Mid-Con Energy Partners, LP Announces Third Quarter 2019 Operating and Financial Results

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TULSA, Oct. 30, 2019 (GLOBE NEWSWIRE) -- Mid-Con Energy Partners, LP MCEP ("Mid-Con Energy" or the "Partnership") announced today its operating and financial results for third quarter 2019.

"We significantly increased our development efforts during the third quarter of 2019," said President and Chief Executive Officer, Jeff Olmstead. "The capital spent was primarily focused on de-risking our long-term development opportunities in Oklahoma and Wyoming, as well as injection progress at our Pine Tree unit in Wyoming. We drilled and cored two wells in some of our recently acquired assets in Oklahoma that signal the opportunity for new waterfloods in those properties. Operationally, we were able to keep production largely flat from the previous quarter while focusing on de-risking development opportunities. Expenses were higher than forecasted due to some unexpected costs that we believe to be one-time in nature. Going forward, we expect to continue reducing debt, while focusing on increasing production and reserves through organic development opportunities, all out of cash flow from operations."

HIGHLIGHTS AND RECENT DEVELOPMENTS – Quarter ended September 30, 2019

  • Net income was $6.0 million for the third quarter of 2019.
  • Generated positive cash flows from operating activities for the third quarter of 2019 of $5.9 million.
  • Continued to reduce outstanding borrowings on our revolving credit facility by $1.0 million during third quarter 2019.
  • Unitization of our Wyoming waterflood project was formally approved in the third quarter of 2019. First injection was achieved in the second quarter of 2019 and expansion of the waterflood continued in the third quarter with additional wells being converted to injection and activation planned for the fourth quarter.
  • In the third quarter of 2019, the Partnership: drilled two wells in two fields in Oklahoma; returned 40 wells to production in Oklahoma (27 of these wells were acquired in the second quarter of 2019); executed five re-stimulations and returned five wells to active water injection in our Wyoming assets. Results of our completed third quarter capital 2019 projects are currently being evaluated for the purpose of high grading and further refining our future capital plans.

FINANCIAL SUMMARY

Production for third quarter 2019 averaged 3,543 Boe/d, which was comparable to 3,538 Boe/d in the second quarter of 2019. Commodity pricing decreased during the third quarter 2019 as the average realized oil price after derivatives was $52.05 versus $55.20 per barrel in second quarter 2019.

Lease operating expenses ("LOE") were $8.3 million ($25.44 per Boe) compared to $7.6 million ($23.56 per Boe) in the second quarter of 2019. The majority of the increase was due to the recently acquired properties in Oklahoma and is expected to be non-recurring as it relates to assimilating those properties in the Partnership's portfolio.

The Partnership spent $4.3 million on capital expenditures during the third quarter of 2019. The increased capital spend was related to drilling two new wells in central Oklahoma, re-completion programs in House Creek and Worland, both located in Wyoming, continued progress on the Pine Tree waterflood project in Wyoming and returning 40 wells to production status in Northeast Oklahoma. The capital spend from most of these projects will continue into fourth quarter 2019.

The decrease in oil and natural gas revenues and the increase in LOE lowered third quarter Adjusted EBITDA(1) to $4.4 million from $5.1 million in the second quarter of 2019. During the third quarter, the Partnership continued to lower debt by $1.0 million to $65.0 million outstanding as of September 30, 2019. As of October 25, 2019, debt outstanding was $67.0 million.

(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.

HEDGING SUMMARY

Mid-Con Energy enters into various commodity derivative contracts intended to achieve more predictable cash flows by reducing the Partnership's exposure to short-term fluctuations in oil prices. We believe this risk management strategy will serve to secure a portion of our revenues and, by retaining some opportunity to participate in upward price movements, may also enable us to realize higher revenues during periods when prices rise.

As of September 30, 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:

      Weighted  Weighted  Weighted      
   Differential  Average Fixed  Average Floor  Average  Total Bbls   
Period Covered  Fixed Price  Price  Price  Ceiling Price  Hedged/day  Index
Swaps - 2019  $  $56.05  $  $  1,664  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
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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 October 30, 2019 FY 2019
Net production (Boe/d)(1) 3,500 - 3,600
Lease operating expenses per Boe $22.00 - $24.00
Production and ad valorem taxes (% of total revenue) 8.00% - 9.00%
Estimated capital expenditures $11.0 MM
(1) Production volumes in Boe equivalents calculated at a rate of six Mcf per Bbl.

THIRD QUARTER 2019 CONFERENCE CALL

As announced on October 24, 2019, Mid-Con Energy's management will host a conference call on Thursday, October 31, 2019, at 9:00 a.m. ET. Interested parties are invited to participate via telephone by dialing 1-877-847-5946 (Conference ID: 6689305) 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 Thursday, November 7, 2019, by dialing 1-855-859-2056 (Conference ID: 6689305). 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 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 primarily in Oklahoma and Wyoming. For more information, please visit Mid-Con Energy's website at www.midconenergypartners.com.

