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Mid-Con Energy Partners, LP Announces Fourth Quarter and Full Year 2018 Operating and Financial Results, 2018 Year End Proved Reserves and 2019 Guidance
“2018 was a transformative year for the Partnership,” commented our President and CEO,
In
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”) onJanuary 31, 2018 , to investors led byJohn Goff . The Partnership used a portion of net proceeds from this Offering to acquire assets in thePowder 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, thePowder River Basin and theBig Horn Basin , as well as increasing our footprint in Oklahoma. These properties consist of approximately 9,271 MBoe of net total proved reserves as ofDecember 31, 2018 at the standardized measure for pricing approved by theSEC (“SEC pricing”).
- In
February 2019 , we executed definitive agreements to sell substantially all of our Eastern Shelf assets inTexas for$60.0 million , and to acquire Oklahoma properties inOsage ,Caddo , andGrady 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 ofJanuary 1, 2019 were 6.2 MMBoe (96% oil) based onSEC pricing as ofJanuary 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%, fromDecember 31, 2017 and inJanuary 2018 the revolving credit facility maturity was extended by two years toNovember 2020 . Compliance Total Leverage, as calculated per our credit agreement, was approximately 3.17x as ofDecember 31, 2018 compared to 3.54x as ofDecember 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
$25.2 million atDecember 31, 2018 , an increase of 5.7% year-over-year, primarily due to higher oil and gas revenue from an increase in commodity prices.
The following table reflects selected unaudited operating and financial results for the fourth quarter and full year of 2018, compared to the fourth quarter and full year of 2017. Mid-Con Energy’s unaudited consolidated financial statements are included at the end of this press release.
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
($ 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
Price Realizations - Oil and natural gas sales were
Lease Operating Expenses - LOE was
Production and Ad Valorem Taxes - Production and ad valorem taxes in the fourth quarter of 2018 were
General and Administrative Expenses (“G&A”) - G&A in the fourth quarter of 2018 was
Net Income (Loss) - For the fourth quarter of 2018,
Adjusted EBITDA - Adjusted EBITDA, a non-GAAP measure, for the fourth quarter of 2018 was
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.
At
The following table shows estimated proved reserves as of
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
At
HEDGING SUMMARY
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.
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
A replay of the conference call will be available through
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
UNITHOLDERS’ SCHEDULE K-1
Our unitholders’ Schedule K-1 for the tax year 2018 are available for download on the
ABOUT
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
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 | ||||
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 | ||||||||||||
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 | ||||
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.
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 | 6,007 | 6,461 | ||||||||||||
Depreciation, depletion and amortization | 5,105 | 3,863 | 16,751 | 17,713 | ||||||||||||
Accretion of discount on asset retirement obligations | (27 | ) | 134 | 721 | 520 | |||||||||||
Impairment of proved oil & natural gas properties | 21,450 | 2,224 | 31,160 | 24,746 | ||||||||||||
Impairment of proved oil & natural gas properties held for sale | — | 296 | — | 296 | ||||||||||||
(Gain) loss on derivatives, net | (24,914 | ) | 4,861 | (5,674 | ) | 1,945 | ||||||||||
Cash settlements paid for matured derivatives | (940 | ) | (893 | ) | (6,928 | ) | (369 | ) | ||||||||
Cash settlements received for early terminations of derivatives | — | 435 | — | 582 | ||||||||||||
Cash premiums paid for derivatives | (201 | ) | (39 | ) | (401 | ) | (5,048 | ) | ||||||||
Non-cash equity-based compensation | 74 | 25 | 744 | 434 | ||||||||||||
Loss on sales of oil and natural gas properties, net | 120 | 3,950 | 509 | 3,950 | ||||||||||||
Dry holes and abandonments on unproved properties | 417 | — | 612 | — | ||||||||||||
Adjusted EBITDA | $ | 5,094 | $ | 8,055 | $ | 25,248 | $ | 23,897 |
INVESTOR RELATIONS CONTACT
IR@midcon-energy.com
(918) 743-7575
Source: Mid-Con Energy Partners, LP