Press Release
<< Back
Mid-Con Energy Partners, LP Announces Second Quarter 2019 Operating and Financial Results
“The second quarter of 2019 was highlighted by the efforts and success of our operations team in managing costs and weather related downtime and executing development opportunities,” said President and Chief Executive Officer
HIGHLIGHTS AND RECENT DEVELOPMENTS
- Production increased by 2% from first quarter of 2019, despite historic flooding in Oklahoma.
- Decreased lease operating expenses (“LOE”) in newly acquired assets in Oklahoma, which contributed to increased cash flow during second quarter of 2019.
- Net income was
$5.1 million for the second quarter of 2019. - Continued to reduce outstanding borrowings on our revolving credit facility. Total net reduction of
$27.0 million for the six months endedJune 30, 2019 . - Our liquidity position at
July 26, 2019 consisted of approximately$0.6 million of available cash and$43.0 million of available borrowings ($110.0 million borrowing base less$66.0 million outstanding borrowings and$1.0 million outstanding standby letter of credit). - Achieved first injection in our Pine Tree waterflood project. Formal unitization approval expected in third quarter of 2019.
- Returned approximately 50 wells to production in newly acquired assets.
- Generated second quarter Adjusted EBITDA of
$5.1 million (1). Excluding professional and other fees related to transaction activity during the quarter, Adjusted EBITDA would have been$5.9 million . - Reported Total Leverage Ratio, as defined by our credit agreement, of 3.24x for the period ending
June 30, 2019 . Excluding professional and other fees related to transaction activity during the quarter, Total Leverage Ratio would have been 2.79x.
(1) Non-GAAP financial measure. Please refer to the related disclosure and reconciliation of net income (loss) to Adjusted EBITDA included in this press release.
FINANCIAL SUMMARY
During the second quarter 2019, the Partnership continued to execute on its plan to reduce debt, while funding capital expenditures with internally generated cash flow.
Production was up 2% to 3,538 Boe/d for the second quarter of 2019 from 3,467 Boe/d in the first quarter of 2019. Commodity pricing also improved during second quarter 2019 as realized oil price increased to
Total lease operating expenses were expected to increase during the quarter due to the acquisition of the Oklahoma properties. Overall LOE increased by 11%, however the operating teams were able to greatly reduce the expenses on the recently acquired properties in Oklahoma, when compared to historical expenses from the predecessor operator. This reduction helped increase cash flow on those specific assets.
General and administrative expenses were higher than anticipated for the quarter due to one-time professional and other fees related to transaction activities.
Adjusted EBITDA continued the positive trend of financial results as it increased to
HEDGING SUMMARY
As of
Period Covered | Differential Fixed Price |
Weighted Average Fixed Price |
Weighted Average Floor Price |
Weighted Average Ceiling Price |
Total Bbls Hedged/day |
Index | ||||||||||||||||
Swaps - 2019 | $ | — | $ | 56.08 | $ | — | $ | — | 1,692 | NYMEX-WTI | ||||||||||||
Swaps - 2019 | $ | (20.15 | ) | $ | — | $ | — | $ | — | 150 | WCS-CRUDE-OIL | |||||||||||
Swaps - 2020 | $ | — | $ | 55.81 | $ | — | $ | — | 1,931 | NYMEX-WTI | ||||||||||||
Swaps - 2021 | $ | — | $ | 55.78 | $ | — | $ | — | 672 | NYMEX-WTI | ||||||||||||
Collars - 2021 | $ | — | $ | — | $ | 52.00 | $ | 58.80 | 672 | NYMEX-WTI |
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 July 31, 2019 | FY 2019 | |
Net production (Boe/d)(1) | 3,400 - 3,800 | |
Lease operating expenses per Boe | $21.00 - $24.00 | |
Production and ad valorem taxes (% of total revenue) | 8.00% - 9.00% | |
Estimated capital expenditures | $9.0 MM | |
(1) Production volumes in Boe equivalents calculated at a rate of six Mcf per Bbl. |
SECOND QUARTER 2019 CONFERENCE CALL
As announced on
