MIDSTATES PETROLEUM COMPANY INC Midstates Petroleum Company, Inc. (“Midstates” or the “Company”) (NYSE: MPO) today announced its financial and operating results for the three months ended September 30, 2015.
Third Quarter and Other Highlights:
- Generated Adjusted EBITDA of $80 million, which outpaced operational capital by $25 million for the third quarter of 2015. Adjusted EBITDA outpaced operational capital by $62 million for the first nine months of 2015.
- Reduced adjusted cash operating expenses to $10.32 per Boe, down 8% from $11.20 per Boe in the third quarter of 2014 and down 12% from $11.75 per Boe in the second quarter of 2015.
- Achieved total Company production of 32,609 Boe per day in the third quarter compared with 33,799 Boe per day in the third quarter of 2014 and 33,893 Boe per day in the second quarter of 2015. A temporary interruption of production at a Midstates’ well site due to a previously reported incident reduced third quarter production by approximately 650 Boe per day.
- Exceeded full year 2015 Mississippian Lime well cost reduction target; current standard AFE well cost is $3.1 million.
- Generating well level returns of greater than 35% in the Mississippian Lime, using October 12, 2015 strip pricing and current standard AFE well cost of $3.1 million.
- Reported liquidity on September 30, 2015 of $417 million comprised of $167 million in cash and $250 million of availability on its revolving credit facility.
- Announced reaffirmation of its borrowing base under its revolving credit facility at $252 million.
- Adjusted Net Income totaled a loss of $6.5 million, or a loss of $0.95 per common share, in the third quarter of 2015.
Jake Brace, President and Chief Executive Officer commented, “In the third quarter, we benefited from continued improvements in drilling efficiency, operating reliably and at a low cost, and shepherding our liquidity. This enabled us to continue generating very strong returns in the current low commodity price environment and provides us with more operational flexibility as we move through the rest of 2015 and into 2016. These differentiated results are driven by our team’s technical expertise and the continuous improvement in our geologic understanding of our premier Miss Lime asset. I am very pleased with the results we achieved given the challenging price environment.”
(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. On August 3, 2015, the Company completed a 1-for-10 reverse stock split of its outstanding common stock. The financial discussion and financial statements included in the tables below give retrospective effect to the reverse stock split for all periods presented.)
Operational Discussion
In the third quarter of 2015, Midstates invested $55 million of operating capital, spud 19 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 |
For the Nine | |||||||||||
| Mississippian Lime | $ | 53,222 | $ | 209,811 | ||||||||
| Anadarko Basin | 1,805 | 6,461 | ||||||||||
| Gulf Coast | - | 2,083 | ||||||||||
| Total operational capital expenditures incurred | $ | 55,027 | $ | 218,355 | ||||||||
The breakdown of all capital spending was: | ||||||||||||
For the Three |
For the Nine | |||||||||||
| Drilling and completion activities, including recompletions | $ | 53,145 | $ | 213,545 | ||||||||
| Acquisition of acreage and seismic data | 1,882 | 4,810 | ||||||||||
| Operational capital expenditures incurred | $ | 55,027 | $ | 218,355 | ||||||||
| Capitalized G&A, office, ARO & other | 3,328 | 7,664 | ||||||||||
| Capitalized interest | 858 | 2,924 | ||||||||||
| Total capital expenditures incurred | $ | 59,213 | $ | 228,943 | ||||||||
Mississippian Lime Update
Production from the Company’s Mississippian Lime properties averaged 26,358 Boe per day for the third quarter of 2015. During the quarter, the Company experienced a temporary production interruption due to a previously reported incident that reduced third quarter production by approximately 650 Boe per day. After adjusting for the estimated impact of the temporary production interruption, the Company’s third quarter production would have been essentially flat versus the 27,029 Boe per day for the second quarter of 2015. Through October 26, 2015, the Company had 275 wells on production for more than 30 days with an average peak 30-day production rate of 557 Boe per day.
The Company had three rigs drilling in its Mississippian Lime horizontal well program in Woods and Alfalfa Counties, Oklahoma for a majority of the third quarter. Midstates spud a total of 19 wells, of which eight were producing, eight were awaiting completion and three were drilling at September 30, 2015. The Company brought 19 fracture stimulated horizontal wells online during the third quarter.
The Company’s total operated rig count remains at three rigs, all of which are drilling in the Mississippian Lime, and Midstates plans to continue to operate a three rig program in the Mississippian Lime in the near term. Additionally, the Company has surpassed its year end 2015 Mississippian Lime well cost target of $3.3 million and its current standard AFE well cost is $3.1 million. With current standard AFE well cost of $3.1 million, Midstates is generating rates of return in excess of 35% at current strip pricing.
Anadarko Basin Update
The Company does not plan to operate any rigs in the Anadarko Basin area in the near term. Due to the current commodity price environment, Midstates’ focus 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 third quarter and had no wells awaiting completion on September 30, 2015. Production for the third quarter in the area averaged 6,251 Boe per day.
