GULFPORT ENERGY CORP

2. PROPERTY AND EQUIPMENT

The major categories of property and equipment and related accumulated DD&A are as follows (in thousands):

Under the full cost method of accounting, the Company is required to perform a ceiling test each quarter. The test determines a limit, or ceiling, on the book value of the Company's oil and natural gas properties. At March 31, 2024 and 2023, the net book value of the Company's oil and gas properties was below the calculated ceiling. As a result, the Company did not record an impairment of its oil and natural gas properties for the three months ended March 31, 2024 or 2023.

Lower natural gas, oil and NGL prices can reduce the value of the Company’s assets. In addition to commodity prices, the Company’s production rates, levels of proved reserves, future development costs, transfers of unevaluated properties and other factors will determine its actual ceiling test calculation and impairment analysis in future periods. Given the decline of commodity prices in 2023 and 2024, non-cash impairments in future periods could occur if the trailing 12-month commodity prices decrease as compared to the average used in prior periods.

Certain general and administrative costs are capitalized to the full cost pool and represent management’s estimate of costs incurred directly related to exploration and development activities. All general and administrative costs not capitalized are charged to expense as they are incurred. Capitalized general and administrative costs were approximately $5.7 million and $5.1 million for the three months ended March 31, 2024 and 2023, respectively.

The Company evaluates the costs excluded from its amortization calculation at least annually. Individually insignificant unevaluated properties are grouped for evaluation and periodically transferred to evaluated properties over a timeframe consistent with their expected development schedule.

The following table summarizes the Company’s non-producing properties excluded from amortization by area (in thousands):

Asset Retirement Obligation

The following table provides a reconciliation of the Company’s asset retirement obligation for the three months ended March 31, 2024 and 2023 (in thousands):