Wexford Uppercase As Well As Gulfport Energy

Gulfport Energy is a reputable Oklahoma based oil as well as gas companionship with widespread interests including inwards Canadian oil sands (via Grizzly Oil Sands) as well as inwards the Utica shale. It trades on the NASDAQ as well as has a marketplace seat cap of a lilliputian over 1.2 billion dollars. The kernel is GPOR.


Wexford Capital is a reputable hedge fund as well as investment grouping based inwards Greenwich Connecticut with (according to the website) $5.6 billion inwards assets nether management. That is to a greater extent than than 100 times what nosotros manage.


The principal of Wexford is Charles E Davidson. He has a fine CV which I pick out cribbed from the website:

Charles E. Davidson, 59, co-founded Wexford inwards 1994 as well as serves every bit its Chairman as well as Chief Investment Officer.  Mr. Davidson has primary responsibleness for the overall strategic administration of Wexford’s investment activities as well as serves every bit the senior portfolio manager for the Wexford Spectrum Funds as well as the Wexford Catalyst Funds.  From 1984-94, Mr. Davidson was a General Partner of Steinhardt Partners, L.P. where he was responsible for all fixed income arbitrage, conduct a opportunity arbitrage, private equity, distressed/bankruptcy as well as especial province of affairs investments of the multi-billion dollar hedge fund.  From 1977-84, Mr. Davidson was employed past times Goldman Sachs & Co. where he was the caput of domestic corporate bond trading as well as proprietary trading.  Mr. Davidson holds an MBA as well as a BA inwards economic science from the University of California – Los Angeles.

Last calendar week I read the proxy for Gulfport Energy which goes through the human relationship with Wexford. There, properly disclosed, are many related political party transactions.


The hedge fund I run is (apart from the administration contract) involved inwards no related political party statements hence I discovery complex related political party transactions surprising. However, every bit I said, they are properly disclosed. Here are a listing of related political party transactions from the last proxy:

... Based entirely on Form 4 filed with the SEC on March 13, 2012 past times Charles E. Davidson. Represents 5,336,526 shares of mutual stock held past times CD Holding Company, LLC. Mr. Davidson is the manager as well as a fellow member of CD Holding Company, LLC as well as the Chairman as well as Chief Investment Officer of Wexford Capital LP...

... We are a political party to administrative service agreements with Stampede Farms LLC, which nosotros elevate to every bit Stampede Farms, Everest Operations Management LLC, which nosotros elevate to every bit Everest, as well as Tatex Thailand III, LLC, which nosotros elevate to every bit Tatex III. Under these agreements, our services include professional person as well as technical back upward as well as the fees for such services tin give notice live amended past times mutual understanding of the parties. Each of these administrative service agreements may live cancelled (1) past times us with at to the lowest degree sixty days prior written notice and, (2) past times the counterparty at whatsoever fourth dimension with at to the lowest degree thirty days prior written notice to us as well as (3) past times either political party if the other political party is inwards cloth breach as well as such breach has non been cured inside thirty days of receipt of written notice of such breach. We did non render services nether whatsoever of these agreements inwards 2011 as well as received no reimbursements thereunder. Each of Stampede Farms, Everest as well as Tatex III is controlled past times Wexford Capital LP, or Wexford...

... We contract with Athena Construction, L.L.C., which nosotros elevate to every bit Athena, to render barge services inwards our West Cote Blanche Bay, or WCBB, as well as Hackberry fields located along the Louisiana Gulf Coast. For the twelvemonth ended Dec 31, 2011, nosotros paid Athena $3,389,000 as well as owed an additional $676,000 for such services at that date. Athena is controlled past times Wexford...

... Effective March 1, 2008, Everest provides revenue enhancement planning, grooming of supporting revenue enhancement schedules as well as consultation services to us based on an agreed fee structure. The reach of such services tin give notice live modified with the mutual understanding of the parties. Everest is controlled past times Wexford. We paid Everest $5,000 for these services inwards 2011. 

Caliber Development Company, LLC, or Caliber, provides edifice maintenance services for our headquarters inwards Oklahoma City, Oklahoma. For the twelvemonth ended Dec 31, 2011, nosotros paid Caliber $20,000 as well as owed an additional $2,000 at that date. Caliber is an entity controlled past times Wexford. 

Great White Directional Services LLC, which nosotros elevate to every bit Directional, performs directional drilling services for us at our WCBB as well as Hackberry fields. Directional was an entity controlled past times Wexford until August 24, 2011 when it was sold to an unrelated tertiary party. Directional is no longer a related party. While notwithstanding a related party, nosotros paid Directional some $2,625,000 as well as owed an additional $1,133,000 for such services at that date. 

