 days ended
December 31, 1997, for the Company and for the six months and 10 days ended
July 10, 1997, for the Predecessor Company are derived from the consolidated
financial statements of the Company included elsewhere in the Annual Report.
The selected financial data at December 31, 1996 and 1995 and for the years then
ended have been derived from historical consolidated financial statements of
WRT. The financial data set forth below should be read in conjuntion with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of the Company and the
notes thereto included elsewhere in this Annual Report.
<TABLE>
<CAPTION>
Reorganized Company Predecessor Company
------------------- ----------------------------------
July 11, Six Months
1997 to 10 Days
December 31, July 10, Year Ended December 31,
-----------------------
1999 1998 1997 1997 1996 1995
---- ---- ---- ---- ---- ----
(in thousands,
except per
share amounts)
Statement of
Operation Data
<S> <C> <C> <C> <C> <C> <C>
Oil and gas sales $10,018 $ 8,298 $ 9,456 $10,138 $24,019 $ 24,655
----------------- ------- ------- ------- --------
Operating expenses 9,978 66,415(1) 11,478 11,002 40,855 139,497(2)
----------------- ------- ------- ------- --------
Net income (loss) from
operations 40 (58,117) (2,022) (864) (16,836) (114,842)
------------------ ------- ------- --------- --------
Interest expense 934 1,534 727 1,106 5,562 13,759
Proceeds from 1,342 - - - - -
litigation trust
Reorganization costs - - - 7,771 7,345 -
Net income (loss)
before
income taxes and
extraordinary item 641 (59,105) (1,713) (9,615) (29,387) (128,175)
Extraordinary item - - - 88,723 - -
Net income (loss)
before dividends on
preferred stock 641 (59,105) (1,713) 79,108 (29,387) (128,175)
Dividends on
preferred stock - - - (1,510) (2,846) (2,846)
Net income (loss)
available to common
stock 641 (59,105) (1,713) 77,598 (32,233) (131,021)
Earnings (loss) per
common and common
equivalent share 0.13 (72.34) (3.88) N/A N/A N/A
Average common and
common equivalent
shares outstanding 5,120 817 442 9,539 9,539 9,466
Capital expenditures $7,147 $ 991 $5,644 $2,562 $4,823 $116,730
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Reorganized Company Predecessor Company
------------------------------ -----------------------
July 11,
1997 to
December 31, Year Ended December 31,
-----------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Balance Sheet Data (in
thousands)
Working capital
<S> <C> <C> <C> <C> <C>
(deficit) $(1,352) $(3,204) $ (719) $(148,932) $ (131,601)
Property, plant and
equipment, net 23,469 19,990 81,501 56,899 63,913
Total assets 33,484 27,568 92,346 68,076 79,247
Total long-term debt 179 381 13,528 - -
Shareholders' equity 24,114 18,503 70,280 (60,551) (61,869)
(deficit)
</TABLE>
(1) Operating expenses for 1998 include a non-cash charges of $50,131,000
for impairment of oil and gas properties, $271,000 for abandonment of
long-lived assets and a $244,000 provision for doubtful accounts. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(2) Operating expenses for 1995 include a non-cash charge of $103,000,000
related to impairment of long-lived assets pursuant to SFAS No. 121,
non-cash charges of $3,600,000 related to a minimum production guarantee
obligation, a $2,000,000 provision for doubtful accounts, and a
$1,400,000 charge related to restructuring costs incurred. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
As a result of the Reorganization Case and Plan, which was consummated
and became effective on July 11, 1997, the Company was required to present its
financial statements pursuant to fresh start reporting standards. Accordingly,
the financial statements of Gulfport are not comparable to the financial
statements of WRT. However, in the case of the statement of operations, the
Company believes that comments comparing calendar years are appropriate in order
to provide a more meaningful understanding of the Company's operations.
The following discussion and analysis of the Company's financial
condition and results of operations is based in part on the consolidated
financial statements and the notes thereto included elsewhere in this Annual
Report and should be read in conjunction therewith.
Credit Facility
In December 1994, WRT entered into a $40,000,000 credit facility with
International Nederlanden (U.S.) Capital Corporation ("INCC") ("INCC Credit
Facility") that was secured by substantially all of WRT's assets. At December
31, 1996, WRT had borrowings outstanding of $15,000,000, the maximum amount of
borrowings available under the INCC Credit Facility. At December 31, 1995, the
revolving loan borrowings were converted to a term loan whereby quarterly
principal payments of one-sixteenth of the outstanding indebtedness were due and
payable. 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, WRT classified the debt as
current at December 31, 1996. While WRT was 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 the
Effective Date, an additional loan fee of $100,000 was made on December 31, 1997
and a loan fee of $100,000 was due on or before December 31, 1998. The loan was
scheduled to mature 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 (i) LIBOR plus 3% or (ii) ING's fluctuating "reference
rate" plus $1.25%. This loan is collateralized by substantially all of the
Company's assets. At December 31, 1999, this rate was 9.75%.
The ING Credit Agreement contains restrictive covenants which impose
limitations on the Company with respect to, among other things: (i) the
maintenance of current assets equal to at least 110% of current liabilities
19
<PAGE>
(excluding any current portion of the ING Credit Agreement); (ii) the incurrence
of debt outside the ordinary course of business; (iii) dividends and similar
payments; (iv) the creation of additional liens on, or the sale of, the
Company's oil and gas properties and other assets; (v) the Company's ability to
enter into forward, future swap or hedging contracts; (vi) mergers or
consolidations; (vii) the issuance of securities other than Common Stock and
options or warrants granting the right to purchase Common Stock; (viii) the
sale, transfer, lease, exchange, alienation or disposal of Company properties or
assets; (ix) investments outside the ordinary course of business; (x)
transactions with affiliates; (xi) general and administrative expenditures in
excess of $1 million during any fiscal quarter or in excess of $3 million during
each fiscal year; and (xii) the maintenance of an aggregate net present value
attributable to all collateral as determined from engineering reports equal to
120% of the principal amount of the ING Credit Agreement on such date.
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
actions by the Company. In consideration for entering into the Amended ING
Credit Agreement and granting 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.
On November 20, 1998, the Company and ING entered into a letter
agreement wherein ING consented to the sale of oil and gas properties totaling
$8.8 million dollars 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.
On July 10, 1999, the Company and ING entered into the Second Amendment
to the Credit Agreement. Under the Second Amendment, the maturity date of the
loan was extended to June 30, 2000 with interim payment of $1,000,000 due by
September 30, 1999 and with $379,000 due on March 31, 2000. The $100,000
December 31, 1998 payment was extended until December 31, 1999 and the $250,000
amendment fee was extended to June 30, 2000 provided that such amendment fee
would be waived if the loan was paid in full by June 30, 2000. Additionally, ING
surrendered the 2.5% warrants that were granted on August 10, 1998 and November
20, 1998. ING waived all events of default occurring as a result of missed
payments prior to the Second Amendment. If cash flow is not sufficient to pay
the balance at June 30, 2000, the Company will seek alternate forms of financing
including, but not limited to, the sale of assets, mezzanine financing and/or
the sale of securities.
Accounting Change
Before July 11, 1997, the Company used the successful efforts method for
reporting oil and gas operations. Commencing on the Effective Date, the Company
converted to the full cost pool method of accounting for its oil and gas
operations to be in conformity with the method used by DLB, its principal
shareholder.
Due to the restating of property values to comply with fresh start
accounting and the conversion from the successful efforts method to the full
cost pool method for reporting oil and gas operations on the Effective Date,
comparison of depreciation, depletion, and amortization expense for the years
ended December 31, 1999, 1998 and 1997, with prior years will not be meaningful.
20
<PAGE>
Results of Operations
Prices and Production Volumes.
The markets for oil and gas have historically been, and will continue to
be, volatile. Prices for oil and gas may fluctuate in response to relatively
minor changes in supply and demand, market uncertainty and a variety of factors
beyond the control of the Company. Set forth in the table below are the average
prices received by the Company and production volumes during the periods
indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
Production Volumes: 1999 1998 1997
<S> <C> <C> <C>
Oil (MBBLS) 576 441 566
Gas (MMCF) 0.107 0.421 2.818
Oil Equivalents (MBOE) 594 512 1,036
Average Prices:
Oil (per BBL) $16.86 $15.48 $20.93
Gas (per MCF) $ 2.83 $ 2.30 $ 2.86
Oil Equivalents (per MBOE) $16.86 $15.18 $19.20
Average Production Costs (per BOE) $ 6.18 $14.01 $ 9.05
Average Production Taxes (per BOE) $ 1.64 $ 1.49 $ 1.48
</TABLE>
In May 1999, the Company hedged 1,000 BOPD at a fixed price of $14.75
per barrel (f.o.b. WCBB) for the period beginning with June 1, 1999 and ending
November 30, 1999. This hedge was based on an average Merc price of $16.35 a
barrel. The difference between the $14.75 per barrel and the $16.35 per barrel
is the $1.00 WTI adjustment for the region and transportation and marketing
fees.
Comparison of Years Ended December 31, 1999 and 1998
The Company reported net income attributable to common stock of $641,000
for the year ended December 31, 1999, as compared with a net (loss) attributable
to common stock of $(59,105,000) for the year ended December 31, 1998. The major
change in earnings attributable to common stock of $59,746,000 was due primarily
to the following factors: (1) the write-down of oil and gas properties in 1998
totaling $50,131,000, (2) the recognition in 1999 of $1,342,000 in revenues from
the litigation trust, (3) the increased oil production as a result of
development efforts in 1999, (4) reduction of operating expenses in 1999, (5)
reduction of general and administrative expenses in 1999, and (6) increase in
average oil and gas prices in 1999.
Impairment of Oil and Gas Properties. At each year end the Company
commissions a reserve report that estimates proved reserves and future revenue
of the Company's properties. The price of oil and gas, finding costs and
operating costs are used to determine future revenue. When changes occur such as
a drop in product prices that indicate the value carried on the balance sheet
cannot be recovered by future net cash flow, an impairment in oil and gas
properties must be recorded. During 1998, the Company incurred an impairment of
oil and gas properties of $50,130,000. The value of oil and gas properties was
impaired due primarily to the reduction in the present value of anticipated
future cash flows which occurred as a result of a 36% decrease in the BOE prices
from $17.91 used in the January 1, 1998 reserve report to $11.43 used in the
January 1, 1999 reserve report. The reserve report dated January 1, 2000 used a
BOE price of $25.56 resulting in the present value of anticipated future cash
flows of $145,355,000.
Recognition of Income from the Litigation Trust. During 1999, the
Company received $1,342,000 in proceeds from the Litigation Trust.
