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CST: 22/08/2019 17:03:48   

Mid-Con Energy Partners, LP Announces Second Quarter 2019 Operating and Financial Results

22 Days ago

TULSA, July 31, 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 second quarter 2019.

“The second quarter of 2019 was highlighted by the efforts and success of our operations team in managing costs and weather related downtime and executing development opportunities,” said President and Chief Executive Officer Jeff Olmstead. “Production increased from the previous quarter in spite of the historic floods in northern Oklahoma. Lease operating expenses came in below expectations at our newly acquired Oklahoma assets. Leverage declined, despite increased professional and other fees related to transaction activity.” Olmstead continued, “Development activity increased as we began injection in our Pine Tree field in the Powder River Basin, with greater than expected injection rates. This field provides a significant growth prospect over the next few years. We also tested several re-complete programs that yielded positive results which provide additional growth potential in the second half of 2019. The results of the second quarter set us up for additional development opportunities, continued cash flow growth and reduced leverage for the second half of 2019.”

HIGHLIGHTS AND RECENT DEVELOPMENTS

  • Production increased by 2% from first quarter of 2019, despite historic flooding in Oklahoma.
  • Decreased lease operating expenses (“LOE”) in newly acquired assets in Oklahoma, which contributed to increased cash flow during second quarter of 2019.
  • Net income was $5.1 million for the second quarter of 2019.
  • Continued to reduce outstanding borrowings on our revolving credit facility. Total net reduction of $27.0 million for the six months ended June 30, 2019.
  • Our liquidity position at July 26, 2019 consisted of approximately $0.6 million of available cash and $43.0 million of available borrowings ($110.0 million borrowing base less $66.0 million outstanding borrowings and $1.0 million outstanding standby letter of credit).
  • Achieved first injection in our Pine Tree waterflood project. Formal unitization approval expected in third quarter of 2019.
  • Returned approximately 50 wells to production in newly acquired assets.
  • Generated second quarter Adjusted EBITDA of $5.1 million(1). Excluding professional and other fees related to transaction activity during the quarter, Adjusted EBITDA would have been $5.9 million.
  • Reported Total Leverage Ratio, as defined by our credit agreement, of 3.24x for the period ending June 30, 2019. Excluding professional and other fees related to transaction activity during the quarter, Total Leverage Ratio would have been 2.79x.
    (1) Non-GAAP financial measure. Please refer to the related disclosure and reconciliation of net income (loss) to Adjusted EBITDA included in this press release.

FINANCIAL SUMMARY

During the second quarter 2019, the Partnership continued to execute on its plan to reduce debt, while funding capital expenditures with internally generated cash flow.

Production was up 2% to 3,538 Boe/d for the second quarter of 2019 from 3,467 Boe/d in the first quarter of 2019. Commodity pricing also improved during second quarter 2019 as realized oil price increased to $55.20 per barrel from $50.47 per barrel in the first quarter of 2019. Revenue was positively impacted by both the increase in production and realized oil prices.

Total lease operating expenses were expected to increase during the quarter due to the acquisition of the Oklahoma properties. Overall LOE increased by 11%, however the operating teams were able to greatly reduce the expenses on the recently acquired properties in Oklahoma, when compared to historical expenses from the predecessor operator. This reduction helped increase cash flow on those specific assets.

General and administrative expenses were higher than anticipated for the quarter due to one-time professional and other fees related to transaction activities.

Adjusted EBITDA continued the positive trend of financial results as it increased to $5.1 million from $4.5 million in the first quarter 2019.

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 June 30, 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   $     $ 56.08     $     $       1,692     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

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 July 31, 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% - 9.00%
Estimated capital expenditures   $9.0 MM
(1) Production volumes in Boe equivalents calculated at a rate of six Mcf per Bbl.

SECOND QUARTER 2019 CONFERENCE CALL

As announced on July 29, 2019, Mid-Con Energy’s management will host a conference call on Thursday, August 1, 2019, at 9:00 a.m. ET. Interested parties are invited to participate via telephone by dialing 1-877-847-5946 (Conference ID: 4076206) 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, August 8, 2019, by dialing 1-855-859-2056 (Conference ID: 4076206). Additionally, a webcast archive will be available at www.midconenergypartners.com.  As of July 31, 2019, the Partnership has posted on its website an updated investor presentation entitled “Supplemental Second Quarter 2019 Results” dated August 1, 2019. The presentation may be accessed by going to www.midconenergypartners.com, and selecting Events and Presentations under the Investor Relations tab.

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 due to a number of factors including but not limited to volatility of commodity prices; revision to oil and natural gas reserves estimates as a result of changes in commodity prices; effectiveness of risk management activities; business strategies; future financial and operating results; ability to replace the reserves we produce through acquisitions and the development of our properties; future capital requirements and availability of financing; realized oil and natural gas prices; production volumes; lease operating expenses; general and administrative expenses; cash flow and liquidity; availability of production equipment; availability of oil field labor; capital expenditures; availability and terms of capital; marketing of oil and natural gas; general economic conditions; competition in the oil and natural gas industry; environmental liabilities; compliance with NASDAQ listing requirements; and any other risks and uncertainties discussed in our Form 10-K and other filings with the SEC.

