GULFPORT ENERGY CORP

Comparison of the Nine Month Periods Ended September 30, 2024 and 2023

Natural Gas, Oil and Condensate and NGL Production and Pricing (sales totals in thousands)

The following table summarizes our natural gas, oil and condensate, and NGL production and related pricing for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. Some totals below may not sum or recalculate due to rounding.

Natural Gas, Oil and Condensate and NGL Sales (in thousands)

The decrease in natural gas sales without the impact of derivatives when comparing the nine months ended September 30, 2024, to the nine months ended September 30, 2023 was due to a 22% decrease in realized prices, partially offset by a 2% increase in sales volumes. The realized price change was primarily driven by the decrease in the average Henry Hub gas index from $2.69 per Mcf in the nine months ended September 30, 2023, to $2.10 per Mcf in the nine months ended September 30, 2024. The 2% increase in natural gas production was primarily due to our 2023 and 2024 development programs in the Utica/Marcellus, partially offset by natural declines and limited activity in the SCOOP.

The decrease in oil and condensate sales without the impact of derivatives when comparing the nine months ended September 30, 2024, to the nine months ended September 30, 2023, was due to a 6% decrease in sales volumes and a 2% decrease in realized prices. The 6% decrease in oil and condensate production was primarily due to natural declines in the SCOOP, partially offset by commencement of sales on new wells targeting the Utica liquids window.

The decrease in NGL sales without the impact of derivatives when comparing the nine months ended September 30, 2024, to the nine months ended September 30, 2023, was due to a 17% decrease in NGL sales volumes, partially offset by a 5% increase in realized prices. The 17% decrease in NGL production was primarily due to natural declines and limited 2023 development in the SCOOP. The realized price change was driven by the increase in the average Mont Belvieu NGL index from $29.83 per barrel in the nine months ended September 30, 2023, to $32.13 per barrel in the nine months ended September 30, 2024.

Natural Gas, Oil and NGL Derivatives (in thousands)

We recognize fair value changes on our natural gas, oil and NGL derivative instruments in each reporting period. The changes in fair value resulted from new positions and settlements that occurred during each period, as well as the relationship between contract prices and the associated forward curves. The significant change in the total gain (loss) for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, was primarily the result of changes in futures pricing for oil, natural gas, and NGLs during each period. See Note 10 of our consolidated financial statements for hedged volumes and pricing.

Lease Operating Expenses (in thousands, except per unit)

The decrease in our total and per unit LOE for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, was primarily the result of a decrease in water disposal activities, surface rental and labor expenses throughout our SCOOP operations and non-operated expenses in Utica/Marcellus.

Taxes Other Than Income (in thousands, except per unit)

The decrease in total and per unit taxes other than income for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, was primarily related to a decrease in production taxes resulting from the decrease in our natural gas, oil and NGL revenues excluding the impact of hedges discussed above.

Transportation, Gathering, Processing and Compression (in thousands, except per unit)

Transportation, gathering, processing and compression for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 increased in total and on a per unit basis primarily as a result of the increase in our production as noted above.

Depreciation, Depletion and Amortization (in thousands, except per unit)

Depreciation, depletion and amortization of our oil and gas properties for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, increased 1% primarily as a result of our drilling and development activities during 2023 and 2024.

Impairment of Oil and Natural Gas Properties

At September 30, 2024, the net book value of our oil and gas properties exceeded the calculated ceiling. As a result, we recorded a non-cash ceiling test impairment of $30.5 million for the nine months ended September 30, 2024. The impairment resulted from declines in the full cost ceiling, which primarily resulted from the significant decrease in the 12-month average trailing price for natural gas. We did not record an impairment in the first or second quarters of 2024 or during 2023.

General and Administrative Expenses (in thousands, except per unit)

The increase in total and per unit general and administrative expenses for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, was primarily driven by increases in employee compensation.

Restructuring costs

During the nine months ended September 30, 2023, Gulfport recognized $4.8 million in personnel-related restructuring expenses associated with changes in the organizational structure and leadership team resulting from the appointment of Gulfport's new CEO in January 2023. Of these expenses, $1.3 million resulted from accelerated vesting of share-based grants, which are non-cash charges. The organizational changes were completed in the second quarter of 2023 and there are no remaining employee termination liabilities associated with these changes.

Interest Expense (in thousands, except per unit)

Due to the tender of the 2026 Senior Notes, interest paid on the 2026 Senior Notes decreased 6% for the nine months ended September 30, 2024 compared to the nine months September 30, 2023. The Company also paid $2.2 million of interest on the 2029 Senior Notes for the nine months ended September 30, 2024. Interest expense on our Credit Facility increased 21% for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, as a result of a higher average balance outstanding. Amortization of loan costs increased 25% for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, as a result of the Third and Fourth Amendments to the Credit Facility which increased the elected commitments and borrowing base. The Company also capitalized $3.6 million and $3.0 million in interest expense for the nine months ended September 30, 2024 and September 30, 2023, respectively.

Loss on Debt Extinguishment

In September 2024, Gulfport Operating purchased and retired $524.3 million of the 2026 Senior Notes in a tender offer using net proceeds from the 2029 Senior Notes offering. The 2026 Senior Notes were tendered at an average price equal to 102.3% of the principal amount. The retirement of the 2026 Senior Notes resulted in a loss on debt extinguishment of $13.4 million, which included cash costs of $12.9 million.

Other, net (in thousands)

Other, net in the Company’s consolidated statements of operations for the nine months ended September 30, 2024, included approximately $3.0 million related to changes in the Company’s legal reserves for certain litigation and regulatory proceedings.

As part of its Chapter 11 Cases and restructuring efforts, the Company filed motions to reject certain firm transportation agreements between the Company and affiliates of TC Energy Corporation (“TC”) and Rover Pipeline LLC (“Rover”). During the first quarter of 2023, Gulfport finalized a settlement agreement with Rover that was approved by the Bankruptcy Court on February 21, 2023. Pursuant to the settlement agreement, Gulfport and Rover agreed that the firm transportation contracts between them would be rejected. As part of the settlement, Gulfport paid a $1.0 million administrative claim, which is included in Other, net. Additionally, on February 24, 2023, Gulfport received an additional $17.8 million interim distribution for its TC claim, which is also included in Other, net. Other, net in the second quarter of 2023 included a $5.0 million recoupment of previously placed collateral for certain firm transportation commitments during our Chapter 11 Cases.

Income Taxes

We recorded income tax expense of $3.4 million for the nine months ended September 30, 2024 compared to an income tax benefit of $554.7 million for the nine months ended September 30, 2023. See Note 14 of our consolidated financial statements for further discussion of our income tax expense.