Document
        

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: August 2, 2016
Date of Earliest Event Reported: July 28, 2016
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))




The information disclosed in Item 7.01, including Exhibit 99.1 hereto, 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 2.01
Completion of Acquisition or Disposition of Assets
 
As previously announced, on May 26, 2016, Mid-Con Energy Partners, LP (the “Partnership”), through its wholly-owned subsidiary, Mid-Con Energy Properties, LLC (“Mid-Con Energy Properties”), entered into a definitive purchase and sale agreement (the “Purchase Agreement”) to sell oil and natural gas assets within Mid-Con Energy Properties’ Hugoton area for an aggregate purchase price of $18 million, subject to customary post-closing purchase price adjustments (collectively, the “Divestiture”). We closed this Divestiture on July 28, 2016. Unaudited pro forma condensed consolidated information of the Partnership to give effect to the disposition of those assets pursuant to the Purchase Agreement is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.

Item 7.01
Regulation FD Disclosure.
On July 28, 2016, Mid-Con Energy Partners, LP issued a press release announcing the closing of the Divestiture. A copy of the press release is furnished as Exhibit 99.2 hereto and is incorporated herein by reference.

Item 9.01
Financial Statements and Exhibits.
 
(b) Pro Forma Financial information:
Unaudited pro forma information of the Partnership to give effect to the disposition of our Hugoton assets is filed as Exhibit 99.1 and is incorporated by reference:
-- Unaudited pro forma condensed consolidated balance sheets as of March 31, 2016
-- Unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2016 and the year ended December 31, 2015
(d) Exhibits
99.1 Unaudited Pro Forma Condensed Consolidated Financial Statements
99.2 News release issued by Mid-Con Energy Partners, LP dated July 28, 2016.


 
SIGNATURE
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
 
MID-CON ENERGY PARTNERS, LP
 
 
 
 
By: Mid-Con Energy GP, LLC,
 
 
 
 
its general partner
 
 
 
Date: August 2, 2016
 
By:
 
/s/ Charles L. McLawhorn, III
 
 
 
 
Charles L. McLawhorn, III
 
 
 
 
Vice President, General Counsel & Secretary




Exhibit


Exhibit 99.1


Mid-Con Energy Partners, LP and subsidiaries
Unaudited Pro Forma Condensed Consolidated Financial Statements


Introduction
On May 26, 2016, Mid-Con Energy Partners, LP (the “Partnership”), through its wholly-owned subsidiary, Mid-Con Energy Properties, LLC (“Mid-Con Energy Properties”), entered into a definitive purchase and sale agreement (the “Purchase Agreement”) to sell oil and natural gas assets within Mid-Con Energy Properties’ Hugoton area for an aggregate purchase price of $18 million, subject to customary post-closing purchase price adjustments (collectively, the “Divestiture”). The Partnership closed this Divestiture on July 28, 2016. This divestiture does not qualify as discontinued operations as it does not represent a strategic shift that will have a major effect on the Partnership’s operations or financial results.
The unaudited pro forma condensed consolidated financial data of the Partnership was derived from historical condensed consolidated financial statements. The unaudited pro forma condensed consolidated balance sheet assumes the Divestiture occurred on March 31, 2016. The unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2016 and the year ended December 31, 2015 give effect to the Divestiture as if it occurred as of the beginning of the period presented. The following unaudited pro forma condensed consolidated financial information should be read in conjunction with the Partnership’s historical financial statements and accompanying notes.
The pro forma adjustments are based on the best information available and assumptions that management believes are factually supportable and reasonable; however, such adjustments are subject to change. In addition, such adjustments are estimates. The unaudited pro forma condensed consolidated financial information is for illustrative and informational purposes only and is not intended to reflect what the Partnership’s consolidated financial position and results of operations would have been had the Divestiture occurred on the dates indicated and is not necessarily indicative of the Partnership’s future consolidated financial position and results of operations.
The pro forma adjustments remove the Divestiture’s consolidated assets, liabilities and results of operations and also gives effect to adjustments to reflect the cash proceeds from the Divestiture.




















Mid-Con Energy Partners, LP and subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheets
(in thousands, except number of units)
March 31, 2016
 
Historical
 
Pro Forma Adjustments for Activity of Disposed Assets
 
Unaudited Pro Forma Balance Sheet
ASSETS
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
105

 
$
17,920

(a)
$
18,025

Accounts receivable:
 
 
 
 
 
Oil and natural gas sales
4,135

 

 
4,135

Related parties
591

 

 
591

Other
2,991

 

 
2,991

Derivative financial instruments
16,320

 

 
16,320

Prepaids and other
560

 

 
560

Total current assets
24,702

 
17,920

 
42,622

 
 
 
 
 
 
Property and Equipment:
 
 
 
 
 
Oil and natural gas properties, successful efforts method:
 
 
 
 
 
Proved properties
520,670

 
(101,869
)
(b)
418,801

Accumulated depletion, depreciation, amortization and impairment
(238,093
)
 
77,008

(b)
(161,085
)
Total property and equipment, net
282,577

 
(24,861
)
 
257,716

 
 
 
 
 
 
Derivative financial instruments
1,363

 

 
1,363

Other assets
3,480

 

 
3,480

Total assets
$
312,122

 
$
(6,941
)
 
$
305,181

 
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable - trade
$
2,629

 
$

 
$
2,629

Accrued liabilities
69

 

 
69

Current maturities of long-term debt
19,000

 

 
19,000

Total current liabilities
21,698

 

 
21,698

 
 
 
 
 
 
Long-term debt
150,000

 

 
150,000

Asset retirement obligations
12,865

 
(2,786
)
(b)
10,079

Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
EQUITY, per accompanying statements:
 
 
 
 
 
Partnership equity:
 
 
 
 
 
General partner interest
8

 
(50
)
(b)
(42
)
Limited partners - 29,784,015 units issued and outstanding
127,551

 
(4,105
)
(b)
123,446

Total equity
127,559

 
(4,155
)
 
123,404

Total liabilities and equity
$
312,122

 
$
(6,941
)
 
$
305,181

See accompanying notes.








Mid-Con Energy Partners, LP and subsidiaries
Unaudited Pro Forma Condensed Consolidated Statements of Operations
For the three months ended March 31, 2016
(in thousands, except per unit data)

 
Historical
 
Pro Forma Adjustments for Activity of Disposed Assets (c)
 
Unaudited Pro Forma Statement of Operations
Revenues:
 
 
 
 
 
Oil sales
$
11,106

 
$
(1,192
)
 
$
9,914

Natural gas sales
163

 
(3
)
 
160

Gain on derivatives, net
2,568

 

 
2,568

Total revenues
13,837

 
(1,195
)
 
12,642

Operating costs and expenses:
 
 
 
 
 
Lease operating expenses
6,065

 
(1,225
)
 
4,840

Oil and natural gas production taxes
592

 
(71
)
 
521

Depreciation, depletion and amortization
6,085

 
(454
)
 
5,631

Accretion of discount on asset retirement obligations
157

 
(34
)
 
123

General and administrative
2,088

 

 
2,088

Total operating costs and expenses
14,987

 
(1,784
)
 
13,203

Loss from operations
(1,150
)
 
589

 
(561
)
Other income (expense):
 
 
 
 
 
Interest income and other
36

 

 
36

Interest expense
(2,199
)
 

 
(2,199
)
Total other expense
(2,163
)
 

 
(2,163
)
Net loss
$
(3,313
)
 
$
589

 
$
(2,724
)
Computation of net (loss) income per limited partner unit:
 
 
 
 
 
General partner's interest in net (loss) income
$
(39
)
 
$
6

 
$
(33
)
Limited partners' interest in net (loss) income
$
(3,274
)
 
$
583

 
$
(2,691
)
 
 
 
 
 
 
Net (loss) income per limited partner unit:
 
 
 
 
 
Basic and diluted
$
(0.11
)
 
$
0.02

 
$
(0.09
)
 
 
 
 
 
 
Weighted average limited partner units outstanding:
 
 
 
 
 
Limited partner units (basic and diluted)
29,768

 
 
 
29,768

See accompanying notes.




















Mid-Con Energy Partners, LP and subsidiaries
Unaudited Pro Forma Condensed Consolidated Statements of Operations
For the twelve months ended December 31, 2015
(in thousands, except per unit data)

 
Historical
 
Pro Forma Adjustments for Activity of Disposed Assets (c)
 
Unaudited Pro Forma Statement of Operations
Revenues:
 
 
 
 
 
Oil sales
$
72,520

 
$
(11,686
)
 
$
60,834

Natural gas sales
1,394

 
(58
)
 
1,336

Gain on derivatives, net
22,366

 

 
22,366

Total revenues
96,280

 
(11,744
)
 
84,536

Operating costs and expenses:
 
 
 
 
 