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)  
       
    June   30, 2019     December   31, 2018  
ASSETS                
Current assets                
Cash and cash equivalents   $ 525     $ 467  
Accounts receivable     6,438       4,194  
Derivative financial instruments           5,666  
Prepaid expenses     393       118  
Assets held for sale, net     430       430  
Total current assets     7,786       10,875  
Property and equipment                
Oil and natural gas properties, successful efforts method                
Proved properties     256,654       379,441  
Unproved properties     3,476       2,928  
Other property and equipment     1,456       427  
Accumulated depletion, depreciation, amortization and impairment     (71,686 )     (175,948 )
Total property and equipment, net     189,900       206,848  
Derivative financial instruments     955       2,418  
Other assets     1,186       1,563  
Total assets   $ 199,827     $ 221,704  
                 
LIABILITIES, CONVERTIBLE PREFERRED UNITS AND EQUITY                
Current liabilities                
Accounts payable                
Trade   $ 693     $ 141  
Related parties     3,320       3,732  
Derivative financial instruments     1,086        
Accrued liabilities     632       2,024  
Other current liabilities     415        
Total current liabilities     6,146       5,897  
Long-term debt     66,000       93,000  
Other long-term liabilities     675       47  
Asset retirement obligations     30,082       26,001  
Commitments and contingencies                
Class A convertible preferred units - 11,627,906 issued and outstanding, respectively     22,325       21,715  
Class B convertible preferred units - 9,803,921 issued and outstanding, respectively     14,731       14,635  
Equity, per accompanying statements                
General partner     (771 )     (786 )
Limited partners - 30,785,958 and 30,436,124 units issued and outstanding, respectively     60,639       61,195  
Total equity     59,868       60,409  
Total liabilities, convertible preferred units and equity   $ 199,827     $ 221,704  

                                                                                                  

Mid-Con Energy Partners, LP and subsidiaries  
Condensed Consolidated Statements of Operations  
(in thousands, except per unit data)  
(Unaudited)  
                                 
    Three Months Ended     Six Months Ended  
    June   30,     June   30,  
    2019     2018     2019     2018  
Revenues                                
Oil sales   $ 16,792     $ 15,931     $ 31,386     $ 30,475  
Natural gas sales     397       264       647       432  
Other operating revenues     340             712        
Gain (loss) on derivatives, net     3,396       (9,500 )     (8,802 )     (12,882 )
Total revenues     20,925       6,695       23,943       18,025  
Operating costs and expenses                                
Lease operating expenses     7,587       5,009       14,417       9,649  
Production and ad valorem taxes     1,469       1,205       2,751       2,238  
Other operating expenses     417             890        
Impairment of proved oil and natural gas properties     204       959       204       9,710  
Depreciation, depletion and amortization     2,369       3,393       5,467       6,834  
Dry holes and abandonments of unproved properties           97             185  
Accretion of discount on asset retirement obligations     417       191       745       344  
General and administrative     2,348       1,358       5,010       3,252  
Total operating costs and expenses     14,811       12,212       29,484       32,212  
Gain (loss) on sales of oil and natural gas properties, net     223       12       9,692       (388 )
Income (loss) from operations     6,337       (5,505 )     4,151       (14,575 )
Other (expense) income                                
Interest income     1             9       2  
Interest expense     (1,229 )     (1,410 )     (2,844 )     (2,749 )
Other income     44             49        
(Loss) gain on settlements of asset retirement obligations     (56 )     60       (56 )     49  
Total other expense     (1,240 )     (1,350 )     (2,842 )     (2,698 )
Net income (loss)     5,097       (6,855 )     1,309       (17,273 )
Less: Distributions to preferred unitholders     1,157       1,139       2,306       2,155  
Less: General partner's interest in net income (loss)     60       (81 )     15       (204 )
Limited partners' interest in net income (loss)   $ 3,880     $ (7,913 )   $ (1,012 )   $ (19,224 )
Limited partners' interest in net income (loss) per unit                                
Basic   $ 0.13     $ (0.26 )   $ (0.03 )   $ (0.64 )
Diluted   $ 0.07     $ (0.26 )   $ (0.03 )   $ (0.64 )
Weighted average limited partner units outstanding                                
Limited partner units (basic)     30,786       30,306       30,708       30,241  
Limited partner units (diluted)     53,187       30,306       30,708       30,241  


Mid-Con Energy Partners, LP and subsidiaries  
Condensed Consolidated Statements of Cash Flows  
(In thousands)  
(Unaudited)  
   
