Quarterly / Earnings Reports | Second Quarter (2Q) Update

Mid-Con Energy Talks Q2 Financials, Production

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Mid-Con Energy Partners, LP detailed its operating and financial results for the second quarter 2019.

President and Chief Executive Officer Jeff Olmstead said: "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. Production increased from the previous quarter in spite of the historic floods in northern Oklahoma. Lease operating expenses came in below expectations at our newly acquired Oklahoma assets. Leverage declined, despite increased professional and other fees related to transaction activity." Olmstead continued, "Development activity increased as we began injection in our Pine Tree field in the Powder River Basin, with greater than expected injection rates. This field provides a significant growth prospect over the next few years. We also tested several re-complete programs that yielded positive results which provide additional growth potential in the second half of 2019. The results of the second quarter set us up for additional development opportunities, continued cash flow growth and reduced leverage for the second half of 2019."

Highlights & 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 ended June 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.

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.

Financials

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 $55.20 per barrel from $50.47 per barrel in the first quarter of 2019. Revenue was positively impacted by both the increase in production and realized oil prices.

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 $5.1 million from $4.5 million in the first quarter 2019.

Hedging

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 June 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: