Midstates Petroleum Company, Inc. (“Midstates” or the
“Company”) (NYSE: MPO) today announced its fourth quarter and
full year 2018 results.
Fourth Quarter and Full-Year 2018
Highlights and Recent Key Items
- Reported net income of $49.8 million,
or $1.91 per share, for the full year 2018 and net income of $35.8
million, or $1.38 per share, in the fourth quarter 2018
- Announced year-end 2018 SEC proved
reserves of 72.4 million barrels of oil equivalent (MMBoe) with a
net present value discounted at 10% (PV-10) of approximately $580
million
- Year-end 2018 SEC proved developed
producing (PDP) reserves of 46.5 MMBoe with a PV-10 of
approximately $425 million
- Achieved Mississippian Lime production
of 16,747 barrels of oil equivalent per day (Boepd) for the full
year 2018
- Generated Adjusted EBITDA of $27.8
million in the fourth quarter of 2018, outpacing quarterly
operational capital expenditures by approximately $24.2 million;
full-year 2018 Adjusted EBITDA totaled $116.4 million,
approximately $19.9 million higher than full-year operational
capital expenditures
- Initiated a process pursuing all
strategic and opportunistic transactions that create significant
shareholder value
- Completed workforce reduction in
January 2019 to better align general and administrative costs
(G&A) with current activity levels; reduced Adjusted Cash
G&A expense by $4 million to $5 million annually (excluding
one-time severance costs)
- Successfully executed $50 million
tender offer for outstanding capital stock in February 2019,
returning capital to shareholders
For the fourth quarter of 2018, Midstates reported net income of
$35.8 million, or $1.38 per share, which included the impact of a
$25.4 million gain related to the Company’s commodity derivative
contracts. In the same period in 2017, the Company reported a net
loss of $121.0 million, or ($4.78) per share, including the impact
of a $5.1 million commodity derivative charge, and in the third
quarter of 2018 reported net income of $11.5 million, or $0.44 per
share, including the impact of a $6.6 million commodity derivative
charge. For the full year 2018, Midstates reported net income of
$49.8 million, or $1.91 per share, which included the impact of a
$3.6 million gain related to the Company’s commodity derivative
contracts, compared to a net loss of $85.1 million, or ($3.39) per
share, including the impact of a $3.7 million gain related to the
Company’s commodity derivative contracts, in 2017.
In the fourth quarter of 2018, Midstates generated Adjusted
EBITDA of $27.8 million, excluding advisory fees and costs incurred
for strategic reviews. This compares to $33.9 million for the same
quarter in 2017 and $31.9 million for the third quarter of 2018.
For the full year 2018, Midstates generated Adjusted EBITDA of
$116.4 million, excluding advisory fees and costs incurred for
strategic reviews, compared to $128.2 million, in 2017.
David Sambrooks, President and Chief Executive Officer,
commented, “In 2018 we continued our strong operational results and
strengthened Midstates financially through several notable
accomplishments. Operationally, we optimized base production
through a substantial workover program and have taken actions to
drive down lease operating and overhead expenses to help maximize
margins and grow value. Midstates generated $116.4 million in
Adjusted EBITDA, outpacing our operational capex by $20 million and
we monetized a portion of our portfolio by selling our non-core
Anadarko asset, using the proceeds and free cash flow to pay down
$105 million in debt during 2018. Finally, our year-end 2018
reserve report continues to demonstrate the underlying value of
Midstates.”
Mr. Sambrooks continued, “We remain focused on creating value
for our shareholders. As such, we are forecasting significant free
cash flow generation in 2019, which allowed us to successfully
execute a $50 million tender offer earlier this year and affords us
the opportunity to consider multiple options moving forward,
including returning a substantial portion of our excess cash to our
shareholders. As we look to the future, we remain committed to
optimizing our production, minimizing costs and operating
efficiently, as well as actively pursuing all opportunities that
enhance us financially and operationally.”
(Adjusted EBITDA, Adjusted Cash Operating Expenses, and Adjusted
Cash G&A Expenses are non-GAAP financial measures. Each measure
is defined and reconciled to the most directly comparable GAAP
measure under “Non-GAAP Financial Measures” in the tables
below.)
Operational Update
Midstates ceased drilling at the end of the third quarter of
2018 in order to further study the production results of its recent
extended lateral wells. With the erosion of commodity prices in the
fourth quarter of 2018, the Company elected to continue the pause
in drilling through mid-year 2019 to maximize free cash flow
generation from its producing properties and will evaluate future
development plans as the Company moves forward.
The Company did not bring online any new saltwater disposal
injection wells during the fourth quarter of 2018. Midstates is
currently operating 11 non-Arbuckle injection wells in Woods and
Alfalfa Counties, Oklahoma, with permitted injection capacity of
approximately 240,000 barrels of water per day. The Company’s total
permitted injection capacity in all formations in Woods and Alfalfa
Counties, Oklahoma, which may differ from actual injection capacity
due to operational constraints, is approximately 372,000 barrels of
water per day. The Company’s current disposal rate into all
formations is approximately 135,000 barrels of water per day.
Approximately 45% of the Company’s water injection is currently
being injected into non-Arbuckle formations.
Production and Pricing
Production during the fourth quarter of 2018 totaled 16,351
Boepd, compared with 17,996 Boepd during the third quarter of 2018.