Great White Pressure Control, which nosotros elevate every bit Pressure Control, performs services for us at our WCBB field. Pressure Control was an entity controlled past times Wexford until August 24, 2011 when it was sold to an unrelated tertiary party. Pressure Control is no longer a related party. While notwithstanding a related party, nosotros paid Pressure Control some $80,000. No amounts were owed to Pressure Control every bit of August 24, 2011. 

Black Fin P&A, LLC, which nosotros elevate to every bit Black Fin, performs plugging as well as abandonment services for us at our WCBB field. For the twelvemonth ended Dec 31, 2011, nosotros did non pay whatsoever amounts to Black Fin as well as owed $436,000 to for such services at that date. Black Fin is an entity controlled past times Wexford.

... We pick out a 23.5% ownership involvement inwards Tatex Thailand II, LLC, or Tatex II. The remaining interests inwards Tatex II are owned past times other entities controlled past times Wexford. Tatex II holds 85,122 of the 1,000,000 outstanding shares of APICO, LLC, or APICO, an international oil as well as gas exploration company. APICO has a reserve base of operations located inwards Southeast Asia through its ownership of concessions roofing 2 1000000 acres which includes the Phu Horm Field. During 2011, nosotros received $870,000 inwards distributions from Tatex II. 

We pick out a 17.9% ownership involvement inwards Tatex III. Tatex III owns a concession roofing some i 1000000 acres inwards Thailand. Approximately 68.7% of the remaining interests inwards Tatex III are owned past times other entities as well as individuals affiliated with Wexford. During the twelvemonth ended Dec 31, 2011, nosotros paid $3,794,000 inwards cash calls to Tatex III. 

We ain a 24.9999% involvement inwards Grizzly, a Canadian unlimited liability company, through our wholly owned subsidiary Grizzly Holdings, Inc. The remaining interests inwards Grizzly are owned past times other entities controlled past times Wexford. As of Dec 31, 2011, Grizzly had some 754,000 acres nether lease inwards the Athabasca part located inwards the Alberta Province virtually Fort McMurray. Grizzly Holdings Inc. entered into a loan understanding with Grizzly effective Jan 1, 2008, nether which Grizzly borrowed funds from us. Borrowed funds initially bore involvement at LIBOR plus 4% as well as had an master copy maturity engagement of Dec 31, 2012. Effective Apr 1, 2010, the loan understanding was amended to modify the involvement charge per unit of measurement to 0.69% as well as modify the maturity engagement to Dec 31, 2011. Effective Oct 15, 2010, the loan understanding was farther amended to modify the maturity engagement to Dec 31, 2012. Interest was paid on a paid-in-kind footing past times increasing the outstanding residual of the loan. During the twelvemonth ended Dec 31, 2011, nosotros loaned Grizzly some $3,182,000 as well as recognized involvement income of some $147,000. Effective Dec 7, 2011, Grizzly Holdings Inc. entered into a debt short town understanding with Grizzly nether which Grizzly agreed to satisfy the entire outstanding debt as well as accrued involvement of $22,325,000 past times issuing additional mutual shares of Grizzly with no number to the ownership construction of Grizzly. 

During the tertiary quarter of 2011, nosotros purchased a 25% ownership involvement inwards Bison Drilling as well as Field Services LLC, or Bison, at a toll of $6,009,000, dependent plain to adjustment. In Apr 2012, nosotros increased our ownership involvement inwards Bison to 40% for an additional payment of $6,152,000. The remaining interests inwards Bison are owned past times entities controlled past times Wexford, including Windsor Permian LLC, or Windsor. Bison owns as well as operates drilling rigs. 

During the quaternary quarter of 2011, nosotros purchased a 25% ownership involvement inwards Muskie Holdings LLC, or Muskie, at a toll of $2,142,000, dependent plain to adjustment. The remaining interests inwards Muskie are owned past times entities controlled past times Wexford, including Windsor. Muskie holds certainly assets, existent estate as well as rights inwards a lease roofing dry reason inwards Wisconsin that is prospective for mining oil as well as natural gas fracture degree sand...

... Effective every bit of Nov 1, 2007, nosotros as well as Windsor entered into an expanse of mutual involvement understanding to jointly laid about oil as well as gas leases inwards the Permian Basin. The understanding provides that each political party must offering the other political party the correct to participate inwards 50% of each such acquisition. The parties besides agreed, dependent plain to certainly exceptions, to part third-party costs as well as expenses inwards proportion to their respective participating interests as well as pay certainly other fees every bit provided inwards the agreement. During 2011, nosotros acquired some 604 internet acres from Windsor nether the damage of this understanding for an aggregate of $1,102,000. Windsor is controlled past times Wexford. 

Windsor is the operator of all of our acreage inwards the Permian Basin. As operator of these properties, Windsor is responsible for the daily operations, monthly performance billings as well as monthly revenue disbursements for the properties inwards which nosotros handgrip an interest. For the twelvemonth ended Dec 31, 2011, Windsor billed us some $56,103,000 as well as at Dec 31, 2011, nosotros owed $5,593,000 for these services. 