Financial Discussion
Adjusted EBITDA, which excludes transaction costs and debt restructuring costs, totaled $80.1 million in the third quarter of 2015, compared with $131.7 million in the third quarter of 2014 and $98.7 million in the second quarter of 2015. The Company incurred no transaction costs or debt restructuring costs in the third quarter of 2015; however, the third quarter of 2014 and the second quarter of 2015 included $1.3 million and $34.6 million of such costs, respectively. Lower average realized prices were the main drivers in the decline in Adjusted EBITDA versus the third quarter of 2014 and the second quarter of 2015.
Adjusted Net Income, which excludes transaction costs and debt restructuring costs, impairment of oil and gas properties, and unrealized gains and losses on derivatives and the related tax impact, totaled a loss of $6.5 million for the third quarter of 2015, or $0.95 per share. The Company reported a GAAP net loss of $494.3 million (before preferred dividends) for the third quarter of 2015, which includes a full cost ceiling impairment of $486.9 million (before taxes), compared to net income of $74.6 million for the third quarter of 2014 and a net loss of $598.4 million (including a full cost ceiling impairment of $498.4 million) in the second quarter of 2015.
Production and Pricing
Production during the third quarter of 2015 totaled 32,609 Boe per day, compared with 33,799 Boe per day in the third quarter of 2014 and 33,893 Boe per day during the second quarter of 2015. Third quarter 2015 production from the Company’s Mississippian Lime properties contributed roughly 81%, or 26,358 Boe per day and the Anadarko Basin properties contributed roughly 19%, or 6,251 Boe per day. For the total Company, oil volumes comprised 39% of total production, natural gas liquids (NGLs) 21%, and natural gas 40% during the third quarter.
In the third quarter of 2015, Midstates’ average realized price per barrel of oil, before realized commodity derivatives, was $43.27 ($66.94 with realized derivatives) while its average realized price for NGL sales was $13.61 per barrel (there were no NGL hedges in place during the third quarter). Natural gas averaged $2.40 per thousand cubic feet (Mcf), before realized derivatives ($3.32 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 $96.4 million, or 56%, to $76.6 million during the third quarter of 2015, as compared to $173.0 million for the third quarter of 2014, and decreased by $17.1 million, or 18%, as compared to $93.7 million in the second quarter of 2015. The decrease in revenues for the third quarter of 2015 versus the third quarter of 2014 and the second quarter of 2015 was mainly attributable to lower average realized commodity prices. The realized gain on derivatives for the third quarter of 2015 was $34.3 million, compared to a realized loss of $7.3 million for the third quarter of 2014 and a realized gain of $42.2 million for the second quarter of 2015.
Midstates did not add any new hedges on its production during the third 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 fourth quarter of 2015 at an average price of approximately $71.56 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 fourth quarter of 2015 at an average price of approximately $4.13 per million BTUs. A detailed summary of the Company’s hedging position as of November 3, 2015 is included in the tables below.
Costs and Expenses
Adjusted Cash Operating Expenses for the third quarter of 2015 were $10.32 per Boe, compared with $11.20 per Boe in the third quarter of 2014 and $11.75 per Boe in the second quarter of 2015. The decrease in per Boe cash costs in the third quarter of 2015 compared with the second quarter of 2015 was attributable to lower lease operating and workover expense and lower general and administrative expenses.
Lease operating and workover expenses (LOE) totaled $18.8 million, or $6.27 per Boe, in the third quarter of 2015, compared with $17.0 million, or $5.46 per Boe, in the third quarter of 2014 and $21.8 million, or $7.06 per Boe, in the second quarter of 2015. Third quarter 2015 LOE and workover expenses decreased on a per Boe basis as compared to second quarter of 2015 primarily due to the divestiture of the Company’s producing assets in Louisiana, where operating costs were relatively higher, and lower LOE costs in the Anadarko Basin as a result of the Company’s workover program during 2015.
Severance and other taxes for the third quarter of 2015 were $2.7 million (3.5% of oil, NGL and natural gas sales revenue) as compared to $5.8 million (3.3% of oil, NGL and natural gas sales revenue) in the same period in 2014 and $2.5 million (2.7% of oil, NGL and natural gas sales revenue) in the second quarter of 2015.
General and administrative expenses totaled $6.7 million, or $2.23 per Boe, compared with $9.9 million, or $3.18 per Boe, in the third quarter of 2014, and $11.5 million, or $3.71 per Boe, in the second quarter of 2015. Third quarter 2015, third quarter 2014 and second quarter 2015 general and administrative expenses included non-cash share-based compensation expense of $0.9 million ($0.31 per Boe), $1.7 million ($0.54 per Boe) and $2.1 million ($0.68 per Boe), respectively. General and administrative expenses in the third quarter and second quarter of 2015 included approximately $0.3 million ($0.10 per Boe) and $1.3 million ($0.42 per Boe), respectively, 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. General and administrative expense for the third quarter of 2015 was also reduced by the capitalization of project related overhead costs, a portion of which will be recovered from Midstates’ joint interest owners.
Interest expense totaled $40.6 million (net of amounts capitalized) for the third quarter of 2015 as compared to $34.3 million in the third quarter of 2014 and $44.9 million in the second quarter of 2015. The Company capitalized $0.9 million in interest to unproved properties during the third quarter of 2015 as compared to $2.6 million in the third quarter of 2014 and $1.1 million in the second quarter of 2015.
