mcep-8k_20171114.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 14, 2017

Date of Earliest Event Reported: November 14, 2017

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.

 


 

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 2.02

Results of Operations and Financial Condition.

On November 14, 2017, Mid-Con Energy Partners, LP (the “Partnership”) issued a press release announcing its earnings for the third quarter ended September 30, 2017. A copy of the press release is furnished as Exhibit 99.1 and incorporated by reference herein.

 

 

 

Item 7.01

Regulation FD Disclosure.

On November 14, 2017, the Partnership issued a press release announcing its earnings for the third quarter ended September 30, 2017. 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.

 

 

 

Item 9.01

Financial Statements and Exhibits.

Exhibits

99.1 Press release dated November 14, 2017.

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: November 14, 2017

 

By:

 

/s/Charles L. McLawhorn, III

 

 

 

 

Charles L. McLawhorn, III

 

 

 

 

Vice President, General Counsel and Secretary

 

 

 

mcep-ex991_6.htm

 

 

Mid-Con Energy Partners, LP Announces Third Quarter 2017 Results and $25 Million Divestiture of Southern Oklahoma Assets

 

TULSA, November 14, 2017 – 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, 2017.

 

THIRD QUARTER 2017 SUMMARY AND SUBSEQUENT HIGHLIGHTS

 

Production averaged 3,500 Boe/d, a decrease of 1.7% sequentially and a decrease of 11.5% year-over-year.

 

Invested approximately $3.9 million in capital expenditures advancing key waterflood projects in our Northeastern Oklahoma and Permian core areas.

 

Signed definitive agreement to divest oil and natural gas assets in our Southern Oklahoma area for $25.0 million, subject to customary post-closing adjustments.

 

Executed a definitive agreement with a group of investors led by John Goff, our largest unitholder, in a private offering of up to $15.0 million aggregate principal amount of Class B Convertible Preferred Units for general partnership purposes, including but not limited to, future acquisitions and reduction of borrowings outstanding under the Partnership’s revolving credit facility.

 

Received a limited waiver to our credit agreement, whereby the existing lender group agreed to waive any events of default related to breach of the total leverage financial covenant for the third quarter of 2017.

 

Received lender commitments for a forthcoming bank amendment, subject to certain conditions being met, which would extend the maturity of our credit facility, among other changes.

 

“We are pleased to report a number of pending transactions that we believe will provide us with the flexibility and liquidity necessary to take advantage of opportunities we see in the market today, and benefit the Partnership for years to come,” commented Jeff Olmstead, our President and Chief Executive Officer.  “From an operational perspective, our grassroots waterflood projects in the Northeastern Oklahoma and Permian core areas continued to yield positive results, which allowed us to accelerate our development in those units and position us for future growth.”

 

The following table reflects selected unaudited operating and financial results for the third quarter of 2017, compared to the second quarter of 2017 and the third quarter of 2016. 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)

 

2017

 

 

2017

 

 

2016

 

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

 

 

3,500

 

 

 

3,560

 

 

 

3,957

 

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

   inclusive of premiums, net(2)(3)

 

$

12,951

 

 

$

12,964

 

 

$

15,592

 

Net loss

 

$

(7,921

)

 

$

(15,199

)

 

$

(2,421

)

Adjusted EBITDA(4)

 

$

3,899

 

 

$

5,474

 

 

$

11,873

 

Distributable Cash Flow(4)

 

$

215

 

 

$

2,878

 

 

$

9,104

 

1

 


 

 

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

(2) September 30, 2017 cash settlements from matured derivatives does not include the $0.1 million settlement received and the $1.1 million of deferred premiums paid upon early termination of previous oil derivative contracts in September 2017.

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

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

 

 

THIRD QUARTER 2017 RESULTS

Production - Production for the third quarter of 2017 was 322 MBoe, or 3,500 Boe/d. On a daily basis, this represented a 1.7% decrease from the second quarter of 2017 and an 11.5% decrease year-over-year. The decrease in production volumes was attributable to primary production declines at select properties in the Permian core area, increasing water cuts at select maturing waterflood properties in our Southern Oklahoma core area, and July 2016 sale of our Hugoton properties. Lower production volumes were partially offset by recent capital investment and corresponding positive waterflood responses at key properties in our Permian core area.