21
<PAGE>
Oil and Gas Revenues. During 1999, the Company reported oil and gas
revenues of $10,018,000, a 20% increase from revenues of $8,298,000 in 1998. The
increase in revenues is attributable to a 82,000 increase in BOE production in
1999 over 1998 and an increase in prices in 1999 over 1998 of $1.68 per BOE.
This overall increase in revenues is despite the $665,000 million decrease in
gas revenues attributable to a .314 MMCF decrease in gas sales. The decrease in
gas sales is the result of the sale in April 1998 of the Bayou Pigeon, Bayou
Penchant, Lac Blanc, Golden Meadow and Deer Island Fields, which produced
significant amounts of natural gas.
Operating Expenses. Lease operating expenses have decreased by
$4,113,000 or 52% from $7,782,000 in 1998 to $3,669,000 in 1999. This decrease
was due in part to the reduction of field related services performed by third
party contractors. The Company has lowered its operating expenses by reducing
facility costs through capital expenditures performed to enhance the saltwater
disposal facility, acidizing and repairing the saltwater wells, repairing the
compressors and a reduction in gas lift costs. This decrease was also due in
part to the sale effective April 1, 1998 of oil and gas properties located in
Bayou Pigeon, Bayou Penchant, Deer Island, Lac Blanc and Golden Meadow. The
decrease was also due in part to a streamlining and cost savings steps taken to
reduce operating costs at the Company's remaining properties.
General and Administrative Expenses. General and administrative expenses
decreased by $1,182,000 or 41% from $2,849,000 in 1998 to $1,667,000 in 1999.
This decrease was due primarily to the Company's efforts to reduce personnel and
overall general and administrative costs.
Interest Expense. Interest expense decreased by $600,000 or 39% from
$1,534,000 in 1998 to $934,000 in 1999. This decrease was due in part to
interest bearing debt reduced by $1.9 million, offset in part by the accrual of
$300,000 in interest on certain vendor debt.
Other changes in income for the year ended December 31, 1999 as compared
to the year ended December 31, 1998 were attributable to the following factors:
Depreciation, Depletion and Amortization. Depreciation, depletion and
amortization expense was $3,615,000 in 1999 consisting of $3,410,000 in
depletion on oil and gas properties and $205,000 in depreciation of other
property and equipment. This is a 19% decrease when compared to 1998
depreciation, depletion and amortization expense of $4,325,000. This decrease is
due primarily to the sale of $8.8 million of property in 1998.
Provision for Doubtful Accounts. The bad debts expense decreased from
$244,000 in 1998 to $56,000 in 1999.
Abandonment of Long-Lived Assets. During 1998, the Company abandoned
outdated computer software costs in the amount of $271,000.
Comparison of Years Ended December 31, 1998 and 1997
The Company reported net (loss) attributable to common stock of
($59,105,000) for the year ended December 31, 1998, as compared with net income
attributable to common stock of $77,598,000 for the year ended December 31,
1997. The major change in earnings attributable to common stock of $136,703,000
was due primarily to the following factors: (1) write-down of oil and gas
properties totaling $50,131,000, (2) the decrease in oil and gas revenues, (3)
the sale of oil and gas properties resulting in an additional decrease in
production and (4) the gain on discharge of debt in the amount of $88,723,000
which dramatically affected 1997 earnings.
Impairment of Oil and Gas Properties. During 1998, the Company incurred
an impairment of oil and gas properties of $50,130,000. The value of the oil and
gas properties was impaired due primarily to the reduction in the present value
of anticipated future cash flow which occurred as a result of a 36% decrease in
the BOE prices from $17.91 used in the January 1, 1998 reserve report to $11.43
used in the January 1, 1999 reserve report.
22
<PAGE>
Oil and Gas Revenues. During 1998, the Company reported oil and gas
revenues of $8,298,000, a 58% decrease from revenues of $19,894,000 for 1997.
The decreased revenues are attributable to a decrease in production volumes of
512 MBOE along with a decrease of $4.02 per BOE in average sales price for the
year.
Decrease in Production. During 1998, production decreased only 512 MBOE
resulting primarily from the sale of producing oil and gas properties effective
April 1, 1998 located in Bayou Pigeon, Bayou Penchant, Deer Island, Lac Blanc,
and Golden Meadow and the sale of Napoleonville effective September 1, 1998.
Extraordinary Gain. During 1997, the Company recognized an extraordinary
gain of $88,723,000 related to the forgiveness of debt recognized in connection
with implementing the Plan of Reorganization.
In 1998, the Company reduced several key expenditures including
production costs, general and administrative expenses, taxes and interest
expense.
Production Costs. Production costs decreased $1,604,000, or 17% to
$7,782,000 in 1998 from $9,386,000 in 1997. Production costs per BOE increased
49% from $9.41 per BOE in 1997 to $14,01 per BOE in 1998. Overall costs
decreased in part because of decreases in lease operating expenses and the sale
of various producing properties.
However, the production costs per BOE rose in 1998 because of the sale
of various producing properties which decreased the number of BOE to carry
production costs and the added expenditure of plugging 40 wells at WCBB.
General and Administrative Expense. General and administrative expenses
decreased by 22% from $3,642,000 in 1997 to $2,849,000 in 1998. The decrease is
due primarily to a reduction in contract services incurred in connection with
implementing the plan of reorganization in 1997. In addition, during 1998
management reduced its work force and implemented other cost savings. During
1997, the Company capitalized $417,000 in general and administrative expenses.
Considering the total G&A incurred for 1997, the expenses were reduced by 30%.
Gross Production Taxes. Production taxes decreased by $719,000, or 47%,
from $1,533,000 in 1997 to $814,000 in 1998. This decrease is attributable to
the reduction in oil and gas sales.
Interest Expense. Interest expense decreased $299,000, from $1,833,000
for 1997 to $1,534,000 for 1998.
Other changes in income for the year ended December 31, 1998 as compared
to the year ended December 31, 1997 were attributable to the following factors:
Depreciation, Depletion and Amortization. Depreciation, depletion and
amortization expense was $4,324,000 in 1998 consisting of $4,136,000 in
depletion on oil and gas properties and $189,000 in depreciation of other
property and equipment. Due to the restating of property values to comply with
fresh start accounting and the conversion from the successful efforts method to
the full cost pool method for reporting oil and gas operations on the Effective
Date, comparisons of 1997 depreciation, depletion and amortization expense with
prior years will not be meaningful.
Provision for Doubtful Accounts. The bad debts expense account
increased $173,000 from $71,000 in 1997 to $244,000 in 1998.
Restructuring Charges and Reorganization Costs. During 1997, the Company
incurred $7,771,000 in reorganization costs, consisting of $3,000,000
contributed to the Litigation Entity as called for in the Plan of
Reorganization, $1,515,000 reimbursed to DLB for restructuring costs it incurred
on the Company's behalf.
23
<PAGE>
Abandonment of Long-Lived Assets. During 1998, the Company abandoned
outdated computer software costs in the amount of $271,000.
Liquidity and Capital Resources
Operating Activities
Net cash flow provided by operating activities for the year ended
December 31, 1999 was $6.4 million, as compared to net cash flow used by
operating activities of $3.9 million for the comparable period in 1998. This
increase is due primarily to the following factors: (1) increased oil production
from the West Cote Blanche Bay field; (2) increased oil prices; (3) a
significant reduction in lease operating expenses; and (4) a significant
reduction in general and administrative expenses.
The Company's strategy is to continue to increase cash flows generated
by these properties by undertaking new drilling, workover, sidetrack and
recompletion projects in the fields to exploit its extensive reserves. The
Company has upgraded its infrastructure by enhancing its existing facilities to
increase operating efficiencies, increase volume capacities and lower lease
operating expenses. Additionally, the Company has undertaken the reprocessing of
its 3D seismic data in its principal property, West Cote Blanche Bay. The
reprocessed data will enable the Company's geophysicists to generate new
prospects and enhance existing prospects in the intermediate zones in the field
thus creating a portfolio of new drilling opportunities in the most prolific
depths of the field.
Capital Requirements and Resources
The primary capital commitment faced by the Company in the short term is
the payments due under the ING Credit Facility.
At December 31, 1999, the outstanding principal balance under the ING
Credit Agreement was $2,879,000. 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
$379,000 is due March 31, 2000 with the remaining principal balance due at
maturity on June 30, 2000. An Amendment Fee of $250,000 is due at June 30, 1999
if the loan has not been paid off by that date. The Company has budgeted to pay
the March principal payment and hopes to pay the June 30, 2000 installment out
of cash flow. If cash flow is not sufficient to pay the June 30, 2000
installment, the Company will seek alternate forms of financing including but
not limited to the sale of non-core assets, mezzanine financing and/or the sale
of securities.
In the Company's January 1, 2000 reserve report, 95% of the Company's
net reserves were categorized as proved non-developed non-producing. The proved
reserves of the Company will generally decline as reserves are depleted, except
to the extent that the Company conducts successful exploration or development
activities or acquires properties containing proved developed reserves, or both.
To realize reserves and increase production, the Company must commence
exploratory drilling, undertake other replacement activities or utilize third
parties to accomplish those activities. In the year 2000 the Company expects to
undertake a shallow to intermediate drilling program. The Company has identified
four to five wells from depths approximately 3,000' to 9,000' that it hopes to
drill in spring 2000. It is anticipated that these reserve development projects
will be funded either through the use of cash flow from operations when
available or by accessing the capital markets. The cash flow generated from
these new projects will be reinvested in the field to complete more capital
projects.
In 1999, the Company invested $7,147,000 in property and equipment and
other long-term assets as compared to $1,330,000 during the comparable period in
1998.
Net cash provided in financing activities for 1999 was $2.9 million as
compared to a use of $3.2 million funds during 1998. The 1998 net cash flows
from financing occurred as a result of the $3,200,000 from the Stockholder
24
<PAGE>
Credit Facility and the net proceeds from the 1999 Regulation D Offering. The
1999 Regulation D Offering after expenses yielded $5,016,000 to the Company.
Affiliated Stockholders subscribed for 4,040,011 shares in the 1999 Regulation D
Offering through the forgiveness of $3.0 million in debt, thus netting $2.0
million to the Company for the net cash proceeds from the 1999 Regulation D
Offering. In 1998, the Company received net funds of $7,363,000 for the Rights
Offering. Affiliated Stockholders exercised 1,200,000 shares of stock through
the forgiveness of $3.0 million in debt, thus netting $4.3 million to the
Company for the net cash proceeds from the 1998 Rights Offering. In addition to
repaying the Affiliated Stockholders through forgiveness of debt, the Company
made principal payments of $10.5 million in long-term debt.
Commitments and 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 filed with the Bankruptcy Court a Motion to Reject the Tri-Deck
Marketing Agreement, and on May 29, 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.
The Trust settled the action against TriDeck in the second quarter of
1999. In June 1999, the Company received proceeds of $1,267,000 from the Trust
as its pro rata entitlement of the settlement funds. Since the Company had no
basis in the Litigation Trust, the Company recognized the entire proceeds of
$1,267,000 as income in the month in which it was received. In addition, the
Company received additional proceeds of $75,000 from the Trust during the three
months ended September 30, 1999 as additional proceeds from this settlement.
On October 1, 1999, Plymouth Resources Group 1998 LLC filed a complaint
in the Western District of Louisiana alleging breach of contract regarding
rework operations at West Cote Blanch Bay. Plymouth has challenged the Company's
right to conduct rework operations in late 1998 and 1999. Plymouth has requested
damages in excess of $100,000, specific performance and an accounting. The
Company does not believe that it breached any contract with Plymouth and is
vigorously defending this lawsuit. Management does not expect this litigation to
have a material impact on the financial statements.
Other Litigation
The Company has been named as a defendant in 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.
Year 2000 Compliance
The Company made all necessary investments in software systems and
applications to ensure it was Year 2000 compliant. The Company did not
experience any difficulties related to the Year 2000 rollover. Any cost
associated with the process of becoming Year 2000 compliant was not material.
25
<PAGE>
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997
Independent Auditors' Reports F-2
Balance Sheets, December 31, 1999 and 1998 F-4
Statements of Operations, The Years Ended December 31, 1999
and 1998, and Periods July 11, 1997 to December 31, 1997,
and January 1, 1997 to July 10, 1997, F-5
Statements of Shareholders' Equity, The Years Ended December
31, 1999 and 1998 F-6
Statements of Cash Flows, The Years Ended December 31, 1999
and 1998, and the Periods July 11, 1997 to December 31, 1997
and January 1, 1997 to July 10, 1997 F-7
Notes to Financial Statements F-9
All financial statement schedules are omitted, as the required information is
inapplicable or the information is presented in the financial statements or
related notes.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
PRE-EMERGENCE CONSOLIDATED FINANCIAL STATEMENTS
The Board of Directors and
Shareholders of Gulfport Energy Corporation:
We have audited the accompanying statements of operations, shareholders'
equity, and cash flows for the period from January 1, 1997 to July 10, 1997 of
Gulfport Energy Corporation (formerly WRT Energy Corporation a Texas
corporation) (the "Company"). These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations of Gulfport Energy
Corporation and its cash flows for the period from January 1, 1997 to July 10,
1997, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, on May 2, 1997, the
Company's plan of reorganization (the "Plan") was confirmed by the bankruptcy
court. The Plan was substantially consummated on July 11, 1997 and the Company
emerged from bankruptcy. In connection with its emergence from bankruptcy, the
Company adopted fresh start reporting. As a result of the adoption of fresh
start reporting, the post-emergence financial statements are not comparable to
the pre-emergence consolidated financial statements.
HOGAN & SLOVACEK
Oklahoma City, OK
March 28, 2000
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
POST-EMERGENCE FINANCIAL STATEMENTS
The Board of Directors and
Shareholders of Gulfport Energy Corporation:
We have audited the accompanying balance sheets of Gulfport Energy
Corporation (a Delaware corporation) (formerly WRT Energy Corporation) (the
"Company") as of December 31, 1999 and 1998, and the related statements of
operations, shareholders' equity, and cash flows for the years ended December
31, 1999 and 1998 and for the period from July 11, 1997 to December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Gulfport Energy Corporation
as of December 31, 1999 and 1998, and the results of its operations and its cash
flows for the years ended December 31, 1999 and 1998 and for the period from
July 11, 1997 to December 31, 1997, in conformity with generally accepted
accounting principles.
HOGAN & SLOVACEK
Oklahoma City, OK
March 28, 2000
F-3
<PAGE>
GULFPORT ENERGY CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------------------
1999 1998
---------------- ----------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 5,664,000 $ 2,778,000
Cash, restricted - 936,000
Accounts receivable, net of allowance
for doubtful accounts of $244,000 and
$4,607,000 for 1999 and 1998, respectively 2,055,000 1,656,000
Prepaid expenses and other 120,000 110,000
------------ ------------
Total current assets 7,839,000 5,480,000
------------ ------------
Property and equipment:
Oil and natural gas properties 84,135,000 77,042,000
Other property and equipment 1,866,000 1,867,000
Accumulated depletion, depreciation,
amortization and impairment reserve (62,532,000) (58,919,000)
------------ ------------
Property and equipment, net 23,469,000 19,990,000
------------ ------------
Other assets 2,176,000 2,098,000
------------ ------------
$ 33,484,000 $ 27,568,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 6,296,000 $ 3,890,000
Current maturities of long-term debt 2,895,000 4,794,000
----------- ------------
Total current liabilities 9,191,000 8,684,000
Long-term debt 179,000 381,000
----------- ------------
Total liabilities 9,370,000 9,065,000
----------- ------------
Commitments and contingencies - -
Shareholders' equity:
Preferred stock - $.01 par value, 1,000,000
authorized, none issued - -
Common stock - $.01 par value, 15,000,000
authorized, 10,145,400 and 3,445,400
issued and outstanding at December 31,
1999 and 1998, respectively 101,000 34,000
Paid-in capital 84,190,000 79,287,000
Accumulated deficit (60,177,000) (60,818,000)
------------ ------------
Total shareholders' equity 24,114,000 18,503,000
------------ ------------
$ 33,484,000 $ 27,568,000
=========== ============
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
GULFPORT ENERGY CORPORATION
STATEMENTS OF OPERATIONS
Predecessor
Reorganized Company Company
------------------------------------------ --------------
July 11, January 1,
through through
Year ended December 31, December 31, July 10,
-----------------------------
1999 1998 1997 1997
-------------- -------------- ------------ ------------
<TABLE>
<CAPTION>
REVENUES:
<S> <C> <C> <C> <C>
Gas sales $ 303,000 $1,346,000 $3,344,000 $4,706,000
Oil and condensate
sales 9,715,000 6,952,000 6,412,000 5,432,000
Other income, net 193,000 546,000 736,000 126,000
-------------- -------------- ------------ -------------
10,211,000 8,844,000 10,492,000 10,264,000
-------------- -------------- ------------ -------------
COSTS AND EXPENSES:
Operating expenses
including
production taxes 4,640,000 8,596,000 5,397,000 5,514,000
Impairment of oil
and gas properties - 50,130,000 - -
Depletion,
depreciation
and amortization 3,615,000 4,325,000 4,542,000 3,314,000
General and
administrative 1,667,000 2,849,000 1,539,000 2,103,000
Interest 934,000 1,534,000 727,000 1,106,000
Provision for
doubtful accounts 56,000 244,000 - 71,000
Impairment of long-
lived assets - 271,000 - -
-------------- -------------- ------------ -------------
10,912,000 67,949,000 12,205,000 12,108,000
-------------- -------------- ------------ -------------
LOSS FROM OPERATIONS
BEFORE OTHER INCOME
(EXPENSE) AND INCOME
TAXES (701,000) (59,105,000) (1,713,000) (1,844,000)
-------------- -------------- ------------ -------------
OTHER INCOME (EXPENSE)
Proceeds from
Litigation Trust 1,342,000 - - -
Reorganization
expenses - - - (7,771,000)
-------------- -------------- ------------ -------------
1,342,000 - - (7,771,000)
-------------- -------------- ------------ -------------
INCOME (LOSS) BEFORE
INCOME TAXES 641,000 (59,105,000) (1,713,000) (9,615,000)
-------------- -------------- ------------ -------------
INCOME TAX EXPENSE
(BENEFIT):
Current 255,000 - - -
Deferred (255,000) - - -
-------------- -------------- ------------ -------------
- - - -
-------------- -------------- ------------ -------------
INCOME (LOSS) BEFORE
EXTRAORDINARY
ITEM- 641,000 (59,105,000) (1,713,000) (9,615,000)
EXTRAORDINARY GAIN - - - 88,723,000
-------------- -------------- ------------ -------------
NET INCOME (LOSS) 641,000 (59,105,000) (1,713,000) 79,108,000
Preferred stock
dividends, net - - - (1,510,000)
-------------- -------------- ------------ -------------
NET INCOME (LOSS)
APPLICABLE TO
COMMON STOCK $ 641,000 $(59,105,000) $(1,713,000) $77,598,000
============== ============== ============ =============
PER SHARE EARNINGS
(LOSS) OF COMMON
STOCK AMOUNTS $ 0.13 $ (72.35) $ (3.88) N/A
============== ============== ============ =============
AVERAGE COMMON AND
COMMON
EQUIVALENT SHARES
OUTSTANDING 5,120,255 816,986 441,526 9,539,000
============== ============== ============ =============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
GULFPORT ENERGY CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Additional
Preferred Stock Paid-In Accumulated Treasury
--------------------------
Stock Shares Amount Capital Deficit Stock
- -------------------------------------------------------------------------------------------------------------
Balance,
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997 $ - 441,720 $ 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 $ - 3,445,400 $1,723,000 $77,598,000 $(60,818,000) -
Change in par value
of common stock - - (1,689,000) 1,689,000 - -
---------------------------------------------------------------------------------
Balance as restated,
December 31, 1998 - 3,445,400 34,000 79,287,000 (60,818,000) -
Regulation D
offering - 6,700,000 67,000 4,903,000 - -
Net income - - - - 641,000 -
--------------------------------------------------------------------------------
Balance,
December 31, 1999 $ - 10,145,400 $101,000 $84,190,000 $(60,177,000) $ -
================================================================================
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
GULFPORT ENERGY CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Predecessor
Reorganized Company Company
-------------------------------------------- --------------
July 11, January 1,
through through
Year ended December 31, December 31, July 10,
-------------------------------
1999 1998 1997 1997
- ---------------------------------- --------------- -------------- ------------ -------------
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net income (loss) $ 641,000 $(59,105,000) $(1,713,000) $79,476,000
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Extraordinary item -
Gain on debt discharge - - - (88,723,000)
Impairment of oil and gas
properties - 50,130,000 - -
Depletion, depreciation and
amortization 3,615,000 4,519,000 4,633,000 3,314,000
Provision for doubtful accounts
receivable 56,000 244,000 - 71,000
Gain on sale of equipment - - (587,000) -
Impairment of long-lived assets - 271,000 - -
Amortization of debt issuance
costs 108,000 - - -
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable (455,000) 2,464,000 (1,077,000) 307,000
(Increase) decrease in prepaid
expenses (10,000) 82,000 (117,000) (331,000)
Increase (decrease) in accounts
payable and accrued liabilities 2,406,000 (2,456,000) 556,000 301,000
--------------- -------------- ------------ ------------
Net cash provided by (used in)
operating activities 6,361,000 (3,851,000) 1,695,000 (5,585,000)
--------------- -------------- ------------ ------------
Cash flows from investing activities:
Additions to cash held in escrow (92,000) (280,000) (133,000) (22,000)
Capital expenditures (7,147,000) (1,330,000) (5,644,000) (2,562,000)
Proceeds from sale of oil and gas
properties 47,000 8,966,000 35,000 -
Proceeds from sale of equipment 5,000 49,000 2,081,000 -
Increase (decrease) in other assets (94,000) 114,000 138,000 -
--------------- ------------- ------------ ------------
Net cash provided by (used in)
investing activities (7,281,000) 7,519,000 (3,523,000) (2,584,000)
--------------- ------------- ------------ ------------
Cash flows from financing activities:
Proceeds from sales of common stock 4,971,000 7,328,000 - -
Proceeds from borrowings 3,210,000 35,000 - 15,000,000
Payment of pre-petition liabilities
and administrative claims - - - (8,105,000)
Proceeds from issuance of warrants - - - 13,300,000
Principle payments on borrowing (5,311,000) (10,580,000) (20,000) (15,014,000)
Payment of loan origination fees - - (200,000) -
--------------- ------------- ------------ ------------
Net cash provided by (used in)
financing activities 2,870,000 (3,217,000) (220,000) 5,181,000
--------------- ------------- ------------ ------------
Net increase (decrease) in cash and
cash equivalents 1,950,000 451,000 (2,048,000) (2,988,000)
Cash and cash equivalents -
beginning of period 3,714,000 3,263,000 5,311,000 5,679,000
--------------- ------------- ------------ ------------
Cash and cash equivalents -
end of period $ 5,664,000 $3,714,000 $3,263,000 $2,691,000
=============== ============= ============ ============
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
GULFPORT ENERGY CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Predecessor
Reorganized Company Company
-------------------------------------------- --------------
July 11, January 1,
through through
Year ended December 31, December 31, July 10,
-------------------------------
1999 1998 1997 1997
- ---------------------------------- --------------- -------------- ------------ -------------
Supplemental Disclosures of Cash
Flow Information:
<S> <C> <C> <C> <C>
Interest paid $ 476,000 $1,334,000 $ 505,000 $ 28,000
Supplemental Information of Non-Cash
Investing and Financing Activities:
Accrued dividends on preferred
stock $ - $ - $ - $(1,510,000)
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE>
GULFPORT ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999,1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
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 "Effective Date"), 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.
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 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"). See prior 10K filings for more information regarding these events.
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.
Oil and Natural Gas Properties
The Company uses the Full Cost 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 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.
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.
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.
F-9
<PAGE>
GULFPORT ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
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.
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 as 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. There is no such liability or asset recorded at December 31,
1999. Oil revenues are recognized in the month produced.
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.
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. PROVISION FOR ALLOWANCE FOR DOUBTFUL ACCOUNTS
A summary of the activity in the allowance for doubtful accounts is as
follows:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
<S> <C> <C>
Balance, beginning of the year $ 4,607,000 $ 4,696,000
Provision for bad debts 56,000 244,000
Bad debts written off (4,419,000) (333,000)
------------------- -------------------
Balance, end of the year $ 244,000 $ 4,607,000
================== ===================
</TABLE>
During the years ended December 31, 1999 and 1998, and during the period
ended July 10, 1997, the Company charged $56,000, $244,000, and $71,000,
respectively, to bad debt expense.
The 1999 bad debts expense related to receivables on properties no longer owned
by the Company.
F-10
<PAGE>
GULFPORT ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
3. PROPERTY AND EQUIPMENT
The major categories of property and equipment and related accumulated
depreciation, depletion and amortization as of December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
<S> <C> <C>
Oil and gas properties $ 84,135,000 $ 77,042,000
Office furniture and fixtures 1,389,000 1,390,000
Building 217,000 217,000
Land 260,000 260,000
------------------- ------------------
Total property and equipment 86,001,000 78,909,000
Accumulated depreciation, depletion
Amortization and impairment reserve (62,532,000) (58,919,000)
------------------- ------------------
Property and equipment, net $ 23,469,000 $ 19,990,000
================== ==================
</TABLE>
Included in oil and gas properties at December 31, 1999, are $413,000 in
general and administrative costs incurred and capitalized to the full cost pool
in 1999. 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.
During 1998, the Company recorded a loss impairment on its oil and gas
properties of $50,130,000. At December 31, 1999, due mainly to an increase in
prevailing sales prices and to the write down of properties recorded during
1998, the 10% discounted future cash flow from oil and gas properties, as
computed by the Company, well exceeded carrying value. Therefore, no loss
impairment related to oil and gas properties was recorded during 1999.
During 1998, $5,097,000 of undeveloped leasehold cost, previously not
considered to be subject to amortization, was determined to be impaired and was
included in the cost of oil and gas properties subject to amortization, and in
the $50,130,000 impairment of oil and gas properties. At December 31, 1999, the
Company had no oil and gas properties not subject to amortization.
During December 1997, the Company sold substantially all of its field
equipment for approximately $2,100,000 resulting in a net gain on the sale of
$594,000. During 1998, the Company sold oil and gas properties totaling
$8,800,000. The sale of these properties was treated as a reduction to the full
cost pool. Additionally, during 1998, the Company abandoned $271,000 in software
costs.
4. OTHER ASSETS
Other assets as of December 31 consist of the following:
<TABLE>
<CAPTION>
1999 1998
-------------- ----------------
<S> <C> <C>
Plugging and abandonment escrow account
on the WCBB properties $ 1,610,000 $ 1,453,000
Prepaid loan fees, net of amortization 34,000 103,000
CD's securing Letter of credit 400,000 400,000
Deposits 132,000 142,000
------------- -------------
$ 2,176,000 $ 2,098,000
============= ==============
</TABLE>
F-11
<PAGE>
GULFPORT ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
5. SETTLEMENT OF CLAIMS
In accordance with the Plan, at the time of reorganization funds were placed
in escrow to cover settlement of disputed priority, administrative and secured
claims. During March, 2000, final settlement of certain priority claims totaling
$116,000 occurred and funds remaining in escrow in excess of claims settled were
remitted to the Company. The total of these funds remitted to the Company during
March, 2000 approximated $197,000.
In addition, the Company accrued certain claims which were to be paid out
over a period of years. Those claims remaining to be paid at December 31, 1999,
are included in the accompanying balance sheets as current liabilities and total
$372,000. Claims remaining to be paid at December 31, 1998, are included in the
accompanying balance sheets and total $372,000 with $186,000 classified as
current liabilities and $186,000 classified as long-term liabilities. Subsequent
to December 31, 1999, $116,000 of these claims was paid from funds held in
escrow as described above.
6. LONG-TERM DEBT
As of December 31 a break down of long-term debt is as follows:
<TABLE>
<CAPTION>
1999 1998
------------------- -----------------
<S> <C> <C>
Credit facility $ 2,879,000 $ 4,779,000
Building loan 195,000 210,000
Priority tax claims - 186,000
------------------- -----------------
3,074,000 5,175,000
Less current portion 2,895,000 4,794,000
------------------- -----------------
$ 179,000 $ 381,000
=================== =================
</TABLE>
Credit Facility
On the Effective Date, the Company entered into a $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. Two subsequent amendments have been made to the ING Credit
Agreement. The second and latest amendment was dated July 10, 1999, and extends
the maturity date to June 30, 2000. The loan bears interest at the option of the
Company at either (1) London Interbank Offering Rate ("LIBOR") plus 3% or (2)
ING's fluctuating "reference rate" plus 1.25%, and is to be paid quarterly. At
December 31, 1999, this rate was 9.75%. Under this amendment a principal payment
of $379,247 is to be made on or before March 31, 2000, and the remaining
principal balance is to be paid on or before June 30, 2000. This loan is
collateralized by substantially all of the Company's assets. In the event that
the remaining principal is not repaid on or before June 30, 2000, the Company
will be required to pay $250,000 in additional loan fees to ING.
Building Loan
In 1996, the Company purchased a building in Lafayette, Louisiana to be
used as the Company's Louisiana headquarters. The building is 12,480 square feet
with approximately 6,180 square feet of finished office area and 6,300 square
feet of warehouse space. This building allows the Company to provide office
space for Louisiana personnel, have access to meeting space close to the fields
and to maintain a corporate presence in Louisiana.
In connection with the purchase of the building, the Company entered
into a loan agreement with MC Bank & Trust Company. 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.
F-12
<PAGE>
GULFPORT ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
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. As of December 31,
1999, the Company owed $195,000 on the Lafayette building.
Long-Term Debt Maturities
Following are the maturities of long-term debt for each of the next five
years:
2000 $2,895,000
2001 18,000
2002 20,000
2003 22,000
2004 24,000
Thereafter 95,000
------------
$3,074,000
============
7. PREFERRED STOCK
All outstanding Preferred Stock issued by WRT was canceled effective July
11, 1997, and the former preferred shareholders were given Warrants to purchase
the Company's Common Stock. Pursuant to the Plan, 221,000 warrants were issued
with an exercise price of $10.00. The Warrants have been adjusted for subsequent
changes in the capitalization of the Company. The Company has not issued any of
its authorized Preferred Stock.
8. COMMON STOCK OPTIONS, WARRANTS AND CHANGES IN CAPITALIZATION
Options
On June 1, 1999, the Company's Chief Executive Officer and President were
each granted stock options for the purchase of 2.5% of the outstanding shares of
Common Stock at an exercise price of $2.00 per share. The options vest 35% on
June 1, 2000, and 35% on June 1, 2001, with the remaining options vesting on
June 1, 2002. The option agreements provide for pro-rata adjustments to options
granted if the Company at any time increases the number of outstanding shares or
otherwise alters its capitalization. Stock options previously granted to the
President were surrendered to the Company upon his death in December, 1999.
On September 15, 1999, all non-employee board members were each granted
10,000 options with an exercise price of $2.00. The options vest 33% on October
1, 1999, and 33% on October 1, 2000, with the remaining options vesting on
October 1, 2001. These options granted to non-employee board members will be
adjusted on a pro-rata basis to reflect any change in the capitalization of the
Company.
Pursuant to the Plan of Reorganization, 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. The employment agreement expired in July, 1999,
and was not renewed by the Company. No expiration term for the options, however,
was specified under the employment agreement.
Warrants
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 (the "Agreement"), authorizing the issuance of
up to 1,104,000 warrants, went into effect as mandated under the Plan of
Reorganization. A total of 221,000 new warrants, each for the purchase of one
share of the Company Common Stock, were issued to the former shareholders of
WRT, in accordance with the Agreement. These warrants are exercisable at $10.00
per warrant and expire on July 11, 2002.
