Condensed Consolidating Financial Information | CONDENSED CONSOLIDATING FINANCIAL INFORMATION On October 17, 2012, December 21, 2012 and August 18, 2014, the Company issued an aggregate of $600.0 million principal amount of its 7.75% Senior Notes. The October Notes, December Notes, and the August Notes are collectively referred to as the "2020 Notes". The 2020 Notes are guaranteed on a senior unsecured basis by all existing consolidated subsidiaries that guarantee the Company's secured revolving credit facility or certain other debt (the "Guarantors"). The 2020 Notes are not guaranteed by Grizzly Holdings, Inc. (the "Non-Guarantor"). The Guarantors are 100% owned by Gulfport (the "Parent"), and the guarantees are full, unconditional, joint and several. There are no significant restrictions on the ability of the Parent or the Guarantors to obtain funds from each other in the form of a dividend or loan. In connection with the issuance of the 2020 Notes, the Company and the subsidiary guarantors entered into registration rights agreements with the initial purchasers, pursuant to which the Company and the subsidiary guarantors agreed to file a registration statement with respect to an offer to exchange the 2020 Notes for a new issue of substantially identical debt securities registered under the Securities Act. The exchange offer for the October Notes and December Notes was completed in October 2013 and the exchange offer for the August Notes was completed in March 2015. On April 21, 2015, the Company issued $350.0 million in aggregate principal amount of 6.625% Senior Notes due 2023 to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons in accordance with Regulation S under the Securities Act. In connection with the 2023 Notes Offering, the Company and its subsidiary guarantors entered into a registration rights agreement, dated as of April 21, 2015, pursuant to which the Company agreed to file a registration statement with respect to an offer to exchange the 2023 Notes for a new issue of substantially identical debt securities registered under the Securities Act. The exchange offer for the 2023 Notes was completed on October 13, 2015. The following condensed consolidating balance sheets, statements of operations, statements of comprehensive (loss) income and statements of cash flows are provided for the Parent, the Guarantors and the Non-Guarantor and include the consolidating adjustments and eliminations necessary to arrive at the information for the Company on a condensed consolidated basis. The information has been presented using the equity method of accounting for the Parent's ownership of the Guarantors and the Non-Guarantor. CONDENSED CONSOLIDATING BALANCE SHEETS (Amounts in thousands) June 30, 2016 Parent Guarantors Non-Guarantor Eliminations Consolidated Assets Current assets: Cash and cash equivalents $ 395,703 $ 733 $ 1 $ — $ 396,437 Accounts receivable - oil and gas 90,758 7,721 — (7,017 ) 91,462 Accounts receivable - related parties 23 — — — 23 Accounts receivable - intercompany 355,924 1,904 — (357,828 ) — Prepaid expenses and other current assets 7,782 — — — 7,782 Short-term derivative instruments 44,672 — — — 44,672 Deferred tax asset 292 — — — 292 Total current assets 895,154 10,358 1 (364,845 ) 540,668 Property and equipment: Oil and natural gas properties, full-cost accounting 5,334,096 352,821 — (729 ) 5,686,188 Other property and equipment 48,064 43 — — 48,107 Accumulated depletion, depreciation, amortization and impairment (3,339,056 ) (31 ) — — (3,339,087 ) Property