Effective Apr 1, 2010, nosotros entered into an expanse of mutual involvement understanding with Windsor Niobrara LLC, which nosotros elevate to every bit Windsor Niobrara, to jointly laid about oil as well as gas leases on certainly lands located inwards Northwest Colorado for the piece of job of exploring, exploiting as well as producing oil as well as gas from the Niobrara Formation. The understanding provides that each political party must offering the other political party the correct to participate inwards such acquisitions on a 50/50 basis. The parties besides agreed, dependent plain to certainly exceptions, to part third-party costs as well as expenses inwards proportion to their respective participating interests as well as pay certainly other fees every bit provided inwards the agreement. We are the operator of this acreage inwards the Niobrara Formation. As operator, nosotros are responsible for daily operations, monthly performance billings as well as monthly revenue disbursements for these properties. For the twelvemonth ended Dec 31, 2011, nosotros billed Windsor Niobrara $6,642,000 and, at Dec 31, 2011, Windsor Niobrara owed us $3,557,000 for these services. Windsor Niobrara is controlled past times Wexford. 

In Feb 2011, nosotros entered into an understanding with an unrelated tertiary political party to laid about certainly leasehold interests inwards acreage located inwards the Utica Shale inwards Ohio. The understanding besides granted us an exclusive correct of commencement refusal for a menstruation of vi months on certainly additional tracts leased past times the seller. As of Dec 31, 2011, nosotros had acquired leasehold interests inwards some 98,000 gross (49,000 net) acres inwards the Utica Shale inwards Eastern Ohio nether these as well as other agreements for some $118,421,000. As of Feb 20, 2012, nosotros had shut on additional acquisitions bringing our leasehold interests to some 107,000 gross (53,500 net) acres. We pick out commitments with diverse hereafter closing dates that could increment our acreage seat inwards the Utica Shale to an aggregate of some 125,000 gross (62,500 net) leasehold acres. Entities affiliated with Wexford, primarily Windsor Ohio LLC, or Windsor Ohio, participated with us on a 50/50 footing inwards the acquisition of the leases described to a higher house and, at Dec 31, 2011, held leasehold interests inwards some 49,000 internet acres for which they paid some $118,413,000, excluding fees as well as expenses of $1,184,000 billed nether the acquisition squad understanding described below. We are the operator on this acreage inwards the Utica Shale. 

Effective July 1, 2008, nosotros entered into an acquisition squad understanding with Everest to seat as well as evaluate potential oil as well as gas properties inwards which nosotros as well as Everest or its affiliates may want to invest. Pursuant to this agreement, Gulfport as well as Everest each agreed to shape an acquisition team. Upon a successful closing of an acquisition or divestiture, the political party whose acquisition squad identified the acquisition or divestiture is entitled to have a fee from the other political party as well as its affiliates, if applicable, participating inwards such closing. The fee is equal to 1% of the party’s proportionate part of the acquisition or divestiture consideration. The understanding has a one-year term unless before terminated past times either political party upon thirty days notice. 

From fourth dimension to time, certainly of our oil engineers render services relating to evaluation of potential investments to Wexford as well as geological evaluations, seismic review as well as like services to Tatex II as well as Tatex III. Wexford, Tatex II as well as Tatex III, respectively, pick out agreed to reimburse us based on the amount, reach as well as nature of services provided past times our oil engineers to such entities. We did non render whatsoever services nether these arrangements inwards 2011.

As yous tin give notice run across in that location are considerable (properly disclosed) related political party transactions with Wexford. Helpfully they include a summary:

Our Relationships with Wexford as well as its Affiliates 

Charles E. Davidson is the Chairman as well as Chief Investment Officer of Wexford as well as he beneficially owned some 16.8% of our outstanding mutual stock every bit of Dec 31, 2011. Wexford is the manager of the Wexford-controlled entities described above. As manager, Wexford has the exclusive authorization to, with other things, purchase, handgrip as well as dispose of the assets of each such entity. Mr. Liddell, our Chairman of the Board, is the operating fellow member and, inwards some cases, an officer, of certainly of these entities. All distributions made past times these entities are commencement paid to the Wexford members inwards accordance with their respective ownership interests until they pick out received amounts equal to their respective working capital missive of the alphabet contributions. Thereafter, distributions are to live made 90% to the Wexford members inwards accordance with their respective ownership interests as well as 10% to Mr. Liddell. Mr. Liddell is non currently entitled to, as well as has non received, distributions from whatsoever of these entities. All transactions betwixt us as well as these entities are reviewed as well as approved past times our independent directors.

All for idea as well as consideration of my readers.

John

Disclosure: We are curt Gulfport Energy as well as pick out been for some time. We of late increased the position.