TULSA, Okla.--(BUSINESS WIRE)--Midstates Petroleum Company, Inc. (“Midstates” or the “Company”) (NYSE: MPO) today announced its financial and operating results for the three months ended June 30, 2015.
Second Quarter and Other Highlights:
- Achieved Adjusted EBITDA of $99 million before debt restructuring costs for the second quarter of 2015.
- Reported Adjusted EBITDA that outpaced operational capital by $29 million for the second quarter of 2015 and by $37 million for first six months of 2015.
- Increased average production in the Mississippian Lime to a record high of 27,029 barrels of oil equivalent (Boe) per day in the second quarter, up 31% from 20,698 Boe per day in the second quarter of 2014 and up 2% from 26,531 Boe per day in the first quarter of 2015.
- Attained total Company production of 33,893 Boe per day in the second quarter, up 6% from 31,912 Boe per day in the second quarter of 2014 and essentially flat with 34,164 Boe per day in the first quarter of 2015.
- Maintained estimated well level returns of greater than 30% in the Mississippian Lime, using July 27, 2015 strip pricing and current AFE of $3.3 million.
- Reduced adjusted cash operating expenses to $11.75 per Boe, down 14% from $13.63 per Boe in the second quarter of 2014 and down 8% from $12.82 per Boe in the first quarter of 2015.
- Closed the sale of remaining Louisiana producing properties in the Dequincy area on April 21 for approximately $42 million in net cash proceeds.
- Executed a $625 million Second Lien note offering and approximately $525 million Third Lien note exchange that significantly boosted liquidity and captured debt reduction opportunity.
- Reported liquidity on June 30, 2015 of $402 million comprised of $151 million in cash and $251 million of availability on its revolving credit facility.
- Increased full year 2015 production guidance to 31,500 to 33,500 Boe per day.
- Reported Adjusted Net Income totaled a loss of $3.9 million, or $0.58 loss per common share, in the second quarter of 2015.
Jake Brace, President and Chief Executive Officer commented, “We are very pleased with our accomplishments during the second quarter. On the financial side, we executed a comprehensive liquidity enhancing transaction and closed on the sale of our remaining producing properties in Louisiana. On the operational side, we again increased production in the Miss Lime and held total Company production essentially flat with the first quarter despite the sale of our Louisiana properties and having only four rigs active during the quarter. Just as importantly, in June we achieved our goal of reducing our standard well costs to $3.3 million in the Miss Lime six months early.”
Brace continued, “We have proven our ability to quickly respond to the downturn both financially and operationally and now have a significant time and flexibility to allow us to manage our business through an extended period of low commodity prices. Looking forward, we will look to protect our liquidity through rigorous capital discipline and continued exceptional operational performance.”
(Adjusted EBITDA, Adjusted Net Income and Cash Operating 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 Discussion
In the second quarter of 2015, Midstates invested $70 million of operating capital, spud 17 wells, and brought 19 wells on line.
The breakdown in operational capital spending by area (excluding capitalized interest and G&A, asset retirement obligations, office and other expenditures) was:
For the Three Months Ended June 30, 2015 |
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Mississippian Lime | $ | 67,700 | |||
Anadarko Basin | 1,493 | ||||
Gulf Coast | 1,160 | ||||
Total operational capital expenditures incurred | $ | 70,353 | |||
The breakdown of all capital spending was:
For the Three Months Ended June 30, 2015 |
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Drilling and completion activities, including recompletions | $ | 69,348 | |||
Acquisition of acreage and seismic data | 1,005 | ||||
Operational capital expenditures incurred | $ | 70,353 | |||
Capitalized G&A, office, ARO & other | 2,576 | ||||
Capitalized interest | 1,082 | ||||
Total capital expenditures incurred | $ | 74,011 | |||
Mississippian Lime Update
Production from the Company’s Mississippian Lime properties averaged 27,029 Boe per day for the second quarter of 2015, an increase of approximately 31% over the second quarter of 2014. Since acquiring these properties in October 2012, Midstates has grown production in the Mississippian Lime from approximately 7,000 Boe per day to over 27,029 Boe per day. Through July 26, 2015, the Company had 258 wells on production for more than 30 days with an average peak 30-day production rate of 559 Boe per day.
The Company had four rigs drilling in its Mississippian Lime horizontal well program in Woods and Alfalfa Counties, Oklahoma for the entire second quarter. Midstates spud a total of 17 wells, of which six were producing, seven were awaiting completion and four were drilling at June 30, 2015. The Company brought 19 fracture stimulated horizontal wells online during the second quarter.
In late July, the Company reduced its active rig count to three operated drilling rigs in the area. In spite of the reduction in rig count, Midstates intends to drill approximately the same amount of net wells during 2015. The reduction is due to continued drilling efficiency gains and increased working interests in operated wells attributable to partner non-consents, all of which allow the Company to drill a higher number of net wells with fewer rigs. Midstates increased its 2015 production guidance to 31,500 to 33,500 Boe per day, while maintaining its capital expenditure guidance for the year. Additionally, through a combination of operational efficiencies and service cost reductions, the Company has already accomplished its goal of reducing standard well costs to $3.3 million in the Mississippian Lime by year-end. With current well cost AFEs of $3.3 million, Midstates is generating rates of return in excess of 30% at the current strip and will continue to work with its service providers on cost reductions and design improvements to further improve well level returns.
