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CST: 22/08/2019 17:56:00   

Mid-Con Energy Partners, LP Announces First Quarter 2019 Operating and Financial Results and Quarterly Distribution on Preferred Units

112 Days ago

TULSA, May 01, 2019 (GLOBE NEWSWIRE) -- Mid-Con Energy Partners, LP (NASDAQ: MCEP) (“Mid-Con Energy” or the “Partnership”) announced today its operating and financial results for the first quarter 2019.

“We continue to transform Mid-Con Energy through acquisitions and divestitures that are focused on improving our financial flexibility and utilizing our operational expertise to maximize the value of our assets,” said President and Chief Executive Officer Jeff Olmstead. “On March 28, 2019, we closed on the previously-announced Strategic Transaction. This transaction consisted of two agreements, the disposition of substantially all of our Texas assets and the acquisition of producing assets in Caddo, Grady, and Osage Counties, Oklahoma. The net effect of the transaction was to significantly reduce outstanding debt and to add long-lived, low-decline assets with the potential for margin enhancements through operational efficiency to our portfolio. Going forward, we believe Unit Holders and the Partnership will benefit from an improved capital structure, lower decline-rate portfolio with development opportunities, and flexibility to prioritize cash flow towards development projects, additional accretive acquisitions or to continue to pay down debt.” 

Olmstead continued, “We are excited with the upside potential within our assets and we will continue to demonstrate capital discipline, while executing operationally. As we look to the future, we expect to continue evaluating potential acquisitions of waterflood assets as well as complementary long-lived, low-decline producing properties where we believe the opportunity exists to enhance margins through our competitive operational strengths.”

Recent Highlights

  • Closed the divestiture of substantially all of the Partnership’s Texas assets for $60.0 million in proceeds on March 28, 2019, subject to customary purchase price adjustments;
  • Closed the acquisition of producing properties in Caddo, Grady, and Osage Counties in Oklahoma for $27.5 million on March 28, 2019, subject to customary purchase price adjustments;
  • Averaged first quarter 2019 production of 3,467 barrels of oil equivalent per day (Boe/d);
  • Reported net loss of $3.8 million for the first quarter 2019;
  • Reduced senior debt balance from $93.0 million at December 31, 2018, to $68.0 million as of March 31, 2019;
  • Amended credit agreement on March 28, 2019, resulting in new borrowing base of $110.0 million which provides $42.3 million in liquidity, net of letters of credit as of April 26, 2019;
  • Reported total leverage ratio as defined by credit agreement of 3.35x as of March 31, 2019;
  • Generated first quarter 2019 adjusted EBITDA of $4.5 million(1).
    (1) Adjusted EBITDA is a Non-GAAP financial measure and is described and reconciled to the most directly comparable GAAP measure in the attached table under “Non-GAAP Financial Measures.”

FIRST QUARTER 2019 RESULTS

Production - Production for the first quarter of 2019 was 312 MBoe, or 3,467 Boe/d with a 94% oil weighting. On a daily basis, this represented a 5% decrease sequentially and a 24% increase year-over-year. Production in the first quarter of 2019 was adversely impacted by winter weather in Wyoming and Texas as well as by shut-ins in Wyoming due to realized pricing. Year-over-year production increase was primarily due to the acquisition of Oklahoma and Wyoming properties during 2018, partially offset by the natural declines in the Texas properties. The Partnership drilled 2 new producing wells in Oklahoma and completed 2 wells in Texas during the first quarter 2019. We also returned 9 wells to production in Oklahoma and 2 in Wyoming during the same period.

Revenue and Price Realizations - Oil and natural gas sales were $14.8 million in the first quarter of 2019, or $47.58/Boe. On a per Boe basis, this represented a 2% decrease sequentially and was primarily due to lower production. Cash settlements received for matured derivatives, inclusive of net premiums, were $0.1 million in the first quarter of 2019, or $0.46/Boe. Cash settlements paid for matured derivatives, inclusive of net premiums, were $3.39/Boe in the fourth quarter of 2018. Cash settlements received from matured derivatives, inclusive of net premiums were $5.25/Boe in the first quarter of 2018. The resulting realized prices, after incorporating cash settlements from matured derivatives, inclusive of net premiums, were $48.03/Boe in the first quarter of 2019, $44.93/Boe in the fourth quarter of 2018, and $53.13/Boe in the first quarter of 2018. 

