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Oct 30, 2019

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

TULSA, Oct. 30, 2019 (GLOBE NEWSWIRE) -- Mid-Con Energy Partners, LP (NASDAQ: MCEP) (“Mid-Con Energy” or the “Partnership”) announced today its operating and financial results for third quarter 2019.

“We significantly increased our development efforts during the third quarter of 2019,” said President and Chief Executive Officer, Jeff Olmstead. “The capital spent was primarily focused on de-risking our long-term development opportunities in Oklahoma and Wyoming, as well as injection progress at our Pine Tree unit in Wyoming. We drilled and cored two wells in some of our recently acquired assets in Oklahoma that signal the opportunity for new waterfloods in those properties. Operationally, we were able to keep production largely flat from the previous quarter while focusing on de-risking development opportunities. Expenses were higher than forecasted due to some unexpected costs that we believe to be one-time in nature. Going forward, we expect to continue reducing debt, while focusing on increasing production and reserves through organic development opportunities, all out of cash flow from operations.”

HIGHLIGHTS AND RECENT DEVELOPMENTS – Quarter ended September 30, 2019

  • Net income was $6.0 million for the third quarter of 2019.
  • Generated positive cash flows from operating activities for the third quarter of 2019 of $5.9 million.
  • Continued to reduce outstanding borrowings on our revolving credit facility by $1.0 million during third quarter 2019.
  • Unitization of our Wyoming waterflood project was formally approved in the third quarter of 2019. First injection was achieved in the second quarter of 2019 and expansion of the waterflood continued in the third quarter with additional wells being converted to injection and activation planned for the fourth quarter.
  • In the third quarter of 2019, the Partnership: drilled two wells in two fields in Oklahoma; returned 40 wells to production in Oklahoma (27 of these wells were acquired in the second quarter of 2019); executed five re-stimulations and returned five wells to active water injection in our Wyoming assets. Results of our completed third quarter capital 2019 projects are currently being evaluated for the purpose of high grading and further refining our future capital plans.

FINANCIAL SUMMARY

Production for third quarter 2019 averaged 3,543 Boe/d, which was comparable to 3,538 Boe/d in the second quarter of 2019. Commodity pricing decreased during the third quarter 2019 as the average realized oil price after derivatives was $52.05 versus $55.20 per barrel in second quarter 2019.

Lease operating expenses (“LOE”) were $8.3 million ($25.44 per Boe) compared to $7.6 million ($23.56 per Boe) in the second quarter of 2019. The majority of the increase was due to the recently acquired properties in Oklahoma and is expected to be non-recurring as it relates to assimilating those properties in the Partnership’s portfolio.

The Partnership spent $4.3 million on capital expenditures during the third quarter of 2019. The increased capital spend was related to drilling two new wells in central Oklahoma, re-completion programs in House Creek and Worland, both located in Wyoming, continued progress on the Pine Tree waterflood project in Wyoming and returning 40 wells to production status in Northeast Oklahoma. The capital spend from most of these projects will continue into fourth quarter 2019.

The decrease in oil and natural gas revenues and the increase in LOE lowered third quarter Adjusted EBITDA(1) to $4.4 million from $5.1 million in the second quarter of 2019. During the third quarter, the Partnership continued to lower debt by $1.0 million to $65.0 million outstanding as of September 30, 2019. As of October 25, 2019, debt outstanding was $67.0 million.

(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.

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 September 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:

            Weighted     Weighted     Weighted            
      Differential     Average Fixed     Average Floor     Average     Total Bbls      
Period Covered     Fixed Price     Price     Price     Ceiling Price     Hedged/day     Index
Swaps - 2019     $     $ 56.05     $     $     1,664     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 October 30, 2019   FY 2019
Net production (Boe/d)(1)   3,500 - 3,600
Lease operating expenses per Boe   $22.00 - $24.00
Production and ad valorem taxes (% of total revenue)   8.00% - 9.00%
Estimated capital expenditures   $11.0 MM
(1)Production volumes in Boe equivalents calculated at a rate of six Mcf per Bbl.

THIRD QUARTER 2019 CONFERENCE CALL

As announced on October 24, 2019, Mid-Con Energy’s management will host a conference call on Thursday, October 31, 2019, at 9:00 a.m. ET. Interested parties are invited to participate via telephone by dialing 1-877-847-5946 (Conference ID: 6689305) 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, November 7, 2019, by dialing 1-855-859-2056 (Conference ID: 6689305). 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 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) 
     
