Mid-Con Energy Partners, LP Announces Third Quarter 2012 Results
DALLAS, Nov 6, 2012 (Menafn - GlobeNewswire via COMTEX) --Mid-Con Energy Partners, LP MCEP ("Mid-Con Energy" or the "Partnership") announced today its operating and financial results for the third quarter ended September 30, 2012.
Mid-Con Energy highlighted the following achievements for the third quarter of 2012 and significant events that have occurred since quarter end:
--Increased average production 48% to 1,913 barrels of oil equivalent
(Boe) per day in the third quarter of 2012, compared to average
production of 1,293 Boe per day in the third quarter of 2011. This also
represents a 10% increase compared to average production of 1,747 Boe
per day in the second quarter of 2012.
--Increased Adjusted EBITDA 79% to 11.8 million in the third quarter of
2012 compared to 6.6 million in the third quarter of 2011. This also
represents a 10% increase compared to 10.7 million second quarter of
2012.
--On October 15, 2012, Mid-Con Energy's Board of Directors of its general
partner declared a 0.01 per unit increase in the cash distribution to
0.485 per unit for the third quarter of 2012, or 1.94 per unit on an
annualized basis.
--On October 22, 2012, Mid-Con Energy successfully completed its public
offering of 1,000,000 primary units representing limited partner
interests at a price to the public of 21.20 per unit. Net proceeds of
approximately 20.4 million, after underwriting discounts but before
offering expenses, were used to reduce borrowings outstanding under the
credit facility.
--In October and November of 2012, Mid-Con Energy completed two
acquisitions of oil properties and additional working interests in its
Hugoton Basin core area for a combined price of approximately 32.6
million, subject to customary post-closing adjustments.
The following table reflects selected operating and financial results for the third quarter of 2012, compared to the third quarter of 2011 and second quarter of 2012. Mid-Con Energy's consolidated financial statements can be found in supplemental tables of this press release.
Three Months Ended
September 30,June 30,
------------------------------
201220112012
----------------------------
( in thousands)
Production:
Oil (MBbl)171111154
Natural gas (MMcf)314728
----------------------------
Total (MBoe) (1)176119159
============================
Average net daily production
(Boe/d) (1)1,9131,2931,747
Revenues, excluding realized
commodity derivatives 15,048 9,775 13,844
Revenues, including realized
commodity derivatives 16,259 9,691 14,747
Net income (loss) (1,137) 11,708 22,428
Adjusted EBITDA (2) 11,830 6,641 10,726
Distributable Cash Flow (2) 10,728n/a 9,327
(1) Production volumes in Boe equivalents calculated at a rate of
six Mcf per Bbl.
(2) Non-GAAP financial measures. Please refer to the related
disclosure and reconciliation of net income to Adjusted EBITDA
and Distributable Cash Flow included in this press release.
"The Partnership remains focused on the continual growth of its underlying asset base as evidenced by our year-over-year and quarter-over-quarter gains in production," noted Craig George, Executive Chairman of the Board. "Additionally, recent bolt-on acquisitions within our Hugoton Basin core area demonstrate another dimension of our ability to grow through waterflood strategy. We set out to achieve certain goals during our December 2011 initial public offering -- and we are confident that third quarter results, increasing the cash distribution to 0.485 per unit and increasing liquidity through an orderly reduction of Yorktown's ownership provided by the public offering are collectively steps in the right direction."
Third Quarter 2012 Results
Production volumes for the third quarter of 2012 were 176 thousand barrels of oil equivalent (MBoe), or approximately 1,913 Boe per day on average. In comparison, Mid-Con Energy's production volumes for the third quarter of 2011 were 119 MBoe, or approximately 1,293 Boe per day on average, and production volumes for the second quarter of 2012 were 159 MBoe, or approximately 1,747 Boe per day on average. Favorable growth in production for the third quarter of 2012 was the result of (i) continued waterflood response to increased injection in each of the Partnership's core areas, (ii) increased drilling activity and development programs with substantial growth capital expenditure components and (iii) the realization of acquired production from Mid-Con Energy's June 2012 purchase of properties and additional working interests in select Southern and Northeastern Oklahoma waterflood units.
Oil and natural gas sales, excluding the effect of realized commodity derivatives, were approximately 15.0 million in the third quarter of 2012, representing a 5.2 million increase from 9.8 million in the third quarter of 2011.
Cash settlements received for realized commodity derivatives during the third quarter of 2012 totaled 1.2 million compared to 0.1 million paid during the third quarter of 2011.
