Quarterly / Earnings Reports | Debt | Second Quarter (2Q) Update | Financial Results | Capital Markets

Mid-Con's Borrowing Base Goes Up, Production Down 12%

Share Print Bookmark    |    Tuesday,August 02,2016

Mid-Con Energy Partners, LP announces operating and financial results for the second quarter ended June 30, 2016.  

Key Points:

• Increase conforming borrowing base to $140.0 million
• Production averaged 4,077 Boe/d, a decrease of 4.9% sequentially and a decrease of 11.7% year-over-year.

Subsequent Events:

• Closed previously announced Hugoton divestiture on July 28, 2016 for contract price of $18.0 million, subject to post-closing adjustments.
• Executed definitive agreement on July 28, 2016 to acquire oil and natural gas properties in Nolan County, Texas for approximately $19.5 million, subject to post-closing adjustments.
• Received unanimous lender support to increase conforming borrowing base to $140.0 million, subject to closing of the Permian acquisition and execution of Amendment No. 10 to the credit agreement.

Hugoton Divestiture

On July 28, 2016, Mid-Con Energy closed its previously announced sale of oil and natural gas assets within the Hugoton area to PO&G Panhandle, LP, an affiliate of P.O.&G. Resources, LP, at a contract price of $18.0 million, subject to post-closing purchase price adjustments.  Net divestiture proceeds were used to reduce borrowings outstanding under the Partnership's revolving credit facility.

Permian Bolt-On Acquisition

On August 1, 2016, Mid-Con Energy, through its wholly owned subsidiary, Mid-Con Energy Properties, LLC announced that it entered into a definitive agreement to acquire net proved oil and natural gas reserves estimated at 1.5 million barrels of oil equivalent ("MMBoe")  for an aggregate purchase price of approximately $19.5 million.  The acquisition is subject to customary post-closing adjustments and is expected to close on or before August 12, 2016 with an effective date of June 1, 2016. The acquisition will be funded through our previously announced private financing from investors including affiliates of Bonanza Capital, Investor John Goff, and Swank Capital.

2016 Guidance

Second Quarter 2016 Results

Production - Production for the second quarter of 2016 was 371 MBoe, or 4,077 Boe/d.  On a daily basis, this represents a 4.9% decrease from the first quarter of 2016 and an 11.7% decrease year-over-year.  The decrease in sequential and year-over-year volumes was primarily due to cost saving initiatives that resulted in shutting-in 184 wells during the beginning of 2016 in response to lower commodity prices.  Additionally, sequential variances reflect natural production declines in the Permian core area and election to defer workover expenses for select marginal producing wells.

Price Realizations - Oil and natural gas sales were $14.8 million in the second quarter of 2016, or $39.83/Boe of production.  On a Boe basis, this represents a 37.9% increase from the first quarter of 2016 and a 22.6% decrease year-over-year.  Cash settlements from matured derivatives, inclusive of net premiums, were $2.7 million in the second quarter of 2016 or $7.36/Boe.  Cash settlements from matured derivatives, inclusive of net premiums, for the first quarter of 2016 and the second quarter of 2015 were $17.85/Boe and $5.19/Boe, respectively.

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 the price of oil and natural gas.  We believe this risk management strategy will serve to secure a baseline 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.

Pursuant to Amendment No. 9 to the credit agreement, the Partnership completed a hedge restructuring on July 1, 2016, which resulted in the early monetization of existing commodity derivative contracts covering production for the months of July 2016 to September 2016.  The Partnership replaced volumes restructured with at-the-market swap contracts in equal amounts.  Net restructuring proceeds were used to reduce borrowings outstanding under the Partnership's revolving credit facility.

As of August 1, 2016, the following unaudited table reflects volumes of Mid-Con Energy's production hedged by commodity derivative contracts, with the corresponding prices at which the production is hedged: