One question though was (and I am paraphrasing): are these transactions large with respect to Gulfport Energy? Is that the reason you are short?
I can answer the first question simply: yes - related party transactions are important in Gulfport. That is easily seen by looking at their assets as mapped on their home page:
The company has interests in the Canadian Oil Sands, the Niobrara Shale, Thailand, the Permian Basin, Southern Louisiana and the Utica Shale.
Lets go through them individually.
The Canadian Oil Sands operations are held through Grizzly Oil Sands. The proxy tells us that Gulfport own a "24.9999% interest in Grizzly, a Canadian unlimited liability company, through our wholly owned subsidiary Grizzly Holdings, Inc. The remaining interests in Grizzly are owned by other entities controlled by Wexford."
The Niobrara Shale is "effective April 1, 2010 ... an area of mutual interest agreement with Windsor Niobrara LLC, which we refer to as Windsor Niobrara, to jointly acquire oil and gas leases on certain lands located in Northwest Colorado for the purpose of exploring, exploiting and producing oil and gas from the Niobrara Formation." That agreement provides that each party must offer the other party the right to participate in such acquisitions on a 50/50 basis. The parties also agreed, subject to certain exceptions, to share third-party costs and expenses in proportion to their respective participating interests and pay certain other fees as provided in the agreement." Gulfport is "the operator" of the Nobrara acreage - but the partner - Windson Niobrara is controlled by Wexford.
The Thailand assets are in two parts - Tatex Thailand II and Tatex Thailand III.
Gulfport have a 23.5% ownership interest in Tatex Thailand II, LLC. The remaining interests in Tatex II are owned by other entities controlled by Wexford.
Gulfport have a 17.9% ownership interest in Tatex III. Approximately 68.7% of the remaining interests in Tatex III are owned by other entities and individuals affiliated with Wexford.
Windsor, an entity controlled by Wexford, is the operator of all Gulfport's assets in the Permian Basin.
The Permian Basin Assets were (at year end) subject to an agreement with Windsor which provides that each party must offer the other party the right to participate in 50% of each such acquisition. The parties also agreed, subject to certain exceptions, to share third-party costs and expenses in proportion to their respective participating interests and pay certain other fees as provided in the agreement.
In other words Windsor owned 50 percent of these and operated them. There is an interesting post-year end transaction which may be the subject of another blog post.
The Southern Louisiana assets (known as West Cote and Hackberry) are not owned by Wexford but Wexford entities provide barging, drilling and pressure control services.
The Utica Shale assets are operated by Gulfport but like the Niobrara and Permian assets they are subject to a 50-50 sharing agreement with a Wexford controlled entity.
In other words Wexford is integral to the running or ownership or both of every asset controlled by Gulfport. The Chairman of Gulfport (Mike Lidell) cements this link. He is the operating member and in some cases an officer of many of the Wexford entities.
Wexford knows more than anyone else about this company
As we have shown Wexford is either a major owner or operator or supplier to every Gulfport Asset. The Chairman of Gulfport is also (at least in part) a Wexford man.
Wexford is a big fund - according to its website it has $5.6 billion under management.
It is worth knowing what Wexford is doing with their stake. The answer is selling. And selling. And selling some more:
|Trade Date||Symbol||Company Name (Issuer)||Trade Type||Shares||Price ($)||Value ($)|
|2012-03-13||GPOR||Gulfport Energy Corp||Sale||245,000||32.80||8,035,020|
|2012-03-08||GPOR||Gulfport Energy Corp||Sale||329,670||32.53||10,723,835|
|2012-03-09||GPOR||Gulfport Energy Corp||Sale||370,422||33.17||12,285,416|
|2012-03-12||GPOR||Gulfport Energy Corp||Sale||150,000||32.43||4,864,200|
|2012-03-07||GPOR||Gulfport Energy Corp||Sale||381,968||32.32||12,347,115|
|2012-03-06||GPOR||Gulfport Energy Corp||Sale||50,000||31.23||1,561,700|
|2012-03-05||GPOR||Gulfport Energy Corp||Sale||59,000||32.18||1,898,797|
|2012-02-29||GPOR||Gulfport Energy Corp||Sale||17,000||34.50||586,585|
|2012-03-02||GPOR||Gulfport Energy Corp||Sale||17,200||33.75||580,534|
|2012-03-01||GPOR||Gulfport Energy Corp||Sale||459,000||34.11||15,657,408|
|2011-12-05||GPOR||Gulfport Energy Corp||Sale||1,150,000||27.84||32,016,000|
|2011-03-30||GPOR||Gulfport Energy Corp||Sale||2,760,000||30.56||84,345,600|
|2010-12-17||GPOR||Gulfport Energy Corp||Sale||3,910,000||19.40||75,854,000|
Still they have 5.3 million shares left - and these have a not-inconsiderable value. Moreover almost all the sales have been at prices far above the current price. Their ownership position (including capital raises) has far more than halved.
I take a highly knowledgeable and very rich seller selling aggressively at prices around $30 as a good sell signal at prices around $30.
It is less good a sell signal where we are currently trading (at prices around $20). The reasons I am still short will need to wait for another post.