Lease operating expenses were 2.6 million, or 14.97 per Boe, in the third quarter of 2012, compared to 2.4 million, or 20.18 per Boe, in the third quarter of 2011. An increase in the total number of producing wells from our drilling programs resulted in higher lease operating expenses in the aggregate; however, the added production received from these new wells led to lower lease operating expenses per Boe produced.
Production taxes were 0.6 million in the third quarter of 2012 for an effective tax rate of approximately 3.9%, compared to 0.5 million in the third quarter of 2011 for an effective tax rate of approximately 4.7%. A portion of Mid-Con Energy's wells in Oklahoma continue to receive a reduced production tax rate due to the state's Enhanced Recovery Project Gross Production Tax Exemption.
General and administrative expenses were 3.7 million in the third quarter of 2012, which included 2.5 million of non-cash equity-based compensation expense related to the Partnership's long-term incentive program. Total general and administrative expenses for the third quarter of 2011 were 1.9 million and included 1.7 million of non-cash equity-based compensation expense related to the issuance of equity interests in the Partnership's predecessor prior to the initial public offering. Higher personnel costs from additional staff and professional fees necessary to comply with public reporting requirements also contributed to the increase in general and administrative expenses for the third quarter of 2012 compared to the prior year period.
Adjusted EBITDA for the third quarter of 2012 was 11.8 million, compared to 6.6 million in the third quarter of 2011. Distributable Cash Flow for the third quarter of 2012 was 10.7 million after subtracting 0.3 million in cash interest expense and 0.8 million in estimated maintenance capital expenditures.
Mid-Con Energy reported a net loss of (1.1) million, or (0.06) per limited partner unit, for the third quarter of 2012. This included 6.1 million of unrealized losses from commodity derivatives and 1.3 million in non-cash impairment charges of oil and gas properties. Net income during the third quarter of 2011 was 11.7 million, or 0.65 per limited partner unit, and included 8.4 million of unrealized gains from commodity derivatives.
Increased Cash Distribution
As announced on October 15, 2012, the Board of Directors of Mid-Con Energy's general partner declared a cash distribution of 0.485 per unit for the quarter ended September 30, 2012. This represents a 0.01 per unit increase compared with the preceding quarter, and results in an annualized distribution of 1.94 per unit. The distribution will be payable on November 14, 2012 to all unitholders of record at the close of business on November 7, 2012.
Additionally, management is targeting annual distribution growth in fiscal year 2013 of approximately 6% to 8% per unit above the current distribution rate of 0.485 per unit, while maintaining sufficient distribution coverage levels. This targeted increase is supported by estimated organic growth from the Partnership's existing asset base and incremental production acquired in recent transactions.
Public Offering of Common Units
On October 22, 2012, Mid-Con Energy closed its public offering of 4,600,000 units representing limited partner interests at a price to the public of 21.20 per unit. 1,000,000 primary units were sold by Mid-Con Energy and 3,600,000 secondary units were sold by Yorktown Energy Partners VI, L.P., Yorktown Energy Partners VII, L.P. and Yorktown Energy Partners VIII, L.P. (collectively "Yorktown"), which included 600,000 units related to the underwriters' full exercise of the over-allotment option.
Mid-Con Energy used net proceeds of approximately 20.4 million from its 1,000,000 primary unit offering, after deducting underwriting discounts but before offering expenses, to repay borrowings outstanding under its credit facility. Mid-Con Energy did not receive any proceeds from the 3,600,000 secondary units sold by Yorktown.
Prior to the offering, Yorktown owned an approximate 48.5% limited partner interest in Mid-Con Energy. Following the offering, Yorktown owns an approximate 26.9% limited partner interest in the Partnership.
Hugoton Basin Acquisitions
On October 15, 2012, Mid-Con Energy announced it had entered into two separate agreements to acquire oil properties and additional working interests in its Hugoton Basin core area for a combined purchase price of 24.1 million. Subsequently, Mid-Con Energy secured additional working interests in the Clawson Ranch acquisition, resulting in an updated combined purchase price of approximately 32.6 million, subject to post-closing adjustments.
War Party I and II Working Interests (3.7 million)
On October 22, 2012, Mid-Con Energy completed the acquisition of additional working interests in its existing War Party I and II Units, effective as of April 1, 2012 for approximately 3.7 million, subject to post-closing adjustments. As a result of the acquisition, the Partnership now owns 100% and 99% of the working interests in its War Party I and II Units, respectively. The acquired interests include current net production of approximately 83 Boe per day (44,578 per flowing Boe), estimated proved reserves of 0.5 MMBoe (7.40 per Boe of proved reserves) categorized as 85% proved developed producing and 99% oil on a Boe basis, a reserve-to-production ratio of approximately 17 years and was acquired at an estimated purchase multiple of 2.8x LTM EBITDA.
