Mid-Con Energy Partners, LP (NASDAQ: MCEP) (“Mid-Con” or the
“Partnership”) has entered into a strategic recapitalization
transaction with its preferred equity holders, providing for the
conversion of all Series A and B Preferred Units into common units
at an average conversion price of $3.12/unit.
In connection with the recapitalization,
ownership of the Partnership’s general partner, Mid-Con GP, LLC
(the “General Partner”), has been transferred to the Partnership,
resulting in strengthened corporate governance, and a new Board of
Directors has been elected by written consent of the holders of a
majority of the common unitholders.
The Partnership also announced today the close
of the spring redetermination of the borrowing base under its
senior secured revolving credit facility (the “Credit Facility”)
and an amendment of the Credit Facility. The borrowing base is now
set at $64 million.
The Partnership also announced that Contango
Resources, Inc. (“Contango Resources”), a subsidiary of Contango
Oil & Gas Company (“Contango”) will be the new operator of the
Partnership’s properties, replacing Mid-Con Energy Operating, LLC.
The move is expected to generate pro-forma annual cash savings of
approximately $6.5 million compared to 2019.
Mid-Con Energy Parties Enters into
Transformational Capital RestructuringMid-Con an upstream
production company focused on conventional assets in Oklahoma and
Wyoming, today announced that it has completed a strategic
recapitalization transaction, resulting in significant changes to
its capital structure and governance to strengthen its balance
sheet, create alignment across all unit holders, reduce costs and
streamline operations, thereby creating immediate and sustainable
value for all unit holders. The holders of all of the Partnership’s
Class A and B preferred units (collectively, the “Preferred
Units”), led by Goff Capital, Inc., (“Goff Capital”) have agreed to
convert their Preferred Units to common units at an average
conversion price of $3.12/unit. In addition, the equity holders of
the General Partner have agreed to contribute the ownership of the
General Partner to the Partnership in exchange for common units. In
connection with these transactions, the limited partnership
agreement of the Partnership has been amended, the directors of the
General Partner have resigned, and a new Board of Directors has
been elected by written consent of affiliates of Goff Capital that
now hold a majority of the outstanding common units. Following
these transactions, the Partnership will have 14,311,522 common
units outstanding.
“These actions simplify our capital structure
and align the ownership and governance of the Partnership through a
Board of Directors elected by the holders of a single class of
common units,” said Chad B. Roller, Ph.D., President and Chief
Operating Officer. “Our new Board members will collectively
represent beneficial ownership of more than 50% of the
Partnership’s units. The changes in capital structure and
governance also will allow the Partnership to focus on cash flow
and debt reduction by eliminating dividends on the Preferred Units
and the overhang of upcoming maturities of the Preferred
Units.”
“Our low decline assets bring stability
quarter-to-quarter with minimal maintenance capital requirements.
The assets have been robust as we continually adjust to volatile
oil prices through deactivation and re-activation of wells in order
to optimize cash flow,” said Mr. Roller. “The Agreement allows the
Partnership to optimize near-term cash flow without the burden of
servicing the Preferred Units.”
Election of New Board Members and
Departure of Six Board MembersThe Partnership is pleased
to announce that Robert Boulware, Travis Goff and Fred Reynolds
have been elected to constitute the Board of Directors of the
General Partner.
Robert Boulware served as President and CEO of
ING Funds Distributor, LLC. Mr. Boulware’s experience also includes
executive and management positions with WESAV Financial, Bank of
America, and Western Savings. Since 2008, he has served on the
Brighthouse Funds Trustee Board as Chairman of the Investment
Committee and as a member of the Nominating and Governance and
Audit Committees. He has also served since 2013 as Board Trustee
for the Vertical Capital Fund, where he is the Lead Independent
Director and a member of the Audit Committee and Nominating and
Governance Committee. Since 2014, Mr. Boulware has served as Board
Trustee with the Sharespost 100 Fund, where he is currently
Chairman of the Board, as well as Chairman of the Audit Committee
and Nominating and Governance Committee. He also has served on the
Board of Gainsco Auto Insurance since 2005 as Director, Chairman of
the Audit Committee and member of the Compensation Committee. Mr.
Boulware received his BSBA from Northern Arizona University at
Flagstaff, Arizona.
Travis Goff is President of Goff Capital, a
Fort Worth, Texas-based family office. Goff Capital is the family
office of John Goff, which directly invests in public securities as
well as private equity in a variety of industries. Mr. Goff manages
all existing and potential private and public investments for Goff
Capital. Mr. Goff is a graduate of the University of Texas at
Austin and began his career at Morgan Stanley in New York, working
in both the investment banking and principal investing platforms.
He currently serves as a Board Member of several companies in the
oil and gas, manufacturing, and media and entertainment
industries.
Fred N. Reynolds is the principal owner of Fred
S. Reynolds & Associates, a petroleum engineering consulting
firm located in Fort Worth, Texas. Mr. Reynolds graduated in 1979
with a Bachelor of Science in Petroleum Engineering from the
University of Oklahoma. Following graduation, Mr. Reynolds worked
for Chevron U.S.A. and Equity Oil Company as a drilling and
completion engineer and Engineering Manager, before joining his
father and forming the petroleum engineering consulting firm of
Fred S. Reynolds & Associates in 1983.
Departing Board members include Charles R.
“Randy” Olmstead, Fred Ball Jr., John (“J.W.”) Brown, and Peter A.
Leidel, who resigned in connection with the reported transactions.
Wilkie S. Colyer, Jr., the President and CEO of Contango, the
parent of the new operator of the Partnership’s properties, also
has resigned from the Board.
