Business Context and Reporting Period
Company: WRT Energy Corporation (Gulfport Energy Corp)
Reporting Period: Year ended December 31, 1996
Status: Debtor-in-Possession under Chapter 11 Bankruptcy Protection (filed February 14, 1996).
Operations: The Company owns and operates mature oil and gas properties in the Louisiana Gulf Coast. Due to severe liquidity issues and production declines, the Company suspended acquisition and development activities in late 1995, focusing solely on maintaining existing producing properties. A Plan of Reorganization was confirmed by the Bankruptcy Court on May 2, 1997, and became effective on July 11, 1997, resulting in a "fresh start" reporting entity.
Key Financial Metrics (Year Ended Dec 31, 1996)
| Metric | 1996 Value | 1995 Value |
|---|---|---|
| Total Revenues | $24,019,000 | $24,655,000 |
| Net Loss (Available to Common) | $(32,233,000) | $(131,021,000) |
| Loss Per Share | $(3.38) | $(13.84) |
| Operating Cash Flow | $9,140,000 | $6,259,000 |
| Working Capital Deficit | $(148,648,000) | $(131,601,000) |
| Total Assets | $68,076,000 | $79,247,000 |
| Shareholders' Deficit | $(90,551,000) | $(61,869,000) |
| Proved Reserves (MMcfe) | 98,659 | 106,893 |
Debt & Liquidity: As of December 31, 1996, the Company held $5,679,000 in cash. However, it was in default on its $15,000,000 Credit Facility and $100,000,000 Senior Notes. Total pre-petition liabilities subject to compromise were $136,346,000. The filing text does not provide a clear value for total debt outstanding at year-end as it was reclassified into pre-petition liabilities.
Material Changes vs. Prior Period
- Net Loss Reduction: The net loss attributable to common stock decreased by approximately $98.8 million compared to 1995. This improvement was primarily driven by the cessation of interest accrual on Senior Notes following the bankruptcy filing and a reduction in impairment charges.
- Impairment Charges: In 1995, the Company recorded a massive non-cash impairment charge of $103.3 million due to the adoption of SFAS No. 121 and significant downward revisions in reserve estimates. In 1996, the impairment charge was significantly lower at $3.9 million.
- Production Volumes: Total production declined to 7,319 MMcfe in 1996 from 12,071 MMcfe in 1995, a decrease of roughly 39%. This was due to mechanical failures (e.g., Exxon Fee #23 well) and normal production declines.
- Production Costs: Production costs per Mcfe increased 130% to $1.82 in 1996 from $0.79 in 1995. This spike was largely due to recording disputed claims adjustments and settlements as production costs, rather than operational inefficiencies alone.
- Reorganization Costs: The Company incurred $7.3 million in reorganization costs in 1996, primarily professional fees and write-offs of debt issuance costs.
Guidance, Outlook, Risks, and Contingencies
Outlook & Strategy: Post-reorganization (effective July 1997), the Company intends to exploit existing properties and acquire additional Louisiana Gulf Coast assets. The 1997 capital budget was approximately $9.1 million, funded by operating cash flows and proceeds from a Rights Offering.
Material Risks & Contingencies:
- Going Concern: The auditors expressed substantial doubt about the Company's ability to continue as a going concern as of December 31, 1996, dependent on the successful implementation of the Reorganization Plan.
- Legal Proceedings:
- Tri-Deck/Perry Gas: A dispute over unpaid production proceeds (approx. $4.3 million) resulted in a full reserve for doubtful accounts. Approximately $1.7 million was held in the Bankruptcy Court registry pending resolution.
- Tricore Energy: A joint venture partner asserted a secured claim of up to $9.1 million based on a minimum production guarantee. The Company is litigating the validity of the security interest.
- Title Dispute: A third party claims title failure on 43 acres in the Bayou Pigeon Field, potentially reducing the Company's working interest in three units.
- Regulatory: The Company faces potential obligations to fund plugging and abandonment trusts under Louisiana's Orphaned Well Act, the amount of which was undetermined as of the filing date.
Investor Verification Checklist
- Reorganization Plan Status: Verify the final terms of the Plan of Reorganization effective July 11, 1997, including the exchange ratio of debt to equity and the treatment of pre-petition claims.
- Post-Reorganization Capitalization: Confirm the number of shares issued to creditors and new investors (DLB/Wexford) and the resulting ownership structure of "New WRT."
- Resolution of Tri-Deck Litigation: Determine the final outcome of the adversary proceeding regarding the $1.7 million held in the Bankruptcy Court registry and any additional recoveries.
- Tricore Claim Settlement: Verify the final settlement amount or court ruling regarding the Tricore Energy secured claim and production guarantee liability.
- Plugging and Abandonment Obligations: Confirm the results of the independent study required by the State of Louisiana to determine the funding requirements for the LLOG P&A Trusts.
- Reserve Revisions: Review updated reserve reports post-reorganization to assess the impact of the 1995/1996 downward revisions on future cash flow projections.