 

Price Realizations - Oil and natural gas sales were $14.0 million in the third quarter of 2017, or $43.37/Boe. On a per Boe basis, this represented a 0.8% increase from the second quarter of 2017 and a 9.5% increase year-over-year. Cash settlements paid for matured derivatives, inclusive of net premiums, were $1.0 million in the third quarter of 2017, or ($3.15)/Boe. This figure does not include the early termination of fourth quarter 2017 derivative contracts during September 2017 that resulted in $0.1 million of cash settlements received and $1.1 million of net premiums paid upon early termination.  Cash settlements from matured derivatives, inclusive of net premiums, were ($3.03)/Boe in the second quarter of 2017 and $3.25/Boe in the third quarter of 2016. The resulting realized prices, after incorporating cash settlements from matured derivatives, inclusive of net premiums, were $40.22/Boe in the third quarter of 2017, $40.01/Boe in the second quarter of 2017, and $42.84/Boe in the third quarter of 2016.

 

Lease Operating Expenses (LOE) - LOE was $6.1 million in the third quarter of 2017, representing a 9.7% increase from the second quarter of 2017 and a 7.2% increase from the third quarter of 2016. The increase in aggregate LOE was attributable to higher ad valorem taxes in the Permian core area and incremental costs associated with properties acquired. On a per Boe basis, LOE in the third quarter of 2017 of $19.01/Boe increased 10.3% sequentially and 21.2% year-over-year.

 

Production Taxes - Production taxes in the third quarter of 2017 were $0.9 million, or $2.66/Boe, for an effective tax rate of 6.1%. Production taxes in the second quarter of 2017 were $0.7 million, or $2.18/Boe, for an effective tax rate of 5.1%. Production taxes in the third quarter of 2016 were $0.8 million, or $2.07/Boe, for an effective tax rate of 5.2%. The increase in the effective production tax rate was primarily due to Oklahoma legislation effective July 1, 2017, that discontinued the state’s EOR tax credit and negatively impacted one of our Northeastern Oklahoma units.

 

Impairment Expense - For the third quarter of 2017, we recorded approximately $4.9 million of non-cash impairment expense related to one of our Permian projects. For the second quarter of 2017, we recorded approximately $17.7 million of non-cash impairment expense. There was no impairment expense recorded for the third quarter 2016.

 

Depreciation, Depletion and Amortization Expenses (“DD&A”) - DD&A for the third quarter of 2017 was $4.4 million, or $13.51/Boe. On a per Boe basis, DD&A decreased 5.5% from the second quarter of 2017 and 13.2% from the third quarter of 2016. The sequential and year-over-year decrease in DD&A per Boe was largely due to lower depletion rates, partially offset by the net impact of the acquisitions and divestitures.

 

General and Administrative Expenses (“G&A”) - G&A in 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. G&A for the second quarter of 2017 was $1.5 million, or $4.54/Boe, and included $0.1 million in non-cash equity-based compensation expense. G&A for the third quarter of 2016 was $1.7 million, or $4.71/Boe, and included

2

 


 

$0.3 million in non-cash equity-based compensation expense. The sequential decrease in aggregate G&A was due to lower payroll expenses and professional fees.

 

Net Interest Expense – Net interest expense for the third quarter of 2017 was $1.6 million compared to approximately $1.5 million for the second quarter of 2017 and $1.7 million for the third quarter 2016. The effective interest rate increased sequentially due to recent trends in the underlying market rates.

Net Loss - For the third quarter of 2017, Mid-Con Energy reported net loss of $7.9 million. Net loss per limited partner unit was $0.29 (basic and diluted) based on the weighted average limited partner units outstanding during the period of 30.0 million (basic and diluted). Net loss for the second quarter of 2017 was $15.2 million, or $0.52 per limited partner unit (basic and diluted) based on the weighted average limited partner units outstanding during the period of 29.9 million (basic and diluted). Net loss for the third quarter of 2016 was $2.4 million, or $0.09 per limited partner unit (basic and diluted), based on the weighted average limited partner units outstanding during the period of 29.9 million (basic and diluted).

 

Adjusted EBITDA - Adjusted EBITDA, a Non-GAAP measure, for the third quarter of 2017 was $3.9 million, or $12.11/Boe. Adjusted EBITDA was $16.90/Boe in the second quarter of 2017 and $32.62/Boe in the third quarter of 2016. The sequential decrease in Adjusted EBITDA, in aggregate and per Boe, was primarily due to the early termination of fourth quarter 2017 derivative positions in September 2017, lower production, and higher LOE.