Anadarko Basin Update
Due to the commodity price environment, the Company does not currently plan to operate any rigs in the Anadarko Basin area during 2015. Midstates’ focus thus far in the basin in 2015 has been on its high-return capital and expense workover program designed to offset some natural production decline and to reduce lease operating costs. The Company intends to continue a limited workover program through the end of the year.
Midstates did not spud or bring on line any new wells during the second quarter and had no wells awaiting completion on June 30, 2015. Production for the second quarter in the area averaged 6,586 Boe per day.
Sale of Remaining Louisiana Producing Properties
On April 21, 2015 the Company closed the sale of its ownership interest in developed and undeveloped acreage in the Dequincy area located in Beauregard and Calcasieu Parishes, Louisiana to Pintail Oil and Gas LLC, for net cash proceeds of approximately $42 million, which was after customary closing adjustments. The proceeds from the sale will be used for general corporate purposes.
Liquidity Enhancing Transaction and Note Exchange
On May 21, 2015 the Company completed a private offering of Senior Secured Second Lien Notes at par with an aggregate principal amount of $625 million and an annual interest rate of 10%. A portion of the net proceeds were used to fully repay borrowings under the Company’s revolving credit facility, with the remainder held in cash for general corporate purposes.
Concurrently with the offering of Second Lien Notes, the Company exchanged approximately $279.8 million of its 10.75% Senior Unsecured Notes due 2020 and approximately $350.3 million of its 9.25% Senior Unsecured Notes due 2021 for new Third Lien Senior Secured Notes in an aggregate principal amount of $504.1 million, representing an exchange at 80% of par value. Additionally, on June 2, 2015, Midstates exchanged approximately $26.5 million of its 10.75% Senior Unsecured Notes due 2020 and approximately $2.0 million of its 9.25% Senior Unsecured Notes due 2021 for new Third Lien Senior Secured Notes in an aggregate principal amount of $20 million, representing an exchange at 70% of par value. The Third Lien Notes will pay cash interest of 10% and pay-in-kind interest of 2% per annum.
The Company also amended its revolving credit facility to provide additional covenant flexibility and allow for the Second Lien Note issuance and Third Lien Note exchange transactions. Upon completion of the transactions, the Company’s borrowing base under its revolving credit facility was reduced to $253 million.
Financial Discussion
On August 3, 2015, the Company completed a 1-for-10 reverse stock split of its outstanding common stock. The following discussion and tables give retroactive effect to the impact of the reverse stock split on share and per share amounts for all periods presented.
Adjusted EBITDA, which excludes transaction costs and debt restructuring costs, totaled $98.7 million in the second quarter of 2015, compared with $122.1 million in the second quarter of 2014 and $101.3 million in the first quarter of 2015. The Company incurred $34.6 million of transaction costs and debt restructuring cost in the second quarter of 2015, $2.5 million in the second quarter of 2014 and $1.7 million in the first quarter of 2015. Lower average realized prices were the main drivers in the decline in Adjusted EBITDA versus the second quarter of 2014 and essentially flat with the first quarter of 2015.
Adjusted Net Income, which excludes transaction costs and debt restructuring cost, impairment of oil and gas properties, and unrealized gains and losses on derivatives and the related tax impact, totaled a loss of $3.9 million for the second quarter of 2015, or 0.58 per share. The Company reported a GAAP net loss of $598.4 million (before preferred dividends) for the second quarter of 2015 which includes a full cost ceiling impairment of $498.4 million (before taxes), compared to net loss of $2.1 million for the second quarter of 2014 and net loss of $193.6 million in the first quarter of 2015.
Production and Pricing
Production during the second quarter of 2015 totaled 33,893 Boe per day, up 6% from 31,912 Boe per day in the second quarter of 2014 and essentially flat with 34,164 Boe per day during the first quarter of 2015. Second quarter 2015 production from the Company’s Mississippian Lime properties contributed roughly 80%, or 27,029 Boe per day, and the Anadarko Basin properties contributed roughly 19%, or 6,586 Boe per day, while Gulf Coast properties contributed the balance of 278 Boe per day. Production in the Anadarko Basin declined versus the 2014 period due to limited capital activity during 2015. For the total Company, oil volumes comprised 41% of total production, natural gas liquids (NGLs) 20%, and natural gas 39% during the second quarter.
In the second quarter of 2015, Midstates’ average realized price per barrel of oil, before realized commodity derivatives, was $53.14 ($81.19 with realized derivatives) while its average realized price for NGL sales was $16.61 per barrel (there were no NGL hedges in place during the first quarter). Natural gas averaged $2.23 per thousand cubic feet (Mcf), before realized derivatives ($3.14 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, before the impact of derivatives, decreased by $85.6 million, or 48%, to $93.7 million during the second quarter of 2015, as compared to $179.3 million for the second quarter of 2014, and increased by $4.3 million, or 5%, as compared to $89.4 million in the first quarter of 2015. The increase in revenues for the second quarter of 2015 versus the first quarter of 2015 was attributable to higher average realized oil prices. The realized gain on derivatives for the second quarter of 2015 was $42.2 million, compared to a realized loss of $17.1 million for the second quarter of 2014 and a realized gain of $52.6 million for the first quarter of 2015.
Midstates added new 2015 oil hedges during the second quarter of 2015. The Company currently has hedges in place on approximately 1.1 million barrels of oil, or 12,000 barrels of oil per day, in the third and fourth quarters of 2015 at an average price of approximately $71.55 per barrel. Additionally, Midstates currently has gas hedges in place on approximately 4.6 million British Thermal Units (BTUs), or 50,000 million BTUs per day, in the third and fourth quarters of 2015 at an average price of approximately $4.13 per million BTUs. These hedges provide added security on Midstates’ oil and natural gas revenue, which together account for approximately 80% of total revenue for 2015. A detailed summary of the Company’s hedging position as of August 4, 2015 is included in the tables below.
Costs and Expenses
Adjusted Cash Operating Expenses for the second quarter of 2015 were $11.75 per Boe, compared with $13.63 per Boe in the second quarter of 2014 and $12.82 per Boe in the first quarter of 2015. The decrease in per Boe cash costs in the second quarter of 2015 compared with the first quarter of 2015 was attributable to lower lease operating and workover expense and lower severance and other tax expenses.
Lease operating and workover expenses (LOE) totaled $21.8 million, or $7.06 per Boe, in the second quarter of 2015, compared with $19.7 million, or $6.79 per Boe, in the second quarter of 2014 and $23.2 million, or $7.56 per Boe, in the first quarter of 2015. Second quarter 2015 LOE and workover expenses decreased on a per Boe basis, as compared to first quarter of 2015, primarily due to the divesture of the Company’s producing assets in Louisiana, where operating costs are relatively higher.
Severance and other taxes were $2.5 million (3.3% of total revenue) as compared to $5.6 million (3.8% of total revenue) in the same period in 2014 and $3.6 million (3.2% of total revenue) in the first quarter of 2015.
General and administrative expenses totaled $11.5 million, or $3.79 per Boe, compared with $13.4 million, or $4.63 per Boe, in the second quarter of 2014, and $11.7 million, or $3.79 per Boe, in the first quarter of 2015. Second quarter 2015, second quarter 2014 and first quarter 2015 general and administrative expenses included non-cash share-based compensation expense of $2.1 million ($0.68 per Boe), $2.2 million ($0.73 per Boe) and $0.8 million ($0.26 per Boe), respectively. General and administrative expenses in the second quarter of 2015 included approximately $1.3 million, or $0.42 per Boe, related to employee and other costs associated with the previously announced closing of the Houston office and the relocation of the Company’s corporate headquarters to Tulsa.
Interest expense totaled $44.9 million (net of amounts capitalized) for the second quarter of 2015 as compared to $33.8 million in the second quarter of 2014 and $36.5 million in the first quarter of 2015. The Company capitalized $1.1 million in interest to unproved properties during the second quarter of 2015 as compared to $3.3 million in the second quarter of 2014 and $1.0 million in the first quarter of 2015.
During the second quarter, the Company did not record an income tax benefit or loss, and had an effective tax rate of 0%.
Liquidity
On June 30, 2015, Midstates’ liquidity was approximately $402 million, consisting of $251 million of available borrowing capacity under the Company’s revolving credit facility and $151 million of cash and cash equivalents. As a result of its financing transaction in May of 2015, the borrowing base under its revolving credit facility was adjusted to $253 million.
Conference Call Information
The Company will host a conference call to discuss second quarter results on Wednesday, August 5 at 11:00 am Eastern time. Participants may join the conference call by dialing (877) 645-4610 (for U.S. and Canada) or (281) 241-6688 (International). The conference call access code is 82234823 for all participants. To listen via live web cast, please visit the Investors section of the Company’s website, www.midstatespetroleum.com.
A supplemental information packet will be posted to the Company’s website tomorrow morning for reference during the conference call.
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 until August 19 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 82234823 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 90 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. 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 including, but not limited to, access to additional borrowing capacity under its revolving credit facility; costs and difficulties related to the integration of acquired businesses and operations with Midstates’ business and operations; 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.
Midstates Petroleum Company, Inc. |
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June 30, 2015 | December 31, 2014 | ||||||||||
ASSETS | |||||||||||
CURRENT ASSETS: | |||||||||||
Cash and cash equivalents | $ | 151,037 | $ | 11,557 | |||||||
Accounts receivable: | |||||||||||
Oil and gas sales | 67,338 | 69,161 | |||||||||
Joint interest billing | 19,484 | 42,407 | |||||||||
Other | 16,758 | 22,193 | |||||||||
Commodity derivative contracts | 35,858 | 126,709 | |||||||||
Other current assets | 2,388 | 1,098 | |||||||||
Total current assets | 292,863 | 273,125 | |||||||||
PROPERTY AND EQUIPMENT: | |||||||||||
Oil and gas properties, on the basis of full-cost accounting | 3,558,960 | 3,442,681 | |||||||||
Other property and equipment | 14,734 | 13,454 | |||||||||
Less accumulated depreciation, depletion, amortization and impairment | (2,119,458 | ) | (1,333,019 | ) | |||||||
Net property and equipment | 1,454,236 | 2,123,116 | |||||||||
OTHER ASSETS: | |||||||||||
Deferred income taxes | 9,579 | 35,821 | |||||||||
Other noncurrent assets | 39,560 | 43,731 | |||||||||
Total other assets | 49,139 | 79,552 | |||||||||
TOTAL | $ | 1,796,238 | $ | 2,475,793 | |||||||
LIABILITIES AND EQUITY | |||||||||||
CURRENT LIABILITIES: | |||||||||||
Accounts payable | $ | 8,818 | $ | 22,783 | |||||||
Accrued liabilities | 155,221 | 183,831 | |||||||||
Commodity derivative contracts | 1,867 | - | |||||||||
Deferred income taxes | 9,579 | 44,862 | |||||||||
Total current liabilities | 175,485 | 251,476 | |||||||||
LONG-TERM LIABILITIES: | |||||||||||
Asset retirement obligations | 17,737 | 21,599 | |||||||||
Long-term debt | 1,924,412 | 1,735,150 | |||||||||
Other long-term liabilities | 1,401 | 1,706 | |||||||||
Total long-term liabilities | 1,943,550 | 1,758,455 | |||||||||
COMMITMENTS AND CONTINGENCIES (Note 15) | |||||||||||
STOCKHOLDERS' EQUITY: | |||||||||||
Preferred stock, $0.01 par value, 49,675,000 shares authorized; no shares issued or outstanding |
- | - | |||||||||
Series A mandatorily convertible preferred stock, $0.01 par value, $403,320 and $387,808 liquidation value at June 30, 2015 and December 31, 2014, respectively; 8% cumulative dividends; 325,000 shares issued and outstanding |
3 | 3 | |||||||||
Common stock, $0.01 par value, 100,000,000 shares authorized; 7,257,0077 shares issued and 7,164,968 shares outstanding at June 30, 2015 and 7,049,173 shares issued and 6,995,705 shares outstanding at December 31, 2014 |
73 | 70 | |||||||||
Treasury stock, at cost | (3,021 | ) | (2,592 | ) | |||||||
Additional paid-in-capital | 886,284 | 882,528 | |||||||||
Retained deficit | (1,206,136 | ) | (414,147 | ) | |||||||
Total stockholders' equity | (322,797 | ) | 465,862 | ||||||||
TOTAL | $ | 1,796,238 | $ | 2,475,793 |
Midstates Petroleum Company, Inc. |
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For the Three Months
Ended June 30, |
For the Six Months
Ended June 30, |
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2015 | 2014 | 2015 | 2014 | ||||||||||||||||||
REVENUES: | |||||||||||||||||||||
Oil sales | $ | 67,498 | $ | 131,273 | $ | 126,755 | $ | 247,495 | |||||||||||||
Natural gas liquid sales | 10,239 | 23,020 | 21,249 | 48,539 | |||||||||||||||||
Natural gas sales | 15,995 | 24,994 | 35,167 | 50,379 | |||||||||||||||||
Gains (losses) on commodity derivative contracts - net(1) | (19,293 | ) | (31,467 | ) | 2,079 | (54,140 | ) | ||||||||||||||
Other | 315 | 170 | 678 | 379 | |||||||||||||||||
Total revenues | 74,754 | 147,990 | 185,928 | 292,652 | |||||||||||||||||
EXPENSES: | |||||||||||||||||||||
Lease operating and workover | 21,758 | 19,721 | 45,020 | 39,848 | |||||||||||||||||
Gathering and transportation | 3,931 | 2,940 | 7,369 | 5,795 | |||||||||||||||||
Severance and other taxes | 2,505 | 5,632 | 6,069 | 13,279 | |||||||||||||||||
Asset retirement accretion | 390 | 432 | 835 | 929 | |||||||||||||||||
Depreciation, depletion, and amortization | 55,255 | 71,074 | 113,683 | 137,975 | |||||||||||||||||
Impairment in carrying value of oil and gas properties | 498,389 | - | 673,056 | 86,471 | |||||||||||||||||
General and administrative(2) | 11,461 | 13,434 | 23,115 | 25,118 | |||||||||||||||||
Acquisition and transaction costs | 251 | 2,483 | 251 | 2,611 | |||||||||||||||||
Debt restructuring costs | 34,398 | - | 36,141 | - | |||||||||||||||||
Other | - | 609 | 73 | 939 | |||||||||||||||||
Total expenses | 628,338 | 116,325 | 905,612 | 312,965 | |||||||||||||||||
OPERATING INCOME (LOSS) | (553,584 | ) | 31,665 | (719,684 | ) | (20,313 | ) | ||||||||||||||
OTHER INCOME (EXPENSE): | |||||||||||||||||||||
Interest income | 27 | 9 | 36 | 19 | |||||||||||||||||