During the third quarter, the Company did not record an income tax benefit or loss, and had an effective tax rate of 0%.
Balance Sheet and Liquidity
On September 30, 2015, all 325,000 shares of the Company’s Series A Preferred Stock mandatorily converted into 3,738,424 shares of the Company’s common stock at a conversion price of $110.00 per share.
On September 30, 2015, Midstates’ liquidity was approximately $417 million, consisting of $250 million of available borrowing capacity under the Company’s revolving credit facility and $167 million of cash and cash equivalents. As a result of its lenders’ semiannual review, the borrowing base under its revolving credit facility was reaffirmed at $252 million.
Conference Call Information
The Company will host a conference call to discuss third quarter results on Wednesday, November 4 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 62080305 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 November 18 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 62080305 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. Condensed Consolidated Balance Sheets (In thousands, except share amounts) (Unaudited) | ||||||||||
| September 30, 2015 | December 31, 2014 | |||||||||
| ASSETS | ||||||||||
| CURRENT ASSETS: | ||||||||||
| Cash and cash equivalents | $ | 166,783 | $ | 11,557 | ||||||
| Accounts receivable: | ||||||||||
| Oil and gas sales | 44,785 | 69,161 | ||||||||
| Joint interest billing | 10,371 | 42,407 | ||||||||
| Other | 14,609 | 22,193 | ||||||||
| Commodity derivative contracts | 33,051 | 126,709 | ||||||||
| Other current assets | 1,559 | 1,098 | ||||||||
| Total current assets | 271,158 | 273,125 | ||||||||
| PROPERTY AND EQUIPMENT: | ||||||||||
| Oil and gas properties, on the basis of full-cost accounting | 3,615,661 | 3,442,681 | ||||||||
| Other property and equipment | 15,065 | 13,454 | ||||||||
| Less accumulated depreciation, depletion, amortization and impairment | (2,651,068 | ) | (1,333,019 | ) | ||||||
| Net property and equipment | 979,658 | 2,123,116 | ||||||||
| OTHER ASSETS: | ||||||||||
| Deferred income taxes | 9,245 | 35,821 | ||||||||
| Other noncurrent assets | 38,000 | 43,731 | ||||||||
| Total other assets | 47,245 | 79,552 | ||||||||
| TOTAL | $ | 1,298,061 | $ | 2,475,793 | ||||||
| LIABILITIES AND EQUITY | ||||||||||
| CURRENT LIABILITIES: | ||||||||||
| Accounts payable | $ | 5,546 | $ | 22,783 | ||||||
| Accrued liabilities | 160,162 | 183,831 | ||||||||
| Deferred income taxes | 9,245 | 44,862 | ||||||||
| Total current liabilities | 174,953 | 251,476 | ||||||||
| LONG-TERM LIABILITIES: | ||||||||||
| Asset retirement obligations | 18,152 | 21,599 | ||||||||
| Long-term debt | 1,916,021 | 1,735,150 | ||||||||
| Other long-term liabilities | 4,946 | 1,706 | ||||||||
| Total long-term liabilities | 1,939,119 | 1,758,455 | ||||||||
COMMITMENTS AND CONTINGENCIES (Note 15) | ||||||||||
STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||||
Preferred stock, $0.01 par value, 49,675,000 shares authorized; no shares issued or outstanding at September 30, 2015 and December 31, 2014 | - | - | ||||||||
Series A mandatorily convertible preferred stock, $0.01 par value, $387,808 liquidation value at December 31, 2014; 8% cumulative dividends, 325,000 shares issued and outstanding at December 31, 2014 | - | 3 | ||||||||
Common stock, $0.01 par value, 100,000,000 shares authorized; 10,985,783 shares issued and 10,891,270 shares outstanding at September 30, 2015 and 7,049,173 shares issued and 6,995,705 shares outstanding at December 31, 2014 | 110 | 70 | ||||||||
| Treasury stock, at cost | (3,068 | ) | (2,592 | ) | ||||||
| Additional paid-in-capital | 887,424 | 882,528 | ||||||||
| Retained deficit | (1,700,477 | ) | (414,147 | ) | ||||||
Total stockholders’ equity (deficit) | (816,011 | ) | 465,862 | |||||||
| TOTAL | $ | 1,298,061 | $ | 2,475,793 | ||||||
Midstates Petroleum Company, Inc. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) | ||||||||||||||||||||
For the Three Months |
For the Nine Months | |||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||
| REVENUES: | ||||||||||||||||||||
| Oil sales | $ | 50,684 | $ | 125,430 | $ | 177,439 | $ | 372,925 | ||||||||||||
| Natural gas liquid sales | 8,498 | 22,989 | 29,747 | 71,528 | ||||||||||||||||
| Natural gas sales | 17,375 | 24,607 | 52,543 | 74,986 | ||||||||||||||||
| Gains (losses) on commodity derivative contracts - net(1) | 33,368 | 50,978 | 35,447 | (3,162 | ) | |||||||||||||||
| Other | 438 | 757 | 1,106 | 1,136 | ||||||||||||||||
| Total revenues | 110,363 | 224,761 | 296,282 | 517,413 | ||||||||||||||||
| EXPENSES: | ||||||||||||||||||||
| Lease operating and workover | 18,803 | 16,965 | 63,823 | 56,813 | ||||||||||||||||
| Gathering and transportation | 4,017 | 3,902 | 11,386 | 9,697 | ||||||||||||||||
| Severance and other taxes | 2,660 | 5,780 | 8,729 | 19,059 | ||||||||||||||||
| Asset retirement accretion | 382 | 406 | 1,217 | 1,335 | ||||||||||||||||
| Depreciation, depletion, and amortization | 44,714 | 73,109 | 158,397 | 211,084 | ||||||||||||||||
| Impairment in carrying value of oil and gas properties | 486,895 | - | 1,159,951 | 86,471 | ||||||||||||||||
| General and administrative(2) | 6,677 | 9,879 | 29,792 | 34,997 | ||||||||||||||||
| Acquisition and transaction costs | 5 | 1,283 | 256 | 3,894 | ||||||||||||||||
| Debt restructuring costs and advisory fees | - | - | 36,141 | - | ||||||||||||||||
| Other | - | 2,346 | 63 | 3,285 | ||||||||||||||||
| Total expenses | 564,153 | 113,670 | 1,469,755 | 426,635 | ||||||||||||||||
| OPERATING INCOME (LOSS) | (453,790 | ) | 111,091 | (1,173,473 | ) | 90,778 | ||||||||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||||||
| Interest income | 43 | 10 | 80 | 29 | ||||||||||||||||
| Interest expense — net of amounts capitalized | (40,595 | ) | (34,288 | ) | (121,978 | ) | (102,048 | ) | ||||||||||||
| Total other income (expense) | (40,552 | ) | (34,278 | ) | (121,898 | ) | (102,019 | ) | ||||||||||||
| INCOME (LOSS) BEFORE TAXES | (494,342 | ) | 76,813 | (1,295,371 | ) | (11,241 | ) | |||||||||||||
| Income tax (expense) benefit | - | (2,216 | ) | 9,041 | 96 | |||||||||||||||
| NET INCOME (LOSS) | $ | (494,342 | ) | $ | 74,597 | $ | (1,286,330 | ) | $ | (11,145 | ) | |||||||||
| Preferred stock dividend | (148 | ) | (1,908 | ) | (948 | ) | (9,334 | ) | ||||||||||||
| Participating securities - Series A Preferred Stock | - | (23,973 | ) | - | - | |||||||||||||||
| Participating securities - Non-vested Restricted Stock | - | (2,524 | ) | - | - | |||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (494,490 | ) | $ | 46,192 | $ | (1,287,278 | ) | $ | (20,479 | ) | |||||||||
| Basic and diluted net income (loss) per share attributable to common shareholders | $ | (72.34 | ) | $ | 6.94 | $ | (189.90 | ) | $ | (3.09 | ) | |||||||||
| Basic and diluted weighted average number of common shares outstanding | 6,835 | 6,659 | 6,779 | 6,634 | ||||||||||||||||
(1) | Includes $34.3 million of realized gains and $7.3 million of realized losses on commodity derivatives for the three months ended September 30, 2015 and 2014, respectively, and $129.1 million of realized gains and $39.2 million of realized losses on commodity derivatives for the nine months ended September 30, 2015 and 2014, respectively. | |
(2) | Includes $0.9 million, or $0.31 per Boe, and $1.7 million, or $0.54 per Boe, of non-cash expenses related to share-based compensation for the three months ended September 30, 2015 and 2014, respectively, and $3.8 million, or $0.42 per Boe, and $5.4 million, or $0.62 per Boe, for the nine months ended September 30, 2015 and 2014, respectively. | |
Midstates Petroleum Company, Inc. Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (In thousands, except share amounts) (Unaudited) | |||||||||||||||||||||||||||||
Additional |
Retained |
Total | |||||||||||||||||||||||||||
Series A | Common Stock | Treasury Stock | |||||||||||||||||||||||||||
| Balance as of December 31, 2014 | $ | 3 | $ | 70 | $ | (2,592 | ) | $ | 882,528 | $ | (414,147 | ) | $ | 465,862 | |||||||||||||||
| Share-based compensation | $ | - | $ | 3 | $ | - | $ | 4,930 | $ | - | 4,933 | ||||||||||||||||||
| Acquisition of treasury stock | - | - | (476 | ) | - | - | (476 | ) | |||||||||||||||||||||
| Net loss | - | - | - | - | (1,286,330 | ) | (1,286,330 | ) | |||||||||||||||||||||
| Conversion of preferred shares | (3 | ) | 37 | - | (34 | ) | - | - | |||||||||||||||||||||
| Balance as of September 30, 2015 | $ | - | $ | 110 | $ | (3,068 | ) | $ | 887,424 | $ | (1,700,477 | ) | $ | (816,011 | ) | ||||||||||||||
Additional |
Retained |
Total | |||||||||||||||||||||||||||
Series A | Common Stock | Treasury Stock | |||||||||||||||||||||||||||
| Balance as of December 31, 2013 | $ | 3 | $ | 69 | $ | (664 | ) | $ | 871,667 | $ | (531,076 | ) | $ | 339,999 | |||||||||||||||
| Share-based compensation | $ | - | $ | 2 | $ | - | $ | 7,143 | $ | - | 7,145 | ||||||||||||||||||
| Acquisition of treasury stock | - | - | (1,722 | ) | - | - | (1,722 | ) | |||||||||||||||||||||
| Net loss | - | - | - | - | (11,145 | ) | (11,145 | ) | |||||||||||||||||||||
| Balance as of September 30, 2014 | $ | 3 | $ | 71 | $ | (2,386 | ) | $ | 878,810 | $ | (542,221 | ) | $ | 334,277 | |||||||||||||||
Midstates Petroleum Company, Inc. Condensed Consolidated Statement of Cash Flows (In thousands) (Unaudited) | ||||||||||||||||||||
Three Months |
Nine Months | |||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||
| Net loss | $ | (494,342 | ) | $ | 74,597 | $ | (1,286,330 | ) | $ | (11,145 | ) | |||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||||||
| (Gains) losses on commodity derivative contracts — net | (33,368 | ) | (50,978 | ) | (35,447 | ) | 3,162 | |||||||||||||
| Net cash received (paid) for commodity derivative contracts | 34,307 | (7,265 | ) | 129,105 | (39,213 | ) | ||||||||||||||
| Asset retirement accretion | 382 | 406 | 1,217 | 1,335 | ||||||||||||||||
| Depreciation, depletion, and amortization | 44,714 | 73,109 | 158,397 | 211,084 | ||||||||||||||||
| Impairment in carrying value of oil and gas properties | 486,895 | - | 1,159,951 | 86,471 | ||||||||||||||||
| Share-based compensation, net of amounts capitalized to oil and gas properties | 916 | 1,690 | 3,813 | 5,358 | ||||||||||||||||
| Deferred income taxes | - | 2,215 | (9,041 | ) | (96 | ) | ||||||||||||||
| Amortization of deferred financing costs | 1,435 | 1,821 | 9,791 | 6,018 | ||||||||||||||||
| Paid-in-kind interest expense | 2,598 | - | 3,785 | - | ||||||||||||||||
| Amortization of deferred gain on debt restructuring | (7,204 | ) | - | (8,979 | ) | - | ||||||||||||||
| Transaction costs for debt restructuring | - | - | 34,398 | - | ||||||||||||||||
| Change in operating assets and liabilities: | ||||||||||||||||||||
| Accounts receivable — oil and gas sales | 18,044 | 6,177 | 18,183 | 5,179 | ||||||||||||||||
| Accounts receivable — JIB and other | 5,676 | 7,621 | 28,293 | 6,064 | ||||||||||||||||
| Other current and noncurrent assets | 988 | 2,909 | (287 | ) | 1,815 | |||||||||||||||
| Accounts payable | (655 | ) | (4,253 | ) | (3,448 | ) | 503 | |||||||||||||
| Accrued liabilities | 37,094 | 26,556 | 33,036 | 30,921 | ||||||||||||||||
| Other | (238 | ) | (586 | ) | (545 | ) | 124 | |||||||||||||
| Net cash provided by operating activities | $ | 97,242 | $ | 134,019 | $ | 235,892 | $ | 307,580 | ||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||
| Investment in property and equipment | (81,298 | ) | (155,329 | ) | (271,576 | ) | (430,876 | ) | ||||||||||||
| Proceeds from the sale of oil and gas properties | (116 | ) | 3,011 | 40,168 | 150,530 | |||||||||||||||
|
| |||||||||||||||||||
| Net cash used in investing activities | $ | (81,414 | ) | $ | (152,318 | ) | $ | (231,408 | ) | $ | (280,346 | ) | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||
| Proceeds from long-term borrowings | - | - | 625,000 | - | ||||||||||||||||
| Proceeds from revolving credit facility | - | 15,000 | 33,000 | 99,000 | ||||||||||||||||
| Repayment of revolving credit facility | - | - | (468,150 | ) | (131,000 | ) | ||||||||||||||
| Deferred financing costs | (35 | ) | (413 | ) | (4,234 | ) | (958 | ) | ||||||||||||
| Transaction costs for debt restructuring | - | - | (34,398 | ) | - | |||||||||||||||
| Acquisition of treasury stock | (47 | ) | (231 | ) | (476 | ) | (1,722 | ) | ||||||||||||
| Net cash used in financing activities | $ | (82 | ) | $ | 14,356 | $ | 150,742 | $ | (34,680 | ) | ||||||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 15,746 | (3,943 | ) | 155,226 | (7,446 | ) | ||||||||||||||
| Cash and cash equivalents, beginning of period | 151,037 | 29,660 | 11,557 | 33,163 | ||||||||||||||||
| Cash and cash equivalents, end of period | $ | 166,783 | $ | 25,717 | $ | 166,783 | $ | 25,717 | ||||||||||||
Midstates Petroleum Company, Inc. Selected Financial and Operating Statistics (Unaudited) | ||||||||||||||||||||||
For the Three Months Ended |
For the Nine Months Ended |
For the Three | ||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | 2015 | ||||||||||||||||||
| PRODUCTION DATA - Mississippian: | ||||||||||||||||||||||
| Oil (Boe/day) | 10,131 | 9,228 | 10,543 | 7,855 | 10,828 | |||||||||||||||||
| Natural gas liquids (Boe/day) | 5,360 | 4,975 | 5,347 | 4,311 | 5,314 | |||||||||||||||||
| Natural gas (Mcf/day) | 65,204 | 57,785 | 64,495 | 48,991 | 65,234 | |||||||||||||||||
| Oil equivalents (MBoe) | 2,425 | 2,193 | 7,272 | 5,550 | 2,460 | |||||||||||||||||
| Average daily production (Boe/day) | 26,358 | 23,834 | 26,639 | 20,331 | 27,029 | |||||||||||||||||
| PRODUCTION DATA - Anadarko: | ||||||||||||||||||||||
| Oil (Boe/day) | 2,602 | 4,002 | 2,854 | 4,240 | 2,937 | |||||||||||||||||
| Natural gas liquids (Boe/day) | 1,427 | 1,888 | 1,358 | 1,788 | 1,404 | |||||||||||||||||
| Natural gas (Mcf/day) | 13,337 | 15,577 | 13,182 | 15,328 | 13,468 | |||||||||||||||||
| Oil equivalents (MBoe) | 575 | 781 | 1,750 | 2,343 | 599 | |||||||||||||||||
| Average daily production (Boe/day) | 6,251 | 8,486 | 6,408 | 8,583 | 6,586 | |||||||||||||||||
| PRODUCTION DATA - Gulf Coast: | ||||||||||||||||||||||
| Oil (Boe/day) | - | 1,066 | 347 | 1,908 | 194 | |||||||||||||||||
| Natural gas liquids (Boe/day) | - | 300 | 109 | 467 | 55 | |||||||||||||||||
| Natural gas (Mcf/day) | - | 682 | 278 | 1,797 | 177 | |||||||||||||||||
| Oil equivalents (MBoe) | - | 136 | 137 | 730 | 25 | |||||||||||||||||
| Average daily production (Boe/day) | - | 1,479 | 503 | 2,675 | 278 | |||||||||||||||||
| PRODUCTION DATA - Combined: | ||||||||||||||||||||||
| Oil (Boe/day) | 12,733 | 14,296 | 13,744 | 14,003 | 13,959 | |||||||||||||||||
| Natural gas liquids (Boe/day) | 6,786 | 7,162 | 6,813 | 6,566 | 6,773 | |||||||||||||||||
| Natural gas (Mcf/day) | 78,541 | 74,044 | 77,995 | 66,116 | 78,969 | |||||||||||||||||
| Oil equivalents (MBoe) | 3,000 | 3,109 | 9,159 | 8,624 | 3,084 | |||||||||||||||||
| Average daily production (Boe/day) | 32,609 | 33,799 | 33,550 | 31,589 | 33,893 | |||||||||||||||||
| AVERAGE SALES PRICES: | ||||||||||||||||||||||
| Oil, without realized derivatives (per Bbl) | $ | 43.27 | $ | 95.37 | $ | 47.29 | $ | 97.55 | $ | 53.14 | ||||||||||||
| Oil, with realized derivatives (per Bbl) | 66.94 | 88.70 | 76.13 | 88.32 | 81.19 | |||||||||||||||||
| Natural gas liquids, without realized derivatives (per Bbl) | 13.61 | 34.89 | 15.99 | 39.90 | 16.61 | |||||||||||||||||
| Natural gas liquids, with realized derivatives (per Bbl) | 13.61 | 35.12 | 15.99 | 40.03 | 16.61 | |||||||||||||||||
| Natural gas, without realized derivatives (per Mcf) | 2.40 | 3.61 | 2.47 | 4.15 | 2.23 | |||||||||||||||||
| Natural gas, with realized derivatives (per Mcf) | 3.32 | 3.81 | 3.45 | 3.92 | 3.14 | |||||||||||||||||
| COSTS AND EXPENSES (PER BOE OF PRODUCTION) | ||||||||||||||||||||||
| Lease operating and workover | $ | 6.27 | $ | 5.46 | $ | 6.97 | $ | 6.59 | $ | 7.06 | ||||||||||||
| Gathering and transportation | 1.34 | 1.26 | 1.24 | 1.12 | 1.27 | |||||||||||||||||
| Severance and other taxes | 0.89 | 1.86 | 0.95 | 2.21 | 0.81 | |||||||||||||||||
| Asset retirement accretion | 0.13 | 0.13 | 0.13 | 0.15 | 0.13 | |||||||||||||||||
| Depreciation, depletion, and amortization | 14.90 | 23.52 | 17.30 | 24.48 | 17.92 | |||||||||||||||||
| Impairment of oil and gas properties | 162.30 | - | 126.65 | 10.03 | 161.60 | |||||||||||||||||
| General and administrative | 2.23 | 3.18 | 3.25 | 4.06 | 3.71 | |||||||||||||||||
| Acquisition and transaction costs | - | 0.41 | - | 0.45 | 0.09 | |||||||||||||||||
| Debt restructuring costs and advisory fees | - | - | 3.97 | - | 11.15 | |||||||||||||||||
| Other | - | 0.75 | - | 0.38 | - | |||||||||||||||||
Midstates Petroleum Company, Inc. Summary of Commodity Derivative Contracts as of September 30, 2015 (Unaudited) | |||||||||||||||||||||||||
2015 | |||||||||||||||||||||||||
| Oil | Q4 | Total | |||||||||||||||||||||||
| WTI Swaps | Volume (Bbls) | 1,104,000 | 1,104,000 | ||||||||||||||||||||||
| Volume (Bbl/d) | 12,000 | 12,000 | |||||||||||||||||||||||
| Price ($/Bbl) | $ | 71.56 | $ | 71.56 | |||||||||||||||||||||
| Natural Gas | |||||||||||||||||||||||||
| Swaps | Volume (Mmbtu) | 4,600,000 | 4,600,000 | ||||||||||||||||||||||
| Volume (Mmbtu/d) | 50,000 | 50,000 | |||||||||||||||||||||||
| Price ($/Mmbtu) | $ | 4.13 | $ | 4.13 | |||||||||||||||||||||
NON-GAAP FINANCIAL MEASURES
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.