 

Distributable Cash Flow (“DCF”) - DCF, a Non-GAAP measure, was $0.2 million for the third quarter of 2017 after subtracting $1.3 million in cash interest expense, $1.9 million in estimated maintenance capital expenditures, and $0.5 million in distributions to preferred unitholders from Adjusted EBITDA.

 

 

SOUTHERN OKLAHOMA DIVESTITURE

Mid-Con Energy announced that it had entered into a definitive agreement to sell oil and natural gas assets within its Southern Oklahoma core area to an unaffiliated buyer for $25.0 million, subject to customary post-closing adjustments.  The effective date of the divestiture is October 1, 2017, and closing is expected to occur on or before November 30, 2017.  Proceeds from the sale will be used to reduce borrowings outstanding under the Partnership's revolving credit facility.

 

The Partnership will divest the entirety of its Southern Oklahoma core area, which as of December 31, 2016, was comprised of 89 gross oil and natural gas producing wells, 55 gross injection wells, 5 gross water supply wells, and 36 gross inactive wells.  Estimated net total proved reserves at year end 2016 were 2.7 million barrels of oil equivalent (“MMBoe”) and average net production during the third quarter of 2017 was approximately 540 Boe/d.

 

 

DEBT AND LIQUIDITY SUMMARY

At September 30, 2017, Mid-Con Energy had debt outstanding of $122.0 million and total liquidity of $2.6 million in cash and cash equivalents. The Partnership breached its total leverage financial covenant in its credit agreement for the quarter ended as of such date. As a result, on November 10, 2017, Mid-Con Energy entered into a limited waiver, whereby the existing lender group agreed to waive any events of default related to such breach for the quarter ended September 30, 2017.

 

In conjunction with its Fall 2017 borrowing base redetermination, the Partnership is in advanced discussions with its lenders to amend the credit agreement to, among other things, extend the maturity date.  Mid-Con Energy has received commitments from its lenders with respect to the amendment that are subject to the satisfaction of certain conditions, including the sale of certain oil and gas properties located in Southern Oklahoma.  We can provide no assurances that the amendment will be signed or become effective or whether the lenders will provide any future waivers of covenant violations.

 

 

HEDGING SUMMARY

3

 


 

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 the price of oil and natural gas. 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 14, 2017, the following unaudited 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

 

4Q17

 

 

1Q18

 

 

2Q18

 

 

3Q18

 

 

4Q18

 

 

1Q19

 

 

2Q19

 

 

3Q19

 

 

4Q19

 

 

Collar Volume (Bbl/d)

 

 

652

 

 

 

1,500

 

 

 

1,484

 

 

 

1,141

 

 

 

1,141

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Call Strike Price ($/Bbl)

 

$

52.35

 

 

$

57.39

 

 

$

57.91

 

 

$

52.42

 

 

$

53.13

 

 

$

 

 

$

 

 

$

 

 

$

 

 

Put Strike Price ($/Bbl)

 

$

45.00

 

 

$

45.00

 

 

$

45.00

 

 

$

43.57

 

 

$

43.57

 

 

$

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WTI Swap Volume (Bbl/d)

 

 

1,957

 

 

 

567

 

 

 

560

 

 

 

326

 

 

 

326

 

 

 

433

 

 

 

429

 

 

 

424

 

 

 

424

 

 

Swap Price ($/Bbl)

 

$

51.54

 

 

$

51.53

 

 

$

51.53

 

 

$

51.00

 

 

$

51.00

 

 

$

51.48

 

 

$

51.48

 

 

$

51.48

 

 

$

51.48

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Put Volume (Bbl/d)(1)

 

 

 

 

 

 

 

 

 

 

 

326

 

 

 

326

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Put Strike Price ($/Bbl)(1)

 

$

 

 

$

 

 

$

 

 

$

45.00

 

 

$

45.00

 

 

$

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Hedged Volume (Bbl/d)

 

 

2,609

 

 

 

2,067

 

 

 

2,044

 

 

 

1,793

 

 

 

1,793

 

 

 

433

 

 

 

429

 

 

 

424

 

 

 

424

 

 

Floor Strike Price ($/Bbl)

 

$

49.91

 

 

$

46.79

 

 

$

46.79

 

 

$

45.18

 

 

$

45.18

 

 

$

51.48

 

 

$

51.48

 

 

$

51.48

 

 

$

51.48

 

 

% Hedged(2)

 

 

78

%

 

 

62

%

 

 

61

%

 

 

54

%

 

 

54

%

 

 

13

%

 

 

13

%

 

 

13

%

 

 

13

%

 

 

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

(2) Estimated percent hedged based on the mid-point of annual 2017 Boe production guidance, multiplied by an approximate 94% oil weighting based on third quarter 2017 reported production volumes.

 

 

FISCAL YEAR 2017 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.

 

FY2017 Guidance as of 11/14/17

 

2017

Net production (Boe/d)(1)

 

3,500 - 3,600

Lease operating expenses per Boe(2)

 

$16.25 - $17.50

Production taxes (% of total revenue)

 

5.5% - 5.7%

Estimated capital expenditures

 

$10.0 MM

(1)

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

(2)

Lease operating expenses Include ad valorem taxes.

 

 

QUARTERLY REPORT ON FORM 10-Q

Certain financial results included in this press release and related footnotes are preliminary and are therefore subject to change prior to filing Mid-Con Energy’s final unaudited quarterly report on Form 10-Q, which will be filed on November 14, 2017.

4

 


 

 

 

THIRD QUARTER 2017 CONFERENCE CALL

Mid-Con Energy’s management will host a conference call on Tuesday, November 14, 2017, at 6:00 p.m. ET. Interested parties are invited to participate via telephone by dialing 1-877-847-5946 (Conference ID: 7296548) 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 21, 2017, by dialing 1-855-859-2056 (Conference ID: 7296548). 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, exploit 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 Southern Oklahoma, Northeastern Oklahoma, and Texas within the Eastern Shelf of 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,” “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, 2016, and in other documents and reports we file from time to time with the SEC.

 

5

 


 

Mid-Con Energy Partners, LP and subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except number of units)

(Unaudited)

 

 

 

 

 

 

September 30, 2017

 

 

December 31, 2016

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,588

 

 

$

2,359

 

Accounts receivable

 

 

 

 

 

 

 

 

Oil and natural gas sales

 

 

4,605

 

 

 

5,302

 

Other

 

 

83

 

 

 

233

 

Derivative financial instruments

 

 

42

 

 

 

 

Prepaids and other

 

 

149

 

 

 

512

 

Total current assets

 

 

7,467

 

 

 

8,406

 

Property and equipment

 

 

 

 

 

 

 

 

Proved oil and natural gas properties, successful efforts method

 

 

454,566

 

 

 

441,479

 

Other property and equipment

 

 

852

 

 

 

289

 

Accumulated depletion, depreciation, amortization and impairment

 

 

(212,922

)

 

 

(176,551

)

Total property and equipment, net

 

 

242,496

 

 

 

265,217

 

Derivative financial instruments

 

 

187

 

 

 

 

Other assets

 

 

1,640

 

 

 

2,663

 

Total assets

 

$

251,790

 

 

$

276,286

 

 

 

 

 

 

 

 

 

 

LIABILITIES, CONVERTIBLE PREFERRED UNITS AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

 

 

 

 

 

 

 

Trade

 

$

532

 

 

$

256

 

Related parties

 

 

3,759

 

 

 

3,431

 

Derivative financial instruments

 

 

784

 

 

 

5,314

 

Accrued liabilities

 

 

897

 

 

 

146

 

Total current liabilities

 

 

5,972

 

 

 

9,147

 

Derivative financial instruments

 

 

 

 

 

2,495

 

Long-term debt

 

 

122,000

 

 

 

122,000

 

Other long term liabilities

 

 

75

 

 

 

93

 

Asset retirement obligations

 

 

12,384

 

 

 

11,331

 

Commitments and contingencies

 

 

 

 

 

 

 

 

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

 

 

20,253

 

 

 

19,570

 

Equity, per accompanying statements

 

 

 

 

 

 

 

 

Partnership equity

 

 

 

 

 

 

 

 

General partner interest

 

 

(470

)

 

 

(248

)

Limited partners - 30,091,463 and 29,912,230 units issued and outstanding,

   respectively

 

 

91,576

 

 

 

111,898

 

Total equity

 

 

91,106

 

 

 

111,650

 

Total liabilities, convertible preferred units and equity

 

$

251,790

 

 

$

276,286

 

 

 

 

 

 

6

 


 

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,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil sales

 

$

13,731

 

 

$

14,012

 

 

$

42,343

 

 

$

39,565

 

Natural gas sales

 

 

233

 

 

 

398

 

 

 

917

 

 

 

891

 

(Loss) gain on derivatives, net

 

 

(2,749

)

 

 

(444

)

 

 

2,916

 

 

 

(7,964

)

Total revenues

 

 

11,215

 

 

 

13,966

 

 

 

46,176

 

 

 

32,492

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses

 

 

6,122

 

 

 

5,709

 

 

 

16,695

 

 

 

17,551

 

Oil and natural gas production taxes

 

 

857

 

 

 

753

 

 

 

2,366

 

 

 

2,077

 

Impairment of proved oil and natural gas properties

 

 

4,850

 

 

 

 

 

 

22,522

 

 

 

895

 

Impairment of proved oil and natural gas properties sold

 

 

 

 

 

 

 

 

 

 

 

3,578

 

Depreciation, depletion and amortization

 

 

4,350

 

 

 

5,665

 

 

 

13,850

 

 

 

17,550

 

Accretion of discount on asset retirement obligations

 

 

142

 

 

 

127

 

 

 

386

 

 

 

443

 

General and administrative

 

 

1,188

 

 

 

1,715

 

 

 

4,485

 

 

 

5,281

 

Total operating costs and expenses

 

 

17,509

 

 

 

13,969

 

 

 

60,304

 

 

 

47,375

 

Loss on sales of oil and natural gas properties, net

 

 

 

 

 

(530

)

 

 

 

 

 

(517

)

Loss from operations

 

 

(6,294

)

 

 

(533

)

 

 

(14,128

)

 

 

(15,400

)

Other (expense) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

3

 

 

 

4

 

 

 

8

 

 

 

9

 

Interest expense

 

 

(1,626

)

 

 

(1,728

)

 

 

(4,615

)

 

 

(5,981

)

Other income (expense)

 

 

4

 

 

 

(164

)

 

 

70

 

 

 

(131

)

Loss on settlements of asset retirement obligations

 

 

(8

)

 

 

 

 

 

(13

)

 

 

 

Total other expense

 

 

(1,627

)

 

 

(1,888

)

 

 

(4,550

)

 

 

(6,103

)

Net loss

 

 

(7,921

)

 

 

(2,421

)

 

 

(18,678

)

 

 

(21,503

)

Less: Distributions to preferred unitholders

 

 

783

 

 

 

440

 

 

 

2,275

 

 

 

440

 

Less: General partner's interest in net loss

 

 

(94

)

 

 

(29

)

 

 

(222

)

 

 

(256

)

Limited partners' interest in net loss

 

$

(8,610

)

 

$

(2,832

)

 

$

(20,731

)

 

$

(21,687

)

Limited partners' interest in net loss per unit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.29

)

 

$

(0.09

)

 

$

(0.69

)

 

$

(0.73

)

Weighted average limited partner units outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Limited partner units (basic and diluted)

 

 

30,042

 

 

 

29,868

 

 

 

29,972

 

 

 

29,807

 

 

 

7

 


 

Mid-Con Energy Partners, LP and subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

Net loss

 

$

(18,678

)

 

$

(21,503

)

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

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

13,850

 

 

 

17,550

 

Debt issuance costs amortization

 

 

1,023

 

 

 

1,019

 

Accretion of discount on asset retirement obligations

 

 

386

 

 

 

443

 

Impairment of proved oil and natural gas properties

 

 

22,522

 

 

 

895

 

Impairment of proved oil and natural gas properties sold

 

 

 

 

 

3,578

 

Loss on settlements of asset retirement obligations

 

 

13

 

 

 

 

Cash paid for settlements of asset retirement obligations

 

 

(30

)

 

 

 

Mark to market on derivatives

 

 

 

 

 

 

 

 

(Gain) loss on derivatives, net

 

 

(2,916

)

 

 

7,964

 

Cash settlements received for matured derivatives

 

 

524

 

 

 

18,467

 

Cash settlements received from early termination of derivatives

 

 

147

 

 

 

5,820

 

Cash premiums paid for derivatives

 

 

(5,009

)

 

 

(3,766

)

Loss on sale of oil and natural gas properties

 

 

 

 

 

517

 

Non-cash equity-based compensation

 

 

409

 

 

 

961

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

697

 

 

 

(160

)

Other receivables

 

 

150

 

 

 

4,805

 

Prepaids and other

 

 

363

 

 

 

326

 

Accounts payable - trade and accrued liabilities

 

 

1,009

 

 

 

80

 

Accounts payable - related parties

 

 

(557

)

 

 

(1,368

)

Net cash provided by operating activities

 

 

13,903

 

 

 