and equipment, net 2,043,104 352,833 — (729 ) 2,395,208 Other assets: Equity investments 242,627 25,441 49,557 (64,578 ) 253,047 Long-term derivative instruments 14,644 — — — 14,644 Deferred tax asset 24,284 — — — 24,284 Other assets 11,336 — — — 11,336 Total other assets 292,891 25,441 49,557 (64,578 ) 303,311 Total assets $ 3,231,149 $ 388,632 $ 49,558 $ (430,152 ) $ 3,239,187 Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 281,712 $ 16,768 $ — $ (8,730 ) $ 289,750 Accounts payable - intercompany — 355,991 125 (356,116 ) — Asset retirement obligation - current 75 — — — 75 Short-term derivative instruments 49,906 — — — 49,906 Total current liabilities 331,693 372,759 125 (364,846 ) 339,731 Long-term derivative instrument 29,269 — — — 29,269 Asset retirement obligation - long-term 29,993 — — — 29,993 Long-term debt 956,754 — — — 956,754 Total liabilities 1,347,709 372,759 125 (364,846 ) 1,355,747 Stockholders' equity: Common stock 1,253 — — — 1,253 Paid-in capital 3,242,404 25,822 255,244 (281,066 ) 3,242,404 Accumulated other comprehensive (loss) income (46,803 ) — (45,507 ) 45,507 (46,803 ) Retained (deficit) earnings (1,313,414 ) (9,949 ) (160,304 ) 170,253 (1,313,414 ) Total stockholders' equity 1,883,440 15,873 49,433 (65,306 ) 1,883,440 Total liabilities and stockholders' equity $ 3,231,149 $ 388,632 $ 49,558 $ (430,152 ) $ 3,239,187 CONDENSED CONSOLIDATING BALANCE SHEETS (Amounts in thousands) December 31, 2015 Parent Guarantors Non-Guarantor Eliminations Consolidated Assets Current assets: Cash and cash equivalents $ 112,494 $ 479 $ 1 $ — $ 112,974 Accounts receivable - oil and gas 72,241 54 — (423 ) 71,872 Accounts receivable - related parties 16 — — — 16 Accounts receivable - intercompany 326,475 60 — (326,535 ) — Prepaid expenses and other current assets 3,905 — — — 3,905 Short-term derivative instruments 142,794 — — — 142,794 Total current assets 657,925 593 1 (326,958 ) 331,561 Property and equipment: Oil and natural gas properties, full-cost accounting, 5,108,258 316,813 — (729 ) 5,424,342 Other property and equipment 33,128 43 — — 33,171 Accumulated depletion, depreciation, amortization and impairment (2,829,081 ) (29 ) — — (2,829,110 ) Property and equipment, net 2,312,305 316,827 — (729 ) 2,628,403 Other assets: Equity investments 231,892 — 50,644 (40,143 ) 242,393 Long-term derivative instruments 51,088 — — — 51,088 Deferred tax assets 74,925 — — — 74,925 Other assets 6,364 — — — 6,364 Total other assets 364,269 — 50,644 (40,143 ) 374,770 Total assets $ 3,334,499 $ 317,420 $ 50,645 $ (367,830 ) $ 3,334,734 Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 264,893 $ 527 $ — $ (292 ) $ 265,128 Accounts payable - intercompany 326,541 124 (326,665 ) — Asset retirement obligation - current 75 — — — — 75 Short-term derivative instruments 437 — — — 437 Deferred tax liability 50,697 — — — 50,697 Current maturities of long-term debt 179 — — — 179 Total current liabilities 316,281 327,068 124 (326,957 ) 316,516 Long-term derivative instrument 6,935 — — — 6,935 Asset retirement obligation - long-term 26,362 — — — 26,362 Long-term debt, net of current maturities 946,084 — — — 946,084 Total liabilities 1,295,662 327,068 124 (326,957 ) 1,295,897 Stockholders' equity: Common stock 1,082 — — — 1,082 Paid-in capital 2,824,303 322 241,553 (241,875 ) 2,824,303 Accumulated other comprehensive (loss) income (55,177 ) — (55,177 ) 55,177 (55,177 ) Retained (deficit) earnings (731,371 ) (9,970 ) (135,855 ) 145,825 (731,371 ) Total stockholders' equity 2,038,837 (9,648 ) 50,521 (40,873 ) 2,038,837 Total liabilities and stockholders' equity $ 3,334,499 $ 317,420 $ 50,645 $ (367,830 ) $ 3,334,734 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (Amounts in thousands) Three months ended June 30, 2016 Parent Guarantors Non-Guarantor Eliminations Consolidated Total revenues $ (28,580 ) $ 428 $ — $ — $ (28,152 ) Costs and expenses: Lease operating expenses 14,491 170 — — 14,661 Production taxes 2,828 28 — — 2,856 Midstream gathering and processing 39,242 107 — — 39,349 Depreciation, depletion, and amortization 55,651 1 — — 55,652 Impairment of oil and gas properties 170,621 — — — 170,621 General and administrative 11,846 8 — — 11,854 Accretion expense 261 — — — 261 294,940 314 — — 295,254 (LOSS) INCOME FROM OPERATIONS (323,520 ) 114 — — (323,406 ) OTHER (INCOME) EXPENSE: Interest expense 16,082 — — — 16,082 Interest income (391 ) — — — (391 ) Loss (income) from equity method investments and investments in subsidiaries 722 59 762 (707 ) 836 16,413 59 762 (707 ) 16,527 (LOSS) INCOME BEFORE INCOME TAXES (339,933 ) 55 (762 ) 707 (339,933 ) INCOME TAX BENEFIT (157 ) — — — (157 ) NET (LOSS) INCOME $ (339,776 ) $ 55 $ (762 ) $ 707 $ (339,776 ) CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (Amounts in thousands) Three months ended June 30, 2015 Parent Guarantors Non-Guarantor Eliminations Consolidated Total revenues $ 112,027 $ 243 $ — $ — $ 112,270 Costs and expenses: Lease operating expenses 16,685 178 — — 16,863 Production taxes 3,260 25 — — 3,285 Midstream gathering and processing 32,892 12 — — 32,904 Depreciation, depletion, and amortization 71,154 1 — — 71,155 General and administrative 9,488 5 22 — 9,515 Accretion expense 192 — — — 192 133,671 221 22 — 133,914 (LOSS) INCOME FROM OPERATIONS (21,644 ) 22 (22 ) — (21,644 ) OTHER (INCOME) EXPENSE: Interest expense 12,023 — — — 12,023 Interest income (248 ) — — — (248 ) Loss (income) from equity method investments and investments in subsidiaries 15,120 — 8,494 (8,494 ) 15,120 26,895 — 8,494 (8,494 ) 26,895 (LOSS) INCOME BEFORE INCOME TAXES (48,539 ) 22 (8,516 ) 8,494 (48,539 ) INCOME TAX BENEFIT (17,214 ) — — — (17,214 ) NET (LOSS) INCOME $ (31,325 ) $ 22 $ (8,516 ) $ 8,494 $ (31,325 ) CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (Amounts in thousands) Six months ended June 30, 2016 Parent Guarantors Non-Guarantor Eliminations Consolidated Total revenues $ 128,171 $ 640 $ — $ — $ 128,811 Costs and expenses: Lease operating expenses 30,963 355 — — 31,318 Production taxes 5,915 52 — — 5,967 Midstream gathering and processing 76,865 136 — — 77,001 Depreciation, depletion, and amortization 121,127 2 121,129 Impairment of oil and gas properties 389,612 — — — 389,612 General and administrative 22,458 14 2 — 22,474 Accretion expense 508 — — — 508 647,448 559 2 — 648,009 (LOSS) INCOME FROM OPERATIONS (519,277 ) 81 (2 ) — (519,198 ) OTHER (INCOME) EXPENSE: Interest expense 32,104 1 — — 32,105 Interest income (485 ) — — — (485 ) Loss (income) from equity method investments and investments in subsidiaries 31,495 59 24,447 (24,428 ) 31,573 63,114 60 24,447 (24,428 ) 63,193 (LOSS) INCOME BEFORE INCOME TAXES (582,391 ) 21 (24,449 ) 24,428 (582,391 ) INCOME TAX BENEFIT (348 ) — — — (348 ) NET (LOSS) INCOME $ (582,043 ) $ 21 $ (24,449 ) $ 24,428 $ (582,043 ) CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (Amounts in thousands) Six months ended June 30, 2015 Parent Guarantors Non-Guarantor Eliminations Consolidated Total revenues $ 287,859 $ 728 $ — $ — $ 288,587 Costs and expenses: Lease operating expenses 33,472 