Gulfport Pose Out Energy Too Wexford Upper-Case Missive Of The Alphabet Business Office V: Parsing Gulfport's Cash Menstruation Statement

From the final 10Q hither are Gulfport Energy's revenue numbers for the past times 3 months:

	Three Months Ended March 31,
		2012				2011
Revenues:
Oil together with condensate sales		$	64,004,000			$	45,196,000
Gas sales			613,000				720,000
Natural gas liquids sales			806,000				659,000
Other income			38,000				63,000
			65,461,000				46,638,000

They had $65 1000000 inwards revenue.

Net income was $26.7 1000000 dollars.

Here is the cash menstruum disputation for operating cash flows:

		Three Months Ended March 31,
		2012				2011
Cash flows from operating activities:
Net income		$	26,869,000			$	21,174,000
Adjustments to reconcile internet income to internet cash provided past times operating activities:
Accretion of discount - Asset Retirement Obligation			176,000				159,000
Depletion, depreciation together with amortization			21,395,000				12,158,000
Stock-based compensation expense			681,000				77,000
Loss from equity investments			268,000				316,000
Interest income - authorities annotation receivable			—				(36,000	)
Unrealized loss on derivative instruments			266,000				—
Amortization of loan commitment fees			112,000				110,000
Changes inwards operating assets together with liabilities:
Increase inwards accounts receivable			(1,718,000	)			(5,419,000	)
Increase inwards accounts receivable - related party			(463,000	)			(160,000	)
(Increase) decrease inwards prepaid expenses			(57,000	)			618,000
Increase (decrease) inwards accounts payable together with accrued liabilities			22,431,000				(709,000	)
Settlement of asset retirement obligation			(531,000	)			—
Net cash provided past times operating activities			69,429,000				28,288,000

The cash generated was - believe it or non - slightly larger than the revenue - together with over xl 1000000 higher than profits. Part of that was depletion (depreciation adds to cash flow). Most the residual was merely an growth inwards accounts payable of 22 million.

Here is the cash menstruum from investing for that 3 months:

Cash flows from investing activities:
Additions to other property, found together with equipment			(82,000	)			(13,000	)
Additions to fossil oil together with gas properties			(84,778,000	)			(33,285,000	)
Proceeds from sale of other property, found together with equipment			140,000				—
Proceeds from sale of fossil oil together with gas properties			—				1,384,000
Advances on authorities annotation receivable to related party			—				(1,319,000	)
Contributions to investment inwards Grizzly Oil Sands ULC			(67,063,000	)			(4,878,000	)
Distributions from investment inwards Tatex Thailand II, LLC			200,000				—
Contributions to investment inwards Tatex Thailand III, LLC			(483,000	)			(895,000	)
Contributions to investment inwards Muskie Holdings LLC			(312,000	)			—
Contributions to investment inwards Timber Wolf Terminals LLC			(1,000,000	)			—
Contributions to investment inwards Windsor Midstream LLC			(7,021,000	)			—
Net cash used inwards investing activities			(160,399,000	)			(39,006,000	)

In those 3 months they invested $160 1000000 but alone had cash flows of $69 1000000 together with earnings of $26.7 million.

How did they finance this?

As noted the fellowship had to finance $160 1000000 of investing activities from alone $26.7 1000000 inwards operating earnings. This presents financing issues.

Firstly the fellowship (as noted) ran upward its accrued liabilities.

Then the fellowship borrowed $10 1000000 dollars.

But to a greater extent than oft than non the fellowship ran downward its cash holdings from $93 1000000 to $13 million.

Where did those cash holdings come upward from?

The cash holdings did non stand upward for past times profits. What they were was proceeds from equity issuance. The fellowship cash menstruum disputation inwards 2011 shows $307 1000000 inwards equity issuance - much of which has gone into investing inwards diverse quarters. The cash is at in i lawsuit heavily depleted (note alone $13 1000000 is left).

If they intend on investing at these rates they volition need to enhance to a greater extent than capital.

What were the investments?

In the final quarter they invested $67 1000000 inwards Grizzly Oil Sands. That is controlled past times Wexford.

They every bit good invested inwards Tatex, Muskie, Timberwolf together with Windsor. All of these are Wexford entities.

Indeed they invested to a greater extent than than their entire revenue inwards Wexford Entities.

But they every bit good added $85 1000000 to fossil oil together with gas properties. Influenza A virus subtype H5N1 fair flake of that was amongst honor to the Permian Basin properties (they drilled wells together with acquired acreage). Those assets are every bit good beingness sold to a Wexford controlled entity. Other releases accept envisaged a sale of that entity which volition enhance roughly cash allowing them to proceed to invest.

I read many 10K together with 10Q filings. Few are this fascinating.






John