mcep-8k_20190312.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: March 13, 2019

Date of Earliest Event Reported: March 12, 2019

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 March 12, 2019, Mid-Con Energy Partners, LP (the “Partnership”) issued a press release announcing its earnings for the fourth quarter and year ended December 31, 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 March 12, 2019, the Partnership issued a press release announcing its earnings for the fourth quarter and year ended December 31, 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 March 13, 2019, the Partnership has posted on its website an updated investor presentation entitled “Supplemental Fourth Quarter and Full Year 2018 Results” dated March 13, 2019.  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 March 12, 2019.

 

 

 

 

 

 

 

 

 

 

MID-CON ENERGY PARTNERS, LP

 

 

 

By:

Mid-Con Energy GP, LLC

 

 

 

 

its general partner

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dated:

March 13, 2019.

By:

/s/Charles L. McLawhorn, III

 

 

 

 

Charles L. McLawhorn, III

 

 

 

 

Vice President, General Counsel and Secretary

 

mcep-ex991_19.htm

Exhibit 99.1

 

Mid-Con Energy Partners, LP Announces Fourth Quarter and Full Year 2018 Operating and Financial Results, 2018 Year End Proved Reserves and 2019 Guidance

 

TULSA, March 12, 2019 – Mid-Con Energy Partners, LP (NASDAQ: MCEP) (“Mid-Con Energy” or the “Partnership”) announces operating and financial results for the fourth quarter and full year ended December 31, 2018.

 

“2018 was a transformative year for the Partnership,” commented our President and CEO, Jeff Olmstead. “We significantly improved our financial position by extending the maturity of our Revolving Credit Facility, increasing the borrowing base amount, reducing total outstanding debt, and reducing our total leverage as calculated by our banks. We closed approximately $23 million in acquisitions, including several properties in our new core area of Wyoming, and expanded our footprint in Oklahoma. This all resulted in production increasing approximately 30% from the first quarter of 2018 compared to the fourth quarter of 2018.

 

In February 2019, we announced the execution of two agreements to sell substantially all of our Texas assets and to acquire assets in Oklahoma. The net effect of this transaction will be to significantly reduce outstanding debt and to add long-lived, low-decline assets with potential for margin enhancements through operational efficiency to our portfolio. This continues our track record from 2018 of entering into transactions that help strengthen our financial position and lower our base PDP decline rate. The lower PDP decline rate provides us a more stable reserve base, which allows for more operational and financial control, to grow from. Lower decline properties require less capital investment to maintain production and reserves, and provide the flexibility to invest additional free cash flow into development of new reserves and/or into new acquisitions.

Our 2019 capital budget will be focused on evaluating our development opportunities in many of these new assets, while also continuing to develop our existing waterfloods.  We will also be focused on operational enhancements on many of the newly acquired fields. If we are successful at decreasing operating costs, and/or increasing production at these new mature fields, the increased margins on these assets will significantly increase the value of their reserves.

We expect to continue this path of acquiring properties with significant waterflood development opportunities, as well as properties with existing low margins where the opportunity exists to enhance these margins through our competitive strengths.”

 

RECENT EVENTS AND FULL YEAR 2018 SUMMARY

 

Completed $15.0 million private offering (the “Offering”) of Class B Convertible Preferred Units (“Class B Preferred Units”) on January 31, 2018, to investors led by John Goff. The Partnership used a portion of net proceeds from this Offering to acquire assets in the Powder River Basin (“PRB Acquisitions”) and the remaining approximately $7.2 million to pay down debt.

 

Closed approximately $23 million, after post-close adjustments, in acquisitions during 2018. The acquisitions included entering into a new core area consisting of two basins, the Powder River Basin and the Big Horn Basin, as well as increasing our footprint in Oklahoma. These properties consist of approximately 9,271 MBoe of net total proved reserves as of December 31, 2018 at the standardized measure for pricing approved by the SEC (“SEC pricing”).

1

 


 

 

In February 2019, we executed definitive agreements to sell substantially all of our Eastern Shelf assets in Texas for $60.0 million, and to acquire Oklahoma properties in Osage, Caddo, and Grady counties for $27.5 million, both subject to customary purchase price adjustments. The properties include 10 mature waterflood units and consist of low decline (average PDP decline of less than 5%), long-lived assets with opportunities to both grow production and decrease current operating expenses through operational efficiencies. Net proved developed producing reserves of these Oklahoma properties as of January 1, 2019 were 6.2 MMBoe (96% oil) based on SEC pricing as of January 1, 2019.

 

On December 19, 2018, the Partnership’s borrowing base was increased to $135.0 million as part of the regularly scheduled semi-annual redetermination.

 

We reduced total debt outstanding at December 31, 2018 by $6.0 million, or 6.1%, from December 31, 2017 and in January 2018 the revolving credit facility maturity was extended by two years to November 2020. Compliance Total Leverage, as calculated per our credit agreement, was approximately 3.17x as of December 31, 2018 compared to 3.54x as of December 31, 2017.

 

Fourth quarter 2018 average daily production of 3,663 Boe/d, an increase of 30.8% from first quarter 2018.

 

Lease operating expenses (“LOE”) of approximately $22.5 million, an increase of 8.3% year-over-year.

 

Realized revenues, inclusive of cash settlements from matured derivatives and net premiums, were $59.0 million, an increase of 8.2% year-over-year.

 

Full year net loss of $18.3 million in 2018 compared to a net loss of $27.3 million in 2017.

 

Adjusted EBITDA, a non-GAAP measure, was $25.2 million at December 31, 2018, an increase of 5.7% year-over-year, primarily due to higher oil and gas revenue from an increase in commodity prices.

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

 

 

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

 

 

December 31,

 

($ in thousands)

 

2018

 

 

2017

 

 

2018

 

 

2017

 

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

 

 

3,663

 

 

 

3,359

 

 

 

3,255

 

 

 

3,510

 

Oil & natural gas sales plus cash settlements from matured derivatives, inclusive of premiums, net(2)

 

$

15,143

 

 

$

14,697

 

 

$

59,007

 

 

$

54,533

 

Net income (loss)

 

$

2,369

 

 

$

(8,655

)

 

$

(18,253

)

 

$

(27,333

)

Adjusted EBITDA(3)

 

$

5,094

 

 

$

8,055

 

 

$

25,248

 

 

$

23,897

 

(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 loss to Adjusted EBITDA included in this press release.

 

FOURTH QUARTER AND FULL YEAR 2018 RESULTS

Production - Production for the fourth quarter of 2018 was 337 MBoe, or 3,663 Boe/d. On a daily basis, this represented a 1.5% increase sequentially and a 9.1% increase year-over-year. Year-over-year production increase was primarily due to the acquisition of the Wyoming and Oklahoma properties, partially offset by the sale of the Southern Oklahoma properties in December 2017 and natural declines in the Texas properties in 2018. The Partnership also returned 88 wells to production in Oklahoma and Wyoming, and drilled 9 new producing wells in Oklahoma and Texas during 2018.

 

2

 


 

Price Realizations - Oil and natural gas sales were $16.3 million in the fourth quarter of 2018, or $48.32/Boe. On a per Boe basis, this represented a 16.2% decrease sequentially and a 4.7% decrease year-over-year. The sequential decrease was primarily due to wider differentials in our Wyoming properties. On a year-over-year basis, the differentials in Texas also negatively affected our realized prices for 2018. Cash settlements paid for matured derivatives, inclusive of net premiums, were $1.1 million in the fourth quarter of 2018, or $3.39/Boe. Cash settlements paid for matured derivatives, inclusive of net premiums, were $8.08/Boe in the third quarter of 2018. Cash settlements received from matured derivatives, inclusive of net premiums were $3.15/Boe in the fourth quarter of 2017. The resulting realized prices, after incorporating cash settlements from matured derivatives, inclusive of net premiums, were $44.93/Boe in the fourth quarter of 2018, $49.59/Boe in the third quarter of 2018, and $47.56/Boe in the fourth quarter of 2017.

