mcep-8k_20181105.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report: November 5, 2018

Date of Earliest Event Reported: November 5, 2018

MID-CON ENERGY PARTNERS, LP

(Exact name of registrant as specified in its charter)

 

 

 

 

Delaware

001-35374

45-2842469

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

 

2431 E. 61st Street, Suite 850
Tulsa, Oklahoma

(Address of principal executive offices)

74136

(Zip code)

(918) 743-7575

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

 

 

 

 

Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

 

 

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

 

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

 

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 


Item 2.02

Results of Operations and Financial Condition.

On November 5, 2018, Mid-Con Energy Partners, LP (the “Partnership”) issued a press release announcing its earnings for the third quarter ended September 30, 2018.  A copy of the press release is furnished as Exhibit 99.1 and incorporated by reference herein.

The information disclosed in this Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities under that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as expressly set forth by specific reference in such filing.

Item 7.01

Regulation FD Disclosure

On November 5, 2018, the Partnership issued a press release announcing its earnings for the third quarter ended September 30, 2018.  A copy of the press release is attached as Exhibit 99.1 to this current report on Form 8-K and is incorporated herein by reference.  

As of November 5, 2018, the Partnership has posted on its website an updated investor presentation entitled “Supplemental Third Quarter 2018 Results” dated November 6, 2018.  The presentation may be accessed by going to www.midconenergypartners.com, and selecting Events and Presentations under the Investor Relations tab

Item 9.01

Financial Statements and Exhibits

 

(d)

Exhibits

 

99.1

Press release dated November 5, 2018.

 

 

 

 

 

 

 

 

 

 

MID-CON ENERGY PARTNERS, LP

 

 

 

By:

Mid-Con Energy GP, LLC

 

 

 

 

its general partner

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dated:

November 5, 2018.

By:

/s/Charles L. McLawhorn, III

 

 

 

 

Charles L. McLawhorn, III

 

 

 

 

Vice President, General Counsel and Secretary

 

mcep-ex991_6.htm

 

EXHIBIT 99.1

 

Mid-Con Energy Partners, LP Announces Third Quarter 2018 Operating and Financial Results

 

TULSA, November 5, 2018 – Mid-Con Energy Partners, LP (NASDAQ: MCEP) (“Mid-Con Energy” or the “Partnership”) announces operating and financial results for the third quarter ended September 30, 2018.

 

“We are pleased to report that the third quarter of 2018 showed continued growth and improvement across almost all areas of the Partnership,” commented Jeff Olmstead, President and CEO. “We continue to focus on improving our balance sheet, optimizing our capital allocation, and building our inventory of future projects.  As we announced previously, we used some of our available liquidity during the quarter to add several new projects in Wyoming and Oklahoma at acquisition prices that resulted in our leverage ratio covenant continuing to improve. Production during the quarter grew by 23%, compared to the previous quarter, due to these recent acquisitions and results from our capital spending. Adjusted EBITDA increased, resulting in our leverage ratio covenant, as calculated by our lenders, decreasing to 2.86X for the period ending September 30, 2018.”  

 

THIRD QUARTER 2018 SUMMARY

 

Closed on the acquisition of multiple oil and gas properties in Oklahoma in July 2018 for a purchase price of $8.3 million, subject to customary post-closing adjustments and the resolution of certain title defects. The properties consist of approximately 1,084 MBoe in proved developed producing reserves as of the end of the second quarter of 2018, with average daily net production of 223 Boe/d during May 2018.

 

Closed the Worland acquisition in July 2018 for a purchase price of $5.0 million, subject to customary post-closing adjustments. The properties consist of approximately 1,071 MBoe in proved developed producing reserves as of the end of the second quarter of 2018, with average net production of 544 Boe/d during May 2018.

 

Closed the Wyoming acquisition in July 2018 for a purchase price of $1.0 million, subject to customary post-closing adjustments. The properties consist of large grassroots waterflood prospects in the Powder River Basin.

 

Average daily production of 3,609 Boe/d, an increase of 23.0% sequentially and an increase of 3.1% year-over-year.

 

Realized prices per Boe, inclusive of cash settlements from matured derivatives and premiums paid, averaged $49.59/Boe, a decrease of 5.6% sequentially and an increase of 23.3% year-over-year.