Clawson Ranch (28.9 million)
On November 2, 2012, Mid-Con Energy completed the acquisition of 100% of the working interests in oil properties, currently under waterflood, in Texas County, Oklahoma for approximately 28.9 million. Previously announced terms of the transaction consisted of 71% of the working interests in the properties for 20.7 million, but the Partnership successfully acquired the remaining 29% of the working interests for approximately 8.2 million, or 28.9 million in the aggregate, subject to customary post-closing adjustments. Clawson Ranch is strategically located approximately 5 miles southeast of the Partnership's War Party I and II Units and is comprised of 14 producing wells, 7 injection wells and 1 water supply well. The acquired properties, updated to reflect 100% of the working interests, include net production of approximately 244 Boe per day (118,443 per flowing Boe), estimated proved reserves of 1.8 MMBoe (16.06 per Boe of proved reserves) categorized as 56% proved developed producing and 99% oil on a Boe basis, a reserve-to-production ratio of approximately 20 years and were acquired at an estimated purchase multiple of 5.0x LTM EBITDA.
The estimated proved reserves for the two acquisitions are based on Mid-Con Energy's preliminary internal evaluation of information provided by the seller, and were estimated using average NYMEX oil and natural gas prices during the preceding 12-month period, determined as an unweighted average of the first-day-of-the-month prices for each month and adjusted for field differentials. Actual reserves and production for these properties may be different in the future.
Hedging Update
Mid-Con Energy enters into various commodity derivative contracts intended to achieve more predictable cash flows and to reduce its exposure to fluctuations in the price of oil. The Partnership's hedging program objective is to protect its ability to make current distributions, and to be better positioned to increase its quarterly distribution over time, while retaining some ability to participate in upward movements in oil prices. Mid-Con Energy uses a phased approach, looking approximately 36 months forward while targeting a higher hedged percentage in the near 12 months of the period.
Supplementing its primary hedging strategy described above, Mid-Con Energy also intends to enter into additional commodity derivative contracts in connection with material increases in its estimated production and at times when management believes market conditions or other circumstances suggest that it is prudent to do so as opposed to entering into commodity derivative contacts at predetermined times or on prescribed terms.
The following table reflects volumes of Mid-Con Energy's production covered by commodity derivative contracts, and the average prices at which the production will be hedged:
Jan-Dec
Oct-Dec 2012Jan-Dec 20132014
----------------------------------
Oil Derivative Contracts:
Swap Contracts:
Volume (Bbls/d)1,2071,2161,315
Weighted Average NYMEX-WTI price per Bbl101.85100.1494.30
Put/Call Option Contracts (Collars):
Volume (Bbls/d)196296--
100.00 --97.67 --
Weighted Average NYMEX-WTI price per Bbl117.00108.08--
% of Estimated Oil Production Hedged - Total
Proved (1)69.9%69.6%57.0%
(1) Based on total proved oil reserves reflected in December 31, 2011 reserve report
audited by Cawley, Gillespie & Associates, Inc.
Liquidity Update
As of September 30, 2012, Mid-Con Energy's liquidity of 41.1 million consisted of 1.1 million in cash and cash equivalents and 40.0 million of available borrowings under its credit facility, which had a borrowing base of 100.0 million at quarter end.
As of November 2, 2012, the Partnership had 70.0 million of total debt outstanding under its credit facility, after giving effect to net proceeds received from the equity offering and borrowings related to the two acquisitions closed in October and November of 2012.
Quarterly Report on Form 10-Q
Certain financial results included in this press release and related footnotes will be available in Mid-Con Energy's September 30, 2012 Quarterly Report on Form 10-Q, which will be filed on or before November 9, 2012.
Earnings Conference Call
Mid-Con Energy's management will host a conference call on Wednesday, November 7, 2012 at 10:00 a.m. ET (9:00 a.m. CT) to discuss operating and financial results. Interested parties are invited to participate via telephone by dialing 1-877-847-5946 (conference id:37747795) 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 telephonic replay of the conference call will be available through November 14, 2012 by dialing 1-855-859-2056 (conference id:37747795). Additionally, a webcast archive will be available at www.midconenergypartners.com.
About Mid-Con Energy Partners, LP
Mid-Con Energy is a Delaware limited partnership formed in July 2011 to own, operate, acquire, exploit and develop producing oil and natural gas properties in North America, with a focus on the Mid-Continent region of the United States. Mid-Con Energy's core areas of operation are located in Southern Oklahoma, Northeastern Oklahoma and parts of Oklahoma and Colorado within the Hugoton Basin.
The Mid-Con Energy Partners, LP logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=11192
Forward-Looking Statements
This press release includes "forward-looking statements" -- that is, statements related to future, not past, events within meaning of the federal securities laws Forward-looking statements are based on current expectations and include any statement that does not directly relate to a current or historical fact. In this context, forward-looking statements often address expected future business and financial performance, and often contain words such as "anticipate," "believe," "estimate," "intend," "expect," "plan," "project," "should," "goal," "forecast," "guidance," "could," "may," "continue," "might," "potential," "scheduled," or "will" or other similar words. These forward-looking statements involve certain risks and uncertainties and ultimately may not prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements. For further discussion of risks and uncertainties, you should refer to Mid-Con Energy's filings with the Securities and Exchange Commission (SEC) available at www.midconenergypartners.com or www.sec.gov. Mid-Con Energy undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this press release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement and our SEC filings.
These forward--looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which may include statements about our:
--business strategies;
--ability to replace the reserves we produce through acquisitions and the
development of our properties;
--oil and natural gas reserves;
--technology;
--realized oil and natural gas prices;
--production volumes;
--lease operating expenses;
--general and administrative expenses;
--future operating results;
--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;
--effectiveness of risk management activities;
--environmental liabilities;
--counterparty credit risk;
--governmental regulation and taxation;
--developments in oil producing and natural gas producing countries; and
--plans, objectives, expectations and intentions.
Mid-Con Energy Partners, LP and
subsidiaries
Consolidated Balance Sheet (Unaudited)
(in thousands)
September
30,
2012
----------
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents 1,057
Accounts receivable:
Oil and gas sales5,459
Other receivables303
Derivative financial
instruments3,872
Prepaids and other129
----------
Total current assets10,820
----------
PROPERTY AND EQUIPMENT, at cost:
Oil and gas properties, successful
efforts method:
Proved properties127,576
Accumulated depletion,
depreciation and
amortization(18,723)
----------
Total property and
equipment, net108,853
----------
DERIVATIVE FINANCIAL
INSTRUMENTS2,299
OTHER ASSETS455
----------
Total assets 122,427
==========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable 5,904
Accrued liabilities869
----------
Total current
liabilities6,773
----------
LONG-TERM DEBT60,000
----------
ASSET RETIREMENT
OBLIGATIONS2,506
----------
EQUITY:
Partnership equity
General partner
interest1,491
Limited partners --
17,932,849 units
outstanding as of
September 30, 201251,657
----------
Total equity53,148
----------
Total liabilities and
equity 122,427
==========
Mid-Con Energy Partners, LP and subsidiaries
Consolidated Statements of Operations (Unaudited)
(in thousands, except per unit data)
Three Months EndedNine Months Ended
September 30,September 30,
2012201120122011
-------------------------------------
Revenues:
Oil sales 14,939 9,459 43,937 25,068
Natural gas sales109316462974
Realized gain (loss) on derivatives,
net1,211(84)1,980(799)
Unrealized gain (loss) on derivatives,
net(6,103)8,3543,6389,400
-------------------------------------
Total Revenues10,15618,04550,01734,643
-------------------------------------
Operating costs and expenses:
Lease operating expenses2,6342,4017,3595,951
Oil and gas production taxes5854601,2981,116
Impairment of proved oil and gas
properties1,255--1,255--
Dry holes and abandonments of unproved
properties------772
Depreciation, depletion and
amortization2,6111,9007,3204,318
Accretion of discount on asset
retirement obligations35239255
General and administrative (includes
non-cash equity-based compensation)3,7141,8608,5832,394
-------------------------------------
Total operating costs and expenses10,8346,64425,90714,606
-------------------------------------
Income (loss) from operations(678)11,40124,11020,037
-------------------------------------
Other income (expense):
Interest income and other2987160
Interest expense(461)(141)(1,164)(378)
Gain on sale of assets--350--1,559
Other revenue and expenses, net------576
-------------------------------------
Total other income (expense)(459)307(1,157)1,917
-------------------------------------
-------------------------------------
Net income (loss) (1,137) 11,708 22,953 21,954
=====================================
Computation of net income (loss) per
limited partner unit:
General partners' interest in net
income (loss) (22) 234 455 439
=====================================