Interest expense — net of amounts capitalized | (44,880 | ) | (33,813 | ) | (81,382 | ) | (67,760 | ) | |||||||||||||
Total other income (expense) | (44,853 | ) | (33,804 | ) | (81,346 | ) | (67,741 | ) | |||||||||||||
LOSS BEFORE TAXES | (598,437 | ) | (2,139 | ) | (801,030 | ) | (88,054 | ) | |||||||||||||
Income tax benefit | - | 41 | 9,041 | 2,311 | |||||||||||||||||
NET LOSS | $ | (598,437 | ) | $ | (2,098 | ) | $ | (791,989 | ) | $ | (85,743 | ) | |||||||||
Preferred stock dividend | (669 | ) | (4,806 | ) | (800 | ) | (7,426 | ) | |||||||||||||
Participating securities - Series A Preferred Stock | - | - | - | - | |||||||||||||||||
Participating securities - Non-vested Restricted Stock | - | - | - | - | |||||||||||||||||
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (599,106 | ) | $ | (6,904 | ) | $ | (792,789 | ) | $ | (93,169 | ) | |||||||||
Basic and diluted net loss per share attributable to common shareholders | $ | (88.44 | ) | $ | (1.04 | ) | $ | (117.45 | ) | $ | (14.07 | ) | |||||||||
Basic and diluted weighted average number of common shares outstanding | 6,774 | 6,645 | (6,750 | ) | 6,622 | ||||||||||||||||
(1) Includes $42.2 million of realized gains and $17.1 million of realized losses on commodity derivatives for the three months ended June 30, 2015 and 2014, respectively, and $94.8 million of realized gains and $31.9 million of realized losses on commodity derivatives for the six months ended June 30, 2015 and 2014, respectively. |
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(2) Includes $2.1 million, or $0.68 per Boe, and $2.2 million, or $0.73 per Boe, of non-cash expenses related to share-based compensation, respectively, for the three months ended June 30, 2015 and 2014 and $2.9 million, or $0.47 per Boe, and $3.7 million, or $0.67 per Boe, respectively, for the six months ended June 30, 2015 and 2014. |
Midstates Petroleum Company, Inc. |
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Series A
Preferred Stock |
Common Stock | Treasury Stock |
Additional Paid-in-Capital |
Retained Deficit |
Total Stockholders' Equity (Deficit) |
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Balance as of December 31, 2014 | $ | 3 | $ | 70 | $ | (2,592 | ) | $ | 882,528 | $ | (414,147 | ) | $ | 465,862 | ||||||||||||||
Share-based compensation | $ | - | $ | 3 | $ | - | $ | 3,756 | $ | - | $ | 3,759 | ||||||||||||||||
Acquisition of treasury stock | - | - | (429 | ) | - | - | (429 | ) | ||||||||||||||||||||
Net loss | - | - | - | - | (791,989 | ) | (791,989 | ) | ||||||||||||||||||||
Balance as of June 30, 2015 | $ | 3 | $ | 73 | $ | (3,021 | ) | $ | 886,284 | $ | (1,206,136 | ) | $ | (322,797 | ) |
Midstates Petroleum Company, Inc. |
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Three Months
Ended June 30, |
Six Months
Ended June 30, |
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2015 | 2014 | 2015 | 2014 | |||||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||
Net loss | $ | (598,437 | ) | $ | (2,098 | ) | $ | (791,989 | ) | $ | (85,743 | ) | ||||||||||
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
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(Gains) losses on commodity derivative contracts — net | 19,293 | 31,467 | (2,079 | ) | 54,140 | |||||||||||||||||
Net cash (paid) received for commodity derivative contracts not designated as hedging instruments | 42,189 | (17,138 | ) | 94,797 | (31,948 | ) | ||||||||||||||||
Asset retirement accretion | 390 | 432 | 835 | 929 | ||||||||||||||||||
Depreciation, depletion, and amortization | 55,255 | 71,074 | 113,683 | 137,975 | ||||||||||||||||||
Impairment in carrying value of oil and gas properties | 498,389 | - | 673,056 | 86,471 | ||||||||||||||||||
Share-based compensation, net of amounts capitalized to oil and gas properties | 2,096 | 2,127 | 2,897 | 3,668 | ||||||||||||||||||
Deferred income taxes | - | (41 | ) | (9,041 | ) | (2,311 | ) | |||||||||||||||
Amortization of deferred financing costs | 6,487 | 1,811 | 8,356 | 4,197 | ||||||||||||||||||
Paid-in-Kind interest on Third Lien | 1,187 | - | 1,187 | - | ||||||||||||||||||
Amortization of deferred gain from debt restructuring | (1,775 | ) | - | (1,775 | ) | - | ||||||||||||||||
Change in operating assets and liabilities: |
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Accounts receivable — oil and gas sales | (27,433 | ) | 1,769 | 139 | (998 | ) | ||||||||||||||||
Accounts receivable — JIB and other | 9,142 | 6,559 | 22,617 | (1,557 | ) | |||||||||||||||||
Other current and noncurrent assets | (186 | ) | 2,878 | (1,275 | ) | (1,094 | ) | |||||||||||||||
Accounts payable | (3,115 | ) | 1,943 | (2,793 | ) | 4,756 | ||||||||||||||||
Accrued liabilities | 22,234 | (32,805 | ) | 30,340 | 4,365 | |||||||||||||||||
Other | (83 | ) | 174 | (305 | ) | 711 | ||||||||||||||||
Net cash provided by operating activities | $ | 25,633 | $ | 68,152 | $ | 138,650 | $ | 173,561 | ||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||
Investment in property and equipment | (79,111 | ) | (152,767 | ) | (190,278 | ) | (275,547 | ) | ||||||||||||||
Proceeds from the sale of oil and gas properties | 40,284 | 147,519 | 40,284 | 147,519 | ||||||||||||||||||
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Net cash used in investing activities | $ | (38,827 | ) | $ | (5,248 | ) | $ | (149,994 | ) | $ | (128,028 | ) | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||
Proceeds from long-term borrowings | 625,000 | - | 625,000 | - | ||||||||||||||||||
Repayment of revolving credit facility | (468,150 | ) | (131,000 | ) | (468,150 | ) | (131,000 | ) | ||||||||||||||
Proceeds from revolving credit facility | 33,000 | 84,000 | 33,000 | 84,000 | ||||||||||||||||||
Transaction costs incurred | (34,398 | ) | - | (34,398 | ) | - | ||||||||||||||||
Deferred financing costs | (3,038 | ) | (50 | ) | (4,199 | ) | (545 | ) | ||||||||||||||
Acquisition of treasury stock | (124 | ) | (842 | ) | (429 | ) | (1,491 | ) | ||||||||||||||
|
||||||||||||||||||||||
Net cash used in financing activities | $ | 152,290 | $ | (47,892 | ) | $ | 150,824 | $ | (49,036 | ) | ||||||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 139,096 | 15,012 | 139,480 | (3,503 | ) | |||||||||||||||||
Cash and cash equivalents, beginning of period | 11,941 | 14,648 | 11,557 | 33,163 | ||||||||||||||||||
Cash and cash equivalents, end of period | $ | 151,037 | $ | 29,660 | $ | 151,037 | $ | 29,660 |
Midstates Petroleum Company, Inc. |
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For the Three Months Ended
June 30, |
For the Three Months
Ended March 31, |
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2015 | 2014 | 2015 | |||||||||||
PRODUCTION DATA - Mississippian: | |||||||||||||
Oil (Boe/day) | 10,828 | 8,221 | 10,675 | ||||||||||
Natural gas liquids (Boe/day) | 5,314 | 4,445 | 5,367 | ||||||||||
Natural gas (Mcf/day) | 65,324 | 48,185 | 62,933 | ||||||||||
Oil equivalents (MBoe) | 2,460 | 1,883 | 2,388 | ||||||||||
Average daily production (Boe/day) | 27,029 | 20,697 | 26,531 | ||||||||||
PRODUCTION DATA - Anadarko: | |||||||||||||
Oil (Boe/day) | 2,937 | 4,380 | 3,028 | ||||||||||
Natural gas liquids (Boe/day) | 1,404 | 1,780 | 1,240 | ||||||||||
Natural gas (Mcf/day) | 13,468 | 16,348 | 12,734 | ||||||||||
Oil equivalents (MBoe) | 599 | 809 | 575 | ||||||||||
Average daily production (Boe/day) | 6,586 | 8,885 | 6,390 | ||||||||||
PRODUCTION DATA - Gulf Coast: | |||||||||||||
Oil (Boe/day) | 194 | 1,688 | 858 | ||||||||||
Natural gas liquids (Boe/day) | 55 | 384 | 275 | ||||||||||
Natural gas (Mcf/day) | 177 | 1,544 | 664 | ||||||||||
Oil equivalents (MBoe) | 25 | 212 | 112 | ||||||||||
Average daily production (Boe/day) | 278 | 2,329 | 1,243 | ||||||||||
PRODUCTION DATA - Combined: | |||||||||||||
Oil (Boe/day) | 13,959 | 14,290 | 14,561 | ||||||||||
Natural gas liquids (Boe/day) | 6,773 | 6,609 | 6,882 | ||||||||||
Natural gas (Mcf/day) | 78,969 | 66,078 | 76,331 | ||||||||||
Oil equivalents (MBoe) | 3,084 | 2,904 | 3,075 | ||||||||||
Average daily production (Boe/day) | 33,893 | 31,912 | 34,164 | ||||||||||
AVERAGE SALES PRICES: | |||||||||||||
Oil, without realized derivatives (per Bbl) | $ | 53.14 | $ | 100.95 | $ | 45.22 | |||||||
Oil, with realized derivatives (per Bbl) | 81.19 | 89.12 | 79.45 | ||||||||||
Natural gas liquids, without realized derivatives (per Bbl) | 16.61 | 38.27 | 17.78 | ||||||||||
Natural gas liquids, with realized derivatives (per Bbl) | 16.61 | 38.52 | 17.78 | ||||||||||
Natural gas, without realized derivatives (per Mcf) | 2.23 | 4.16 | 2.79 | ||||||||||
Natural gas, with realized derivatives (per Mcf) | 3.14 | 3.84 | 3.92 | ||||||||||
COSTS AND EXPENSES (PER BOE OF PRODUCTION) | |||||||||||||
Lease operating and workover | $ | 7.06 | $ | 6.79 | $ | 7.56 | |||||||
Gathering and transportation | 1.27 | 1.01 | 1.12 | ||||||||||
Severance and other taxes | 0.81 | 1.94 | 1.16 | ||||||||||
Asset retirement accretion | 0.13 | 0.15 | 0.14 | ||||||||||
Depreciation, depletion, and amortization | 17.92 | 24.47 | 19.00 | ||||||||||
Impairment of oil and gas properties | 161.60 | - | 56.80 | ||||||||||
General and administrative | 3.79 | 4.63 | 3.79 | ||||||||||
Acquisition and transaction costs | 0.09 | 0.86 | - | ||||||||||
Debt restructuring costs | 11.15 | - | 0.57 | ||||||||||
Other | - | 0.21 | 0.03 |
Midstates Petroleum Company, Inc. |
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2015 |
||||||||||||||||||||||||
Oil | Q3 | Q4 | Total | |||||||||||||||||||||
WTI Swaps | Volume (Bbls) | 1,104,000 | 1,104,000 | 2,208,000 | ||||||||||||||||||||
Volume (Bbl/d) | 12,000 | 12,000 | 12,000 | |||||||||||||||||||||
Price ($/Bbl) | $ | 71.56 | $ | 71.56 | $ | 71.56 | ||||||||||||||||||
Natural Gas | ||||||||||||||||||||||||
Swaps | Volume (Mmbtu) | 4,600,000 | 4,600,000 | 9,200,000 | ||||||||||||||||||||
Volume (Mmbtu/d) | 50,000 | 50,000 | 50,000 | |||||||||||||||||||||
Price ($/Mmbtu) | $ | 4.13 | $ | 4.13 | $ | 4.13 |
NON-GAAP FINANCIAL MEASURES |
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Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of the Company's consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDA as earnings before interest income, interest expense, income taxes, depreciation, depletion and amortization, property impairments, unrealized commodity derivative gains and losses and non-cash stock-based compensation expense. Adjusted EBITDA is not a measure of net income or cash flows as determined by United States generally accepted accounting principles, or GAAP. |
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The following tables present a reconciliation of the non-GAAP financial measure of Adjusted EBITDA to the GAAP financial measures of net income (loss) and net cash provided by operating activities, respectively. |
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Midstates Petroleum Company, Inc. |
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For the Three Months
Ended June 30, |
For the Six Months
Ended June 30, |
For the Three Months
Ended March 31, |
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2015 | 2014 | 2015 | 2014 | 2015 | ||||||||||||||||||
Adjusted EBITDA reconciliation to net loss: |
|
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Net loss | $ | (598,437 | ) | $ | (2,098 | ) | $ | (791,989 | ) | $ | (85,743 | ) | $ | (193,554 | ) | |||||||
Depreciation, depletion and amortization | 55,255 | 71,074 | 113,683 | 137,975 | 58,428 | |||||||||||||||||
Impairment of oil and gas properties | 498,389 | - | 673,056 | 86,471 | 174,667 | |||||||||||||||||
Loss on sale/impairment of inventory |
- |
- |
97 |
- |
97 | |||||||||||||||||
(Gains) losses on commodity derivative contracts — net | 19,293 | 31,467 | (2,079 | ) | 54,140 | (21,372 | ) | |||||||||||||||
Net cash (paid) received for commodity derivative contracts not designated as hedging instruments |
42,189 | (17,138 | ) | 94,797 | (31,948 | ) | 52,608 | |||||||||||||||
Income tax benefit | - | (41 | ) | (9,041 | ) | (2,311 | ) | (9,041 | ) | |||||||||||||
Interest income | (27 | ) | (9 | ) | (36 | ) | (19 | ) | (9 | ) | ||||||||||||
Interest expense, net of amounts capitalized | 44,880 | 33,813 | 81,382 | 67,760 | 36,503 | |||||||||||||||||
Asset retirement obligation accretion | 390 | 432 | 835 | 929 | 445 | |||||||||||||||||
Share-based compensation, net of amounts capitalized | 2,096 | 2,127 | 2,897 | 3,668 | 801 | |||||||||||||||||
Adjusted EBITDA | $ | 64,028 | $ | 119,627 | $ | 163,602 | $ | 230,922 | $ | 99,573 | ||||||||||||
Adjusted EBITDA reconciliation to net cash provided by operating activities: | ||||||||||||||||||||||
Net cash provided by operating activities | 25,633 | 79,615 | 138,650 | 177,047 | 113,017 | |||||||||||||||||
Changes in working capital(1) |
(559 | ) | 8,019 | (48,626 | ) | (9,669 | ) | (48,069 | ) | |||||||||||||
Interest income | (27 | ) | (9 | ) | (36 | ) | (19 | ) | (9 | ) | ||||||||||||
Interest expense, net of amounts capitalized and accrued but not paid(2) | 45,468 | 33,813 | 81,970 | 67,760 | 36,503 | |||||||||||||||||
Amortization of deferred financing costs | (6,487 | ) | (1,811 | ) | (8,356 | ) | (4,197 | ) | (1,869 | ) | ||||||||||||
Adjusted EBITDA | $ | 64,028 | $ | 119,627 | $ | 163,602 | $ | 230,922 | $ | 99,573 | ||||||||||||
Acquisition and transaction costs | 251 | 2,483 | 251 | 2,611 | - | |||||||||||||||||
Debt restructuring costs | 34,398 | - | 36,141 | - | 1,743 | |||||||||||||||||
|
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Adjusted EBITDA, before acquisition and transaction costs and debt restructuring costs |
$ | 98,677 | $ | 122,110 | $ | 199,994 | $ | 233,533 | $ | 101,316 | ||||||||||||
Adjusted EBITDA, before acquisition and transaction costs and debt restructuring costs per Boe |
$ | 32.00 | $ | 42.05 | $ | 32.47 | $ | 42.35 | $ | 32.95 | ||||||||||||
(1) Changes in working capital for all periods have been adjusted for the loss on sale of field equipment inventory and current taxes. |