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 due to a number of factors including but not limited to volatility of commodity prices; revision to oil and natural gas reserves estimates as a result of changes in commodity prices; effectiveness of risk management activities; business strategies; future financial and operating results; ability to replace the reserves we produce through acquisitions and the development of our properties; future capital requirements and availability of financing; realized oil and natural gas prices; production volumes; lease operating expenses; general and administrative expenses; cash flow and liquidity; availability of production equipment; availability of oil field labor; capital expenditures; availability and terms of capital; marketing of oil and natural gas; general economic conditions; competition in the oil and natural gas industry; environmental liabilities; compliance with NASDAQ listing requirements; and any other risks and uncertainties discussed in our Form 10-K and other filings with the
Mid-Con Energy Partners, LP and subsidiaries | ||||||||
Condensed Consolidated Balance Sheets | ||||||||
(in thousands, except number of units) | ||||||||
(Unaudited) | ||||||||
June 30, 2019 | December 31, 2018 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 525 | $ | 467 | ||||
Accounts receivable | 6,438 | 4,194 | ||||||
Derivative financial instruments | — | 5,666 | ||||||
Prepaid expenses | 393 | 118 | ||||||
Assets held for sale, net | 430 | 430 | ||||||
Total current assets | 7,786 | 10,875 | ||||||
Property and equipment | ||||||||
Oil and natural gas properties, successful efforts method | ||||||||
Proved properties | 256,654 | 379,441 | ||||||
Unproved properties | 3,476 | 2,928 | ||||||
Other property and equipment | 1,456 | 427 | ||||||
Accumulated depletion, depreciation, amortization and impairment | (71,686 | ) | (175,948 | ) | ||||
Total property and equipment, net | 189,900 | 206,848 | ||||||
Derivative financial instruments | 955 | 2,418 | ||||||
Other assets | 1,186 | 1,563 | ||||||
Total assets | $ | 199,827 | $ | 221,704 | ||||
LIABILITIES, CONVERTIBLE PREFERRED UNITS AND EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | ||||||||
Trade | $ | 693 | $ | 141 | ||||
Related parties | 3,320 | 3,732 | ||||||
Derivative financial instruments | 1,086 | — | ||||||
Accrued liabilities | 632 | 2,024 | ||||||
Other current liabilities | 415 | — | ||||||
Total current liabilities | 6,146 | 5,897 | ||||||
Long-term debt | 66,000 | 93,000 | ||||||
Other long-term liabilities | 675 | 47 | ||||||
Asset retirement obligations | 30,082 | 26,001 | ||||||
Commitments and contingencies | ||||||||
Class A convertible preferred units - 11,627,906 issued and outstanding, respectively | 22,325 | 21,715 | ||||||
Class B convertible preferred units - 9,803,921 issued and outstanding, respectively | 14,731 | 14,635 | ||||||
Equity, per accompanying statements | ||||||||
General partner | (771 | ) | (786 | ) | ||||
Limited partners - 30,785,958 and 30,436,124 units issued and outstanding, respectively | 60,639 | 61,195 | ||||||
Total equity | 59,868 | 60,409 | ||||||
Total liabilities, convertible preferred units and equity | $ | 199,827 | $ | 221,704 |
Mid-Con Energy Partners, LP and subsidiaries | ||||||||||||||||
Condensed Consolidated Statements of Operations | ||||||||||||||||
(in thousands, except per unit data) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenues | ||||||||||||||||
Oil sales | $ | 16,792 | $ | 15,931 | $ | 31,386 | $ | 30,475 | ||||||||
Natural gas sales | 397 | 264 | 647 | 432 | ||||||||||||
Other operating revenues | 340 | — | 712 | — | ||||||||||||
Gain (loss) on derivatives, net | 3,396 | (9,500 | ) | (8,802 | ) | (12,882 | ) | |||||||||
Total revenues | 20,925 | 6,695 | 23,943 | 18,025 | ||||||||||||
Operating costs and expenses | ||||||||||||||||
Lease operating expenses | 7,587 | 5,009 | 14,417 | 9,649 | ||||||||||||
Production and ad valorem taxes | 1,469 | 1,205 | 2,751 | 2,238 | ||||||||||||
Other operating expenses | 417 | — | 890 | — | ||||||||||||
Impairment of proved oil and natural gas properties | 204 | 959 | 204 | 9,710 | ||||||||||||
Depreciation, depletion and amortization | 2,369 | 3,393 | 5,467 | 6,834 | ||||||||||||
Dry holes and abandonments of unproved properties | — | 97 | — | 185 | ||||||||||||
Accretion of discount on asset retirement obligations | 417 | 191 | 745 | 344 | ||||||||||||
General and administrative | 2,348 | 1,358 | 5,010 | 3,252 | ||||||||||||