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.
Midstates Petroleum Company, Inc. Adjusted EBITDA (In thousands) (Unaudited) | |||||||||||||||||||||||||||
For the Three Months |
For the Nine Months |
For the Three | |||||||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | 2015 | |||||||||||||||||||||||
| Adjusted EBITDA reconciliation to net loss: | |||||||||||||||||||||||||||
| Net income (loss) | $ | (494,342 | ) | $ | 74,597 | $ | (1,286,330 | ) | $ | (11,145 | ) | $ | (598,437 | ) | |||||||||||||
| Depreciation, depletion and amortization | 44,714 | 73,109 | 158,397 | 211,084 | 55,255 | ||||||||||||||||||||||
| Impairment of oil and gas properties | 486,895 | - | 1,159,951 | 86,471 | 498,389 | ||||||||||||||||||||||
| Loss on sale/impairment of inventory | - | 2,346 | 97 | 3,285 | - | ||||||||||||||||||||||
| (Gains) losses on commodity derivative contracts — net | (33,368 | ) | (50,978 | ) | (35,447 | ) | 3,162 | 19,293 | |||||||||||||||||||
| Net cash received (paid) for commodity derivative contracts | 34,307 | (7,265 | ) | 129,105 | (39,213 | ) | 42,189 | ||||||||||||||||||||
| Income tax expense (benefit) | - | 2,216 | (9,041 | ) | (96 | ) | - | ||||||||||||||||||||
| Interest income | (43 | ) | (10 | ) | (80 | ) | (29 | ) | (27 | ) | |||||||||||||||||
| Interest expense, net of amounts capitalized | 40,595 | 34,288 | 121,978 | 102,048 | 44,880 | ||||||||||||||||||||||
| Asset retirement obligation accretion | 382 | 406 | 1,217 | 1,335 | 390 | ||||||||||||||||||||||
| Share-based compensation, net of amounts capitalized | 916 | 1,690 | 3,813 | 5,358 | 2,096 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 80,056 | $ | 130,399 | $ | 243,660 | $ | 362,260 | $ | 64,028 | |||||||||||||||||
| Adjusted EBITDA reconciliation to net cash provided by operating activities: | |||||||||||||||||||||||||||
| Net cash provided by operating activities | 97,242 | 134,019 | 235,892 | 307,580 | 25,633 | ||||||||||||||||||||||
| Changes in working capital (1) | (60,909 | ) | (36,077 | ) | (109,533 | ) | (41,321 | ) | (559 | ) | |||||||||||||||||
| Interest income | (43 | ) | (10 | ) | (80 | ) | (29 | ) | (27 | ) | |||||||||||||||||
| Interest expense, net of amounts capitalized and accrued but not paid(2) | 45,201 | 34,288 | 127,172 | 102,048 | 45,468 | ||||||||||||||||||||||
| Amortization of deferred financing costs | (1,435 | ) | (1,821 | ) | (9,791 | ) | (6,018 | ) | (6,487 | ) | |||||||||||||||||
| Adjusted EBITDA | $ | 80,056 | $ | 130,399 | $ | 243,660 | $ | 362,260 | $ | 64,028 | |||||||||||||||||
| Acquisition and transaction costs | 5 | 1,283 | 256 | 3,894 | 251 | ||||||||||||||||||||||
| Debt restructuring costs and advisory fees | - | - | 36,141 | - | 34,398 | ||||||||||||||||||||||
| Adjusted EBITDA, before acquisition and | |||||||||||||||||||||||||||
| transaction costs and debt restructuring costs | $ | 80,061 | $ | 131,682 | $ | 280,057 | $ | 366,154 | $ | 98,677 | |||||||||||||||||
Adjusted EBITDA, before acquisition and transaction costs and debt restructuring costs per Boe | $ | 26.69 | $ | 42.35 | $ | 30.58 | $ | 42.46 | $ | 32.00 | |||||||||||||||||
(1) | Changes in working capital for all periods have been adjusted for the loss on sale of field equipment inventory and current taxes. | |
(2) | For the three and nine month periods ending September 30, 2015, interest expense includes $2.6 million and $3.4 million, respectively of paid-in-kind interest related to the Company’s Third Lien Notes, and $7.2 million and $9.0 million, respectively, of deferred gain amortization from the Company’s troubled debt restructuring. | |
NON-GAAP FINANCIAL MEASURES
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.