Oil volumes comprised 27% of total production, natural gas liquids
(NGLs) 26%, and natural gas 47% during the fourth quarter of 2018.
Production for the full year 2018 totaled 20,326 Boepd, compared
with 22,148 Boepd for the full year 2017. Production from the
Company’s Mississippian Lime properties contributed approximately
82%, or 16,747 Boepd, and the Anadarko Basin properties contributed
approximately 18%, or 3,579 Boepd. Midstates divested its Anadarko
Basin properties in the second quarter of 2018. For the total
Company, oil volumes comprised 29% of total production, natural gas
liquids (NGLs) 25%, and natural gas 46% for the full year 2018.
On January 1, 2018, Midstates adopted Accounting Standards
Codification 606, Revenue from Contracts with Customers (ASC 606).
As a result, gathering and transportation and a portion of lease
operating expenses are now being presented net against oil, NGLs
and natural gas revenues.
Total oil, NGLs and natural gas revenues in the fourth quarter
of 2018 were approximately $43.2 million, before the impact of
derivatives, compared to $53.0 million in the third quarter of
2018. During the fourth quarter of 2018, the Company realized a
gain on derivatives of $25.4 million, compared with a $6.6 million
loss during the third quarter of 2018. For the full year 2018,
total oil, NGLs and natural gas revenues were approximately $200.8
million, before the impact of derivatives, compared to $220.9
million for the full year 2017. In 2018, the Company realized a
gain on derivatives of $3.6 million, compared with a $3.7 million
gain during the full year 2017.
The following table sets forth information regarding average
realized sales prices for the periods indicated:
Crude Oil
NGLs Natural Gas Year
Ended
Year
Ended
Year
Ended
Year
Ended
Year
Ended
Year
Ended
December 31,2018
December 31,
2017
December 31,2018
December 31,
2017
December 31,2018
December 31,
2017
Average sales price exclusive of realized derivatives and certain
deductions from revenue $ 64.57 $ 49.45 $ 27.62 $ 22.64 $ 2.39 $
2.64 Realized derivatives (3.72 ) 1.47 —
— (0.01 ) 0.15 Average sales price with
realized derivatives exclusive of certain deductions from revenue $
60.85 $ 50.92 $ 27.62 $ 22.64 $ 2.38 $ 2.79 Certain deductions from
revenue (0.03 ) — (0.04 ) —
(0.67
)
— Average sales price inclusive of realized derivatives and
certain deductions from revenue $ 60.82 $ 50.92 $ 27.58
$ 22.64 $ 1.71 $ 2.79
Hedging Update
To reduce downside commodity price risk and protect cash flow,
Midstates has entered into a number of swaps and three-way collars
to hedge a portion of the Company’s oil and natural gas revenues
through 2020. A summary of the Company’s hedges is included in the
below table.
NYMEX WTI Fixed Swaps
Three-Way Collars
HedgePosition(Bbls)
WeightedAvgStrikePrice
HedgePosition(Bbls)
WeightedAvgCeilingPrice
WeightedAvg FloorPrice
WeightedAvgSub-FloorPrice Quarter
Ended: December 31, 2018(1) 313,720 $ 58.59 46,000 $ 56.70 $
50.00 $ 40.00 March 31, 2019(1) 74,800 $ 66.48 180,000 $ 63.14 $
53.75 $ 43.75 June 30, 2019(1) 57,650 $ 64.69 182,000 $ 63.14 $
53.75 $ 43.75 September 30, 2019(1) 46,000 $ 62.96 184,000 $ 63.14
$ 53.75 $ 43.75 December 31, 2019(1) 46,000 $ 61.43 184,000 $ 63.14
$ 53.75 $ 43.75 March 31, 2020(1) — $ — 91,000 $ 65.75 $ 50.00 $
40.00 June 30, 2020(1) — $ — 91,000 $ 65.75 $ 50.00 $ 40.00
September 30, 2020(1) — $ — 92,000 $ 65.75 $ 50.00 $ 40.00 December
31, 2020(1) — $ — 92,000 $ 65.75 $ 50.00 $ 40.00
NYMEX HENRY HUB Fixed Swaps
Three-Way Collars
HedgePosition(MMBtu)
WeightedAvg StrikePrice
HedgePosition(MMBtu)
WeightedAvgCeilingPrice
WeightedAvgFloorPrice
WeightedAvgSub-FloorPrice Quarter
Ended: December 31, 2018(1) 2,055,000 $ 2.95 1,380,000 $ 3.40 $
3.00 $ 2.50 March 31, 2019(1) 1,980,000 $ 3.01 1,350,000 $ 3.40 $
3.00 $ 2.50 June 30, 2019(1) 1,365,000 $ 2.75 September 30, 2019(1)
1,380,000 $ 2.75 December 31, 2019(1) 465,000 $ 2.75 610,000 $ 3.45
$ 2.65 $ 2.15 March 31, 2020(1) 910,000 $ 3.45 $ 2.65 $ 2.15
_______________________
(1) Positions shown represent open commodity derivative
contract positions as of December 31, 2018.
2018 Year-End Proved
Reserves
Midstates’ reserves were fully engineered by its third-party
independent reserve consultant, Cawley, Gillespie & Associates,
Inc. The following table presents these results:
Oil(MBls)
NaturalGas(MMcf)
NGLs(MBbls)
Total(MBoe)
PV-10(1)(in
millions)
PV-10(2)(in
millions)
Mississippian Lime:
Proved developed producing
10,713 138,850 12,650 46,505 $ 424,989 $ 378,453 Proved developed
non-producing 282 8,398 775 2,457 8,400 7,380 Proved undeveloped
7,070 63,265 5,846 23,460 146,261 119,829
Total
Proved 18,065 210,513 19,271 72,422
$ 579,650 $ 505,662 (1)
Year-end 2018 SEC Pricing: $65.56 per barrel of oil, $29.50
per barrel of NGLs, and $3.10 per million BTUs of gas. (2)
Utilizing flat pricing of $60.00 per Bbl of oil, $27.00 per Bbl of
NGLs, and $3.00 per million BTUs of gas.
Midstates’ estimated proved reserves for year-end 2018 totaled
72.4 MMBoe, comprised of 25% oil, 27% NGLs, and 48% natural gas.
The Company elected to pause drilling in the fourth quarter of 2018
and reconfigured its drilling program to emphasize two-mile
laterals. The revised development strategy reduced proved
undeveloped (PUD) inventory to 48 locations at year-end 2018,
consisting of 31 two-mile laterals and 17 one-mile laterals
developed over 3 years within the SEC five-year development
window.
At year-end 2018, Midstates’ proved reserves, as prepared
utilizing SEC pricing, had a net PV-10 of approximately $579.7
million. The Company’s estimated reserves at year-end 2018 were
based on the average oil, NGL, and natural gas prices for each
month, which were $65.56 per barrel (“Bbl”), $29.50 per Bbl, and
$3.10 per million BTUs.
Utilizing flat pricing of $60.00 per Bbl of oil, $27.00 per Bbl
of NGLs, and $3.00 per million BTUs, the Company’s year-end 2018
proved reserves had a PV-10 value of approximately $506
million.
Costs and Expenses
Adjusted Cash Operating Expenses (which excludes debt
restructuring and advisory fees, as well as severance costs) for
the fourth quarter of 2018 were $16.6 million, or $11.02 per Boe,
compared with $18.6 million, or $11.21 per Boe, in the third
quarter of 2018. Full year 2018 Adjusted Cash Operating Expenses
were $79.7 million, or $11.97 per Boe, compared with $103.5
million, or $12.80 per Boe in 2017. The decrease in Adjusted Cash
Operating Expenses for full year 2018 compared to the full year
2017 was due primarily to the sale of the Company’s Anadarko Basin
producing properties in May 2018, resulting in lower lease
operating and Adjusted Cash G&A expenses.
Lease operating expenses (LOE) and workover expenses combined
totaled $10.6 million, or $7.05 per Boe, in the fourth quarter of
2018, compared with $11.9 million, or $7.16 per Boe, in the third
quarter of 2018. Full year 2018 combined LOE and workover expenses
were $54.2 million, or $8.14 per Boe, compared with $63.3 million,
or $7.83 per Boe in 2017. LOE per Boe decreased by $0.38 for the
full year 2018 compared to the full year 2017 primarily due to the
sale of the Company’s Anadarko Basin producing properties in May
2018, which had higher LOE per Boe. Full year 2018 workover
expenses increased $0.69 per Boe from the full year 2017 due to the
Company’s expanded Mississippian Lime workover program during
2018.
Severance and other taxes for the fourth quarter of 2018 were
$2.7 million, or $1.78 per Boe (6.2% of oil, NGL and natural gas
sales revenue), compared to $3.4 million, or $2.03 per Boe (6.2% of
oil, NGL and natural gas sales revenue) in the third quarter of
2018. Full year 2018 severance and other taxes were $11.7 million,
or $1.75 per Boe (5.8% of oil, NGL and natural gas sales revenue),
compared with $8.9 million, or $1.10 per Boe (4.0% of oil, NGL and
natural gas sales revenue) in 2017. Severance and other tax rates
have increased from prior quarters due to legislation that was
signed into law in Oklahoma that increased the 4.0% incentive tax
rate to 7.0% effective with December 2017 production. Additionally,
new legislation was signed into law in March 2018 in Oklahoma to
further amend the gross production incentive tax rate for wells
drilled beginning July 1, 2015 from 2.0% to 5.0% effective July
2018.
In January 2019, to better align Midstates’ general and
administrative (G&A) expense with its current activity levels,
the Company completed a workforce reduction that will result in
annualized Adjusted Cash G&A expense savings of $4 million to
$5 million (excluding one-time severance costs). G&A expenses
for the fourth quarter of 2018 totaled $4.8 million, or $3.20 per
Boe, compared to $4.7 million, or $2.84 per Boe, in the third
quarter of 2018. Fourth quarter 2018 and third quarter 2018 G&A
expenses included net non-cash share-based compensation expense of
$1.1 million, or $0.72 per Boe, and $0.9 million, or $0.55 per Boe,
respectively. Full year 2018 G&A expenses total $24.5 million,
or $3.68 per Boe, compared to $29.4 million, or $3.63 per Boe, for
the full year 2017. Full year 2018 and full year 2017 G&A
expenses included net non-cash share-based compensation expense of
$5.4 million, or $0.81 per Boe, and $9.2 million, or $1.14 per Boe,
respectively. Adjusted Cash G&A expense, which excludes
non-cash share-based compensation and certain non-recurring items,
but includes capitalized general and administrative costs, totaled
$3.3 million, or $2.17 per Boe for the fourth quarter of 2018,
compared to $3.9 million, or $2.33 per Boe, in the third quarter of
2018. Fourth quarter 2018 Adjusted Cash G&A expenses decreased
compared to third quarter of 2018 primarily due to lower employee
costs. Full year 2018 Adjusted Cash G&A expense totaled $15.5
million, or $2.32 per Boe, compared to $20.1 million, or $2.48 per
Boe, for the full year 2017. Full year 2018 Adjusted Cash G&A
expenses decreased compared to full year 2017 primarily due to
lower employee costs.
Depreciation, depletion and amortization expense for the fourth
quarter of 2018 totaled $14.8 million, or $9.85 per Boe, compared
to $15.5 million, or $9.36 per Boe in the third quarter of 2018.
Full year 2018 Depreciation, depletion and amortization expense
total $62.0 million, or $9.31 per Boe, compared to $65.8 million,
or $8.14 per Boe, for the full year 2017.
Interest expense totaled $0.7 million (net of amounts
capitalized) for the fourth quarter of 2018, compared to $0.7
million in the third quarter of 2018. The Company capitalized $0.2
million in interest to unproved properties in the fourth quarter of
2018 and 0.1 million in third quarter of 2018. Full year 2018
interest expense total $4.5 million (net of amounts capitalized),
compared to $5.6 million for the full year 2017. The Company
capitalized $0.5 million in interest to unproved properties in 2018
and $2.4 million in 2017. The decrease in interest expenses for
full year 2018 compared to the full year 2017 was the result of the
Company making $105 million in pay-downs during 2018 to the
outstanding credit facility balance with proceeds from the sale of
the Anadarko Basin producing properties and cash on hand.
The Company had an effective tax rate of 0% and did not record
an income tax expense or benefit for both the fourth quarter or
full year 2018.
Capital Expenditures
In the fourth quarter of 2018, the Company invested $3.6 million
of operating capital in the Mississippian Lime.
The following table provides operational capital spending by
area as well as a reconciliation to total capital expenditures for
the three months and full year ended December 31, 2018 (in
thousands):
For the ThreeMonths
EndedDecember 31, 2018 For the Year
EndedDecember 31, 2018 Drilling and completion
activities $ 2,636 $ 90,220 Acquisition of acreage and seismic data
967 6,246
Operational capital expenditures
incurred $ 3,603 $ 96,466
Capitalized G&A, office, ARO & other 395 3,744 Capitalized
interest 153 466
Total capital expenditures
incurred $ 4,151 $ 100,676
For the ThreeMonths
EndedDecember 31, 2018 For the Year
EndedDecember 31, 2018 Mississippian Lime $ 3,603 $
96,530 Anadarko Basin — (64 )
Total operational
capital expenditures incurred $ 3,603 $
96,466
Balance Sheet and
Liquidity
On December 31, 2018, the Company’s liquidity was approximately
$156.3 million, consisting of cash and cash equivalents of $11.3
million and $145.0 million available under its credit facility. Its
long-term debt was $23.1 million, resulting in net debt of
approximately $11.8 million.
As of March 6, 2019, the Company’s liquidity was approximately
$109.0 million, consisting of cash and cash equivalents of $3.0
million and $106.0 million available under its credit facility. Its
long-term debt was $62.1 million, resulting in net debt of
approximately $59.1 million.
On October 24, 2018, the Company’s borrowing base under its
revolving credit facility was reaffirmed at $170 million. The next
scheduled borrowing base redetermination will occur during the
second quarter of 2019.
Strategic Update
Midstates is committed to pursuing all strategic and
opportunistic transactions that create significant shareholder
value, including a sale of the Company or mergers and acquisitions
that provide for greater scale and operational synergies to enhance
bottom line profitability. To aid in this pursuit, the Company has
retained Houlihan Lokey, Inc as its financial advisor.
Conference Call
Information
The Company will host a conference call to discuss fourth
quarter and year-end 2018 results on Thursday, March 14, at 9:00
a.m. Eastern time (8:00 a.m. Central time). Participants may join
the conference call by dialing (877) 645-4610 (for U.S. and Canada)
or (707) 595-2723 (International). The conference call access code
is 5358516 for all participants. To listen via live web cast,
please visit the Investor Relations section of the Company’s
website, www.midstatespetroleum.com.
An audio replay of the conference call will be available
approximately two hours after the conclusion of the call. The audio
replay will remain available for approximately 30 days and can be
accessed by dialing (855) 859-2056 (for U.S. and Canada) or (404)
537-3406 (International). The conference call audio replay access
code is 5358516 for all participants. The audio replay will also be
available in the Investors section of the Company’s website
approximately two hours after the conclusion of the call and remain
available for approximately 30 calendar days.
Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All statements
that are not statements of historical fact, including statements
regarding the Company’s strategy, future operations, financial
position, estimated revenues and losses, projected costs, resource
potential, drilling locations, prospects and plans and objectives
of management, are considered forward-looking statements. Without
limiting the generality of the foregoing, these statements are
based on certain assumptions made by the Company based on
management's experience, expectations and perception of historical
trends, current conditions, anticipated future developments and
other factors believed to be appropriate. Although the Company
believes that its plans, intentions and expectations reflected in
or suggested by the forward-looking statements made in this press
release are reasonable, the Company gives no assurance that these
plans, intentions or expectations will be achieved when anticipated
or at all. Moreover, such statements are subject to a number of
factors, many of which are beyond the control of the Company, which
may cause actual results to differ materially from those implied or
expressed by the forward-looking statements. These factors include,
but are not limited to variations in the market demand for, and
prices of, oil and natural gas; uncertainties about the Company’s
estimated quantities of oil and natural gas reserves, resource
potential and drilling locations; the adequacy of the Company’s
capital resources and liquidity; general economic and business
conditions; weather-related downtime; failure to realize expected
value creation from property acquisitions; uncertainties about the
Company’s ability to replace reserves and economically develop its
current reserves; risks related to the concentration of the
Company’s operations; drilling results; and potential financial
losses or earnings reductions from the Company’s commodity
derivative positions.
Any forward-looking statement speaks only as of the date on
which such statement is made and the Company undertakes no
obligation to correct or update any forward-looking statement,
whether as a result of new information, future events or otherwise,
except as required by applicable law.
About Midstates Petroleum Company,
Inc.
Midstates Petroleum Company, Inc. is an independent exploration
and production company focused on the application of modern
drilling and completion techniques in oil and liquids-rich basins
in the onshore U.S. The Company’s operations are currently focused
on oilfields in the Mississippian Lime play in Oklahoma.
MIDSTATES PETROLEUM COMPANY,
INC. CONSOLIDATED BALANCE SHEETS (In
thousands, except share amounts) (Unaudited)
December 31, 2018 December 31, 2017
ASSETS CURRENT ASSETS: Cash and cash equivalents $ 11,341 $
68,498 Accounts receivable: Oil and gas sales 22,165 32,455 Joint
interest billing 2,474 3,297 Other 1,374 166 Commodity derivative
contracts 6,940 762 Other current assets 1,684
1,510 Total current assets 45,978 106,688 PROPERTY AND
EQUIPMENT: Oil and gas properties, on the basis of full-cost
accounting Proved properties 809,272 765,308 Unproved properties
not being amortized 4,050 7,065 Other property and equipment 6,345
6,508 Less accumulated depreciation, depletion and amortization
(266,198 ) (204,419 ) Net property and equipment
553,469 574,462 OTHER NONCURRENT ASSETS: Commodity derivative
assets 791 — Other noncurrent assets 5,257
6,978 Total other noncurrent assets 6,048
6,978
TOTAL $ 605,495
$ 688,128 LIABILITIES AND EQUITY
CURRENT LIABILITIES: Accounts payable $ 6,511 $ 11,547 Accrued
liabilities 25,521 42,842 Commodity derivative contracts —
3,433 Total current liabilities 32,032 57,822
LONG-TERM LIABILITIES: Asset retirement obligations 8,087 15,506
Commodity derivative contracts 80 562 Long-term debt 23,059 128,059
Other long-term liabilities 560 592
Total long-term liabilities 31,786 144,719 COMMITMENTS AND
CONTINGENCIES STOCKHOLDERS’ EQUITY: Preferred stock, $0.01
par value, 50,000,000 shares authorized — — Warrants, 6,625,554
warrants outstanding 37,329 37,329 Common stock, $0.01 par value,
250,000,000 shares authorized 255 253 Treasury stock (2,455 )
(1,603 ) Additional paid-in-capital 531,911 524,755 Retained
deficit (25,363 ) (75,147 ) Total stockholders’
equity 541,677 485,587
TOTAL
$ 605,495 $ 688,128
MIDSTATES PETROLEUM COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (In
thousands) (Unaudited) For the
ThreeMonths Ended For the Year
Ended
For the Three
Months Ended