“On behalf of management, staff, and investors,
I extend our gratitude to the departing board members for their
time, experience, and thoughtfulness in working through the
recapitalization,” said Mr. Roller. “Management worked very closely
with the Board over many hours and in tough conditions brought
about by the current pandemic afflicting our communities, the US
and abroad. Our Board exhibited patience and perseverance from
beginning to execution. As the partnership flips to a new page, we
enthusiastically welcome our new Board members. Their experience
and vested ownership, coupled with technical expertise, will be
invaluable as the Partnership navigates through the eventual
recovery in the energy sector.”
Resignation of Senior Executive
ManagementThe Partnership announced the resignation of
Randy Olmstead from his current positions as CEO and Chairman of
the Board. “We want to sincerely thank Mr. Olmstead for his service
to the Partnership, both before and after the Partnership went
public in 2011. His leadership and experience over three decades
was invaluable in guiding the Partnership through both up and down
cycles in oil prices. We wish Mr. Olmstead the very best in his
future endeavors,” said Mr. Roller.
15th Amendment to Credit Facility and
June 1, 2020 Borrowing Base DeterminationThe Partnership
also announced the spring determination of the borrowing base under
its senior bank debt (the “Credit Facility”). The new borrowing
base is set at $64 million and is a reduction from the previous
borrowing base of $95 million. The reduction in the borrowing base
is a result of the unprecedented downturn in the oil markets. In
addition, the Partnership announced the 15th Amendment to the
Credit Facility (the “Amendment”), effective as of June 1, 2020.
The Amendment aims to achieve $10 million in debt reduction through
the next regularly scheduled redetermination of the borrowing base
on or around November 2020. In addition, the Partnership will cease
capital expenditures for the remainder of 2020 and look to divest
non-core assets to accelerate debt repayment.
“The Partnership would like to thank our bank
group for their unanimous support and efforts to establish a
mutually agreeable plan for our future operations,” said Mr.
Roller. “The Amendment allows for a constructive approach to right
size the balance sheet and position the Partnership to succeed in
the second half of 2020 and going into 2021.”
Appointment of Contango Resources as
Operator for the PartnershipThe Partnership has entered
into a Management Services Agreement (“MSA”) with Contango
Resources effective as of July 1, 2020, under which Contango
Resources will serve as operator of the Partnership’s assets for a
flat fee arrangement, which is expected to generate pro forma
annual cash savings of approximately $6.5 million compared with
2019. Contango will also receive warrants to acquire common units
of the Partnership, further aligning it with equityholders. “The
Partnership continues to focus on managing operational costs and
the shift of operations will allow us to leverage the larger scale
of Contango to ultimately reduce cost,” said Mr. Roller. “Contango
has existing production in our core areas and an operations team
with a proven track record, who will be joined by key members of
the Partnership’s existing operations team.” Contango Resources
will take over operations in the third quarter of 2020, replacing
Mid-Con Energy Operating.
About Mid-Con Energy Partners,
LPMid-Con Energy is a publicly held Delaware limited
partnership formed in July 2011 to own, acquire, and develop
producing oil and natural gas properties in North America, with a
focus on Enhanced Oil Recovery. Mid-Con Energy’s core areas of
operation are located in Oklahoma and Wyoming. For more
information, please visit Mid-Con Energy's website at
www.midconenergypartners.com.
Forward-Looking StatementsThis
press release includes “forward-looking statements” — that is,
statements related to future, not past, events within meaning of
the federal securities laws. Forward-looking statements are based
on current expectations and include any statement that does not
directly relate to a current or historical fact. In this context,
forward-looking statements often address expected future business
and financial performance, and often contain words such as
“anticipate,” “believe,” “estimate,” “intend,” “expect,” “plan,”
“project,” “should,” “goal,” “forecast,” “guidance,” “could,”
“may,” “continue,” “might,” “potential,” “scheduled,” “pursue,”
“target,” “will” and the negative of such terms or other comparable
terminology. These forward-looking statements involve certain risks
and uncertainties and ultimately may not prove to be accurate.
Actual results and future events could differ materially from those
anticipated in such statements due to a number of factors including
but not limited to volatility of commodity prices; revision to oil
and natural gas reserves estimates as a result of changes in
commodity prices; effectiveness of risk management activities;
business strategies; future financial and operating results; our
ability to pay distributions; ability to replace the reserves we
produce through acquisitions and the development of our properties;
future capital requirements and availability of financing;
technology and cybersecurity; realized oil and natural gas prices;
production volumes; lease operating expenses; general and
administrative expenses; cash flow and liquidity; availability of
production equipment; availability of oil field labor; capital
expenditures; availability and terms of capital; marketing of oil
and natural gas; general economic conditions; world-wide epidemics,
including the coronavirus; competition in the oil and natural gas
industry; environmental liabilities; counterparty credit risk;
governmental regulation and taxation; compliance with NASDAQ
listing requirements; developments in oil producing and natural gas
producing countries; plans, objectives, expectations and
intentions; and any other risks and uncertainties discussed in our
Form 10-K and other filings with the SEC.
Mid-Con Energy undertakes no obligation and
does not intend to update these forward-looking statements to
reflect events or circumstances occurring after this press release.
You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
press release. All forward-looking statements are qualified in
their entirety by this cautionary statement and
our SEC filings. Please see the risks and uncertainties
detailed in the “Forward-Looking Statements” and “Risk Factors”
sections of our Annual Report on Form 10-K for the year
ended December 31, 2019, and in other documents and reports we
file from time to time with the SEC.
Investor Relations
ContactIR@midcon-energy.com(918) 743-7575
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