371 — — 33,843 Production taxes 7,513 57 — — 7,570 Midstream gathering and processing 58,266 19 — — 58,285 Depreciation, depletion, and amortization 161,062 2 — — 161,064 General and administrative 20,249 41 24 — 20,314 Accretion expense 382 — — — 382 280,944 490 24 — 281,458 INCOME (LOSS) FROM OPERATIONS 6,915 238 (24 ) — 7,129 OTHER (INCOME) EXPENSE: Interest expense 20,782 — — — 20,782 Interest income (257 ) — — — (257 ) (Income) loss from equity method investments and investments in subsidiaries (5,069 ) — 12,636 (12,422 ) (4,855 ) 15,456 — 12,636 (12,422 ) 15,670 (LOSS) INCOME BEFORE INCOME TAXES (8,541 ) 238 (12,660 ) 12,422 (8,541 ) INCOME TAX BENEFIT (2,735 ) — — — (2,735 ) NET (LOSS) INCOME $ (5,806 ) $ 238 $ (12,660 ) $ 12,422 $ (5,806 ) CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Amounts in thousands) Three months ended June 30, 2016 Parent Guarantors Non-Guarantor Eliminations Consolidated Net (loss) income $ (339,776 ) $ 55 $ (762 ) $ 707 $ (339,776 ) Foreign currency translation adjustment (684 ) — (604 ) 604 (684 ) Other comprehensive (loss) income (684 ) — (604 ) 604 (684 ) Comprehensive (loss) income $ (340,460 ) $ 55 $ (1,366 ) $ 1,311 $ (340,460 ) Three months ended June 30, 2015 Parent Guarantors Non-Guarantor Eliminations Consolidated Net (loss) income $ (31,325 ) $ 22 $ (8,516 ) $ 8,494 $ (31,325 ) Foreign currency translation adjustment 3,247 — 3,247 (3,247 ) 3,247 Other comprehensive income (loss) 3,247 — 3,247 (3,247 ) 3,247 Comprehensive (loss) income $ (28,078 ) $ 22 $ (5,269 ) $ 5,247 $ (28,078 ) Six months ended June 30, 2016 Parent Guarantors Non-Guarantor Eliminations Consolidated Net (loss) income $ (582,043 ) $ 21 $ (24,449 ) $ 24,428 $ (582,043 ) Foreign currency translation adjustment 8,374 — 9,669 (9,669 ) 8,374 Other comprehensive income (loss) 8,374 — 9,669 (9,669 ) 8,374 Comprehensive (loss) income $ (573,669 ) $ 21 $ (14,780 ) $ 14,759 $ (573,669 ) Six months ended June 30, 2015 Parent Guarantors Non-Guarantor Eliminations Consolidated Net (loss) income $ (5,806 ) $ 238 $ (12,660 ) $ 12,422 $ (5,806 ) Foreign currency translation adjustment (11,737 ) — (11,737 ) 11,737 (11,737 ) Other comprehensive (loss) income (11,737 ) — (11,737 ) 11,737 (11,737 ) Comprehensive (loss) income $ (17,543 ) $ 238 $ (24,397 ) $ 24,159 $ (17,543 ) CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Amounts in thousands) Six months ended June 30, 2016 Parent Guarantors Non-Guarantor Eliminations Consolidated Net cash provided by operating activities $ 142,470 $ 254 $ — $ — $ 142,724 Net cash (used in) provided by investing activities (281,044 ) (25,500 ) (13,690 ) 39,190 (281,044 ) Net cash provided by (used in) financing activities 421,783 25,500 13,690 (39,190 ) 421,783 Net increase in cash and cash equivalents 283,209 254 — — 283,463 Cash and cash equivalents at beginning of period 112,494 479 1 — 112,974 Cash and cash equivalents at end of period $ 395,703 $ 733 $ 1 $ — $ 396,437 Six months ended June 30, 2015 Parent Guarantors Non-Guarantor Eliminations Consolidated Net cash provided by (used in) operating activities $ 135,485 $ 3,389 $ (1 ) $ 1 $ 138,874 Net cash (used in) provided by investing activities (976,820 ) (2,946 ) (8,267 ) 8,267 (979,766 ) Net cash provided by (used in) financing activities 1,224,040 — 8,268 (8,268 ) 1,224,040 Net increase in cash and cash equivalents 382,705 443 — — 383,148 Cash and cash equivalents at beginning of period 141,535 804 1 — 142,340 Cash and cash equivalents at end of period $ 524,240 $ 1,247 $ 1 $ — $ 525,488 |