F-13
<PAGE>
GULFPORT ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
The Agreement contains several anti-dilutive provisions that provide for
adjustments to the terms of the warrants in the event of any recapitalization by
the Company. As a result of the Company's capitalization changes as described
below, these 221,000 warrants issued can purchase .234 shares of Common Stock
for each warrant outstanding at December 31, 1999.
Rights Offering
On November 20, 1998, the Company completed a $7,500,000 Rights Offering.
The Company distributed 4,000,000 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. 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
3,445,400, and increasing the par value of each share to $.50. Subsequent to
this reverse stock split, the par value was reduced to $.01.
Regulation D Private Placement Offering
During September 1999, the Company conducted a private placement of stock
(the "Regulation D Offering"). In accordance with the provisions of certain
exemptions, the Regulation D Offering was made only to Accredited Investors as
defined in Regulation D.
The Company offered 6,700,000 shares of common stock at an exercise price of
$.75 per share. Each shareholder exercising his basic subscription privilege in
full was entitled to oversubscribe for additional shares. A total of 6,700,000
shares were subscribed, yielding $5,016,000, net of offering costs. As of the
date of the Regulation D Offering, Affiliated Shareholders were owed $3,238,000
by the Company. In the Regulation D Offering, the Affiliated Shareholders
acquired 4,040,011 common shares through the forgiveness of $3,030,000 of this
debt, with the remaining balance of $208,000 paid in cash during October, 1999.
9. INCOME TAXES
A reconciliation of the statutory federal income tax amount to the recorded
expense follows:
<TABLE>
<CAPTION>
July 11, 1997 January 1, 1997
Through Through
December 31, July 10,
1999 1998 1997 1997
------------- ------------- -------------- ---------------
Income (loss)
before federal
<S> <C> <C> <C> <C>
income taxes $ 641,000 $(59,105,000) $ (1,713,000) $ 79,108,000
------------- ------------- -------------- --------------
Expected income
tax (benefit)
at statutory
rate 255,000 (22,460,000) (651,000) 30,061,000
Valuation allowance - 22,460,000 651,000 -
Net operating loss
carryforward
utilized - - - (30,061,000)
Other deferred tax
assets utilized (255,000) - - -
------------- ------------- -------------- -------------
Income tax
expense
recorded $ - $ - $ - $ -
============= ============= ============== =============
</TABLE>
F-14
<PAGE>
GULFPORT ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
The Company filed a short period tax return for the six months and ten days
ended July 10, 1997. On that return, the Company utilized $30,061,000 of its
deferred tax asset. Since the deferred tax asset was fully reserved by a
valuation allowance at December 31, 1996, no income tax expense was recognized
on the financial statements for the period ended July 10, 1997.
The tax effects of temporary differences and net operating loss
carryforwards, which give rise to deferred tax assets at December 31 are as
follows:
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Net operating loss carryforward $ 18,572,000 $ 17,630,000
Oil and gas property basis
difference 23,089,000 23,089,000
Other 1,443,000 1,953,000
------------- -------------
Total deferred tax asset 43,104,000 42,672,000
Valuation allowance (43,104,000) (42,672,000)
------------- -------------
Net deferred tax asset $ - $ -
============= =============
</TABLE>
The Company has an available tax net operating loss carry forward of
approximately $70,000,000 as of December 31, 1999. This carryforward will begin
to expire in the year 2013.
10. 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. The
difference between common stock outstanding and common stock and stock
equivalents outstanding for the year ended December 31, 1999, was insignificant.
11. RELATED PARTY TRANSACTIONS
Subsequent to the Effective Date, substantially all of the Company's former
unsecured creditors became shareholders. In the ordinary course of business, the
Company still conducts business activities with a substantial number of these
shareholders.
DLB paid $1,515,000 in reorganization costs incurred on the Company's
behalf, which was satisfied by the issuance of stock in connection with the
Company's 1997 stock rights offering. These costs were included in
reorganization cost incurred during the six months and 10 days ended July 10,
1997. In addition, DLB charged the Company $465,000 for management services
provided to it during the period July 11, 1997 through December 31, 1997. During
the period May 1, 1997 through July 10, 1997, DLB was the operator on the WCBB
properties in which the Company had a 50% working interest at that time.
Subsequent to that date, the WCBB properties were contributed to the Company for
common stock, and the Company became the operator of these properties.
DLB and Wexford Management LLC ("Wexford") were, along with the Company,
co-proponents in the Plan of Reorganization. As of December 31, 1997, 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 DLB's acquisition by
Chesapeake Energy Corporation. As a result of this distribution, Charles
Davidson, Mike Liddell and Mark Liddell collectively received 37.5% of the
Company's stock. As of December 31, 1999, Wexford and its affiliates owned
approximately 17.7% of the Company's issued outstanding stock. Charles Davidson,
Mike Liddell and Mark Liddell own collectively 54.22% of the Company's
outstanding stock as of December 31, 1999.
F-15
<PAGE>
GULFPORT ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
Administrative Service Agreement
Pursuant to the terms and conditions of an 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
continued 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. During the year ended December 31, 1997, the
services of Gary C. Hanna and Ronald D. Youtsey, the Company's then President
and Secretary, respectively, were provided under this agreement. These
individuals are no longer with the Company. On April 28, 1998, in connection
with the acquisition of DLB, Inc. by Chesapeake Energy Corporation, the
obligations of DLB under the Administrative Services Agreement were assigned to
DLB Equities, L.L.C.
In return for the services rendered under the Administrative Services
Agreement, the Company paid 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 $21,000
and $969,000 during 1999 and 1998, respectively. Effective June of 1999, this
Administrative Service Agreement was terminated.
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 and was satisfied with the exercise of 632,484 rights in
the November 20, 1998 Rights Offering through debt forgiveness.
Sales
During the year ended December 31, 1998, the Company sold $2,058,000 in oil
to a DLB subsidiary. During the period July 11, 1997 through December 31, 1997,
the Company sold $4,335,000 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. No sales to related parties were made during 1999.
Stockholder Credit Facility
On August 18, 1998, the Company entered into 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 facility agreement, the Company
paid the eligible Affiliated 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
pursuant to their Basic Subscription Privilege in the Rights Offering through
the forgiveness of the amount owed to them under this stockholder credit
facility.
F-16
<PAGE>
GULFPORT ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
On August 5, 1999, the Company entered into a $3,255,000 revolving credit
facility with the "Affiliated Stockholders". Borrowing under this agreement was
due on August 1, 2000, and bore interest at LIBOR plus 3%. Pursuant to the terms
of the agreement, the Company paid aggregate commitment fees equal to $65,000 or
2% of the related borrowings in stock. This debt was extinguished through the
issuance of 4,040,011 shares of common stock to the Affiliated Stockholders in
the Regulation D Offering in August, 1999, and through the payment of additional
funds totaling $208,000.
12. COMMITMENTS
Leases
As of December 31, 1999 and 1998, the Company had no long-term,
non-cancelable operating lease commitments.
Rental expense for all operating leases for the years ended December 31,
1999 and 1998, the period commencing July 11, 1997 and ending December 31, 1997,
and the period commencing January 1, 1997 and ending July 10, 1997, totaled
$119,000, $120,000, $77,000, and $109,000, 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 was to be transferred to the purchaser. At December 31, 1998,
the Company and the purchaser were working to cure a title defect in the field.
Accordingly, the Company treated the $936,000 as restricted cash as of December
31, 1998. Once that title defect was cured during 1999, the escrow was
transferred to the purchaser and the purchase price of $936,000 for the field
was released to ING as payment on the Company's note.
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. Texaco Exploration and Production, Inc. ("Texaco") retained a
security interest in production from these properties and the plugging and
abandonment trust until such time as the Company's plugging and abandonment
obligations to Texaco 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, 1999, the
plugging and abandonment trust totaled $1,610,000, including interest received
during 1999 of $64,000. The Company was in arrears on its escrow payments in the
amounts of $166,000 and $37,000 as of December 31, 1999 and 1998, respectively.
During March, 2000, the Company began to fulfill its yearly plugging commitment
of 20 wells at WCBB.
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 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. During the year ended December 31, 1998, the period
F-17
<PAGE>
GULFPORT ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
commencing July 11, 1997 and ending on December 31, 1997, and the period
commencing January 1, 1997 and ending on July 10, 1997, the Company incurred
$4,000, $13,000, and $23,000, respectively, in matching contributions expense
associated with this plan. The Company did not incur any expense related to this
plan during the year ended December 31, 1999. On February 17, 1999, the Company
sponsored 401(k) savings plan was terminated and all contributions were
distributed to the participants.
Effective January 1, 2000, the Company is sponsoring new 401(k) and Profit
Sharing plans under which eligible employees may contribute up to 15% of pay
through salary deferrals. Also under these plans, the Company will make a
contribution each calendar year on behalf of each employee equal to at least 3%
of his or her salary, regardless of the employee's participation in salary
deferrals.
Employment Agreement
At December 31, 1999, the Company had an employment agreement with its Chief
Executive Officer. This agreement expires June 1, 2004, and calls for an annual
salary of $200,000 which may be adjusted for cost of living increases.
13. 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 Trust entered into a
Clarification Agreement to clarify provisions of the Plan regarding the rights
of the Company and the Litigation Trust to prosecute certain causes of action
arising from the Tri-Deck matter. As a part of the Clarification Agreement, the
Litigation Trust 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 Trust, 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 Trust. No
provision for the recognition of income concerning this matter has been
reflected in the financial statements prior to 1999. The funds received from the
Litigation Trust during 1999 represent settlement of the Tri-Deck case.
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. This lawsuit was dismissed
with prejudice during 1999.
On October 1, 1999, Plymouth Resources Group 1998 LLC filed a complaint in
the Western District of Louisiana alleging breach of contract regarding rework
operations at West Cote Blanche Bay. Plymouth has challenged the Company's right
to conduct rework operations in late 1998 and 1999. Plymouth has requested
damages in excess of $100,000, specific performance and an accounting. The
Company does not believe that it breached any contract with Plymouth and is
vigorously defending this lawsuit. Management does not expect this litigation to
have a material impact on the financial statements.
The Company owns and operates a production facility at WCBB. Pursuant to
facility use agreements, the Company charges third parties including Texaco for
using the facility. The Company and Texaco are currently negotiating past due
amounts related to the facility. The Company believes that it has adequately
recorded in its financial statements all material obligations arising from the
operations of WCBB as well as revenues earned attributed to operating these
facilities.
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.
F-18
<PAGE>
GULFPORT ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
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 oil and 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. During 1999 and 1998, the Company incurred bad
debts of $56,000 and $244,000, respectively. The bad debt incurred during 1998
related to a disputed pre-bankruptcy receivable which was determined to be
uncollectible.
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 December 31, 1999 and 1998 the Company held cash in excess of
insured limits in these banks totaling $5,962,000 and $3,983,000 respectively.
During the year ended December 31, 1999, approximately 99% of the Company's
revenues from oil and natural gas sales were attributable to five primary
customers: Equiva Trading Company, Black Hills Energy Resources, Inc., Flash Oil
& Gas Southwest, Inc., Burlington Resources, and Plains All American, Inc.
During the year ended December 31, 1998, approximately 76% of the Company's
revenues from oil and natural gas sales were attributable to sales to five
primary customers: Equiva Trading Company, Gathering and Energy Marketing Corp.,
Black Hills Energy Resources, Inc., Prior Energy Company, and Plains Marketing,
L.P. During the year ended December 31, 1997, approximately 99% of the Company's
revenues from oil and gas sales were attributable to sales to five primary
customers: Prior Energy Company, Wickford Energy Marketing, Inc., Gathering and
Energy Marketing Corp., Texaco Trading and Transportation and Mobil Oil
Corporation. Included in accounts payable and accrued liabilities in the
accompanying balance sheets at December 31, 1999, is approximately $1,000,000 in
production revenues remitted to the Company by certain of the above-named
customers. The Company has not recognized these receipts as sales revenue in the
accompanying statements of operations because it believes these funds exceed its
share of revenues on the related properties.
14. LITIGATION TRUST ENTITY
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 Trust 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 Trust 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.
During 1999, the Company received $1,342,000 in proceeds from the Litigation
Trust.
F-19
<PAGE>
GULFPORT ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
15. SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION
ACTIVITIES (UNAUDITED)
The following is historical revenue and cost information relating to the
Company's oil and gas operations located entirely in the southeastern United
States:
Capitalized Costs Related to Oil and Gas Producing Activities
<TABLE>
<CAPTION>
1999 1998
-------------- ----------------
<S> <C> <C>
Proven Properties $ 84,135,000 $ 77,042,000
Accumulated depreciation, depletion,
amortization and impairment reserve (62,047,000) (58,637,000)
-------------- ----------------
Proven properties , net $ 22,088,000 $ 18,405,000
============== ================
</TABLE>
Costs Incurred in Oil and Gas Property Acquisition and Development Activities
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- -----------
<S> <C> <C> <C>
Acquisition $ 337,000 $ - $15,144,000
Development 6,803,000 746,000 6,787,000
---------- ---------- -----------
$7,140,000 $ 746,000 $21,931,000
========== ========== ===========
</TABLE>
Results of Operations for Producing Activities
The following schedule sets forth the revenues and expenses related to the
production and sale of oil and gas. The income tax expense is calculated by
applying the current statutory tax rates to the revenues after deducting costs,
which include depreciation, depletion and amortization allowances, after giving
effect to the permanent differences. The results of operations exclude general
office overhead and interest expense attributable to oil and gas production.
July 11, 1997 January 1, 1997
Through Through
December 31, July 10,
1999 1998 1997 1997
----------- ------------ ------------- ---------------
Revenues $10,018,000 $ 8,298,000 $ 9,328,000 $10,138,000
Production costs (4,640,000) (8,596,000) (4,541,000) (5,143,000)
Impairment of oil
and gas properties - (50,130,000) - -
Depletion (3,410,000) (4,136,000) (4,371,000) (3,314,000)
----------- ----------- ----------- -----------
1,968,000 (54,564,000) 416,000 1,681,000
----------- ------------ ----------- -----------
Income tax expense
Current 781,000 - - -
Deferred (781,000) - - -
----------- ------------- ---------- -----------
Results of operations
from producing
activities $ 1,968,000 $(54,564,000) $ 416,000 $1,681,000
=========== ============= ========== ==========
F-20
<PAGE>
GULFPORT ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
Oil and Gas Reserves
The following table presents estimated volumes of proven and proven
developed oil and gas reserves, prepared by reserve engineers, as of December
31, 1999, 1998, and 1997 and changes in proven reserves during the last three
years, assuming continuation of economic conditions prevailing at the end of
each year. Estimated volumes as of July 11, 1997 were extrapolated from the
December 31, 1997 numbers and were not prepared by independent reserve
engineers. Volumes for oil are stated in thousands of barrels (MBbls) and
volumes for natural gas are stated in millions of cubic feet (MMCF). The
weighted average prices at December 31, 1999 used for reserve report purposes
are $25.57 and $2.12 for oil and gas reserves, respectively.
The Company emphasizes that the volumes of reserves shown below are estimates
which, by their nature, are subject to revision. The estimates are made using
all available geological and reservoir data, as well as production performance
data. These estimates are reviewed annually and revised, either upward or
downward, as warranted by additional performance data.
<TABLE>
<CAPTION>
July 11 to
December 31, January 1, to
1999 1998 1997 July 10, 1997
----------------- ------------------- ------------------ -------------------
----------------- ------------------- ------------------ -------------------
Oil Gas Oil Gas Oil Gas Oil Gas
----------------- -------- --------- -------- --------- -------- ----------
----------------- -------- --------- -------- --------- -------- ----------
Proven Reserves:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of the period 24,282 3,331 25,817 11,576 13,677 13,409 13,923 15,121
Purchases of oil and gas
reserves in place 1,594 2,762 - - 11,612 163 - -
Extensions, discoveries and
other additions - - - - - - - -
Revisions of prior reserve
estimates 641 297 - - 848 (890) - -
Current production (594) (126) (441) (421) (320) (1,106) (246) (1,712)
Sales of oil and gas
reserves in place - - (1,094) (7,824) - - - -
-------- ------- ------- ------- ------- -------- ------- --------
End of period 25,923 6,264 24,282 3,331 25,817 11,576 13,677 13,409
======== ======= ======= ======= ======= ======== ======= ========
Proven developed reserves 6,606 2,073 5,665 1,250 7,219 8,259 7,248 8,252
======== ======= ======= ======= ======= ======== ======= ========
</TABLE>
Discounted Future Net Cash Flows
Estimates of future net cash flows from proven oil and gas reserves were
made in accordance with SFAS No. 69, "Disclosures about Oil and Gas Producing
Activities." The following tables present the estimated future cash flows, and
changes therein, from the Company's proven oil and gas reserves as of December
31, 1999, 1998, and 1997, assuming continuation of economic conditions
prevailing at the end of each year.
F-21
<PAGE>
GULFPORT ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
Standardized Measure of Discounted Future Net Cash Flows Relating to Proven Oil
and Gas Reserves
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Future cash flows $ 676,056,000 $ 286,086,000 $ 492,680,000
Future development costs (132,708,000) (116,000,000) (166,812,000)
Future production costs (91,705,000) (58,582,000) (119,235,000)
Future production taxes (83,392,000) (35,116,000) (58,807,000)
------------- ------------- -------------
Future net cash flows
before income taxes 368,251,000 76,388,000 147,826,000
10% annual discount for
estimated timing of
cash flows (222,896,000) (48,965,000) (71,396,000)
-------------- ------------- -------------
Discounted future net
cash flows 145,355,000 27,423,000 76,430,000
Future income taxes, net of
10% annual discount (14,602,000) - -
------------- ------------- -------------
Standardized measure of
discounted future net
cash flows $ 130,753,000 $ 27,423,000 76,430,000
============= ============ =============
</TABLE>
Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to
Proven Oil and Gas Reserves
<TABLE>
<CAPTION>
1999 1998 1997
-------------- ------------- --------------
Sales and transfers of
oil and gas produced,
net of
<S> <C> <C> <C>
Production costs $ (5,378,000) $ 298,000 $ (9,354,000)
Net changes in prices
and development and
production costs 113,060,000 (59,354,000) (50,101,000)
Acquisition of oil and
gas reserves in place,
less related production
costs 4,978,000 - 27,195,000
Extensions, discoveries
and improven recovery,
less related costs - - -
Revisions of previous
quantity estimates, less
related production costs 3,722,000 4,438,000 5,720,000
Sales of reserves in place - (16,679,000) -
Abandoned properties - (140,000) -
Accretion of discount 1,550,000 22,430,000 6,248,000
Net change in income taxes (14,602,000) - -
Other - - (1,945,000)
------------ ------------- -------------
Total change in
standardized measure of
discounted future
net cash flows $103,330,000 $(49,007,000) $ (22,237,000)
============ ============= =============
</TABLE>
F-22
<PAGE>
GULFPORT ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
Comparison of Standardized Measure of Discounted Future Net Cash Flows to
the Net Carrying Value of Proven Oil and Gas Properties at December 31, 1999 and
1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
---------------- -------------------
Standardized measure of discounted
<S> <C> <C>
future net cash flows $ 130,753,000 $ 27,423,000
---------------- -----------------
Proven oil and gas properties 84,135,000 77,042,000
Less accumulated depreciation,
depletion, amortization and
impairment reserve (62,047,000) (58,637,000)
---------------- -----------------
Net carrying value of proven oil
and gas properties 22,088,000 18,405,000
---------------- -----------------
Standardized measure of discounted
future net cash flows in excess of
net carrying value of proven oil and
gas properties $ 108,665,000 $ 9,018,000
================ =================
</TABLE>
F-23
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not Applicable
PART III
Item 10. Directors and Executive Officers of the Registrant.
The officers and directors of the Company are as follows:
Name Age Position
---- --- --------
Mark Liddell 45 President and Director
Mike Liddell 46 Chairman of the Board, Chief
Executive Officer and Director
Lisa Holbrook 29 Vice President of Legal Affairs and
General Counsel
*Robert E. Brooks 52 Director
*David L. Houston 47 Director
*Mickey Liddell 38 Director
*Members of the Company's Audit Committee.
Mark Liddell served as a director of Gulfport from July 11, 1997 until
December 24, 1999 and as its President from April 28, 1998 until December 24,
1999. On December 24, 1999, Mr. Liddell died resulting in a vacancy on the Board
of Directors. Until April 28, 1998, Mr. Liddell held the position of President
of DLB, a position he held since October 1994. Mr. Liddell was Vice President of
DLB from 1991 to 1994. From 1985 to 1991, he was Vice President of DLB Energy.
From November 1997 to April 1999,, Mr. Liddell served as a director of Bayard
Drilling Technologies, Inc., a publicly held drilling company, from 1991 to May
1995, Mr. Liddell served as a director of TGX Corporation, a publicly held oil
and gas company, and from 1989 to 1990, he served as a director of Kaneb
Services, Inc., a publicly held industrial services and pipeline transportation
company. He received a B.S. degree in education and a J.D. degree from the
University of Oklahoma. He was the brother of Mike Liddell and Mickey Liddell.
Mike Liddell has served as a director of Gulfport since July 11, 1997,
as Chief Executive Officer since April 28, 1998 and as Chairman of the Board
since July 28, 1998. In addition, Mr. Liddell served as Chief Executive Officer
of DLB from October 1994 to April 28, 1998, and as a director of DLB from 1991
through April 1998. From 1991 to 1994, Mr. Liddell was President of DLB. From
1979 to 1991, he was President and Chief Executive Officer of DLB Energy. He
received a B.S. degree in education from Oklahoma State University. He is the
brother of Mark Liddell and Mickey Liddell.
Lisa Holbrook has served as Vice President of Gulfport since November 5,
1999, and as General Counsel since April 28, 1998. In addition, Ms. Holbrook
served as Assistant General Counsel of DLB until April 1998. Ms. Holbrook
received a B.A. in political science from Southwestern Oklahoma State
University. In 1996, Ms. Holbrook received her J.D. from Oklahoma City
University Law School where she graduated with highest distinction.
Robert E. Brooks has served as a director of Gulfport since July 11,
1997. Mr. Brooks is currently a partner with Brooks Greenblatt, a commercial
finance company located in Baton Rouge, Louisiana that was formed by Mr. Brooks
in July 1997. Mr. Brooks is a Certified Public Accountant and was Senior Vice
49
<PAGE>
President in charge of Asset Finance and Managed Assets for Bank One, Louisiana
between 1993 and July 1997. He received his B.S. degree from Purdue University
in mechanical engineering in 1969. He obtained graduate degrees in finance and
accounting from the Graduate School of Business at the University of Chicago in
1974.
David Houston has served as a director of Gulfport since July 1998.
Since 1991, Mr. Houston has been the principal of Houston & Associates, a firm
that offers life and disability insurance, compensation and benefits plans and
estate planning. Prior to 1991, he was President and Chief Executive Officer of
Equity Bank for Savings, F.A., a $600 million, Oklahoma-based savings bank. He
currently serves on the board of directors and executive committee of Deaconess
Hospital, Oklahoma City, Oklahoma, and is the former chair of the Oklahoma State
Ethics Commission and the Oklahoma League of Savings Institutions. He received a
Bachelor of Science degree in business from Oklahoma State University and a
graduate degree in banking from Louisiana State University.
Mickey Liddell has served as a director of Gulfport since January 1999.
Mr. Liddell is currently the President of Banner Entertainment, Inc., a motion
picture production company in Los Angeles, California. Prior to 1994, Mr.
Liddell owned and managed wholesale nutrition product stores in Los Angeles. Mr.
Liddell received a Bachelor of Arts from the University of Oklahoma in
Communications in 1984 and a graduate degree from Parson School of Design in New
York, New York in 1987. He is the brother of Mark Liddell and Mike Liddell.
New Director
Dan Noles was appointed to the Board of Directors in January of 2000.
Mr. Noles fills the vacancy created by the death of Mark Liddell. Mr. Noles
has served as the president of Atoka Management Company, an oilfield equipment
company, since 1993. Mr. Noles received his Bachelor degree in Finance from the
University of Oklahoma in 1970. Mr. Noles is the brother-in-law to Mike
Liddell and Mickey Liddell.
Item 11. Executive Compensation
The following table provides summary information concerning compensation
paid or accrued during the three fiscal years December 31, 1999, 1998 and 1997
to the Company's Chief Executive Officer and each of the four most highly
compensated executive officers of the Company, determined as of the end of the
last fiscal year, whose annual compensation exceeded $100,000.
<TABLE>
<CAPTION>
Long Term
Name and Principal Annual Compensation All Other
Position Year Compensation(1)(2) Awards Compensation
- --------------------------------------------------------------------------------
Salary Bonus
-------------------
<S> <C> <C> <C> <C> <C>
Mike Liddell 1999 $200,000 $ 4,166 (2) ---
Chief Executive 1998 $133,333
Officer(3)
Mark Liddell 1999 $200,000 $ 4,166 (2) ---
President(4) 1998 $133,333
Raymond P. Landry 1999 $ --- --- ---
Executive Vice- 1998 $156,000 --- ---
President(5) 1997 $156,000 $78,000 $60,000 ---
Wayne A. Benninger 1998 --- --- ---
---
Vice-President 1998 $ --- --- ---
---
Strategic Planning(6) 1997 $ 95,506 $65,500 --- ---
Thomas Stewart 1999 --- --- ---
---
Vice-President of 1998 --- --- ---
---
Operations(7) 1997 $ 83,359 $53,000 --- ---
</TABLE>
- ----------------
(1) Amounts shown include cash and non-cash compensation earned and received by
the named executives as well as amounts earned but deferred at their election.
(2) Mike Liddell and Mark Liddell each received stock options exercisable at
$2.00 per share for 253,635 shares. These options had no readily determinable
market value at the date of issuance.
50
<PAGE>
(2) The Company provides various perquisites to certain employees, including the
named executives. In each case, the aggregate value of the perquisite provided
to the named executives did not exceed 10% of such named executive's annual
salary and bonus.
(3) Mr. Mike Liddell became the Chief Executive Officer of the Company on April
28, 1998. From April 28, 1998 until June 1999 Mr. Liddell's services were
provided pursuant to the Administrative Services Agreement. The Administrative
Services Agreement was terminated in June 1999 and all services previously
rendered thereunder were transferred to the Company. The compensation shown
represents $100,000 paid under the Administrative Services Agreement from
January 1999 until May 1999 and $100,000 paid directly from the Company from
June 1999 until December 1999. See "Certain Transactions".
(4) Mr. Mark Liddell became the President of the Company on April 28, 1998. From
April 28, 1998 until June 1999 Mr. Liddell's services were provided pursuant to
the Administrative Services Agreement. The Administrative Services Agreement was
terminated in June 1999 and all services previously rendered thereunder were
transferred to the Company. The compensation shown represents $100,000 paid
under the Administrative Services Agreement and $100,000 paid directly from the
Company from June 1999 until December 1999. See "Certain Transactions".
(5) Mr. Landry received $78,000 in compensation during 1997 as a participant of
the employee stay bonus program. Mr. Landry ceased to be an Executive Vice
President on May 5, 1998, but continued to serve as an employee of the Company
until July 1999.
(6) Mr. Beninger resigned as Vice President of Strategic Planning on August 31,
1997. During 1997, Mr. Beninger received $65,500 in compensation as a
participant of the employee stay bonus program.
(7) Mr. Stewart resigned as Vice President of Operations on July 11, 1997.
During 1997, Mr. Stewart received $53,000 in compensation as a participant of
the employee stay bonus program.
Stock Options Granted
On June 1, 1999, Mike Liddell, Chief Executive Officer and Chairman of
the Board, received a grant of options for 2.5% of the issued shares of Common
Stock at an exercise price of $2.00 per share. The options shall be exercisable
and vest as to 35% of the shares on June 1, 2000, an additional 35% of the
shares will become exercisable and vest on June 1, 2001, and the remaining
shares will become exercisable and vest on June 1, 2002. On January 17, 2000,
Mr. Liddell was granted an additional 203,635 giving him a total of 457,270
options at the date of this filing.
On June 1, 1999, Mark Liddell, President, received a grant of options
for 2.5% of the outstanding shares of Common Stock at an exercise price of $2.00
per share. The options were scheduled to be exercisable and vest as to 35% of
the shares on June 1, 2000, an additional 35% of the shares will become
exercisable and vest on June 1, 2001, and the remaining shares will become
exercisable and vest on June 1, 2002. On December 24, 1999, Mr. Liddell died.
Pursuant to the terms of Mr. Liddell's Stock Option Agreement, all of his
options were surrendered to the Company.
On September 15, 1999, the non-employee board members were granted
10,000 options each with an exercise price of $2.00. The options shall vest
3,333 on October 1, 1999, 3,333 on October 1, 2000, and 3,334 on October 1,
2001. On January 17, 2000, each of the non-employee board members were granted
an additional 10,000 options with the option vesting as to one-third on each
anniversary of the grant for three years.
The Option Agreements for Mike Liddell and the Directors provide that if
the Company at any time increases the number of outstanding shares of the
Company or alters the capitalization of the Company in any other way, the stock
options shall be adjusted to reflect such changes.
51
<PAGE>
The following table sets forth information concerning the grant of stock
options during 1999 to the named executives and directors.
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
Number of #of Total Value Assumed Annual
Securities Options Rates at of Stock Price
Underlying Granted Appreciation for Option
Options Employers Exercise Terms(1)
Name Granted(#) in 1999 Price ($/SH) 5%($) 10%($)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mike Liddell 253,635 47% $2.00 $296,379 $751,083
Mark Liddell 253,635 47% $2.00 $296,379 $751,083
Robert Brooks 10,000 02% $2.00 $ 12,578 $ 31,875
David Houston 10,000 02% $2.00 $ 12,578 $ 31,975
Mickey Liddell 10,000 02% $2.00 $ 12,578 $ 31,875
</TABLE>
No options were granted to the named executives or directors in 1998.
The following table sets forth information concerning the grant of stock options
during 1997 to the named executives.
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
Number of #of Total Value Assumed Annual
Securities Options Rates at of Stock Price
Underlying Granted Appreciation for Option
Options Employers Exercise Terms(1)
Name Granted(#) in 1999 Price ($/SH) 5%($) 10%($)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Raymond P. Landry 1,817 100% $3.50 $4,938 $10,136
</TABLE>
(1) The assumed annual rates of increase are based on an annually compounded
increase of the exercise price through a presumed ten year option term.
(2) Mr. Landry's options were granted under an employment agreement that was
part of the Plan of Reorganization. On March 5, 1999, the Company conducted a 50
to 1 reverse stock split which reduced Mr. Landry's options to 1,200. On
September 15, 1999 the Company issued an additional 6,700,000 shares in
connection with its Regulation D offering. The Additional issuance increased Mr.
Landry's options to 1,817.
Stock Option Holdings
The following table sets forth the number of unexercised options held by
named executives as of December 31, 1999. No options were exercised in 1997 or
1998 and no options were in-the-money as of December 31, 1999.
<TABLE>
<CAPTION>
Number of Unexercised
Options at FY-End
Name Exercisable Unexercisable
- -------------------------------------------------------------------------------------
<S> <C> <C>
Mike Liddell(1) --- 253,635
Mark Liddell(1) 253,635
Robert Brooks(1) 3,333 6,667
David Houston(1) 3,333 6,667
Mickey Liddell(1) 3,333 6,667
Raymond P. Landry(2) --- 1,817
</TABLE>
(1) These options were exercisable at $2.00 per share.
(2) These options were exercisable at $3.50 per share.
52
<PAGE>
Stock Options Granted 2000
On December 24, 1999 Mark Liddell died. Mr. Liddell had previously been
granted 253,635 options. Pursuant to the terms of Mr. Liddell's Stock Option
Agreement, all of his options were surrendered to the Company. The following is
a table of stock option grants made after December 31, 1999 and before the date
of this filing.
<TABLE>
<CAPTION>
Options Options Total
Name At December 31, 1999 Granted 2000 Options Granted
- ------ ------------------------------------------------------------------------
<S> <C> <C> <C>
Mike Liddell 253,635 203,635 457,270
Robert Brooks 10,000 10,000 20,000
David Houston 10,000 10,000 20,000
Mickey Liddell 10,000 10,000 20,000
Dan Noles -- 20,000 20,000
Lisa Holbrook -- 10,000 10,000
Employees -- 50,000 50,000
</TABLE>
* All options reflected on this table are exercisable at $2.00 a share and vest
in three equal installments.
Director Compensation
Up to the Effective Date, each director who was not a salaried employee
of the Company received $500 for his attendance at each meeting of the Board of
Directors and was reimbursed for expenses incurred in connection with attending
each such meeting. Currently, each outside director receives compensation in the
amount of $1,000 per month, $500 for attendance at each meeting of the Board of
Directors and reimbursement for expenses incurred in connection with attending
such meetings.
Employment Agreements
On June 1, 1999, the Company entered into a five-year employment
agreement with Mike Liddell, Chief Executive Officer and Chairman of the Board.
The employment agreement provides for a salary of $200,000 per year.
On June 1, 1999, the Company entered into a five-year employment
agreement with Mark Liddell, President and Director. The employment agreement
provided for a salary of $200,000 per year. The employment agreement with Mr.
Liddell terminated by its own terms with no further liability to the Company
upon Mr. Liddell's death on December 24, 1999.
Pursuant to the Plan, Mr. Landry entered into a two-year employment
agreement with Gulfport commencing on the Effective Date. This employment
agreement provided for a salary of $156,000 per year and stock options to
purchase 60,000 shares of Common Stock at $3.50 per share pursuant to a stock
option agreement to be established by Gulfport. Mr. Landry's contract expired
July 1999 and was not renewed by the Company.
In addition, Gulfport assumed the rights and obligations of existing
employment contracts with Wayne A. Beninger and Thomas C. Stewart, both of which
expired on August 31, 1997, and called for annual salaries of $125,000 and
$100,000, respectively.
Compensation Committee Interlocks and Insider Trading
The Compensation Committee of the Company is comprised of all
non-employee directors of the Company which include Robert Brooks, David Houston
and Mickey Liddell. Mickey Liddell is the President of Banner Entertainment,
LLC. Mike and Mark Liddell are members of Banner Entertainment, LLC and assist
in making compensation decisions for Mickey Liddell. Other than herein
53
<PAGE>
disclosed, no member of the Committee is a former or current officer or employee
of the Company and no employee of the Company serves or has served on the
compensation committee (or board of directors of a corporation lacking a
compensation committee) of a corporation employing a member of this Committee.
Item 12. Security Ownership of Certain Beneficial Owners and Management
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner(1) Beneficial Ownership
- --------------------------------------------------------------------------------
Shares Percentage(2)
-----------------------
<S> <C> <C> <C>
Mike Liddell(3) 757,145 7.46%
6307 Waterford Blvd., Suite 100
Oklahoma City, OK 73118
Mark Liddell(4) 385,907 3.8%
6307 Waterford Blvd., Suite 100
Oklahoma City, OK 73118
Charles E. Davidson(5) 4,358,995 42.96%
411 West Putnam Avenue
Greenwich, CT 06830
Wexford Managment, LLC(6) 1,795,860 17.7%
411 West Putnam Avenue
Greenwich, CT 06830
Peter M. Faulkner(7) 777,384 7.66%
767 Third Avenue, Fifth Floor
New York, New York 10017
Lisa Holbrook * *
6307 Waterford Blvd., Suite 100
Oklahoma City, OK 73118
Robert Brooks * *
343 3rd Street
Suite 205
Baton Rouge, LA 70801
David Houston * *
1120 N.W. 63rd
Suite 360
Oklahoma City, OK 73116
Mickey Liddell * *
8265 Sunset Blvd.
Suite 200
Los Angeles, CA 90046
All directors and executive officers as a group __________ _______
(6 individuals) 1,143,052 11.26
</TABLE>
- --------------------
* Less than one percent.
54
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(1) Unless otherwise indicated, each person or group has sole voting power
with respect to all listed shares.
(2) Each listed person's percentage ownership is determined by assuming that
options, warrants and other convertible securities that are held by such
person and that are exercisable or convertible within sixty (60) days
have been exercised.
(3) Includes shares of Common Stock held of record by Liddell Investments,
L.L.C. Mr. Liddell is the sole member of Liddell Investments, L.L.C.
(4) Mr. Liddell's shares were transferred to his estate upon his death on
December 24, 1999.
(5) Includes 3,574,722 shares of Common Stock held of record by CD Holding,
L.L.C. and 784,273 shares of Common Stock held in an IRA for Mr.
Davidson. Mr. Davidson is the sole member of CD Holding, L.L.C. Does not
include 1,795,860 shares of Common Stock held by the Wexford Entities
(as defined below). Mr. Davidson is the Chairman and controlling member
of Wexford Management, L.L.C. Mr. Davidson disclaims beneficial
ownership of the 1,795,860 shares owned by the Wexford Entities.
However, Mr. Davidson controls 61% of the issued stock of the Company.
As a result, Mr. Davidson is able to influence significantly and
possibly control matters requiring approval of the shareholders
including the election of directors.
(6) Includes shares of Common Stock owned by the following investment funds
(the "Wexford Entities") that are affiliated with Wexford Management:
Wexford Special Situations 1996, L.P.; Wexford Special Situations 1996
Institutional, L.P.; Wexford Special Situations 1996, Limited;
Wexford-Euris Special Situations 1996, L.P.; Wexford Spectrum Investors,
L.L.C.; Wexford Capital Partners II, L.P.; Wexford Overseas Partners I,
L.P.
(7) Includes shares of Common Stock owned by the following investment funds:
PMF Partners, L.L.C., Rumpere Capital, L.P., and Rumpere Capital Fund,
Ltd.
Item 13. Certain Relationships and Related Transactions
Reorganization of the Company
By Order dated May 2, 1997, the Bankruptcy Court confirmed the Plan of
WRT and co-proponents DLB Oil & Gas, Inc. and Wexford Management. On July 11,
1997, DLB Oil & Gas, Inc. and Wexford Management received, pursuant to the Plan,
an aggregate of 13.2 million shares of Common Stock for various claims, assets
and cash as detailed below:
Unsecured debt of $34.3 million 2.88 million shares
Contribution of DLB's interest in certain
WCBB properties 5.62 million shares
Cash of $5.0 million 1.43 million shares
Contribution of $11.5 million of secured and
asserted secured claims 3.27 million shares
Total shares issued to DLB and Wexford
Management 13.20 million shares
For additional information concerning the Company's bankruptcy
reorganization, see "Business - Events Leading to the Reorganization Case."
Administrative Services Agreement
After emerging from bankruptcy, the Company entered into an
Administrative Service Agreement with DLB. The Administrative Service Agreement
was terminated in June 1999. Prior to termination of the Agreement and pursuant
to the terms and conditions of the Administrative Services Agreement, DLB agreed
to make available to the Company personnel, services, facilities, supplies, and
equipment as the Company may need, including executive and managerial,
55
<PAGE>
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 was to continue 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 by Chesapeake Energy
Corporation, the obligations of DLB under the Administrative Services Agreement
were assigned to DLB Equities, L.L.C. Until the Administrative Services
Agreement was terminated in June 1999, the services of Mike Liddell, Chief
Executive Officer, and Mark Liddell, President, were provided under the
Administrative Services Agreement. DLB Equities, L.L.C. is owned equally by Mike
and Mark Liddell.
At December 31, 1997, the Company 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
Corporation, 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 Liddell, Mark Liddell and Charles 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 as
payment for the receivable.
In return for the services rendered under the Administrative Services
Agreement, the Company paid 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 $532,000
and $139,000 during the nine and six months ended September 30, 1998,
respectively.
During June 1999, the Administrative Services Agreement was terminated
by mutual agreement between DLB Equities, L.L.C. and the Company's Board of
Directors. All services previously provided by the Administrative Services
Agreement were transferred directly to the Company.
Stockholder Line of Credit
On August 18, 1998, the Company entered into the Stockholder Credit
Facility, a $3,000,000 revolving credit facility with CD Holdings, L.L.C.,
Liddell Investments, L.L.C., Liddell Holdings, L.L.C. and Wexford Entities
(collectively the "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
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. On November 20, 1998, the
Affiliated Stockholders converted this debt to 1,200,000 shares of the Company's
common stock in the Rights Offering.
On August 5, 1999, the Company entered into the Line of Credit for
$3,238,000 with the Affiliated Stockholders. Borrowing under the Line of Credit
was due on September 15, 1999 and bore interest at LIBOR plus 3%. Pursuant to
the Line of Credit, the Company paid the Affiliated Eligible Stockholders an
aggregate commitment fee equal to $65,000 in common stock and interest totaling
$31,131. On September 15, 1999, the Affiliated Shareholders converted $3,030,000
of this line of credit into 4,040,011 shares of the Company's common stock in
the Regulation D Private Placement Offering. The Company repaid $208,314 of this
Line of Credit in cash to Affiliated Eligible Stockholders for debt not
converted in the offering.
56
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
None
57
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934 as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
Date: March _____, 2000.
GULFPORT ENERGY CORPORATION
By:/s/Mike Liddell
-------------------------------------
Mike Liddell, Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934 as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacity and on the date indicated.
Date: March ____, 2000 By:/s/Mike Liddell
--------------------------------------
Mike Liddell, Chief Executive Officer
And Director
Date: March ____, 2000 By:/s/Robert Brooks
-------------------------------------
Robert Brooks, Director
Date: March ____, 2000 By:/s/David L. Houston
-------------------------------------
David L. Houston, Director
Date: March ____, 2000 By:/s/Mickey Liddell
------------------------------------
Mickey Liddell, Director
Date: March _____, 2000 By:/s/Dan Noles
------------------------------------
Dan Noles, Director
58
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 5,664
<SECURITIES> 0
<RECEIVABLES> 2,299
<ALLOWANCES> 244
<INVENTORY> 0
<CURRENT-ASSETS> 120
<PP&E> 86,001
<DEPRECIATION> 62,532
<TOTAL-ASSETS> 33,484
<CURRENT-LIABILITIES> 9,191
<BONDS> 0
0
0
<COMMON> 101
<OTHER-SE> 24,013
<TOTAL-LIABILITY-AND-EQUITY> 33,484
<SALES> 10,018
<TOTAL-REVENUES> 10,211
<CGS> 0
<TOTAL-COSTS> 9,978
<OTHER-EXPENSES> (1,342)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 934
<INCOME-PRETAX> 641
<INCOME-TAX> 0
<INCOME-CONTINUING> 641
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 641
<EPS-BASIC> .13
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