Lease Operating Expenses (“LOE”) - LOE was $6.8 million in the first quarter of 2019, representing a 3% increase from the fourth quarter of 2018 and an increase of 42% from the first quarter of 2018. On a per Boe basis, LOE in the first quarter of 2019 was $21.89/Boe an increase of 11% sequentially and an increase of 19% year-over-year. The sequential increase in aggregate LOE, and on a per BOE basis, is primarily due to lower production and higher costs associated with winter weather. The year-over-year variance on aggregate LOE, and on a per Boe basis, was primarily due to the acquisition of the Oklahoma and Wyoming properties during 2018. 

Production and Ad Valorem Taxes - Production and ad valorem taxes in the first quarter of 2019 were $1.3 million, or $4.11/Boe, reflecting an effective tax rate of 8.6%. Production and ad valorem taxes in the fourth quarter of 2018 were $1.7 million, or $4.99/Boe, for an effective tax rate of 10.3%. Production and ad valorem taxes in the first quarter of 2018 were $1.0 million, or $4.10/Boe, reflecting an effective tax rate of 5.9%. The sequential decrease in effective tax rate was primarily due to ad valorem tax adjustments related to acquisitions that impacted fourth quarter 2018.

General and Administrative Expenses (“G&A”) - G&A in the first quarter of 2019 was $2.7 million, or $8.53/Boe. This compares to fourth quarter 2018 G&A of $1.6 million, or $4.64/Boe. G&A in the first quarter of 2018 was $1.9 million, or $7.52/Boe. The increase both sequentially and year-over-year was primarily due to professional and other fees related to acquisition and divestiture activities.

Net Income (Loss) - For the first quarter of 2019, Mid-Con Energy reported net loss of $3.8 million. Net loss per limited partner unit was $0.16 (basic and diluted) based on the weighted average limited partner units outstanding during the period of 30.6 million (basic and diluted). Net income for the fourth quarter of 2018 was $2.4 million, or $0.04 (basic) and $0.02 (diluted) per limited partner unit, based on a weighted average of 30.4 million (basic) and 52.6 million (diluted). Net loss for the first quarter of 2018 was $10.4 million, or $0.37 per limited partner unit (basic and diluted), based on a weighted average of 30.2 million limited partner units outstanding during the period.

Adjusted EBITDA - Adjusted EBITDA, a non-GAAP measure, for the first quarter of 2019 was $4.5 million, or $14.42/Boe, compared to $15.12/Boe in the fourth quarter of 2018 and $23.81/Boe in the first quarter of 2018. The sequential decrease in Adjusted EBITDA, in aggregate and per Boe, was primarily due to lower production and increased professional and other fees related to acquisition and divestiture activities. 

BALANCE SHEET, LIQUIDITY AND BORROWING BASE SUMMARY

On March 28, 2019, in conjunction with the closing of the sale of the Partnership’s Texas assets and concurrent acquisition of producing properties in Caddo, Grady, and Osage Counties in Oklahoma, the Partnership’s borrowing base was updated to $110.0 million. As of March 31, 2019, the Partnership had $68.0 million of borrowings outstanding on its revolving credit facility. The next borrowing base redetermination will be before or during the fall of 2019. 

On April 26, 2019, total liquidity was $42.3 million, which consisted of $1.3 million of cash and $41.0 million of available borrowings under its revolving credit facility.

STRATEGIC TRANSACTION

On March 28, 2019, the Partnership announced the closing of the previously announced Strategic Transaction, which included the divestiture of substantially all of Mid-Con Energy’s Texas assets for $60.0 million in proceeds and the simultaneous acquisition of producing properties in Caddo, Grady, and Osage Counties in Oklahoma for $27.5 million. Each individual transaction is subject to customary purchase price adjustments. Further, in conjunction with the closing of the transaction, the Partnership and its lenders executed Amendment No. 13 to the Credit Agreement and set the borrowing base at $110.0 million. 

HEDGING SUMMARY

Mid-Con Energy enters into various commodity derivative contracts intended to achieve more predictable cash flows by reducing the Partnership’s exposure to short-term fluctuations in oil prices. We believe this risk management strategy will serve to secure a portion of our revenues and, by retaining some opportunity to participate in upward price movements, may also enable us to realize higher revenues during periods when prices rise.