Total operating costs and expenses | 14,811 | 12,212 | 29,484 | 32,212 | ||||||||||||
Gain (loss) on sales of oil and natural gas properties, net | 223 | 12 | 9,692 | (388 | ) | |||||||||||
Income (loss) from operations | 6,337 | (5,505 | ) | 4,151 | (14,575 | ) | ||||||||||
Other (expense) income | ||||||||||||||||
Interest income | 1 | — | 9 | 2 | ||||||||||||
Interest expense | (1,229 | ) | (1,410 | ) | (2,844 | ) | (2,749 | ) | ||||||||
Other income | 44 | — | 49 | — | ||||||||||||
(Loss) gain on settlements of asset retirement obligations | (56 | ) | 60 | (56 | ) | 49 | ||||||||||
Total other expense | (1,240 | ) | (1,350 | ) | (2,842 | ) | (2,698 | ) | ||||||||
Net income (loss) | 5,097 | (6,855 | ) | 1,309 | (17,273 | ) | ||||||||||
Less: Distributions to preferred unitholders | 1,157 | 1,139 | 2,306 | 2,155 | ||||||||||||
Less: General partner's interest in net income (loss) | 60 | (81 | ) | 15 | (204 | ) | ||||||||||
Limited partners' interest in net income (loss) | $ | 3,880 | $ | (7,913 | ) | $ | (1,012 | ) | $ | (19,224 | ) | |||||
Limited partners' interest in net income (loss) per unit | ||||||||||||||||
Basic | $ | 0.13 | $ | (0.26 | ) | $ | (0.03 | ) | $ | (0.64 | ) | |||||
Diluted | $ | 0.07 | $ | (0.26 | ) | $ | (0.03 | ) | $ | (0.64 | ) | |||||
Weighted average limited partner units outstanding | ||||||||||||||||
Limited partner units (basic) | 30,786 | 30,306 | 30,708 | 30,241 | ||||||||||||
Limited partner units (diluted) | 53,187 | 30,306 | 30,708 | 30,241 |
Mid-Con Energy Partners, LP and subsidiaries | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
(In thousands) | ||||||||
(Unaudited) | ||||||||
Six Months Ended June 30, |
||||||||
2019 | 2018 | |||||||
Cash flows from operating activities | ||||||||
Net income (loss) | $ | 1,309 | $ | (17,273 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities | ||||||||
Depreciation, depletion and amortization | 5,467 | 6,834 | ||||||
Debt issuance costs amortization | 356 | 329 | ||||||
Accretion of discount on asset retirement obligations | 745 | 344 | ||||||
Impairment of proved oil and natural gas properties | 204 | 9,710 | ||||||
Dry holes and abandonments of unproved properties | — | 185 | ||||||
Loss (gain) on settlements of asset retirement obligations | 56 | (49 | ) | |||||
Cash paid for settlements of asset retirement obligations | (72 | ) | (65 | ) | ||||
Mark to market on derivatives | ||||||||
Loss on derivatives, net | 8,802 | 12,882 | ||||||
Cash settlements paid for matured derivatives, net | (586 | ) | (3,505 | ) | ||||
(Gain) loss on sales of oil and natural gas properties | (9,692 | ) | 388 | |||||
Non-cash equity-based compensation | 456 | 367 | ||||||
Changes in operating assets and liabilities | ||||||||
Accounts receivable | (2,441 | ) | (325 | ) | ||||
Prepaid expenses and other assets | (254 | ) | (1,565 | ) | ||||
Accounts payable - trade and accrued liabilities | 434 | 442 | ||||||
Accounts payable - related parties | (293 | ) | 1,277 | |||||
Net cash provided by operating activities | 4,491 | 9,976 | ||||||
Cash flows from investing activities | ||||||||
Acquisitions of oil and natural gas properties | (3,262 | ) | (9,257 | ) | ||||
Additions to oil and natural gas properties | (5,085 | ) | (3,724 | ) | ||||
Proceeds from sales of oil and natural gas properties | 32,514 | 1,163 | ||||||
Net cash provided by (used in) investing activities | 24,167 | (11,818 | ) | |||||
Cash flows from financing activities | ||||||||
Proceeds from line of credit | 7,000 | 7,000 | ||||||
Payments on line of credit | (34,000 | ) | (19,000 | ) | ||||
Debt issuance costs | — | (651 | ) | |||||
Proceeds from sale of Class B convertible preferred units, net of offering costs | — | 14,878 | ||||||
Distributions to Class A convertible preferred units | (1,000 | ) | (1,500 | ) | ||||
Distributions to Class B convertible preferred units | (600 | ) | (200 | ) | ||||
Net cash (used in) provided by financing activities | (28,600 | ) | 527 | |||||
Net increase (decrease) in cash and cash equivalents | 58 | (1,315 | ) | |||||
Beginning cash and cash equivalents | 467 | 1,832 | ||||||
Ending cash and cash equivalents | $ | 525 | $ | 517 |
Mid-Con Energy Partners, LP and subsidiaries | |||||||||||||||||||||||||||||||||