 

Lease Operating Expenses- LOE was $6.6 million in the fourth quarter of 2018, representing a 6.3% increase from the third quarter of 2018 and an increase of 33.5% from the fourth quarter of 2017.  On a per Boe basis, LOE in the fourth quarter of 2018 of $19.71/Boe increased 4.8% sequentially and increased 22.4% year-over-year.  The sequential increase in aggregate LOE, and on a per BOE basis, is primarily due to weather related operational expenses and increased well work in Wyoming, and the first full quarter effect of the Worland assets.  The year-over-year variance on aggregate LOE, and on a per Boe basis, was primarily due to the addition of higher lifting cost properties in Wyoming in 2018 and the divestiture of lower cost properties in Southern Oklahoma in December 2017.

 

Production and Ad Valorem Taxes - Production and ad valorem taxes in the fourth quarter of 2018 were $1.7 million, or $4.99/Boe, reflecting an effective tax rate of 10.3%. Production and ad valorem taxes in the third quarter of 2018 were $1.6 million, or $4.71/Boe, for an effective tax rate of 8.2%. Production and ad valorem taxes in the fourth quarter of 2017 were $0.9 million, or $2.91/Boe, reflecting an effective tax rate of 5.7%.  The sequential and year-over-year increase in effective tax rate was primarily due to accounting adjustments related to acquired properties in Wyoming with higher ad valorem taxes.

 

General and Administrative Expenses (“G&A”) - G&A in the fourth quarter of 2018 was $1.6 million, or $4.64/Boe. G&A in the third quarter 2018 was $1.5 million, or $4.50/Boe. G&A for the fourth quarter of 2017 was $1.2 million, or $3.99/Boe. The increase both sequentially and year-over-year was primarily due to higher cash and equity based compensation expense.

 

Net Income (Loss) - For the fourth quarter of 2018, Mid-Con Energy reported net income of $2.4 million. Net income per limited partner unit was $0.04 (basic) and $0.02 (diluted) based on the weighted average limited partner units outstanding during the period of 30.4 million (basic) and 52.6 (diluted). Net loss for the third quarter of 2018 was $3.3 million, or $0.14 (basic and diluted) per limited partner unit, based on a weighted average of 30.4 million (basic and diluted) limited partner units outstanding during the period. Net loss for the fourth quarter of 2017 was $8.7 million, or $0.30 per limited partner unit (basic and diluted), based on a weighted average of 30.1 million limited partner units outstanding during the period. The positive sequential and year-over-year variance was primarily attributable to lower commodity prices in the fourth quarter 2018 resulting in a gain on derivatives, inclusive of net premiums.

 

Adjusted EBITDA - Adjusted EBITDA, a non-GAAP measure, for the fourth quarter of 2018 was $5.1 million, or $15.12/Boe. Adjusted EBITDA was $22.52/Boe in the third quarter of 2018 and $26.07/Boe in the fourth quarter of 2017. The sequential and year-over-year decrease in Adjusted EBITDA, in aggregate and per Boe, was primarily due to lower realized pricing related to wider differentials.

 

YEAR END 2018 ESTIMATED NET PROVED RESERVES

Mid-Con Energy’s year end 2018 estimated net proved reserves were 24.8 MMBoe, representing a 27.0% increase compared to year end 2017 estimated net proved reserves of 19.6 MMBoe. Reserves at year end 2018 were categorized as approximately 96% oil and approximately 75% proved developed, both on a per Boe basis.

3

 


 

At December 31, 2018, the standardized measure of the Partnership’s estimated net proved reserves was $348.3 million. The standardized measure represents the present value of estimated future net revenue to be generated from the production of proved reserves, determined in accordance with the rules and regulations of the SEC, without giving effect to non-property related expenses, such as general and administrative expenses, debt service and future federal income tax expense, or to depreciation, depletion and amortization, and then discounted using an annual rate of 10 percent. Given Mid-Con Energy’s status as a limited partnership, the calculation of standardized measure does not include any provision for federal income tax expense.

 

The following table shows estimated proved reserves as of December 31, 2018, as prepared by the Partnership’s internal reserve engineers and audited by Cawley, Gillespie & Associates, Inc., independent petroleum engineers.