  September 30, 2019     December 31, 2018  
ASSETS              
Current assets              
Cash and cash equivalents $ 467     $ 467  
Accounts receivable   5,243       4,194  
Derivative financial instruments   2,133       5,666  
Prepaid expenses   237       118  
Assets held for sale   430       430  
Total current assets   8,510       10,875  
Property and equipment              
Oil and natural gas properties, successful efforts method              
Proved properties   261,411       379,441  
Unproved properties   3,563       2,928  
Other property and equipment   1,360       427  
Accumulated depletion, depreciation, amortization and impairment   (74,426 )     (175,948 )
Total property and equipment, net   191,908       206,848  
Derivative financial instruments   3,630       2,418  
Other assets   995       1,563  
Total assets $ 205,043     $ 221,704  
               
LIABILITIES, CONVERTIBLE PREFERRED UNITS AND EQUITY              
Current liabilities              
Accounts payable              
Trade $ 187     $ 141  
Related parties   5,678       3,732  
Accrued liabilities   449       2,024  
Other current liabilities   422        
Total current liabilities   6,736       5,897  
Long-term debt   65,000       93,000  
Other long-term liabilities   567       47  
Asset retirement obligations   30,534       26,001  
Commitments and contingencies              
Class A convertible preferred units - 11,627,906 issued and outstanding, respectively   22,642       21,715  
Class B convertible preferred units - 9,803,921 issued and outstanding, respectively   14,780       14,635  
Equity, per accompanying statements              
General partner   (702 )     (786 )
Limited partners - 30,824,291 and 30,436,124 units issued and outstanding, respectively   65,486       61,195  
Total equity   64,784       60,409  
Total liabilities, convertible preferred units and equity $ 205,043     $ 221,704  
               


Mid-Con Energy Partners, LP and subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per unit data) 
(Unaudited) 
 
  Three Months Ended     Nine Months Ended  
  September 30,     September 30,  
  2019     2018     2019     2018  
Revenues                              
Oil sales $ 15,468     $ 18,765     $ 46,854     $ 49,240  
Natural gas sales   283       380       930       812  
Other operating revenues   271       320       983       320  
Gain (loss) on derivatives, net   5,730       (6,358 )     (3,072 )     (19,240 )
Total revenues   21,752       13,107       45,695       31,132  
Operating costs and expenses                              
Lease operating expenses   8,293       6,246       22,710       15,895  
Production and ad valorem taxes   1,333       1,565       4,084       3,803  
Other operating expenses   536       288       1,426       288  
Impairment of proved oil and natural gas properties   180             384       9,710  
Depreciation, depletion and amortization   2,559       4,812       8,026       11,646  
Dry holes and abandonments of unproved properties         10             195  
Accretion of discount on asset retirement obligations   423       404       1,168       748  
General and administrative   1,404       1,494       6,414       4,746  
Total operating costs and expenses   14,728       14,819       44,212       47,031  
(Loss) gain on sales of oil and natural gas properties, net         (1 )     9,692       (389 )
Income (loss) from operations   7,024       (1,713 )     11,175       (16,288 )
Other (expense) income                              
Interest income   1       1       10       3  
Interest expense   (1,175 )     (1,620 )     (4,019 )     (4,369 )
Other income   4       20       53       20  
Gain on sale of other assets   123             123        
(Loss) gain on settlements of asset retirement obligations   (16 )     (37 )     (72 )     12  
Total other expense   (1,063 )     (1,636 )     (3,905 )     (4,334 )
Net income (loss)   5,961       (3,349 )     7,270       (20,622 )
Less: Distributions to preferred unitholders   1,166       1,148       3,472       3,303  
Less: General partner's interest in net income (loss)   69       (39 )     84       (243 )
Limited partners' interest in net income (loss) $ 4,726     $ (4,458 )   $ 3,714     $ (23,682 )
Limited partners' interest in net income (loss) per unit                              
Basic $ 0.15     $ (0.14 )   $ 0.12     $ (0.78 )
Diluted $ 0.09     $ (0.14 )   $ 0.07     $ (0.78 )
                               
Weighted average limited partner units outstanding                              
Limited partner units (basic)   30,811       30,392       30,743       30,292  
Limited partner units (diluted)   53,189       30,392       53,142       30,292  
                               


Mid-Con Energy Partners, LP and subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands) 
(Unaudited) 
   