The following table provides a reconciliation of net income (GAAP) to adjusted net income (non-GAAP) (unaudited and in thousands).
For the Three Months |
For the Nine Months |
For the Three | |||||||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | 2015 | |||||||||||||||||||||||
| Net income (loss) - GAAP | $ | (494,342 | ) | $ | 74,597 | $ | (1,286,330 | ) | $ | (11,145 | ) | $ | (598,437 | ) | |||||||||||||
| Adjustments for certain non-cash items: | |||||||||||||||||||||||||||
Unrealized mark-to-market (gains) losses on commodity derivative contracts | 939 | (58,243 | ) | 93,658 | (36,051 | ) | 61,482 | ||||||||||||||||||||
| Impairment on oil and gas properties | 486,895 | - | 1,159,951 | 86,471 | 498,389 | ||||||||||||||||||||||
| Acquisition and transaction costs | 5 | 1,283 | 256 | 3,894 | 251 | ||||||||||||||||||||||
| Debt restructuring costs and advisory fees | - | - | 36,141 | - | 34,398 | ||||||||||||||||||||||
| Tax impact (1) | - | 1,643 | (9,004 | ) | (464 | ) | - | ||||||||||||||||||||
| Adjusted net income (loss) - non-GAAP | $ | (6,503 | ) | $ | 19,280 | $ | (5,328 | ) | $ | 42,705 | $ | (3,917 | ) | ||||||||||||||
(1) | The tax impact is computed utilizing the Company’s effective federal and state income tax rates. The income tax rate for the nine months ended September 30, 2015 was approximately 0.07%. | |
NON-GAAP FINANCIAL MEASURES
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 are not a measure of operating expenses as determined by United States generally accepted accounting principles, or GAAP.
The following table provides a reconciliation of Operating Expenses (GAAP) to Cash Operating Expenses (non-GAAP) (unaudited and in thousands).
For the Three Months |
For the Nine Months |
For the Three | |||||||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | 2015 | |||||||||||||||||||||||
| Operating Expenses - GAAP | $ | 564,153 | $ | 113,670 | $ | 1,469,755 | $ | 426,635 | $ | 628,338 | |||||||||||||||||
| Adjustments for certain non-cash items: | |||||||||||||||||||||||||||
| Asset retirement accretion | (382 | ) | (406 | ) | (1,217 | ) | (1,335 | ) | (390 | ) | |||||||||||||||||
| Share-based compensation, net of amounts capitalized | (916 | ) | (1,690 | ) | (3,813 | ) | (5,358 | ) | (2,096 | ) | |||||||||||||||||
| Depreciation, depletion, and amortization | (44,714 | ) | (73,109 | ) | (158,397 | ) | (211,084 | ) | (55,255 | ) | |||||||||||||||||
| Impairment on oil and gas properties | (486,895 | ) | - | (1,159,951 | ) | (86,471 | ) | (498,389 | ) | ||||||||||||||||||
| Other | - | (2,346 | ) | - | (3,285 | ) | - | ||||||||||||||||||||
| Cash Operating Expenses - Non-GAAP | $ | 31,246 | $ | 36,119 | $ | 146,377 | $ | 119,102 | $ | 72,208 | |||||||||||||||||
| Cash Operating Expenses - Non-GAAP, per Boe | $ | 10.42 | $ | 11.62 | $ | 15.98 | $ | 13.81 | $ | 23.41 | |||||||||||||||||
| Acquisition, transaction costs and debt restructuring costs | $ | 5 | $ | 1,283 | $ | 36,397 | $ | 3,894 | $ | 34,649 | |||||||||||||||||
| Acquisition, transaction costs and debt restructuring costs, per Boe | $ | 0.00 | $ | 0.41 | $ | 3.97 | $ | 0.45 | $ | 11.24 | |||||||||||||||||
| Severance and other costs associated with the Houston office closure | $ | 305 | $ | - | $ | 3,960 | $ | - | $ | 1,280 | |||||||||||||||||
| Severance and other costs associated with the Houston office closure, per Boe | $ | 0.10 | $ | - | $ | 0.43 | $ | - | $ | 0.42 | |||||||||||||||||
| Adjusted Cash Operating Expenses - Non-GAAP | $ | 30,936 | $ | 34,836 | $ | 106,020 | $ | 115,208 | $ | 36,279 | |||||||||||||||||
| Adjusted Cash Operating Expenses - Non-GAAP, per Boe | $ | 10.32 | $ | 11.20 | $ | 11.58 | $ | 13.36 | $ | 11.75 | |||||||||||||||||
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