Core Area

 

Oil (Mbbl)

 

 

Gas (MMcf)

 

 

Total (Mboe)(1)

 

 

% Total

 

 

% Oil

 

 

% Proved Developed

 

Texas

 

 

4,017

 

 

 

1,186

 

 

 

4,215

 

 

 

17

%

 

 

95

%

 

 

88

%

Oklahoma

 

 

12,523

 

 

 

4,054

 

 

 

13,198

 

 

 

53

%

 

 

95

%

 

 

88

%

Wyoming

 

 

7,249

 

 

 

1,081

 

 

 

7,429

 

 

 

30

%

 

 

98

%

 

 

45

%

Total

 

 

23,789

 

 

 

6,321

 

 

 

24,842

 

 

 

100

%

 

 

96

%

 

 

75

%

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

 

LIQUIDITY AND BORROWING BASE SUMMARY

On December 19, 2018, the Partnership’s borrowing base was increased to $135.0 million. The next borrowing base redetermination will be before or during the second quarter 2019.

 

At December 31, 2018, that Partnership’s total liquidity of $41.5 million, consisted of $0.5 million of cash and $41.0 million of available borrowings under its revolving credit facility, net of $1.0 million outstanding standby letter of credit. At March 12, 2019, the Partnership’s total liquidity of $35.0 million, consisted of $1.0 million of cash and $34.0 million of available borrowings under its revolving credit facility, net of $1.0 million outstanding standby letter of credit. This decrease was due to a deposit on the transactions announced in February 2019 and cash payments made to acquire additional interests in Wyoming.

 

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 12, 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:

OIL HEDGES

 

1Q19

 

 

2Q19

 

 

3Q19

 

 

4Q19

 

 

1Q20

 

 

2Q20

 

 

3Q20

 

 

4Q20

 

 

1Q21

 

 

2Q21

 

 

3Q21

 

 

4Q21

 

WTI Collar Volume (Bbl/d)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

693

 

 

 

678

 

 

 

662

 

 

 

655

 

Call Strike Price ($/Bbl)

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

58.80

 

 

$

58.80

 

 

$

58.80

 

 

$

58.80

 

Put Strike Price ($/Bbl)

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

52.00

 

 

$

52.00

 

 

$

52.00

 

 

$

52.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WTI Swap Volume (Bbl/d)

 

 

1,938

 

 

 

1,798

 

 

 

1,720

 

 

 

1,664

 

 

 

2,078

 

 

 

2,052

 

 

 

1,810

 

 

 

1,786

 

 

 

693

 

 

 

678

 

 

 

662

 

 

 

655

 

Swap Price ($/Bbl)

 

$

56.24

 

 

$

56.15

 

 

$

56.10

 

 

$

56.05

 

 

$

55.64

 

 

$

55.66

 

 

$

54.54

 

 

$

57.44

 

 

$

55.78

 

 

$

55.78

 

 

$

55.78

 

 

$

55.78

 

Total Hedged Volume (Bbl/d)

 

 

1,938

 

 

 

1,798

 

 

 

1,720

 

 

 

1,664

 

 

 

2,078

 

 

 

2,052

 

 

 

1,810

 

 

 

1,786

 

 

 

1,387

 

 

 

1,356

 

 

 

1,325

 

 

 

1,310

 

Floor Strike Price ($/Bbl)

 

$

56.24

 

 

$

56.15

 

 

$

56.10

 

 

$

56.05

 

 

$

55.64

 

 

$

55.66

 

 

$

54.54

 

 

$

57.44

 

 

$

53.89

 

 

$

53.89

 

 

$

53.89

 

 

$

53.89

 

% Hedged(1)

 

 

58

%

 

 

54

%

 

 

51

%

 

 

50

%

 

 

62

%

 

 

61

%

 

 

54

%

 

 

53

%

 

 

41

%

 

 

41

%

 

 

40

%

 

 

39

%

(1) Estimated percent hedged based on the mid-point of annual 2019 Boe production guidance, multiplied by an approximate 93% oil weighting based on fourth quarter 2018 reported production volumes.

 

4

 


 

DIFFERENTIAL HEDGES

 

1Q19

 

 

2Q19

 

 

3Q19

 

 

4Q19

 

 

1Q20

 

 

2Q20

 

 

3Q20

 

 

4Q20

 

 

1Q21

 

 

2Q21

 

 

3Q21

 

 

4Q21

 

WCS - WTI Swap (Bbl/d)

 

 

98

 

 

 

152

 

 

 

153

 

 

 

153

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Swap Strike Price ($/Bbl)

 

$

20.15

 

 

$

20.15

 

 

$

20.15

 

 

$

20.15

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

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 03/12/2019

 

FY 2019

Net production (Boe/d)(1)

 

3,400 - 3,800

Lease operating expenses per Boe

 

$21.00 - $24.00

Production 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.

 

FOURTH QUARTER AND FULL YEAR 2018 CONFERENCE CALL

As announced on March 11, 2019, Mid-Con Energy’s management will host a conference call on Wednesday, March 13, 2019, at 9:00 a.m. ET. Interested parties are invited to participate via telephone by dialing 1-877-847-5946 (Conference ID: 3489459) 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 March 20, 2019, by dialing 1-855-859-2056 (Conference ID: 3489459). Additionally, a webcast archive will be available at www.midconenergypartners.com.

 

ANNUAL REPORT ON FORM 10-K

Our consolidated, audited financial statements and related footnotes will be available in our Annual Report on 2018 Form 10-K for year ended December 31, 2018 which will be filed on or about March 13, 2019.

 

UNITHOLDERS’ SCHEDULE K-1

Our unitholders’ Schedule K-1 for the tax year 2018 are available for download on the Mid-Con Energy website. Any questions related to Schedule K-1 should be directed to Mid-Con Energy Tax Package Support at 1-855-886-9760.

 

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

5

 


 

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.

6

 


 

Mid-Con Energy Partners, LP and subsidiaries

Consolidated Balance Sheets

(in thousands, except per unit data)

(Unaudited)

 

 

December 31,

 

 

 

2018

 

 

2017

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

467

 

 

$

1,832

 

Accounts receivable

 

 

 

 

 

 

 

 

Oil and natural gas sales

 

 

3,691

 

 

 

5,262

 

Other

 

 

503

 

 

 

103

 

Derivative financial instruments

 

 

5,666

 

 

 

 

Prepaid expenses and other

 

 

118

 

 

 

166

 

Assets held for sale, net

 

 

430

 

 

 

2,058

 

Total current assets

 

 

10,875

 

 

 

9,421

 

Property and equipment

 

 

 

 

 

 

 

 

Oil and natural gas properties, successful efforts method

 

 

 

 

 

 

 

 

Proved properties

 

 

379,441

 

 

 

335,796

 

Unproved properties

 

 

2,928

 

 

 

369

 

Other property and equipment

 

 

427

 

 

 

427

 

Accumulated depletion, depreciation, amortization and impairment

 

 

(175,948

)

 

 

(129,101

)

Total property and equipment, net

 

 

206,848

 

 

 

207,491

 

Derivative financial instruments

 

 

2,418

 

 

 

 

Other assets

 

 

1,563

 

 

 

2,451

 

Total assets

 

$

221,704

 

 

$

219,363

 

LIABILITIES, CONVERTIBLE PREFERRED UNITS AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

 

 

 

 

 

 

 

Trade

 

$

141

 

 

$

593

 

Related parties

 

 

3,732

 

 

 

1,631

 

Derivative financial instruments

 

 

 

 

 

4,252

 

Accrued liabilities

 

 

2,024

 

 

 

603

 

Liabilities related to assets held for sale

 

 

 

 

 

77

 

Total current liabilities

 

 

5,897

 

 

 

7,156

 

Derivative financial instruments

 

 

 

 

 

666

 

Long-term debt

 

 

93,000

 

 

 

99,000

 

Other long-term liabilities

 

 

47

 

 

 

70

 

Asset retirement obligations

 

 

26,001

 

 

 

10,249

 

Commitments and contingencies

 

 

 

 

 

 

 

 

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

 

 

21,715

 

 

 

20,534

 

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

 

 

14,635

 

 

 

 

Equity

 

 

 

 

 

 

 

 

General partner

 

 

(786

)

 

 

(572

)

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

 

 

61,195

 

 

 

82,260

 

Total equity

 

 

60,409

 

 

 

81,688

 

Total liabilities, convertible preferred units and equity

 

$

221,704

 

 

$

219,363

 

7

 


 

Mid-Con Energy Partners, LP and subsidiaries

Consolidated Statements of Operations

(in thousands, except per unit data)