Lease operating expenses
33,591

 
(10,222
)
 
23,369

Oil and natural gas production taxes
3,487

 
(706
)
 
2,781

Impairment of proved oil and natural gas properties
103,938

 
(36,564
)
 
67,374

Depreciation, depletion and amortization
34,174

 
(3,934
)
 
30,240

Accretion of discount on asset retirement obligations
432

 
(79
)
 
353

General and administrative
9,411

 

 
9,411

Total operating costs and expenses
185,033

 
(51,505
)
 
133,528

Loss from operations
(88,753
)
 
39,761

 
(48,992
)
Other income (expense):
 
 
 
 
 
Interest income and other
558

 

 
558

Interest expense
(7,258
)
 

 
(7,258
)
Gain (loss) on settlements of ARO
(42
)
 
50

 
8

Total other expense
(6,742
)
 
50

 
(6,692
)
Net loss
$
(95,495
)
 
$
39,811

 
$
(55,684
)
Computation of net (loss) income per limited partner unit:
 
 
 
 
 
General partner's interest in net (loss) income
$
(1,146
)
 
$
478

 
$
(668
)
Limited partners' interest in net (loss) income
$
(94,349
)
 
$
39,333

 
$
(55,016
)
 
 
 
 
 
 
Net (loss) income per limited partner unit:
 
 
 
 
 
Basic and diluted
$
(3.18
)
 
$
1.32

 
$
(1.86
)
 
 
 
 
 
 
Weighted average limited partner units outstanding:
 
 
 
 
 
Limited partner units (basic and diluted)
29,642

 
 
 
29,642

See accompanying notes.


















Mid-Con Energy Partners, LP and subsidiaries
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements


Note 1. Basis of Presentation

The unaudited pro forma condensed consolidated financial statements give effect to the pro forma adjustments necessary to reflect the Divestiture as if it had occurred as of the beginning of the periods presented in the unaudited pro forma statements of operations for the three months ended March 31, 2016 and the year ended December 31, 2015 and on March 31, 2016 in the unaudited pro forma balance sheet. The consideration for the sale of the Hugoton properties consisted of approximately $17.9 million in cash with estimated post-closing purchase price adjustments of approximately $0.1 million from the date the Partnership entered into the Purchase Agreement.

Note 2. Pro Forma Adjustments
The unaudited pro forma condensed consolidated financial statements reflect the following adjustments:
Balance Sheet
“Historical” represents the historical condensed consolidated balance sheet of Mid-Con Energy Partners, LP as of March 31, 2016.
(a)
Pro forma adjustment to reflect the cash proceeds from the Divestiture
(b)
Pro forma adjustment to remove the assets and liabilities sold in the Divestiture

Statement of Operations
“Historical” represents the historical condensed consolidated statements of operations of Mid-Con Energy Partners, LP for the three months ended March 31, 2016 and for the year ended December 31, 2015.
(c)
All adjustments are to eliminate revenues and expenses of the assets sold in the Divestiture from the Partnership’s consolidated statements of operations



Exhibit



Mid-Con Energy Partners, LP Closes Hugoton Asset Divestiture

DALLAS, July 28, 2016 – Mid-Con Energy Partners, LP (NASDAQ: MCEP) (“Mid-Con Energy” or the “Partnership”), through its wholly-owned subsidiary, Mid-Con Energy Properties, LLC, announces that it has closed its previously announced divestiture of oil and natural gas assets within the Hugoton area to PO&G Panhandle, LP, an affiliate of P.O.&G. Resources, LP, at a contract price of $18.0 million, subject to customary post-closing purchase price adjustments. Net divestiture proceeds will be used to reduce borrowings outstanding under the Partnership’s revolving credit facility.

For reference, the divested assets in the Hugoton area, as of December 31, 2015 were comprised of 70 producing wells, 45 injection wells, 5 water supply wells, and 86 inactive wells. Average net production during December 2015 was 682 Boe/d and total proved reserves at year end 2015 were 3.2 million barrels of oil equivalent.


ABOUT MID-CON ENERGY PARTNERS, LP
Mid-Con Energy is a publicly held Delaware limited partnership formed in July 2011 to own, operate, acquire, exploit and develop producing oil and natural gas properties in North America, with a focus on Enhanced Oil Recovery (“EOR”). Mid-Con Energy’s core areas of operation are located in Southern Oklahoma, Northeastern Oklahoma, the Gulf Coast, and the Permian. 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,” or "will" or other similar words. 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" of our public filings.


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