 

Lease operating expenses (“LOE”) of $6.7 million, an increase of 26.7% sequentially and an increase of 8.7% year-over-year.

 

Net loss of $3.3 million in the third quarter of 2018, a decrease of 51.1% sequentially and a decrease of 57.7% year-over-year.

 

Adjusted EBITDA of $7.5 million, a 12.7% increase sequentially and a 91.7% increase year-over-year.

 

As of September 30, 2018, we had $96 million in outstanding debt, an increase of $9.0 million from June 30, 2018, and a decrease of $3.0 million from the beginning of the year. Our Debt/EBITDA, as calculated by our credit agreement, was 2.86x, down from 3.14x for the previous quarter. (1)

 

The Partnership spent excess cash on $2.3 million in capital expenditures (“CAPEX”) to drill three producing wells, performed two recompletions, six capital workovers, and re-entered one plugged well to re-establish production.

 

(1)

Our Credit Agreement calls for us to calculate our leverage ratio covenant for the period beginning October 1, 2017 on an annualized basis until we reach September 30, 2018. At that point in time the calculation returns to a trailing-twelve-month test. This calculation also includes certain pro-forma adjustments for acquisitions and divestitures during the calculation period.

 


 

The following table reflects selected unaudited operating and financial results for the third quarter of 2018, compared to the second quarter of 2018 and the third quarter of 2017. Mid-Con Energy’s unaudited condensed consolidated financial statements are included at the end of this press release.

 

Three Months Ended

 

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

($ in thousands)

 

2018

 

 

2018

 

 

2017

 

Average net daily production (Boe/d)(1)

 

 

3,609

 

 

 

2,934

 

 

 

3,500

 

Oil & natural gas sales including cash settlements from matured derivatives,

   net of premiums(2)

 

$

16,462

 

 

$

14,014

 

 

$

12,951

 

Net loss

 

$

(3,349

)

 

$

(6,855

)

 

$

(7,921

)

Adjusted EBITDA(3)

 

$

7,475

 

 

$

6,630

 

 

$

3,899

 

(1) Production volumes in Boe equivalents calculated at a Btu conversion rate of six Mcf per Bbl.

(2) Net premiums include those incurred previously, or upon settlement, that are attributable to instruments that settled during the period.

(3) Non-GAAP financial measure. Please refer to the related disclosure and reconciliation of net income (loss) to Adjusted EBITDA included in this press release.

 

THIRD QUARTER 2018 RESULTS

Production - Production for the third quarter of 2018 was 332 MBoe, or 3,609 Boe/d. On a daily basis, this represented a 23.0% increase sequentially and a 3.1% increase year-over-year. The sequential increase was primarily due to acquisitions in Oklahoma and Wyoming during the third quarter 2018. The year-over-year increase was primarily due to acquisitions during 2018, partially offset by the sale of our Southern Oklahoma assets in December 2017.

 

Price Realizations - Oil and natural gas sales were $19.1 million in the third quarter of 2018, or $57.67/Boe. On a per Boe basis, this represented a 4.9% decrease sequentially and a 33.0% increase year-over-year. Cash settlements paid for matured derivatives, inclusive of net premiums, were $2.7 million in the third quarter of 2018, or $8.08/Boe. Cash settlements paid for matured derivatives, inclusive of net premiums, were $8.17/Boe in the second quarter of 2018. Cash settlements paid for matured derivatives, inclusive of net premiums, were $3.15/Boe in the third quarter of 2017. The resulting realized prices, after incorporating cash settlements from matured derivatives, inclusive of net premiums, were $49.59/Boe in the third quarter of 2018, $52.49/Boe in the second quarter of 2018, and $40.22/Boe in the third quarter of 2017. The sequential decrease in realized prices was due to lower oil quality in Worland and higher differentials in our other Wyoming and Texas properties. This decrease was partially offset by higher WTI prices and higher average derivative pricing.

 

Lease Operating Expenses - LOE was $6.7 million in the third quarter of 2018, representing a 26.7% increase from the second quarter of 2018 and an increase of 8.7% from the third quarter of 2017. LOE in the third quarter of 2018 was $20.04/Boe, an increase of 1.9% sequentially and an increase of 5.4% year-over-year. The sequential and year-over-year increase on an LOE/Boe basis is primarily due to higher lifting costs in acquired assets.

 

Production Taxes - Production taxes in the third quarter of 2018 were $1.2 million, or $3.48/Boe, reflecting an effective tax rate of 6.1%. Production taxes in the second quarter of 2018 were $1.0 million, or $3.61/Boe, for an effective tax rate of 6.0%. Production taxes in the third quarter of 2017 were $0.9 million, or $2.66/Boe, reflecting an effective tax rate of 6.1%. The increase in effective tax rate sequentially was primarily due to the acquisition of production in areas with higher production tax rates.

 

Impairment Expense – There was no impairment expense recorded for the third quarter 2018. For the second quarter of 2018, we recorded $1.0 million of non-cash impairment expense. For the third quarter of 2017, we recorded $4.9 million of non-cash impairment expense.

 

Depreciation, Depletion and Amortization Expenses (“DD&A”) - DD&A for the third quarter of 2018 was $4.8 million, or $14.49/Boe. On a per Boe basis, DD&A increased 14.1% from the second quarter of 2018 and increased 7.3% from the third quarter of 2017. The sequential and year-over-year increase was primarily due to the net impact to of the Oklahoma and Wyoming acquisitions and Southern Oklahoma divestiture.

 

General and Administrative Expenses (“G&A”) - G&A for the third quarter of 2018 was $1.5 million, or $4.50/Boe, and included $0.3 million, or $0.91/Boe, of non-cash equity-based compensation expense related to the Partnership’s Long


Term Incentive Program. G&A for the second quarter of 2018 was $1.4 million, or $5.09/Boe and included $0.1 million, or $0.48/Boe, of non-cash equity-based compensation expense related to the Partnership’s Long Term Incentive Program. G&A for the third quarter of 2017 was $1.2 million, or $3.69/Boe, and included $0.1 million, or $0.23/Boe, in non-cash equity-based compensation expense related to the Partnership’s Long Term Incentive Program. Excluding non-cash equity based compensation, G&A was consistent with the second quarter of 2018 and the third quarter of 2017.

 

Net Interest Expense - Net interest expense for the third quarter of 2018 was $1.6 million compared to $1.4 million for the second quarter of 2018 and $1.6 million for the third quarter of 2017. Sequentially, the higher net interest expense is primarily due to rising underlying market rates and higher borrowings outstanding. The year-over-year net interest expense remained flat due to lower borrowings outstanding that were offset by rising underlying market rates. The average effective interest rate for the third quarter of 2018 was 5.6%. For the second quarter 2018, the average effective interest rate was 5.2%. For the third quarter of 2017, average effective interest rate was 4.0%.

Net Loss- For the third quarter of 2018, Mid-Con Energy reported a net loss of $3.3 million. Net loss per limited partner unit was $0.14 (basic and diluted) based on the weighted average limited partner units outstanding during the period of 30.4 million (basic and diluted). Net loss for the second quarter of 2018 was $6.9 million, or $0.26 (basic and diluted) per limited partner unit, based on a weighted average of 30.3 million (basic and diluted) limited partner units outstanding during the period. Net loss for the third quarter of 2017 was $7.9 million, or per limited partner unit of $0.29 (basic and diluted), based on a weighted average limited partner units of 30.0 million (basic and diluted). The positive sequential variance was primarily attributable to increased production and lower impairment expense, offset by lower realized commodity prices and higher operating expenses. The positive variance year-over-year was primarily attributable to an increase in realized commodity prices and lower impairment expense.

 

Adjusted EBITDA - Adjusted EBITDA, a non-GAAP measure, for the third quarter of 2018 was $7.5 million, or $22.52/Boe. Adjusted EBITDA was $24.83/Boe in the second quarter of 2018 and $12.11/Boe in the third quarter of 2017. The sequential decrease in Adjusted EBITDA per Boe, was primarily due to higher basis differentials in Wyoming and Texas and higher lifting costs in acquired assets, partially offset by higher production. The year-over-year increase in Adjusted EBITDA, on a per Boe basis, was primarily due to higher commodity prices.