(Unaudited)

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil sales

 

$

15,966

 

 

$

15,346

 

 

$

65,206

 

 

$

57,689

 

Natural gas sales

 

 

318

 

 

 

323

 

 

 

1,130

 

 

 

1,240

 

Other operating revenues

 

 

458

 

 

 

 

 

 

778

 

 

 

 

Gain (loss) on derivatives, net

 

 

24,914

 

 

 

(4,861

)

 

 

5,674

 

 

 

(1,945

)

Total revenues

 

 

41,656

 

 

 

10,808

 

 

 

72,788

 

 

 

56,984

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses

 

 

6,642

 

 

 

4,976

 

 

 

22,537

 

 

 

20,805

 

Production and ad valorem taxes

 

 

1,680

 

 

 

898

 

 

 

5,483

 

 

 

4,130

 

Other operating expenses

 

 

657

 

 

 

 

 

 

945

 

 

 

 

Impairment of proved oil and natural gas properties

 

 

21,450

 

 

 

2,224

 

 

 

31,160

 

 

 

24,746

 

Impairment of proved oil and natural gas properties held for sale

 

 

 

 

 

296

 

 

 

 

 

 

296

 

Depreciation, depletion and amortization

 

 

5,105

 

 

 

3,863

 

 

 

16,751

 

 

 

17,713

 

Dry holes and abandonments of unproved properties

 

 

417

 

 

 

 

 

 

612

 

 

 

 

Accretion of discount on asset retirement obligations

 

 

(27

)

 

 

134

 

 

 

721

 

 

 

520

 

General and administrative

 

 

1,565

 

 

 

1,234

 

 

 

6,311

 

 

 

5,719

 

Total operating costs and expenses

 

 

37,489

 

 

 

13,625

 

 

 

84,520

 

 

 

73,929

 

Loss on sales of oil and natural gas properties, net

 

 

(120

)

 

 

(3,950

)

 

 

(509

)

 

 

(3,950

)

Income (loss) from operations

 

 

4,047

 

 

 

(6,767

)

 

 

(12,241

)

 

 

(20,895

)

Other (expense) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

3

 

 

 

3

 

 

 

11

 

Interest expense

 

 

(1,641

)

 

 

(1,857

)

 

 

(6,010

)

 

 

(6,472

)

Other (expenses) income

 

 

(35

)

 

 

(10

)

 

 

(15

)

 

 

60

 

(Loss) gain on settlements of assets retirement obligations

 

 

(2

)

 

 

(24

)

 

 

10

 

 

 

(37

)

Total other expense

 

 

(1,678

)

 

 

(1,888

)

 

 

(6,012

)

 

 

(6,438

)

Net income (loss)

 

 

2,369

 

 

 

(8,655

)

 

 

(18,253

)

 

 

(27,333

)

Less: Distributions to preferred unitholders

 

 

1,153

 

 

 

788

 

 

 

4,456

 

 

 

3,063

 

Less: General partner's interest in net income (loss)

 

 

29

 

 

 

(102

)

 

 

(214

)

 

 

(324

)

Limited partners' interest in net income (loss)

 

$

1,187

 

 

$

(9,341

)

 

$

(22,495

)

 

$

(30,072

)

Limited partners' net income (loss) per unit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.04

 

 

$

(0.30

)

 

$

(0.74

)

 

$

(0.99

)

Diluted

 

$

0.02

 

 

$

(0.30

)

 

$

(0.74

)

 

$

(0.99

)

Weighted average limited partner units outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Limited partner units (basic)

 

 

30,436

 

 

 

30,091

 

 

 

30,328

 

 

 

30,002

 

Limited partner units (diluted)

 

 

52,579

 

 

 

30,091

 

 

 

30,328

 

 

 

30,002

 

 

 

 

 

 

 

 

8

 


 

Mid-Con Energy Partners, LP and subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

Year Ended December 31,

 

 

 

2018

 

 

2017

 

 

 

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(18,253

)

 

$

(27,333

)

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

16,751

 

 

 

17,713

 

 

 

 

Debt issuance costs amortization

 

 

678

 

 

 

1,384

 

 

 

 