35,628

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Acquisitions of oil and natural gas properties

 

 

(4,668

)

 

 

(19,055

)

Additions to oil and natural gas properties

 

 

(7,281

)

 

 

(5,111

)

Additions to other property and equipment

 

 

(133

)

 

 

(124

)

Proceeds from sale of oil and natural gas properties

 

 

 

 

 

17,312

 

Net cash used in investing activities

 

 

(12,082

)

 

 

(6,978

)

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Proceeds from line of credit

 

 

6,000

 

 

 

 

Payments on line of credit

 

 

(6,000

)

 

 

(52,100

)

Offering costs

 

 

(92

)

 

 

(16

)

Debt issuance costs

 

 

 

 

 

(9

)

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

 

 

 

 

 

24,975

 

Distributions to Class A convertible preferred units

 

 

(1,500

)

 

 

 

Net cash used in financing activities

 

 

(1,592

)

 

 

(27,150

)

Net increase in cash and cash equivalents

 

 

229

 

 

 

1,500

 

Beginning cash and cash equivalents

 

 

2,359

 

 

 

615

 

Ending cash and cash equivalents

 

$

2,588

 

 

$

2,115

 

 

 

 

 

 

 

 

 

 

 

8

 


 

NON-GAAP FINANCIAL MEASURES

 

This press release, the financial tables and other supplemental information include “Adjusted EBITDA” and “Distributable Cash Flow,” each of which are non-generally accepted accounting principles (“Non-GAAP”) measures used by our management to describe financial performance with external users of our financial statements.

 

The Partnership believes the Non-GAAP financial measures described above are 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 and Distributable Cash Flow should not be considered an alternative to net income (loss), 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:

 

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 settlements received for early terminations of derivatives, net;

 

Cash premiums received (paid) for derivatives, net;

 

Cash premiums paid at inception of derivatives, net;

 

Impairment of proved oil and natural gas properties;

 

Non-cash equity-based compensation; and

 

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

 

Distributable Cash Flow is defined as Adjusted EBITDA less:

 

Cash interest expense;

 

Estimated maintenance capital expenditures;

 

Distributions to preferred unitholders; and

 

Other non-operating cash (income) expense.

9

 


 

 

Mid-Con Energy Partners, LP and subsidiaries

Reconciliation of Net Loss to Adjusted EBITDA and Distributable Cash Flow

(in thousands)

(Unaudited)

 

 

Three Months Ended

 

 

 

September 30,

 

 

June 30,

 

 

September 30,

 

 

 

2017

 

 

2017

 

 

2016

 

Net loss

 

$

(7,921

)

 

$

(15,199

)

 

$

(2,421

)

Interest expense, net

 

 

1,623

 

 

 

1,537

 

 

 

1,724

 

Depreciation, depletion and amortization

 

 

4,350

 

 

 

4,631

 

 

 

5,665

 

Accretion of discount on asset retirement obligations

 

 

142

 

 

 

136

 

 

 

127

 

Impairment of proved oil & natural gas properties

 

 

4,850

 

 

 

17,672

 

 

 

 

Impairment of proved oil & natural gas properties sold

 

 

 

 

 

 

 

 

 

Loss (gain) on derivatives, net

 

 

2,749

 

 

 

(2,533

)

 

 

444

 

Cash settlements received (paid) for matured derivatives, net

 

 

323

 

 

 

357

 

 

 

1,182

 

Cash settlements received for early termination of derivatives

 

 

147

 

 

 

 

 

 

5,820

 

Cash premiums paid for derivatives, net

 

 

(2,438

)

 

 

(1,297

)

 

 

(1,509

)

Non-cash equity-based compensation

 

 

74

 

 

 

170

 

 

 

311

 

Loss on sales of oil and natural gas properties

 

 

 

 

 

 

 

 

530

 

Adjusted EBITDA

 

 

3,899

 

 

 

5,474

 

 

 

11,873

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

Cash interest expense

 

 

1,261

 

 

 

1,187

 

 

 

1,363

 

Estimated maintenance capital expenditures

 

 

1,923

 

 

 

843

 

 

 

1,129

 

Distributions to preferred unitholders

 

 

500

 

 

 

500

 

 

 

277

 

Other income

 

 

 

 

 

66

 

 

 

 

Distributable Cash Flow

 

$

215

 

 

$

2,878

 

 

$

9,104

 

 

 

INVESTOR RELATIONS CONTACT

IR@midcon-energy.com

(918) 743-7575