As of March 31, 2019, the following table reflects volumes of Mid-Con Energy’s production hedged by commodity derivative contracts, with the corresponding prices at which the production is hedged:

                                   
Period Covered   Differential
Fixed Price
    Weighted
Average
Fixed Price
    Weighted
Average
Floor Price
    Weighted
Average
Ceiling Price
    Total Bbls
Hedged/day
    Index
Swaps - 2019   $     $ 56.10     $     $       1,727     NYMEX-WTI
Swaps - 2019   $ (20.15 )   $     $     $       150     WCS-CRUDE-OIL
Swaps - 2020   $     $ 55.81     $     $       1,931     NYMEX-WTI
Swaps - 2021   $     $ 55.78     $     $       672     NYMEX-WTI
Collars - 2021   $     $     $ 52.00     $ 58.80       672     NYMEX-WTI
                                             

PREFERRED UNIT DISTRIBUTION

The Partnership announces that the Board of Directors of its general partner declared a cash distribution for: (1) its Class A Convertible Preferred Units for the first quarter of 2019, a cash distribution of $0.0430 per Preferred Unit and (2) its Class B Convertible Preferred Units for the first quarter of 2019, a cash distribution of $0.0306 per Preferred Unit, according to terms outlined in the Partnership Agreement. Such cash distributions will be paid on or before May 15, 2019, to holders of record as of the close of business on May 7, 2019.

FISCAL YEAR 2019 GUIDANCE

The following outlook is subject to all the cautionary statements and limitations described under the “Forward-Looking Statements” caption at the end of this press release. These estimates and assumptions reflect management’s best judgment based on current and anticipated market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control.

     
Guidance as of May 1, 2019   FY 2019
Net production (Boe/d)(1)   3,400 - 3,800
Lease operating expenses per Boe   $21.00 - $24.00
Production and ad valorem taxes (% of total revenue)   8.00% - 9.50%
Estimated capital expenditures   9.0 MM
(1) Production volumes in Boe equivalents calculated at a rate of six Mcf per Bbl.
 

FIRST QUARTER 2019 CONFERENCE CALL

As announced on April 30, 2019, Mid-Con Energy’s management will host a conference call on Thursday, May 2, 2019, at 9:00 a.m. ET. Interested parties are invited to participate via telephone by dialing 1-877-847-5946 (Conference ID: 2352589) at least five minutes prior to the scheduled start time of the call, or via webcast by clicking on "Events & Presentations” in the investor relations section of the Mid-Con Energy website at www.midconenergypartners.com. A replay of the conference call will be available through Thursday, May 9, 2019, by dialing 1-855-859-2056 (Conference ID: 2352589). Additionally, a webcast archive will be available at www.midconenergypartners.com.

ABOUT MID-CON ENERGY PARTNERS, LP

Mid-Con Energy is a publicly held Delaware limited partnership formed in July 2011 to own, acquire, and develop producing oil and natural gas properties in North America, with a focus on Enhanced Oil Recovery. Mid-Con Energy’s core areas of operation are located primarily in Oklahoma and Wyoming. For more information, please visit Mid-Con Energy’s website at www.midconenergypartners.com.

FORWARD-LOOKING STATEMENTS

This press release includes “forward-looking statements” — that is, statements related to future, not past, events within meaning of the federal securities laws. Forward-looking statements are based on current expectations and include any statement that does not directly relate to a current or historical fact. In this context, forward-looking statements often address expected future business and financial performance, and often contain words such as “anticipate,” “believe,” “estimate,” “intend,” “expect,” “plan,” “project,” “should,” “goal,” “forecast,” “guidance,” “could,” “may,” “continue,” “might,” “potential,” “scheduled,” “pursue,” “target,” “will” and the negative of such terms or other comparable terminology. These forward-looking statements involve certain risks and uncertainties and ultimately may not prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements. For further discussion of risks and uncertainties, you should refer to Mid-Con Energy’s filings with the Securities and Exchange Commission (“SEC”) available at www.midconenergypartners.com or www.sec.gov. Mid-Con Energy undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this press release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement and our SEC filings. Please see the risks and uncertainties detailed in the “Forward-Looking Statements” and “Risk Factors” sections of our Annual Report on Form 10-K for the year ended December 31, 2018, and in other documents and reports we file from time to time with the SEC.

   
Mid-Con Energy Partners, LP and subsidiaries  
Condensed Consolidated Balance Sheets  
(in thousands, except number of units)  
(Unaudited)  
       
    March   31, 2019     December   31, 2018  
ASSETS                
Current assets                
Cash and cash equivalents   $ 185     $ 467  
Accounts receivable                
Oil and natural gas sales     5,035       3,691  
Other     179       503  
Derivative financial instruments           5,666  
Prepaid expenses and other     487       118  
Assets held for sale, net     430       430  
Total current assets     6,316       10,875  
Property and equipment                
Oil and natural gas properties, successful efforts method                
Proved properties     276,389       379,441  
Unproved properties     3,371       2,928  
Other property and equipment     1,551       427  
Accumulated depletion, depreciation, amortization and impairment     (90,710 )     (175,948 )
Total property and equipment, net     190,601       206,848  
Derivative financial instruments           2,418  
Other assets     1,385       1,563  
Total assets   $ 198,302     $ 221,704  
                 
LIABILITIES, CONVERTIBLE PREFERRED UNITS AND EQUITY                
Current liabilities                
Accounts payable                
Trade   $ 804     $ 141  
Related parties     1,176       3,732  
Derivative financial instruments     2,928        
Accrued liabilities     590       2,024  
Other current liabilities     408        
Total current liabilities     5,906       5,897  
Derivative financial instruments     1,329        
Long-term debt     68,000       93,000  
Other long-term liabilities     782       47  
Asset retirement obligations     29,780       26,001  
Commitments and contingencies                
Class A convertible preferred units - 11,627,906 issued and outstanding, respectively     22,016       21,715  
Class B convertible preferred units - 9,803,921 issued and outstanding, respectively     14,683       14,635  
Equity, per accompanying statements                
General partner     (831 )     (786 )
Limited partners - 30,785,958 and 30,436,124 units issued and outstanding, respectively     56,637       61,195  
Total equity     55,806       60,409  
Total liabilities, convertible preferred units and equity   $ 198,302     $ 221,704  


Mid-Con Energy Partners, LP and subsidiaries  
Condensed Consolidated Statements of Operations  
(in thousands, except per unit data)  
(Unaudited)  
                 
    Three Months Ended  
    March   31,  
    2019     2018  
Revenues                
Oil sales   $ 14,594     $ 14,544  
Natural gas sales     250       168  
Other operating revenues     372        
Loss on derivatives, net     (12,198 )     (3,382 )
Total revenues     3,018       11,330  
Operating costs and expenses                
Lease operating expenses     6,830       4,640  
Production and ad valorem taxes     1,282       1,033  
Other operating expenses     473        
Impairment of proved oil and natural gas properties           8,751  
Depreciation, depletion and amortization     3,098       3,441  
Dry holes and abandonments of unproved properties           88  
Accretion of discount on asset retirement obligations     328       153  
General and administrative     2,662       1,894  
Total operating costs and expenses     14,673       20,000  
Gain (loss) on sales of oil and natural gas properties, net     9,469       (400 )
Loss from operations     (2,186 )     (9,070 )
Other (expense) income                
Interest income     8       2  
Interest expense     (1,615 )     (1,339 )
Other income     5        
Loss on settlements of asset retirement obligations           (11 )
Total other expense     (1,602 )     (1,348 )
Net loss     (3,788 )     (10,418 )
Less: Distributions to preferred unitholders     1,149       1,016  
Less: General partner's interest in net loss     (45 )     (123 )
Limited partners' interest in net loss   $ (4,892 )   $ (11,311 )
Limited partners' interest in net loss per unit                
Basic and diluted   $ (0.16 )   $ (0.37 )
Weighted average limited partner units outstanding                
Limited partner units (basic and diluted)     30,630       30,176  


Mid-Con Energy Partners, LP and subsidiaries  
Condensed Consolidated Statements of Cash Flows  
(In thousands)  
(Unaudited)  
   