For the Year
Ended
For the Three
Months Ended
December 31,
2018
December 31,
2018
December 31,
2017
December 31,2017
September 30,2018
REVENUES: Oil sales $ 24,111 $ 123,945 $ 31,586 $ 117,083 $
33,218 Natural gas liquid sales 9,096 44,747 12,532 44,112 12,720
Natural gas sales 9,993 32,138 13,387 59,708 7,026 Other revenue
1,018 4,252 947
4,191 1,384 Total revenues from contracts with
customers 44,218 205,082 58,452 225,094 54,348 Gains (losses) on
commodity derivative contracts—net 25,425
3,555 (5,108 ) 3,659 (6,583 )
Total revenues 69,643 208,637 53,344 228,753 47,765
EXPENSES: Lease operating and workover 10,608 54,229 15,223
63,287 11,861 Gathering and transportation 63 241 3,480 14,507 54
Severance and other taxes 2,682 11,680 2,701 8,869 3,360 Asset
retirement accretion 152 846 267 1,100 147 Depreciation, depletion,
and amortization 14,818 62,000 19,361 65,832 15,485 Impairment in
carrying value of oil and gas properties — — 125,300 125,300 —
General and administrative 4,805 24,540 6,250 29,352 4,688 Advisory
fees — 850 — —
— Total expenses 33,128
154,386 172,582 308,247
35,595
OPERATING INCOME (LOSS) 36,515 54,251 (119,238
) (79,494 ) 12,170
OTHER INCOME (EXPENSE): Interest income 5
33 9 9 4 Interest expense—net (713 ) (4,500 )
(1,738 ) (5,592 ) (658 ) Total other expense
(708 ) (4,467 ) (1,729 ) (5,583 ) (654
)
INCOME (LOSS) BEFORE TAXES 35,807 49,784
(120,967 ) (85,077 ) 11,516
Income tax benefit — — —
— —
NET INCOME (LOSS) $
35,807 $ 49,784 $
(120,967 )
$ (85,077 ) $
11,516 Participating securities—non-vested restricted
stock (940 ) (1,394 ) — — (351 )
NET INCOME (LOSS) ATTRIBUTABLE
TO COMMON SHAREHOLDERS $ 34,867 $
48,390 $ (120,967 )
$
(85,077 ) $ 11,165 Basic and
diluted net income (loss) per share attributable to common
shareholders $ 1.38 $ 1.91 $ (4.78 ) $ (3.39 ) $ 0.44
Basic and diluted weighted average number of common shares
outstanding 25,385 25,337 25,253
25,119 25,332
MIDSTATES PETROLEUM COMPANY,
INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’
EQUITY (In thousands) (Unaudited)
Series APreferredStock
CommonStock Warrants
TreasuryStock AdditionalPaid-in-Capital
RetainedEarnings(Deficit)
TotalStockholders’Equity(Deficit)
Balance as of December 31, 2015 (Predecessor) $
— $ 110 $ — $
(3,081 ) $ 888,247 $
(2,211,342 ) $ (1,326,066 )
Share-based compensation — (6 ) — — 3,045 — 3,039 Acquisition of
treasury stock — — — (53 ) — — (53 ) Net income — —
— — — 1,323,079
1,323,079
Balance as of October 21, 2016
(Predecessor) $ — $ 104 $
— $ (3,134 ) $ 891,292
$ (888,263 ) $ (1 )
Cancellation of predecessor equity — (104 ) —
3,134 (891,292 ) 888,263
1
Balance as of October 21, 2016 (Predecessor)
$ — $ —
$ — $
— $ —
$ — $ —
Issuance of successor common stock — 247 —
— 510,905
— 511,152 Issuance of successor warrants — —
37,329
— —
— 37,329
Balance as of
October 21, 2016 (Successor) $ — $
247 $ 37,329 $ — $
510,905 $ — $ 548,481 Issuance
of successor common stock — 3 — — — — 3 Share-based compensation —
— — 3,400 — 3,400 Net income — — —
— — 9,930 9,930
Balance as of December 31, 2016 (Successor) $
— $ 250 $ 37,329 $
— $ 514,305 $ 9,930 $
561,814 Issuance of successor common stock — 3 — — 10,450 —
10,453 Share-based compensation — — — (1,603 ) — — (1,603 ) Net
loss — — — — —
(85,077 ) (85,077 )
Balance as of December
31, 2018 (Successor) $ — $ 253
$ 37,329 $ (1,603 )
$
524,755 $ (75,147 ) $
485,587 Share-based compensation — 2 — — 7,156 — 7,158
Acquisition of treasury stock — — — (852 ) — — (852 ) Net income
— — — — —
49,784 49,784
Balance as of December
31, 2018 (Successor) $ — $ 255
$ 37,329 $ (2,455 )
$ 531,911 $ (25,363 )
$ 541,677
MIDSTATES PETROLEUM COMPANY, INC. CONSOLIDATED
STATEMENTS OF CASH FLOWS (In thousands)
(Unaudited)
For the YearEnded
For the YearEnded
December 31,2018
December 31,2017
CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $
49,784 $ (85,077 ) Adjustments to reconcile net income/(loss) to
net cash provided by operating activities: (Gains) on commodity
derivative contracts—net (3,555 ) (3,659 ) Net cash received (paid)
for commodity derivative contracts not designated as hedging
instruments (7,328 ) 6,891 Asset retirement accretion 846 1,100
Depreciation, depletion, and amortization 62,000 65,832 Impairment
in carrying value of oil and gas properties — 125,300 Share-based
compensation, net of amounts capitalized to oil and gas properties
5,407 9,196 Amortization of deferred financing costs 476 385 Change
in operating assets and liabilities: Accounts receivable—oil and
gas sales 8,690 2,766 Accounts receivable—JIB and other (744 )