 

OKLAHOMA ACQUISITION

On July 2, 2018, we acquired multiple oil and natural gas properties located in Oklahoma for a purchase price of $8.3 million, subject to customary post-closing sale price adjustments and the resolution of certain title defects. The effective date of the acquisition was July 1, 2018. The properties consist of approximately 1,084 MBoe in proved developed producing reserves as of the end of the second quarter of 2018, with average daily net production of 223 Boe/d during May 2018.

 

WORLAND ACQUISITION

On July 27, 2018, we acquired multiple oil and natural gas properties and mid-stream assets located in Washakie County, Wyoming for a purchase price of $5.0 million, subject to customary post-closing sale price adjustments. The effective date of the acquisition was January 1, 2018. The properties consist of approximately 1,071 MBoe in proved developed producing reserves as of the end of the second quarter of 2018, with average daily net production of 544 Boe/d during May 2018.

 

WYOMING ACQUISITION

On July 10, 2018, we acquired multiple oil and natural gas properties located in Campbell County, Wyoming, for a purchase price of $1.0 million, subject to customary post-closing sale price adjustments. The effective date of the acquisition was July 1, 2018. The properties consist of large grassroots waterflood prospects located in the Powder River Basin.

 

LIQUIDITY

At September 30, 2018, the Partnership’s total liquidity of $28.1 million consisted of $0.1 million of cash and $28 million of available borrowings under its revolving credit facility, net of $1.0 million outstanding standby letter of credit. At November 5, 2018 the Partnership’s total liquidity of $29.5 million consisted of $0.5 million of cash and $29.0 million of available borrowings under its revolving credit facility, net of $1.0 million outstanding standby letters of credit.

 

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 November 5, 2018, 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:

 

OIL HEDGES

 

4Q18

 

 

1Q19

 

 

 

 

2Q19

 

 

 

 

3Q19

 

 

 

 

4Q19

 

 

 

 

1Q20

 

 

 

 

2Q20

 

 

 

 

3Q20

 

Collar Volume (Bbl/d)

 

 

1,141

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Call Strike Price ($/Bbl)

 

$

53.13

 

 

$

 

 

 

 

$

 

 

 

 

$

 

 

 

 

$

 

 

 

 

$

 

 

 

 

$

 

 

 

 

$

 

Put Strike Price ($/Bbl)

 

$

43.57

 

 

$

 

 

 

 

$

 

 

 

 

$

 

 

 

 

$

 

 

 

 

$

 

 

 

 

$

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WTI Swap Volume (Bbl/d)

 

 

467

 

 

 

1,938

 

 

 

 

 

1,798

 

 

 

 

 

1,720

 

 

 

 

 

1,664

 

 

 

 

 

1,646

 

 

 

 

 

1,607

 

 

 

 

 

1,554

 

Swap Price ($/Bbl)

 

$

54.19

 

 

$

56.24

 

 

 

 

$

56.15

 

 

 

 

$

56.10

 

 

 

 

$

56.05

 

 

 

 

$

55.17

 

 

 

 

$

55.17

 

 

 

 

$

54.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Put Volume (Bbl/d)(1)

 

 

326

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Put Strike Price ($/Bbl)(1)

 

$

45.00

 

 

$

 

 

 

 

$

 

 

 

 

$

 

 

 

 

$

 

 

 

 

$

 

 

 

 

$

 

 

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Hedged Volume (Bbl/d)

 

 

1,934

 

 

 

1,938

 

 

 

 

 

1,798

 

 

 

 

 

1,720

 

 

 

 

 

1,664

 

 

 

 

 

1,646

 

 

 

 

 

1,607

 

 

 

 

 

1,554

 

Floor Strike Price ($/Bbl)

 

$

46.38

 

 

$

56.24

 

 

 

 

$

56.15

 

 

 

 

$

56.10

 

 

 

 

$

56.05

 

 

 

 

$

55.17

 

 

 

 

$

55.17

 

 

 

 

$

54.06

 

% Hedged(2)

 

 

63

%

 

 

63

%

 

 

 

 

59

%

 

 

 

 

56

%

 

 

 

 

54

%

 

 

 

 

54

%

 

 

 

 

52

%

 

 

 

 

51

%

(1) Deferred premium puts include premiums that are to be paid monthly as the contracts settle (refer to our SEC filings for additional details).

(2) Estimated percent hedged based on the mid-point of annual 2018 Boe production guidance updated 11/05/2018, multiplied by an approximate 93% oil weighting based on third quarter 2018 reported production volumes.

 

2018 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.

FY2018 Guidance as of 11/05/2018

 

2018

Net production (Boe/d)(1)

 

3,200 - 3,400

Lease operating expenses per Boe

 

$20.00 - $21.00

Production taxes (% of total revenue)

 

6.50% - 7.00%

Estimated capital expenditures

 

$8.7 MM

 

(1) Production volumes in Boe equivalents calculated at a rate of six Mcf per Bbl.

 

THIRD QUARTER 2018 CONFERENCE CALL

As announced on October 24, 2018, Mid-Con Energy’s management will host a conference call on Tuesday, November 6, 2018, at 9:00 a.m. ET. Interested parties are invited to participate via telephone by dialing 1-877-847-5946 (Conference ID: 5076536) 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 November 13, 2018, by dialing 1-855-859-2056 (Conference ID: 5076536). 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 in Oklahoma, Texas, 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, 2017, 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 per unit data)

 

 

 

 

 

 

September 30, 2018

 

 

December 31, 2017

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

126

 

 

$

1,832

 

Accounts receivable

 

 

 

 

 

 

 

 

Oil and natural gas sales

 

 

7,725

 

 

 

5,262

 

Other

 

 

1,617

 

 

 

103

 

Prepaid expenses and other

 

 

242

 

 

 

166

 

Assets held for sale, net

 

 

430

 

 

 

2,058

 

Total current assets

 

 

10,140

 

 

 

9,421

 

Property and equipment

 

 

 

 

 

 

 

 

Oil and natural gas properties, successful efforts method

 

 

 

 

 

 

 

 

Proved properties

 

 

391,560

 

 

 

335,796

 

Unproved properties

 

 

1,564

 

 

 

369

 

Other property and equipment

 

 

427

 

 

 

427

 

Accumulated depletion, depreciation, amortization and impairment

 

 

(149,393

)

 

 

(129,101

)

Total property and equipment, net

 

 

244,158

 

 

 

207,491

 

Other assets

 

 

1,599

 

 

 

2,451

 

Total assets

 

$

255,897

 

 

$

219,363

 

 

 

 

 

 

 

 

 

 

LIABILITIES, CONVERTIBLE PREFERRED UNITS AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

 

 

 

 

 

 

 

Trade

 

$

1,048

 

 

$

593

 

Related parties

 

 

4,507

 

 

 

1,631

 

Derivative financial instruments

 

 

10,644

 

 

 

4,252

 

Accrued liabilities

 

 

2,011

 

 

 

603

 

Liabilities related to assets held for sale

 

 

 

 

 

77

 

Total current liabilities

 

 

18,210

 

 

 

7,156

 

Derivative financial instruments

 

 

7,326

 

 

 

666

 

Long-term debt

 

 

96,000

 

 

 

99,000

 

Other long-term liabilities

 

 

52

 

 

 

70

 

Asset retirement obligations

 

 

39,192

 

 

 

10,249

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Class A convertible preferred units - 11,627,906 issued and outstanding, respectively

 

 

21,411

 

 

 

20,534

 

Class B convertible preferred units - 9,803,921 and 0 issued and outstanding, respectively

 

 

14,587

 

 

 

 

Equity, per accompanying statements

 

 

 

 

 

 

 

 

General partner

 

 

(815

)

 

 

(572

)

Limited partners - 30,436,124 and 30,090,463 units issued and outstanding, respectively

 

 

59,934

 

 

 

82,260

 

Total equity

 

 

59,119

 

 

 

81,688

 

Total liabilities, convertible preferred units and equity

 

$

255,897

 

 

$

219,363

 

(Unaudited)


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,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil sales

 

$

18,765

 

 

$

13,731

 

 

$

49,240

 

 

$

42,343

 

Natural gas sales

 

 

380

 

 