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(2) Interest expense includes $1.2 million of paid-in-kind interest on the Third Lien Notes in the three and six month periods ended June 30, 2015, as well as a $1.7 million reduction in interest expense from amortization of the deferred gain related to the debt restructuring. |
NON-GAAP FINANCIAL MEASURES |
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The following table provides information that the Company believes may be useful to investors who follow the practice of some industry analysts who adjust reported Company earnings to exclude certain non-cash items. Adjusted net income is not a measure of net income as determined by United States generally accepted accounting principles, or GAAP. |
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The following table provides a reconciliation of net income (GAAP) to adjusted net income (non-GAAP) (unaudited and in thousands). |
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For the Three Months
Ended June 30, |
For the Six Months
Ended June 30, |
For the Three Months
Ended March 31, |
||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | ||||||||||||||||||
Net income (loss) - GAAP | $ | (598,437 | ) | $ | (2,098 | ) | $ | (791,989 | ) | $ | (85,743 | ) | $ | (193,554 | ) | |||||||
Adjustments for certain non-cash items: | ||||||||||||||||||||||
Unrealized mark-to-market (gains) losses on commodity derivative contracts |
61,482 | 14,329 | 92,718 | 22,192 | 31,236 | |||||||||||||||||
Impairment on oil and gas properties | 498,389 | - | 673,056 | 86,471 | 174,667 | |||||||||||||||||
Acquisition and transaction costs | 251 | 2,483 | 251 | 2,611 | - | |||||||||||||||||
Debt restructuring costs | 34,398 | - | 36,141 | - | 1,743 | |||||||||||||||||
Tax impact(1) |
- | (322 | ) | (8,646 | ) | (2,920 | ) | (9,189 | ) | |||||||||||||
Adjusted net income (loss) - non-GAAP | $ | (3,917 | ) | $ | 14,392 | $ | 1,531 | $ | 22,611 | $ | 4,903 | |||||||||||
(1) The tax impact is computed utilizing the Company’s effective federal and state income tax rates. The income tax rate for the three months ended June 30, 2015 was approximately 0.0%. |
NON-GAAP FINANCIAL MEASURES |
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The following table provides information that the Company believes may be useful to investors who follow the practice of some industry analysts who adjust operating expenses to exclude certain non-cash items. Cash Operating Expenses is not a measure of operating expenses as determined by United States generally accepted accounting principles, or GAAP. |
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The following table provides a reconciliation of Operating Expenses (GAAP) to Cash Operating Expenses (non-GAAP) (unaudited and in thousands). |
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For the Three Months
Ended June 30, |
For the Six Months
Ended June 30, |
For the Three Months
Ended March 31, |
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2015 | 2014 | 2015 | 2014 | 2015 | ||||||||||||||||||
Operating Expenses - GAAP | $ | 628,338 | $ | 116,325 | $ | 905,612 | $ | 312,965 | $ | 277,299 | ||||||||||||
Adjustments for certain non-cash items: | ||||||||||||||||||||||
Asset retirement accretion | (390 | ) | (432 | ) | (835 | ) | (929 | ) | (445 | ) | ||||||||||||
Share-based compensation, net of amounts capitalized | (2,096 | ) | (2,127 | ) | (2,897 | ) | (3,668 | ) | (801 | ) | ||||||||||||
Depreciation, depletion, and amortization | (55,255 | ) | (71,074 | ) | (113,683 | ) | (137,975 | ) | (58,428 | ) | ||||||||||||
Impairment on oil and gas properties | (498,389 | ) | - | (673,056 | ) | (86,471 | ) | (174,667 | ) | |||||||||||||
Other | - | (609 | ) | 73 | (939 | ) | (97 | ) | ||||||||||||||
Cash Operating Expenses - Non-GAAP | $ | 72,208 | $ | 42,083 | $ | 115,214 | $ | 82,983 | $ | 42,861 | ||||||||||||
Cash Operating Expenses - Non-GAAP, per Boe | $ | 23.41 | $ | 14.49 | $ | 18.71 | $ | 15.05 | $ | 13.94 | ||||||||||||
Acquisition, transaction costs and debt restructuring costs | $ | 34,649 | $ | 2,483 | $ | 36,392 | $ | 2,611 | $ | 1,743 | ||||||||||||
Acquisition, transaction costs and debt restructuring costs, per Boe | $ | 11.24 | $ | 0.86 | $ | 5.91 | $ | 0.47 | $ | 0.57 | ||||||||||||
Severance and other costs associated with the Houston office closure | $ | 1,280 | $ | - | $ | 2,966 | $ | - | $ | 1,686 | ||||||||||||
Severance and other costs associated with the Houston office closure, per Boe | $ | 0.42 | $ | - | $ | 0.48 | $ | - | $ | 0.55 | ||||||||||||
Adjusted Cash Operating Expenses - Non-GAAP | $ | 36,279 | $ | 39,600 | $ | 75,856 | $ | 80,372 | $ | 39,432 | ||||||||||||
Adjusted Cash Operating Expenses - Non-GAAP, per Boe | $ | 11.75 | $ | 13.63 | $ | 12.31 | $ | 14.57 | $ | 12.81 | ||||||||||||