FORWARD-LOOKING STATEMENTS

This press release includes "forward-looking statements" — that is, statements related to future, not past, events within meaning of the federal securities laws. Forward-looking statements are based on current expectations and include any statement that does not directly relate to a current or historical fact. In this context, forward-looking statements often address expected future business and financial performance, and often contain words such as "anticipate," "believe," "estimate," "intend," "expect," "plan," "project," "should," "goal," "forecast," "guidance," "could," "may," "continue," "might," "potential," "scheduled," "pursue," "target," "will" and the negative of such terms or other comparable terminology. These forward-looking statements involve certain risks and uncertainties and ultimately may not prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements 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 SEC.

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, 2018, and in other documents and reports we file from time to time with the SEC.

Mid-Con Energy Partners, LP and subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except number of units) 
(Unaudited) 
   
 September 30, 2019  December 31, 2018 
ASSETS       
Current assets       
Cash and cash equivalents$467  $467 
Accounts receivable 5,243   4,194 
Derivative financial instruments 2,133   5,666 
Prepaid expenses 237   118 
Assets held for sale 430   430 
Total current assets 8,510   10,875 
Property and equipment       
Oil and natural gas properties, successful efforts method       
Proved properties 261,411   379,441 
Unproved properties 3,563   2,928 
Other property and equipment 1,360   427 
Accumulated depletion, depreciation, amortization and impairment (74,426)  (175,948)
Total property and equipment, net 191,908   206,848 
Derivative financial instruments 3,630   2,418 
Other assets 995   1,563 
Total assets$205,043  $221,704 
        
LIABILITIES, CONVERTIBLE PREFERRED UNITS AND EQUITY       
Current liabilities       
Accounts payable       
Trade$187  $141 
Related parties 5,678   3,732 
Accrued liabilities 449   2,024 
Other current liabilities 422    
Total current liabilities 6,736   5,897 
Long-term debt 65,000   93,000 
Other long-term liabilities 567   47 
Asset retirement obligations 30,534   26,001 
Commitments and contingencies       
Class A convertible preferred units - 11,627,906 issued and outstanding, respectively 22,642   21,715 
Class B convertible preferred units - 9,803,921 issued and outstanding, respectively 14,780   14,635 
Equity, per accompanying statements       
General partner (702)  (786)
Limited partners - 30,824,291 and 30,436,124 units issued and outstanding, respectively 65,486   61,195 
Total equity 64,784   60,409 
Total liabilities, convertible preferred units and equity$205,043  $221,704 
        


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, 
 2019  2018  2019  2018 
Revenues               
Oil sales$15,468  $18,765  $46,854  $49,240 
Natural gas sales 283   380   930   812 
Other operating revenues 271   320   983   320 
Gain (loss) on derivatives, net 5,730   (6,358)  (3,072)  (19,240)
Total revenues 21,752   13,107   45,695   31,132 
Operating costs and expenses               
Lease operating expenses 8,293   6,246   22,710   15,895 
Production and ad valorem taxes 1,333   1,565   4,084   3,803 
Other operating expenses 536   288   1,426   288 
Impairment of proved oil and natural gas properties 180      384   9,710 
Depreciation, depletion and amortization 2,559   4,812   8,026   11,646 
Dry holes and abandonments of unproved properties    10      195 
Accretion of discount on asset retirement obligations 423   404   1,168   748 
General and administrative 1,404   1,494   6,414   4,746 
Total operating costs and expenses 14,728   14,819   44,212   47,031 
(Loss) gain on sales of oil and natural gas properties, net    (1)  9,692   (389)
Income (loss) from operations 7,024   (1,713)  11,175   (16,288)
Other (expense) income               
Interest income 1   1   10   3 
Interest expense (1,175)  (1,620)  (4,019)  (4,369)
Other income 4   20   53   20 
Gain on sale of other assets 123      123    
(Loss) gain on settlements of asset retirement obligations (16)  (37)  (72)  12 
Total other expense (1,063)  (1,636)  (3,905)  (4,334)
Net income (loss) 5,961   (3,349)  7,270   (20,622)
Less: Distributions to preferred unitholders 1,166   1,148   3,472   3,303 
Less: General partner's interest in net income (loss) 69   (39)  84   (243)
Limited partners' interest in net income (loss)$4,726  $(4,458) $3,714  $(23,682)
Limited partners' interest in net income (loss) per unit               
Basic$0.15  $(0.14) $0.12  $(0.78)
Diluted$0.09  $(0.14) $0.07  $(0.78)
                
Weighted average limited partner units outstanding               
Limited partner units (basic) 30,811   30,392   30,743   30,292 
Limited partner units (diluted) 53,189   30,392   53,142   30,292 
                


Mid-Con Energy Partners, LP and subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands) 
(Unaudited) 
  
 Nine Months Ended 
 September 30, 
 2019  2018 
Cash flows from operating activities       
Net income (loss)$7,270  $(20,622)
Adjustments to reconcile net income (loss) to net cash provided by operating activities       
Depreciation, depletion and amortization 8,026   11,646 
Debt issuance costs amortization 533   503 
Accretion of discount on asset retirement obligations 1,168   748 
Impairment of proved oil and natural gas properties 384   9,710 
Dry holes and abandonments of unproved properties    195 
Loss (gain) on settlements of asset retirement obligations 72   (12)
Cash paid for settlements of asset retirement obligations (96)  (102)
Mark to market on derivatives       
Loss on derivatives, net 3,072   19,240 
Cash settlements paid for matured derivatives, net (750)  (5,988)
Cash premiums paid for derivatives    (200)
(Gain) loss on sales of oil and natural gas properties (9,692)  389 
Gain on sale of other assets (123)   
Non-cash equity-based compensation 577   670 
Changes in operating assets and liabilities       
Accounts receivable (1,246)  (3,109)
Prepaid expenses and other assets (84)  (76)
Accounts payable - trade and accrued liabilities (226)  689 
Accounts payable - related parties 1,537   2,452 
Net cash provided by operating activities 10,422   16,133 
Cash flows from investing activities       
Acquisitions of oil and natural gas properties (3,296)  (21,626)
Additions to oil and natural gas properties (9,363)  (6,072)
Proceeds from sales of oil and natural gas properties 32,514   1,163 
Proceeds from sale of other assets 123    
Net cash provided by (used in) investing activities 19,978   (26,535)
Cash flows from financing activities       
Proceeds from line of credit 8,000   20,000 
Payments on line of credit (36,000)  (23,000)
Debt issuance costs    (651)
Proceeds from sale of Class B convertible preferred units, net of offering costs    14,847 
Distributions to Class A convertible preferred units (1,500)  (2,000)
Distributions to Class B convertible preferred units (900)  (500)
Net cash (used in) provided by financing activities (30,400)  8,696 
Net decrease in cash and cash equivalents    (1,706)
Beginning cash and cash equivalents 467   1,832 
Ending cash and cash equivalents$467  $126 
        


Mid-Con Energy Partners, LP and subsidiaries
Production, Prices, and Unit Costs per Boe
(Unaudited)
 
 Three Months Ended     Nine Months Ended   
 September 30,     September 30,   
          %            % 
 2019  2018  Change  Change  2019  2018  Change  Change
Production Volumes                            
Oil (MBbls) 294   309   (15) (5%)   877   798   79  10%
Natural gas (MMcf) 193   139   54  39%   498   317   181  57%
Total (MBoe) 326   332   (6) (2%)   960   851   109  13%
Average daily net production (Boe/d) 3,543   3,609   (66) (2%)   3,516   3,117   399  13%
                             
Average sales price                            
Oil (per Bbl)                            
Sales price$52.61  $60.73  $(8.12) (13%)  $53.43  $61.7  $(8.27) (13%)
Effect of net settlements on matured derivative instruments$(0.56) $(8.69) $8.13  94%  $(0.86) $(7.75) $6.89  89%
Realized oil price after derivatives$52.05  $52.04  $0.01  0%  $52.57  $53.95  $(1.38) (3%)
Natural gas (per Mcf)$1.47  $2.73  $(1.26) (46%)  $1.87  $2.56  $(0.69) (27%)
                             
Average unit costs per Boe                            
Lease operating expenses$25.44  $18.81  $6.63  35%  $23.66  $18.68  $4.98  27%
Production and ad valorem taxes$4.09  $4.71  $(0.62) (13%)  $4.25  $4.47  $(0.22) (5%)
Depreciation, depletion and amortization$7.85  $14.49  $(6.64) (46%)  $8.36  $13.69  $(5.33) (39%)
General and administrative expenses$4.31  $4.5  $(0.19) (4%)  $6.68  $5.58  $1.1  20%

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 sale of other assets;
  • (Gain) loss on sales of oil and natural gas properties, net; and
  • Dry holes and abandonments of unproved properties.
Mid-Con Energy Partners, LP and subsidiaries
Reconciliation of Net Income (Loss) to Adjusted EBITDA
(in thousands) 
(Unaudited) 
            
 Three Months Ended 
 September 30, 2019  June 30, 2019  September 30, 2018 
Net income (loss)$5,961  $5,097  $(3,349)
Interest expense, net 1,174   1,228   1,619 
Depreciation, depletion and amortization 2,559   2,369   4,812 
Accretion of discount on asset retirement obligations 423   417   404 
Impairment of proved oil and natural gas properties 180   204    
Dry holes and abandonments of unproved properties       10 
(Gain) loss on derivatives, net (5,730)  (3,396)  6,358 
Cash settlements paid for matured derivatives, net (164)  (729)  (2,483)
Cash premiums paid for derivatives       (200)
Non-cash equity-based compensation 121   122   303 
Gain on sales of other assets (123)      
(Gain) loss on sales of oil and natural gas properties, net    (223)  1 
Adjusted EBITDA$4,401  $5,089  $7,475 
 

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

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