Quarterly / Earnings Reports | Capital Markets | Private Equity Activity
Midstates' MissLime, Wilcox Ops Lift Q2 Production 21%
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Midstates Petroleum Company Inc. has reported its financial and operating results for the three months ended June 30, 2013.
Key points include:
- Second quarter 2013 results reflect one month of operating results from the $620 million acquisition of Anadarko Basin properties in Texas and Oklahoma from Panther Energy Company, LLC.
- In conjunction with the acquisition, the Company issued $700 million of 9.25% senior unsecured notes due 2021 and amended its revolving credit facility to increase the borrowing base to $425 million.
- Average daily production for the second quarter 2013 rose 21% to 19,634 net barrels of oil equivalent (Boe) per day from 16,208 net Boe per day in the first quarter of 2013.
- After assuming operations of the Panther Acquisition properties, Midstates was running nine rigs at the end of the quarter and spud 28 wells during the quarter. The Company continues to see improvements in efficiency and costs to drill and complete wells.
- The Company recently brought three new successful horizontal wells online in its Louisiana Wilcox program, two in the North Cowards Gully field and one in the South Bearhead Creek field.
- Adjusted EBITDA, excluding the $11.5 million of acquisition and transaction costs related to the Panther Acquisition, totaled $64.9 million compared to $56.5 million for the first quarter of 2013.
- Adjusted Net Income (Loss), which excludes, among other items, acquisition and transaction costs related to the Panther Acquisition, was a loss of $4.2 million, or a $0.06 loss per share.
John Crum, Chairman, President and CEO, commented, "The second quarter of 2013 was an extremely busy quarter for us. We closed the Panther Acquisition on May 31st as planned and also completed our $700 million senior notes offering. We assumed operations of the new assets and accelerated our integration process. We look forward to working with the Panther team as we begin implementing our strategy."
"Our second quarter financial and operational results reflect the production growth achieved from volumes added from one month of the new Panther assets as well as our Mississippian drilling program, which continues to meet all of our expectations."
Individual updates for the companies operational areas can be found below:
- Midstates Spuds 21 MissLime Wells; Maintains Five Rig Program
- Midstates Details Gulf Coast Wilcox Results, Future Investment
Three Months Ended June 30, 2013 Financial Results
Adjusted EBITDA totaled $53.4 million in the second quarter of 2013, which was reduced by $11.5 million of acquisition and transaction costs related to the Panther Acquisition, compared to $32.8 million in the second quarter of 2012 and $56.5 million for the first quarter of 2013.
Net income of $3.3 million for the second quarter of 2013 compares to a net loss of $112.4 million for the second quarter of 2012 and a net loss of $7.9 million in the first quarter of 2013. Net income for the second quarter of 2013 includes unrealized gains on derivatives of $23.5 million as well as a non-cash tax expense of $2.0 million. The net loss for the second quarter of 2012 included a $149.5 million non-cash deferred tax charge associated with the Company’s IPO corporate reorganization, as well as unrealized gains on derivatives of $53.3 million. The first quarter 2013 loss included unrealized losses on derivatives of $15.1 million and a non-cash tax benefit of $5.0 million.
Adjusted Net Income (Loss), which excludes acquisition and transaction costs and unrealized gains on derivatives and the related tax impact totaled a loss of $4.2 million for the second quarter of 2013, or $0.06 loss per share.
Production during the second quarter of 2013 increased to 19,634 Boe per day compared to 7,904 Boe per day during the second quarter of 2012, and 16,208 Boe per day in the first quarter of 2013. Second quarter 2013 production from the Company’s Mid-Continent properties (including one month of production from the Panther Acquisition) averaged 13,094 Boe per day while Gulf Coast properties contributed the balance of 6,540 Boe per day. The Panther Acquisition properties contributed roughly 14%, or 2,668 Boe per day, comprised of 48% oil and 21% natural gas liquids (“NGLs”). For the total Company, oil volumes comprised 45% of total production, NGLs 17%, and natural gas 38% on a Boe basis.
In the second quarter of 2013, Midstates' average realized price per barrel of oil, before realized commodity derivatives, was $97.54 ($94.86 with realized derivatives) while its average realized price for NGL sales, before realized derivatives, was $35.34 per barrel ($37.41 with realized derivatives). Natural gas averaged $3.55 per thousand cubic feet, before realized derivatives ($3.65 with realized derivatives). Detailed comparisons of commodity prices by period and region are included in the tables below.