    Three Months Ended
March   31,
 
    2019     2018  
Cash flows from operating activities                
Net loss   $ (3,788 )   $ (10,418 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities                
Depreciation, depletion and amortization     3,098       3,441  
Debt issuance costs amortization     178       154  
Accretion of discount on asset retirement obligations     328       153  
Impairment of proved oil and natural gas properties           8,751  
Dry holes and abandonments of unproved properties           88  
Loss on settlements of asset retirement obligations           11  
Cash paid for settlements of asset retirement obligations           (27 )
Mark to market on derivatives                
Loss on derivatives, net     12,198       3,382  
Cash settlements received (paid) for matured derivatives     143       (1,324 )
(Gain) loss on sales of oil and natural gas properties     (9,469 )     400  
Non-cash equity-based compensation     334       239  
Changes in operating assets and liabilities                
Accounts receivable     (1,344 )     234  
Other receivables     127       (280 )
Prepaids and other     (369 )     (331 )
Accounts payable - trade and accrued liabilities     432       319  
Accounts payable - related parties     (2,999 )     (357 )
Net cash (used in) provided by operating activities     (1,131 )     4,435  
Cash flows from investing activities                
Acquisitions of oil and natural gas properties     (2,796 )     (8,899 )
Additions to oil and natural gas properties     (3,057 )     (1,465 )
Proceeds from sales of oil and natural gas properties     32,502       1,151  
Net cash provided by (used in) investing activities     26,649       (9,213 )
Cash flows from financing activities                
Proceeds from line of credit     7,000       2,000  
Payments on line of credit     (32,000 )     (11,762 )
Debt issuance costs           (651 )
Proceeds from sale of Class B convertible preferred units, net of offering costs           14,971  
Distributions to Class A convertible preferred units     (500 )     (1,000 )
Distributions to Class B convertible preferred units     (300 )      
Net cash (used in) provided by financing activities     (25,800 )     3,558  
Net decrease in cash and cash equivalents     (282 )     (1,220 )
Beginning cash and cash equivalents     467       1,832  
Ending cash and cash equivalents   $ 185     $ 612  
                 

NON-GAAP FINANCIAL MEASURES

This press release, the financial tables and other supplemental information include “Adjusted EBITDA” which is a non-generally accepted accounting principles (“Non-GAAP”) measure used by our management to describe financial performance with external users of our financial statements. The Partnership believes the Adjusted EBITDA is useful to investors because this measurement is used by many companies in its industry as a measurement of financial performance and is commonly employed by financial analysts and others to evaluate the financial performance of the Partnership and to compare the financial performance of the Partnership with the performance of other publicly traded partnerships within its industry. Adjusted EBITDA should not be considered an alternative to net income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP.

Adjusted EBITDA is defined as net income (loss) plus (minus):

  • Interest expense, net;
  • Depreciation, depletion and amortization;
  • Accretion of discount on asset retirement obligations;
  • (Gain) loss on derivatives, net;
  • Cash settlements received (paid) for matured derivatives, net;
  • Cash premiums received (paid) for derivatives, net;
  • Impairment of proved oil and natural gas properties;
  • Non-cash equity-based compensation;
  • (Gain) loss on sales of oil and natural gas properties, net; and
  • Dry holes and abandonments on unproved properties.
 
Mid-Con Energy Partners, LP and subsidiaries
Reconciliation of Net (Loss) Income to Adjusted EBITDA
(in thousands)
(Unaudited)
             
    Thee Month Ended
    March 31, 2019   December 31, 2018   March 31, 2018
Net (loss) income   $  (3,788)   $  2,369   $  (10,418)
Interest expense, net   1,607   1,641   1,337
Depreciation, depletion and amortization   3,098   5,105   3,441
Accretion of discount on asset retirement obligations   328   (27)   153
Impairment of proved oil and natural gas properties     21,450   8,751
Dry holes and abandonments of unproved properties     417   88
Loss (gain) on derivatives, net   12,198   (24,914)   3,382
Cash settlements received (paid) for matured derivatives   143   (940)   (1,324)
Cash premiums paid for derivatives, net     (201)  
Non-cash equity-based compensation   334   74   239
(Gain) loss on sales of oil and natural gas properties, net   (9,469)   120   400
Adjusted EBITDA   $  4,451   $  5,094   $  6,049
             

INVESTOR RELATIONS CONTACT
IR@midcon-energy.com
(918) 743-7575

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