Limited partners' interest in net
income (loss) (1,115) 11,474 22,498 21,515
=====================================
Net income (loss) per limited partner
unit (basic and diluted) (0.06) 0.65 1.26 1.22
Weighted average limited partner units
outstanding:
(basic and diluted)17,93317,64017,79017,640
=====================================
Mid-Con Energy Partners, LP and subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Nine Months Ended
September 30,
20122011
------------------
Cash Flows from Operating Activities:
Net income 22,953 21,954
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization7,3204,318
Debt placement fee amortization81--
Accretion of discount on asset retirement
obligations9255
Impairment of proved oil and gas
properties1,255--
Dry holes and abandonments of unproved
properties--772
Unrealized gain on derivative
instruments, net(3,638)(9,400)
Gain on sale of assets--(1,559)
Equity-based compensation5,1941,671
Changes in operating assets and
liabilities:
Accounts receivable(441)(1,498)
Other receivables(303)--
Other current assets2,300139
Accounts payable and accrued liabilities2,972(1,820)
Revenues payable--42
Advance billings and other--(120)
------------------
Net cash provided by operating
activities37,78514,554
------------------
Cash Flows from Investing Activities:
Additions to oil and gas properties(17,031)(21,370)
Additions to other property and equipment--(679)
Acquisitions of oil and natural gas
properties(16,577)(10,146)
Proceeds from sale of other property and
equipment--1,219
Proceeds from sale of investment in
subsidiary, net of cash sold--2,095
Proceeds from sale of property and
equipment to subsidiary, net of cash sold--4,000
------------------
Net cash used in investing activities(33,608)(24,881)
------------------
Cash Flows from Financing Activities:
Proceeds from line of credit27,00017,850
Payments on line of credit(12,000)(7,900)
Borrowings on note payable--412
Payments on note payable--(84)
Distributions paid(18,348)--
Issuance of common units--13
------------------
Net cash provided by (used in) financing
activities(3,348)10,291
------------------
Net increase (decrease) in cash and cash
equivalents829(36)
Beginning cash and cash equivalents228222
------------------
Ending cash and cash equivalents 1,057 186
==================
Supplemental Cash Flow Information:
------------------
Cash paid for interest 1,014 340
------------------
Non-Cash Investing and Financing
Activities:
------------------
Accrued capital expenditures - oil and gas
properties 785 1,421
------------------
Notes receivable from officers, directors
and employees -- 106
------------------
Deferred gain on sale of property and
equipment to subsidiary -- 3,224
------------------
This press release, 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 management to describe financial performance with external users of Mid-Con Energy's 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, 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:
--Income tax expense (benefit);
--Interest expense;
--Depreciation, depletion and amortization;
--Accretion of discount on asset retirement obligations;
--Unrealized losses on commodity derivative contracts;
--Impairment expenses;
--Dry hole costs and abandonments of unproved properties;
--Equity-based compensation; and
--Loss on sale of assets;
Less:
--Interest income;
--Unrealized gains on commodity derivative contracts; and
--Gain on sale of assets.
Distributable Cash Flow is defined as Adjusted EBITDA less:
--Cash income taxes;
--Cash interest expense; and
--Estimated maintenance capital expenditures.
Reconciliation of Net Income to Adjusted EBITDA and Distributable Cash
Flow
(in thousands)
Nine
Months
Three Months EndedEnded
-----------------------------------------
SeptemberSeptemberSeptember
30,30,June 30,30,
2012201120122012
-------------------------------------
Net income (loss) (1,137) 11,708 22,428 22,953
Interest expense4611413501,164
Depreciation, depletion and
amortization2,6111,9002,3977,320
Accretion of discount on
asset retirement
obligations35233092
Unrealized (gain) loss on
derivatives, net6,103(8,354)(14,514)(3,638)
Impairment expense1,255----1,255
Equity-based compensation2,5041,671385,194
Interest income(2)(98)(3)(7)
Gain on sale of assets--(350)----
-------------------------------------
Adjusted EBITDA 11,830 6,641 10,726 34,333
=====================================
Less:
Cash interest expense 340n/a 333 1,014
Estimated maintenance
capital expenditures762n/a1,0663,167
-------------------------------------
Distributable Cash Flow 10,728n/a 9,327 30,152
=====================================
This news release was distributed by GlobeNewswire, www.globenewswire.com
SOURCE: Mid-Con Energy Partners, LP
(Logo:http://media.primezone.com/cache/17839/int/12064.jpg)
CONTACT: Jeff Olmstead
President and Chief Financial Officer
(972) 479-5980
jolmstead@midcon-energy.com
Matthew Lewis
Associate
(972) 479-5984
mlewis@midcon-energy.com
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