Oil, NGL and natural gas sales revenues increased by $48.8 million to $103.1 million during the second quarter of 2013 as compared to $54.3 million for the second quarter of 2012, and by $12.4 million, or 14%, compared to $90.7 million in the first quarter of 2013. The realized loss on derivatives for the second quarter of 2013 was $1.1 million compared to realized losses of $5.2 million for the second quarter of 2012 and $5.0 million for the first quarter of 2013.
Three Months Ended June 30, 2013 Costs and Expenses
Lease operating and workover expenses of $17.6 million ($9.83 per Boe), increased $3.7 million ($0.32 per Boe) from the first quarter of 2013. The increase per Boe was primarily the result of higher salt water disposal and surface maintenance costs in the Gulf Coast region, and higher electricity costs and workovers in the Mississippian Lime properties. The Company continues to implement initiatives that are reducing these costs by expanding salt water disposal capacity in the Gulf Coast region, and in the Mississippian Lime, switching from more costly diesel fired electricity generators to natural gas generators for use in areas where the local electrical grid is unstable or becomes taxed.
Severance and ad valorem taxes as a percentage of oil, NGL and natural gas sales revenue (before derivatives) were 6.4% for the second quarter of 2013 as compared to 6.6% for the first quarter of 2013.
Depreciation, depletion and amortization expense (DD&A) totaled $52.8 million ($29.56 per Boe), an increase of $10.8 million as compared to $42.0 million ($28.77 per Boe) in the first quarter of 2013. The increase in total DD&A for the period is related to the increase in production quarter over quarter.
General and administrative expenses for the second quarter of 2013 of $15.3 million ($8.55 per Boe) includes one month of expenses related to the Panther Acquisition transition services agreement. First quarter 2013 general and administrative expenses totaled $11.0 million. For the second quarter 2013, acquisition and transaction costs related to the Panther Acquisition were $11.5 million ($6.43 per Boe) and represented bridge financing fees, due diligence costs, and legal fees. Second quarter 2013 and first quarter 2013 general and administrative expenses included non-cash share-based compensation expense of $1.8 million ($0.99 per Boe) and $1.2 million ($0.85 per Boe), respectively.
Total Cash Operating Expenses (excluding the impact of $11.5 million of acquisition and transaction costs) were $21.07 per Boe as compared to $20.29 per Boe in the first quarter of 2013.
Total interest expense (after amounts capitalized) was $16.6 million for the second quarter of 2013 as compared to $10.9 million in the first quarter of 2013. The Company capitalized $7.9 million in interest to unproved properties during the second quarter of 2013 as compared to $7.1 million in the first quarter of 2013.
The Company recorded income tax expense during the quarter of $2.0 million as compared to an income tax benefit of $5.0 million in the first quarter of 2013. The Company does not expect to have a cash income tax liability for the foreseeable future.
Liquidity and Capital Investment
On June 30, 2013, Midstates’ liquidity was $216 million, consisting of $204 million of available borrowing capacity under the Company’s revolving credit facility (which consists of a current borrowing base of $425 million) and $12 million of cash and cash equivalents.
On May 31, 2013, the Company closed a private issuance of $700 million in aggregate principal amount of 9.25% Senior Notes which mature in 2021. The proceeds from the Notes offering of approximately $683 million (net of the initial purchasers’ discount) were used to fund the Panther Acquisition, to repay a portion of the outstanding borrowings under the Company’s revolving credit facility, for general corporate purposes and to pay expenses related to the Panther Acquisition, the Notes offering and the Company’s entry into an amendment to its revolving credit facility. Also on May 31, 2013, in connection with the Panther Acquisition, the Company’s revolving credit facility was amended to increase the borrowing base (subject to redetermination in late September 2013) to $425 million and extend the maturity date to 2018.
Excluding the Panther Acquisition and capitalized interest, the Company invested $141.5 million during the second quarter of 2013, of which $58.0 million was spent in the Gulf Coast region and $82.5 million was spent in the Mid-Continent region ($76.8 million in the Mississippian Lime and $5.7 million in the Anadarko Properties). Excluding the previously mentioned items, of the $267.3 million spent during the six months ended June 30, 2013, $147.7 million was spent in the Gulf Coast region and $118.2 million was spent in the Mid-Continent region.