    Six Months Ended
June   30,
 
    2019     2018  
Cash flows from operating activities                
Net income (loss)   $ 1,309     $ (17,273 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities                
Depreciation, depletion and amortization     5,467       6,834  
Debt issuance costs amortization     356       329  
Accretion of discount on asset retirement obligations     745       344  
Impairment of proved oil and natural gas properties     204       9,710  
Dry holes and abandonments of unproved properties           185  
Loss (gain) on settlements of asset retirement obligations     56       (49 )
Cash paid for settlements of asset retirement obligations     (72 )     (65 )
Mark to market on derivatives                
Loss on derivatives, net     8,802       12,882  
Cash settlements paid for matured derivatives, net     (586 )     (3,505 )
(Gain) loss on sales of oil and natural gas properties     (9,692 )     388  
Non-cash equity-based compensation     456       367  
Changes in operating assets and liabilities                
Accounts receivable     (2,441 )     (325 )
Prepaid expenses and other assets     (254 )     (1,565 )
Accounts payable - trade and accrued liabilities     434       442  
Accounts payable - related parties     (293 )     1,277  
Net cash provided by operating activities     4,491       9,976  
Cash flows from investing activities                
Acquisitions of oil and natural gas properties     (3,262 )     (9,257 )
Additions to oil and natural gas properties     (5,085 )     (3,724 )
Proceeds from sales of oil and natural gas properties     32,514       1,163  
Net cash provided by (used in) investing activities     24,167       (11,818 )
Cash flows from financing activities                
Proceeds from line of credit     7,000       7,000  
Payments on line of credit     (34,000 )     (19,000 )
Debt issuance costs           (651 )
Proceeds from sale of Class B convertible preferred units, net of offering costs           14,878  
Distributions to Class A convertible preferred units     (1,000 )     (1,500 )
Distributions to Class B convertible preferred units     (600 )     (200 )
Net cash (used in) provided by financing activities     (28,600 )     527  
Net increase (decrease) in cash and cash equivalents     58       (1,315 )
Beginning cash and cash equivalents     467       1,832  
Ending cash and cash equivalents   $ 525     $ 517  


Mid-Con Energy Partners, LP and subsidiaries
Production, Prices, and Unit Costs per Boe
(Unaudited)
                                                               
    Three Months Ended
June   30,
                    Six Months Ended
June 30,
               
    2019     2018     Change     %
Change
    2019     2018     Change     %
Change
Production Volumes                                                              
Oil (MBbls)     291       251       40     16 %       583       489       94     19 %
Natural gas (MMcf)     184       92       92     100 %       305       178       127     71 %
Total (MBoe)     322       267       55     21 %       634       519       115     22 %
Average daily net production (Boe/d)     3,538       2,934       604     21 %       3,503       2,867       636     22 %
                                                               
Average sales price                                                              
Oil (per Bbl)                                                              
Sales price   $ 57.70     $ 63.47     $ (5.77 )   (9 %)     $ 53.84     $ 62.32     $ (8.48 )   (14 %)
Effect of net settlements on matured derivative instruments   $ (2.50 )   $ (8.69 )   $ 6.19     71 %     $ (1.01 )   $ (7.17 )   $ 6.16     86 %
Realized oil price after derivatives   $ 55.20     $ 54.78     $ 0.42     1 %     $ 52.83     $ 55.15     $ (2.32 )   (4 %)
Natural gas (per Mcf)   $ 2.16     $ 2.87     $ (0.71 )   (25 %)     $ 2.12     $ 2.43     $ (0.31 )   (13 %)
                                                               
Average unit costs per Boe                                                              
Lease operating expenses   $ 23.56     $ 18.76     $ 4.80     26 %     $ 22.74     $ 18.59     $ 4.15     22 %
Production and ad valorem taxes   $ 4.56     $ 4.51     $ 0.05     1 %     $ 4.34     $ 4.31     $ 0.03     1 %
Depreciation, depletion and amortization   $ 7.36     $ 12.71     $ (5.35 )   (42 %)     $ 8.62     $ 13.17     $ (4.55 )   (35 %)
General and administrative expenses   $ 7.29     $ 5.09     $ 2.20     43 %     $ 7.90     $ 6.27     $ 1.63     26 %

NON-GAAP FINANCIAL MEASURE

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 Non-GAAP financial measure described above 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 Income (Loss) to Adjusted EBITDA  
(in thousands)  
(Unaudited)  
                         
    Three Months Ended  
    June 30, 2019     March 31, 2019     June 30, 2018  
Net income (loss)   $ 5,097     $ (3,788 )   $ (6,855 )
Interest expense, net     1,228       1,607       1,410  
Depreciation, depletion and amortization     2,369       3,098       3,393  
Accretion of discount on asset retirement obligations     417       328       191  
Impairment of proved oil and natural gas properties     204             959  
Dry holes and abandonments of unproved properties                 97  
(Gain) loss on derivatives, net     (3,396 )     12,198       9,500  
Cash settlements (paid) received for matured derivatives     (729 )     143       (2,181 )
Non-cash equity-based compensation     122       334       128  
Gain on sales of oil and natural gas properties, net     (223 )     (9,469 )     (12 )
Adjusted EBITDA   $ 5,089     $ 4,451     $ 6,630  

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

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