3,362 Other current and noncurrent assets 537 283 Accounts payable
(1,779 ) 2,961 Accrued liabilities (7,145 ) (8,973 ) Other
(34 ) (765 )
Net cash provided by operating
activities $ 107,155 $
119,602 CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment $ (112,398 ) $ (130,199 )
Proceeds from the sale of oil and gas properties 54,091 2,885
Proceeds from the sale of oil and gas equipment 355
1,350
Net cash used in investing activities
$ (57,952 ) $ (125,964 )
CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from
revolving credit facility $ 1,000 $ — Repayment of revolving credit
facility (106,000 ) — Deferred financing costs (508 ) (375 )
Repurchase of restricted stock for tax withholdings (852 )
(1,603 )
Net cash used in financing activities
$ (106,360 ) $ (1,978 )
NET (DECREASE) IN CASH AND CASH EQUIVALENTS $
(57,157 ) $ (8,340 ) Cash and
cash equivalents, beginning of period 68,498
76,838 Cash and cash equivalents,
end of period $ 11,341 $
68,498 SUPPLEMENTAL INFORMATION:
Non-cash transactions — investments in property and equipment
accrued — not paid $ 6,092 $ 17,164 Cash paid for interest, net $
4,128 $ 5,353
MIDSTATES PETROLEUM COMPANY, INC. SELECTED
FINANCIAL AND OPERATING STATISTICS
For the Three Months Ended
December 31,
For the Year Ended December
31,
For the Three MonthsEnded
September 30,
2018 2017 2018
2017 2018 Operating Data – Mississippian Lime:
Net production volumes: Oil (Bbls/day) 4,463 4,960 4,768
5,108 5,249 NGLs (Bbls/day) 4,194 3,903 4,014 4,273 4,257 Natural
gas (Mcf/day) 46,161 50,787 47,791 52,797 50,939 Total oil
equivalents (MBoe) 1,505 1,594 6,113 6,636 1,656 Average daily
production (Boe/day) 16,351 17,327 16,747 18,181 17,996
Operating Data – Anadarko Basin: Net production
volumes: Oil (Bbls/day) — 1,347 1,168 1,379 — NGLs (Bbls/day) —
1,065 1,017 1,066 —
Natural gas (Mcf/day)
— 8,867 8,365 9,135 — Total oil equivalents (MBoe) — 358
540
1,448 — Average daily production (Boe/day) — 3,890 3,579 3,967 —
Operating Data - Combined: Net production volumes:
Oil (Bbls/day) 4,463 6,307 5,936 6,487 5,249 NGLs (Bbls/day) 4,194
4,968 5,031 5,339 4,257 Natural gas (Mcf/day) 46,161 59,654 56,156
61,932 50,939 Total oil equivalents (MBoe) 1,505 1,952 6,663 8,084
1,656 Average daily production (Boe/day) 16,351 21,217 20,326
22,148 17,996
Average Sales Prices: Oil, without realized
derivatives (per Bbl) $ 58.73 $ 54.43 $ 64.54 $ 49.45 $ 68.79 Oil,
with realized derivatives (per Bbl) $ 63.64 $ 53.49 $ 60.82 $ 50.92
$ 60.68 Natural gas liquids, without realized derivatives (per Bbl)
$ 23.57 $ 27.42 $ 27.58 $ 22.64 $ 32.48 Natural gas liquids, with
realized derivatives (per Bbl) $ 23.57 $ 27.42 $ 27.58 $ 22.64 $
32.48 Natural gas, without realized derivatives (per Mcf) $ 2.35 $
2.44 $ 1.72 $ 2.64 $ 1.49 Natural gas, with realized derivatives
(per Mcf) $ 1.93 $ 2.67 $ 1.71 $ 2.79 $ 1.51
Costs and Expenses
(per Boe of production): Lease operating $ 6.27 $ 7.02 $ 6.35 $
6.73 $ 5.81 Workover $ 0.78 $ 0.78 $ 1.79 $ 1.10 $ 1.35 Gathering
and transportation $ 0.04 $ 1.78 $ 0.04 $ 1.79 $ 0.03 Severance and
other taxes $ 1.78 $ 1.38 $ 1.75 $ 1.10 $ 2.03 Asset retirement
accretion $ 0.10 $ 0.14 $ 0.13 $ 0.14 $ 0.09 Depreciation,
depletion and amortization $ 9.85 $ 9.92 $ 9.31 $ 8.14 $ 9.36
Impairment of oil and gas properties $ — $ 64.19 $ — $ 15.50 $ —
General and administrative $ 3.20 $ 3.20 $ 3.68 $ 3.63 $ 2.84
Advisory fees $ — $ — $ 0.13 $ — $ —
MIDSTATES PETROLEUM COMPANY,
INC. ADJUSTED EBITDA (In thousands)
(Unaudited)
For the Three Months Ended
December 31,
For the Year Ended December
31,
For the ThreeMonths
EndedSeptember 30,
2018 2017 2018
2017 2018 Adjusted EBITDA to net income (loss)
reconciliation: Net income (loss) $ 35,807 $ (120,967 ) $
49,784 $ (85,077 ) $ 11,516 Depreciation, depletion and
amortization 14,818 19,361 62,000 65,832 15,485 Impairment in
carrying value of oil and gas properties — 125,300 — 125,300 —
Losses (gains) on commodity derivative contracts—net (25,425 )
5,108 (3,555 ) (3,659 ) 6,583 Net cash received (paid) for
commodity derivative contracts not designated as hedging
instruments 203 742 (7,328 ) 6,891 (3,854 ) Income tax expense — —
— — — Interest income (5 ) (9 ) (33 ) (9 ) (4 ) Interest expense,
net of amounts capitalized 713 1,738 4,500 5,592 658 Asset
retirement obligation accretion 152 267 846 1,100 147 Share-based
compensation, net of amounts capitalized 1,078
2,094 5,407 9,196 905
Adjusted EBITDA $ 27,341
$ 33,634 $ 111,621
$ 125,166 $ 31,436
Lagging costs associated with restructuring 208 — 543 — — Costs
incurred for strategic reviews 280 — 3,402 — 489 Advisory costs
— 300 850 3,030
—
Adjusted EBITDA before restructuring and
advisory costs $ 27,829 $
33,934 $ 116,416 $
128,196 $ 31,925
MIDSTATES PETROLEUM
COMPANY, INC. CASH OPERATING EXPENSES (In
thousands) (Unaudited)
For the Three Months Ended
December 31,
For the Year Ended December
31,
For the ThreeMonths
EndedSeptember 30,
2018 2017 2018
2017 2018 Operating Expenses – GAAP $ 33,128 $
172,582 $ 154,386 $ 308,247 $ 35,595 Adjustments for certain
non-cash items: Asset retirement accretion 152 267 846 1,100 147
Share-based compensation, net 1,078 2,094 5,407 9,196 905
Depreciation, depletion and amortization 14,818 19,360 62,000
65,832 15,485 Impairment of oil and gas properties —
125,300 — 125,300 —
Cash Operating Expenses
– Non-GAAP $ 17,080 $ 25,561
$ 86,133 $ 106,819 $
19,058 Cash Operating Expenses – Non-GAAP per Boe
$ 11.35 $ 13.09 $ 12.93
$ 13.21 $ 11.51 Advisory fees $
— $ 300 $ 850 $ 3,030 $ — Advisory fees, per Boe $ — $ 0.15 $ 0.13
$ 0.37 $ — Lagging costs associated with restructuring $ 208
$ — $ 543 $ — $ — Lagging costs associated with restructuring, per
Boe $ 0.14 $ — $ 0.08 $ — $ — Severance costs $ — $ 331 $
1,621 $ 331 $ — Severance costs, per Boe $ — $ 0.17 $ 0.24 $ 0.04 $
— Costs incurred for strategic reviews $ 280 $ — $ 3,402 $ —
$ 489 Costs incurred for strategic reviews, per Boe $ 0.19 $ — $
0.51 $ — $ 0.30
Adjusted Cash Operating Expenses –
Non-GAAP $ 16,592 $ 24,930 $
79,717 $ 103,458 $ 18,569
Adjusted Cash Operating Expenses – Non-GAAP per Boe $
11.02 $ 12.77 $ 11.97 $
12.80 $ 11.21
MIDSTATES PETROLEUM COMPANY,
INC. ADJUSTED CASH GENERAL AND ADMINISTRATIVE EXPENSES
(In thousands) (Unaudited)
For the Three MonthsEnded
December 31,
For the Year Ended December
31,
For the ThreeMonths
EndedSeptember 30,
2018 2017 2018
2017 2018 General and Administrative Expenses
– GAAP $ 4,805 $ 6,250 $ 24,540 $ 29,352 $ 4,688 Adjustments for
certain non-cash and non-recurring items: Share-based compensation,
net (1,078 ) (2,094 ) (5,407 ) (9,196 ) (905 ) Capitalized general
and administrative expenses 29 606 1,900 3,270 571 Severance costs
— (331 ) (1,621 ) (331 ) — Costs incurred for strategic reviews
(280 ) — (3,402 ) — (489 ) Advisory costs included in general and
administrative expenses (208 ) (300 ) (543 )
(3,030 ) —
Adjusted Cash General and
Administrative Expenses –
Non-GAAP
$ 3,268 $ 4,131 $
15,467 $ 20,065 $
3,865 Adjusted Cash General and Administrative
Expenses –
Non-GAAP per Boe
$ 2.17 $ 2.12 $
2.32 $ 2.48 $ 2.33
MIDSTATES PETROLEUM
COMPANY, INC.Reconciliation of PV-10 to the
Standardized Measure
We refer to PV-10 as the present value of estimated future net
cash flows of estimated proved reserves as calculated in the
respective reserves report using a discount rate of 10%. This
amount includes projected revenues, estimated production costs,
estimated future development costs and estimated cash flows related
to future asset retirement obligations (“ARO”). PV-10 is a
financial measure not defined under US GAAP. Accordingly, the
following table reconciles total PV-10 to the standardized measure
of discounted future net cash flows, which is the most directly
comparable US GAAP financial measure. We believe the presentation
of PV-10 provides useful information because it is widely used by
investors in evaluating oil and natural gas companies without
regard to specific income tax characteristics of such entities.
PV-10 is not a measure of financial or operating performance under
US GAAP, nor is it intended to represent the current market value
of our estimated proved reserves. PV-10 should not be considered in
isolation or as a substitute for the standardized measure of
discounted future net cash flows as defined under US GAAP.
The following table provides a reconciliation of PV-10 to the
standardized measure of discounted cash flows (in thousands):
As ofDecember
31,2018
As ofDecember
31,2017(1)
PV-10 $ 579,650 $ 558,133 Present value of future income tax,
discounted at 10% (13,374) (8,890)
Standardized measure of
discounted future net cash flows $ 566,276 $
549,243 (1) The PV-10 and standardized measure of
discounted future net cash flows as of December 31, 2017 includes
our Anadarko Basin assets, which were divested on May 31, 2018.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190313005831/en/
Midstates Petroleum Company, Inc.Jason McGlynn, Investor
Relations, (918) 947-4614Jason.McGlynn@midstatespetroleum.com
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