Accretion of discount on asset retirement obligations

 

 

721

 

 

 

520

 

 

 

 

Impairment of proved oil and natural gas properties

 

 

31,160

 

 

 

24,746

 

 

 

 

Impairment of proved oil and natural gas properties held for sale

 

 

 

 

 

296

 

 

 

 

Dry holes and abandonments of unproved properties

 

 

612

 

 

 

 

 

 

 

(Gain) loss on settlements of asset retirement obligations

 

 

(10

)

 

 

37

 

 

 

 

Cash paid for settlements of asset retirement obligations

 

 

(128

)

 

 

(95

)

 

 

 

Mark to market on derivatives

 

 

 

 

 

 

 

 

 

 

 

(Gain) loss on derivatives, net

 

 

(5,674

)

 

 

1,945

 

 

 

 

Cash settlements paid for matured derivatives, net

 

 

(6,928

)

 

 

(369

)

 

 

 

Cash settlements received for early terminations of derivatives

 

 

 

 

 

582

 

 

 

 

Cash premiums paid for derivatives

 

 

(401

)

 

 

(5,048

)

 

 

 

Loss on sales of oil and natural gas properties, net

 

 

509

 

 

 

3,950

 

 

 

 

Non-cash equity-based compensation

 

 

744

 

 

 

434

 

 

 

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,571

 

 

 

40

 

 

 

 

Other receivables

 

 

(204

)

 

 

150

 

 

 

 

Prepaids and other

 

 

(61

)

 

 

(655

)

 

 

 

Accounts payable - trade and accrued liabilities

 

 

(210

)

 

 

427

 

 

 

 

Accounts payable - related parties

 

 

1,708

 

 

 

(1,478

)

 

 

 

Net cash provided by operating activities

 

 

22,585

 

 

 

17,246

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

 

 

 

Acquisitions of oil and natural gas properties

 

 

(21,243

)

 

 

(5,034

)

 

 

 

Additions to oil and natural gas properties

 

 

(8,617

)

 

 

(9,947

)

 

 

 

Additions to other property and equipment

 

 

 

 

 

(137

)

 

 

 

Proceeds from sales of oil and natural gas properties

 

 

1,044

 

 

 

22,115

 

 

 

 

Net cash (used in) provided by investing activities

 

 

(28,816

)

 

 

6,997

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

 

 

 

Proceeds from line of credit

 

 

22,000

 

 

 

6,000

 

 

 

 

Payments on line of credit

 

 

(28,000

)

 

 

(29,000

)

 

 

 

Offering costs

 

 

 

 

 

(99

)

 

 

 

Debt issuance costs

 

 

(681

)

 

 

(171

)

 

 

 

Proceeds from sale of Class B convertible preferred units, net of offering costs

 

 

14,847

 

 

 

 

 

 

 

Distributions to Class A convertible preferred units

 

 

(2,500

)

 

 

(1,500

)

 

 

 

Distributions to Class B convertible preferred units

 

 

(800

)

 

 

 

 

 

 

Net cash provided by (used in) financing activities

 

 

4,866

 

 

 

(24,770

)

 

 

 

Net decrease in cash and cash equivalents

 

 

(1,365

)

 

 

(527

)

 

 

 

Beginning cash and cash equivalents

 

 

1,832

 

 

 

2,359

 

 

 

 

Ending cash and cash equivalents

 

$

467

 

 

$

1,832

 

 

 

 

 

9

 


 

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 these measurements are used by many companies in its industry as a measurement of financial performance and are 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;

 

Cash settlements received for early terminations of derivatives;

 

Cash premiums received (paid) for derivatives, net;

 

Impairment of proved oil and natural gas properties;

 

Impairment of proved oil and natural gas properties held for sale;

 

Non-cash equity-based compensation;

 

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

 

Dry holes and abandonments on unproved properties.

10

 


 

Mid-Con Energy Partners, LP and subsidiaries

Reconciliation of Net Income (Loss) to Adjusted EBITDA

(in thousands)

(Unaudited)

 

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net income (loss)

 

$

2,369

 

 

$

(8,655

)

 

$

(18,253

)

 

$

(27,333

)

Interest expense, net

 

 

1,641

 

 

 

1,854

&