 

233

 

 

 

812

 

 

 

917

 

Other operating revenues

 

 

320

 

 

 

 

 

 

320

 

 

 

 

(Loss) gain on derivatives, net

 

 

(6,358

)

 

 

(2,749

)

 

 

(19,240

)

 

 

2,916

 

Total revenues

 

 

13,107

 

 

 

11,215

 

 

 

31,132

 

 

 

46,176

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses

 

 

6,654

 

 

 

6,122

 

 

 

16,706

 

 

 

16,695

 

Oil and natural gas production taxes

 

 

1,157

 

 

 

857

 

 

 

2,992

 

 

 

2,366

 

Other operating expenses

 

 

288

 

 

 

 

 

 

288

 

 

 

 

Impairment of proved oil and natural gas properties

 

 

 

 

 

4,850

 

 

 

9,710

 

 

 

22,522

 

Depreciation, depletion and amortization

 

 

4,812

 

 

 

4,350

 

 

 

11,646

 

 

 

13,850

 

Dry holes and abandonments of unproved properties

 

 

10

 

 

 

 

 

 

195

 

 

 

 

Accretion of discount on asset retirement obligations

 

 

404

 

 

 

142

 

 

 

748

 

 

 

386

 

General and administrative

 

 

1,494

 

 

 

1,188

 

 

 

4,746

 

 

 

4,485

 

Total operating costs and expenses

 

 

14,819

 

 

 

17,509

 

 

 

47,031

 

 

 

60,304

 

Loss on sales of oil and natural gas properties, net

 

 

(1

)

 

 

 

 

 

(389

)

 

 

 

Loss from operations

 

 

(1,713

)

 

 

(6,294

)

 

 

(16,288

)

 

 

(14,128

)

Other (expense) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1

 

 

 

3

 

 

 

3

 

 

 

8

 

Interest expense

 

 

(1,620

)

 

 

(1,626

)

 

 

(4,369

)

 

 

(4,615

)

Other income

 

 

20

 

 

 

4

 

 

 

20

 

 

 

70

 

(Loss) gain on settlements of asset retirement obligations

 

 

(37

)

 

 

(8

)

 

 

12

 

 

 

(13

)

Total other expense

 

 

(1,636

)

 

 

(1,627

)

 

 

(4,334

)

 

 

(4,550

)

Net loss

 

 

(3,349

)

 

 

(7,921

)

 

 

(20,622

)

 

 

(18,678

)

Less: Distributions to preferred unitholders

 

 

1,148

 

 

 

783

 

 

 

3,303

 

 

 

2,275

 

Less: General partner's interest in net loss

 

 

(39

)

 

 

(94

)

 

 

(243

)

 

 

(222

)

Limited partners' interest in net loss

 

$

(4,458

)

 

$

(8,610

)

 

$

(23,682

)

 

$

(20,731

)

Limited partners' interest in net loss per unit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.14

)

 

$

(0.29

)

 

$

(0.78

)

 

$

(0.69

)

Weighted average limited partner units outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Limited partner units (basic and diluted)

 

 

30,392

 

 

 

30,042

 

 

 

30,292

 

 

 

29,972

 

 

 

 

 


Mid-Con Energy Partners, LP and subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

Nine Months Ended

September 30,

 

 

 

2018

 

 

2017

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

Net loss

 

$

(20,622

)

 

$

(18,678

)

Adjustments to reconcile net loss to net cash provided by operating activities

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

11,646

 

 

 

13,850

 

Debt issuance costs amortization

 

 

503

 

 

 

1,023

 

Accretion of discount on asset retirement obligations

 

 

748

 

 

 

386

 

Impairment of proved oil and natural gas properties

 

 

9,710

 

 

 

22,522

 

Dry holes and abandonments of unproved properties

 

 

195

 

 

 

 

(Gain) loss on settlements of asset retirement obligations

 

 

(12

)

 

 

13

 

Cash paid for settlements of asset retirement obligations

 

 

(102

)

 

 

(30

)

Mark to market on derivatives

 

 

 

 

 

 

 

 

Loss (gain) on derivatives, net

 

 

19,240

 

 

 

(2,916

)

Cash settlements (paid) received for matured derivatives

 