Production, Prices, and Unit Costs per Boe | |||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||||||||||||||||||
2019 | 2018 | Change | % Change |
2019 | 2018 | Change | % Change |
||||||||||||||||||||||||||
Production Volumes | |||||||||||||||||||||||||||||||||
Oil (MBbls) | 291 | 251 | 40 | 16 | % | 583 | 489 | 94 | 19 | % | |||||||||||||||||||||||
Natural gas (MMcf) | 184 | 92 | 92 | 100 | % | 305 | 178 | 127 | 71 | % | |||||||||||||||||||||||
Total (MBoe) | 322 | 267 | 55 | 21 | % | 634 | 519 | 115 | 22 | % | |||||||||||||||||||||||
Average daily net production (Boe/d) | 3,538 | 2,934 | 604 | 21 | % | 3,503 | 2,867 | 636 | 22 | % | |||||||||||||||||||||||
Average sales price | |||||||||||||||||||||||||||||||||
Oil (per Bbl) | |||||||||||||||||||||||||||||||||
Sales price | $ | 57.70 | $ | 63.47 | $ | (5.77 | ) | (9 | %) | $ | 53.84 | $ | 62.32 | $ | (8.48 | ) | (14 | %) | |||||||||||||||
Effect of net settlements on matured derivative instruments | $ | (2.50 | ) | $ | (8.69 | ) | $ | 6.19 | 71 | % | $ | (1.01 | ) | $ | (7.17 | ) | $ | 6.16 | 86 | % | |||||||||||||
Realized oil price after derivatives | $ | 55.20 | $ | 54.78 | $ | 0.42 | 1 | % | $ | 52.83 | $ | 55.15 | $ | (2.32 | ) | (4 | %) | ||||||||||||||||
Natural gas (per Mcf) | $ | 2.16 | $ | 2.87 | $ | (0.71 | ) | (25 | %) | $ | 2.12 | $ | 2.43 | $ | (0.31 | ) | (13 | %) | |||||||||||||||
Average unit costs per Boe | |||||||||||||||||||||||||||||||||
Lease operating expenses | $ | 23.56 | $ | 18.76 | $ | 4.80 | 26 | % | $ | 22.74 | $ | 18.59 | $ | 4.15 | 22 | % | |||||||||||||||||
Production and ad valorem taxes | $ | 4.56 | $ | 4.51 | $ | 0.05 | 1 | % | $ | 4.34 | $ | 4.31 | $ | 0.03 | 1 | % | |||||||||||||||||
Depreciation, depletion and amortization | $ | 7.36 | $ | 12.71 | $ | (5.35 | ) | (42 | %) | $ | 8.62 | $ | 13.17 | $ | (4.55 | ) | (35 | %) | |||||||||||||||
General and administrative expenses | $ | 7.29 | $ | 5.09 | $ | 2.20 | 43 | % | $ | 7.90 | $ | 6.27 | $ | 1.63 | 26 | % |
NON-GAAP FINANCIAL MEASURE
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 this measurement is used by many companies in its industry as a measurement of financial performance and is commonly employed by financial analysts and others to evaluate the financial performance of the Partnership and to compare the financial performance of the Partnership with the performance of other publicly traded partnerships within its industry. Adjusted EBITDA should not be considered an alternative to net income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP.
Adjusted EBITDA is defined as net income (loss) plus (minus):
- Interest expense, net;
- Depreciation, depletion and amortization;
- Accretion of discount on asset retirement obligations;
- (Gain) loss on derivatives, net;
- Cash settlements received (paid) for matured derivatives, net;
- Cash premiums received (paid) for derivatives, net;
- Impairment of proved oil and natural gas properties;
- Non-cash equity-based compensation;
- (Gain) loss on sales of oil and natural gas properties, net; and
- Dry holes and abandonments on unproved properties.
Mid-Con Energy Partners, LP and subsidiaries | ||||||||||||
Reconciliation of Net Income (Loss) to Adjusted EBITDA | ||||||||||||
(in thousands) | ||||||||||||
(Unaudited) | ||||||||||||
Three Months Ended | ||||||||||||
June 30, 2019 | March 31, 2019 | June 30, 2018 | ||||||||||
Net income (loss) | $ | 5,097 | $ | (3,788 | ) | $ | (6,855 | ) | ||||
Interest expense, net | 1,228 | 1,607 | 1,410 | |||||||||
Depreciation, depletion and amortization | 2,369 | 3,098 | 3,393 | |||||||||
Accretion of discount on asset retirement obligations | 417 | 328 | 191 | |||||||||
Impairment of proved oil and natural gas properties | 204 | — | 959 | |||||||||
Dry holes and abandonments of unproved properties | — | — | 97 | |||||||||
(Gain) loss on derivatives, net | (3,396 | ) | 12,198 | 9,500 | ||||||||
Cash settlements (paid) received for matured derivatives | (729 | ) | 143 | (2,181 | ) | |||||||
Non-cash equity-based compensation | 122 | 334 | 128 | |||||||||
Gain on sales of oil and natural gas properties, net | (223 | ) | (9,469 | ) | (12 | ) | ||||||
Adjusted EBITDA | $ | 5,089 | $ | 4,451 | $ | 6,630 |
INVESTOR RELATIONS CONTACT
IR@midcon-energy.com
(918) 743-7575
Source: Mid-Con Energy Partners, LP