Reports Quarter-Over-Quarter Production Growth of nearly 30% in Q4’14
Mid-Con Energy Partners (ticker: MCEP), a U.S. E&P master limited partnership (MLP), announced its fourth quarter and full-year 2014 results this week. According to the release, production for fourth quarter 2014 averaged 4,011 BOEPD, an increase of 29.5% sequentially and 57.7% year-over-year. Adjusted EBITDA was $17.8 million, 16.7% more than in Q3’14 and 23.6% more than fourth quarter 2013, showing continued growth. The company’s distributable cash flow (DCF) was $13.5 million, up 17.0% sequentially and 9.8% more year-over-year. The company’s distribution coverage was 3.59x and 4.15x pro forma of acquisitions closed during the quarter. Cash distribution for Q4’14 was $0.125 per unit, or $0.50 per unit annualized.
During the fourth quarter of 2014, MCEP issued 5.8 million common units for net proceeds of approximately $96.0 million, which were used to fund a portion of the Eastern Shelf acquisition in the Permian Basin. The $117.6 million acquisition, which closed on November 17, 2014, was for net proved reserves (68% proved developed and 89% oil weighted) estimated at 6.1 MMBOE with average Q2’14 net production of 1,197 BOEPD.
Compared to a group of 12 U.S. E&P MLPs in EnerCom’s MLP Scorecard, MCEP’s dividend coverage ratio of 79.6% is well above the average of -12.4%. The company’s FCF/unit of $6.92 is substantially higher than the group average of $0.05 as well. Entering 2015, the company has approximately $38.2 million in liquidity and plans on spending $13 million on development. In a conference call, management said the available capital is “more than sufficient” to survive the current environment and expects similar expenditure levels in 2016.
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Analyst Commentary
Kevin Smith, Raymond James Equity Research 03.04.2015
Mid-Con Energy Partners turned in a strong quarter as it realized the benefits of its recent Eastern Shelf acquisition. However, the company’s liquidity remains constrained and, combined with a relatively light hedge book, has dictated that Mid-Con is in de-levering mode this year. Post the 76% distribution cut, Mid-Con’s distribution coverage ratio is the highest in our coverage universe. That being said, we anticipate that management will wait for oil and gas prices to improve, reduce its leverage ratio, and boost its hedge book before looking to grow its distribution. We maintain our Market Perform rating.