  Nine Months Ended  
  September 30,  
  2019     2018  
Cash flows from operating activities              
Net income (loss) $ 7,270     $ (20,622 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities              
Depreciation, depletion and amortization   8,026       11,646  
Debt issuance costs amortization   533       503  
Accretion of discount on asset retirement obligations   1,168       748  
Impairment of proved oil and natural gas properties   384       9,710  
Dry holes and abandonments of unproved properties         195  
Loss (gain) on settlements of asset retirement obligations   72       (12 )
Cash paid for settlements of asset retirement obligations   (96 )     (102 )
Mark to market on derivatives              
Loss on derivatives, net   3,072       19,240  
Cash settlements paid for matured derivatives, net   (750 )     (5,988 )
Cash premiums paid for derivatives         (200 )
(Gain) loss on sales of oil and natural gas properties   (9,692 )     389  
Gain on sale of other assets   (123 )      
Non-cash equity-based compensation   577       670  
Changes in operating assets and liabilities              
Accounts receivable   (1,246 )     (3,109 )
Prepaid expenses and other assets   (84 )     (76 )
Accounts payable - trade and accrued liabilities   (226 )     689  
Accounts payable - related parties   1,537       2,452  
Net cash provided by operating activities   10,422       16,133  
Cash flows from investing activities              
Acquisitions of oil and natural gas properties   (3,296 )     (21,626 )
Additions to oil and natural gas properties   (9,363 )     (6,072 )
Proceeds from sales of oil and natural gas properties   32,514       1,163  
Proceeds from sale of other assets   123        
Net cash provided by (used in) investing activities   19,978       (26,535 )
Cash flows from financing activities              
Proceeds from line of credit   8,000       20,000  
Payments on line of credit   (36,000 )     (23,000 )
Debt issuance costs         (651 )
Proceeds from sale of Class B convertible preferred units, net of offering costs         14,847  
Distributions to Class A convertible preferred units   (1,500 )     (2,000 )
Distributions to Class B convertible preferred units   (900 )     (500 )
Net cash (used in) provided by financing activities   (30,400 )     8,696  
Net decrease in cash and cash equivalents         (1,706 )
Beginning cash and cash equivalents   467       1,832  
Ending cash and cash equivalents $ 467     $ 126  
               


Mid-Con Energy Partners, LP and subsidiaries
Production, Prices, and Unit Costs per Boe
(Unaudited)
 
  Three Months Ended           Nine Months Ended      
  September 30,           September 30,      
                    %                        % 
  2019     2018     Change     Change     2019     2018     Change     Change
Production Volumes                                                        
Oil (MBbls)   294       309       (15 )   (5%)       877       798       79     10%
Natural gas (MMcf)   193       139       54     39%       498       317       181     57%
Total (MBoe)   326       332       (6 )   (2%)       960       851       109     13%
Average daily net production (Boe/d)   3,543       3,609       (66 )   (2%)       3,516       3,117       399     13%
                                                         
Average sales price                                                        
Oil (per Bbl)                                                        
Sales price $ 52.61     $ 60.73     $ (8.12 )   (13%)     $ 53.43     $ 61.7     $ (8.27 )   (13%)
Effect of net settlements on matured derivative instruments $ (0.56 )   $ (8.69 )   $ 8.13     94%     $ (0.86 )   $ (7.75 )   $ 6.89     89%
Realized oil price after derivatives $ 52.05     $ 52.04     $ 0.01     0%     $ 52.57     $ 53.95     $ (1.38 )   (3%)
Natural gas (per Mcf) $ 1.47     $ 2.73     $ (1.26 )   (46%)     $ 1.87     $ 2.56     $ (0.69 )   (27%)
                                                         
Average unit costs per Boe                                                        
Lease operating expenses $ 25.44     $ 18.81     $ 6.63     35%     $ 23.66     $ 18.68     $ 4.98     27%
Production and ad valorem taxes $ 4.09     $ 4.71     $ (0.62 )   (13%)     $ 4.25     $ 4.47     $ (0.22 )   (5%)
Depreciation, depletion and amortization $ 7.85     $ 14.49     $ (6.64 )   (46%)     $ 8.36     $ 13.69     $ (5.33 )   (39%)
General and administrative expenses $ 4.31     $ 4.5     $ (0.19 )   (4%)     $ 6.68     $ 5.58     $ 1.1     20%

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 sale of other assets;
  • (Gain) loss on sales of oil and natural gas properties, net; and
  • Dry holes and abandonments of unproved properties.
Mid-Con Energy Partners, LP and subsidiaries
Reconciliation of Net Income (Loss) to Adjusted EBITDA
(in thousands) 
(Unaudited) 
                       
  Three Months Ended  
  September 30, 2019     June 30, 2019     September 30, 2018  
Net income (loss) $ 5,961     $ 5,097     $ (3,349 )
Interest expense, net   1,174       1,228       1,619  
Depreciation, depletion and amortization   2,559       2,369       4,812  
Accretion of discount on asset retirement obligations   423       417       404  
Impairment of proved oil and natural gas properties   180       204        
Dry holes and abandonments of unproved properties               10  
(Gain) loss on derivatives, net   (5,730 )     (3,396 )     6,358  
Cash settlements paid for matured derivatives, net   (164 )     (729 )     (2,483 )
Cash premiums paid for derivatives               (200 )
Non-cash equity-based compensation   121       122       303  
Gain on sales of other assets   (123 )            
(Gain) loss on sales of oil and natural gas properties, net         (223 )     1  
Adjusted EBITDA $ 4,401     $ 5,089     $ 7,475  
 

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

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Source: Mid-Con Energy Partners, LP