 

(5,988

)

 

 

524

 

Cash settlements received from early termination of derivatives

 

 

 

 

 

147

 

Cash premiums paid for derivatives

 

 

(200

)

 

 

(5,009

)

Loss on sales of oil and natural gas properties

 

 

389

 

 

 

 

Non-cash equity-based compensation

 

 

670

 

 

 

409

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(2,463

)

 

 

697

 

Other receivables

 

 

(646

)

 

 

150

 

Prepaids and other

 

 

(76

)

 

 

363

 

Accounts payable - trade and accrued liabilities

 

 

689

 

 

 

1,009

 

Accounts payable - related parties

 

 

2,452

 

 

 

(557

)

Net cash provided by operating activities

 

 

16,133

 

 

 

13,903

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Acquisitions of oil and natural gas properties

 

 

(21,626

)

 

 

(4,668

)

Additions to oil and natural gas properties

 

 

(6,072

)

 

 

(7,281

)

Additions to other property and equipment

 

 

 

 

 

(133

)

Proceeds from sales of oil and natural gas properties

 

 

1,163

 

 

 

 

Net cash used in investing activities

 

 

(26,535

)

 

 

(12,082

)

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Proceeds from line of credit

 

 

20,000

 

 

 

6,000

 

Payments on line of credit

 

 

(23,000

)

 

 

(6,000

)

Offering costs

 

 

 

 

 

(92

)

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

 

 

(2,000

)

 

 

(1,500

)

Distributions to Class B convertible preferred units

 

 

(500

)

 

 

 

Net cash provided by (used in) financing activities

 

 

8,696

 

 

 

(1,592

)

Net (decrease) increase in cash and cash equivalents

 

 

(1,706

)

 

 

229

 

Beginning cash and cash equivalents

 

 

1,832

 

 

 

2,359

 

Ending cash and cash equivalents

 

$

126

 

 

$

2,588

 

 

 

 

 

 

 

 

 

 

 

 


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 Non-GAAP financial measure described above is useful to investors because it 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;

 

Impairment of proved oil and natural gas properties;

 

Dry holes and abandonments of unproved properties;

 

(Gain) loss on derivatives, net;

 

Cash settlements received (paid) for matured derivatives, net;

 

Cash settlements received (paid) for early terminations of derivatives;

 

Cash premiums received (paid) for derivatives, net;

 

Non-cash equity-based compensation; and

 

(Gain) loss on sales of oil and natural gas properties, net.


 

Mid-Con Energy Partners, LP and subsidiaries

Reconciliation of Net Loss to Adjusted EBITDA

(in thousands)

(Unaudited)

 

 

Three Months Ended

 

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

 

2018

 

 

2018

 

 

2017

 

Net loss

 

$

(3,349

)

 

$

(6,855

)

 

$

(7,921

)

Interest expense, net

 

 

1,619

 

 

 

1,410

 

 

 

1,623

 

Depreciation, depletion and amortization

 

 

4,812

 

 

 

3,393

 

 

 

4,350

 

Accretion of discount on asset retirement obligations

 

 

404

 

 

 

191

 

 

 

142

 

Impairment of proved oil & natural gas properties

 

 

 

 

 

959

 

 

 

4,850

 

Dry holes and abandonment of unproved properties

 

 

10

 

 

 

97

 

 

 

 

Loss on derivatives, net

 

 

6,358

 

 

 

9,500

 

 

 

2,749

 

Cash settlements (paid) received for matured derivatives, net

 

 

(2,483

)

 

 

(2,181

)

 

 

323

 

Cash settlements received for early termination of derivatives

 

 

 

 

 

 

 

 

147

 

Cash premiums paid for derivatives, net

 

 

(200

)

 

 

 

 

 

(2,438

)

Non-cash equity-based compensation

 

 

303

 

 

 

128

 

 

 

74

 

Loss (gain) on sales of oil and natural gas properties

 

 

1

 

 

 

(12

)

 

 

 

Adjusted EBITDA

 

$

7,475

 

 

$

6,630

 

 

$

3,899

 

 

INVESTOR RELATIONS CONTACT

IR@midcon-energy.com

(918) 743-7575