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Mid-Con Energy Partners: Some Uncertainty About Its Production Levels


  • Mid-Con's production hasn't met expectations recently. Production from its retained assets appeared to decline in Q4 2017 compared to expectations for flat to slightly increased production.
  • Mid-Con's 2018 outlook indicates a wide range of possible outcomes for its legacy assets. Production could be down modestly or increase a bit more.
  • Mid-Con's waterflood investments may result in improved production in 2019, but for now, it is difficult to get a good read on the capex level required to maintain production.
  • Mid-Con's financial situation is significantly improved, though, and its credit facility should have plenty of borrowing capacity going forward.
  • Mid-Con is expected to generate around $7 million in positive cash flow in 2018 at roughly $61 WTI oil.

Mid-Con Energy Partners (NASDAQ:MCEP) appears to be still dealing with steeper than expected base production declines that have not been fully offset by positive waterflood responses yet. This resulted in Q4 2017 production (excluding the divested Southern Oklahoma assets) declining from Q3 2017 levels, when it was supposed to stay flat or increase. The outlook for 2018 may be more positive, but the guidance calls for anywhere from a modest decline in production to a larger increase.

While production is a question mark, Mid-Con has stabilised its financial situation and should further reduce its debt during 2018. Mid-Con's credit facility doesn't seem to be an issue anymore, and it has a fair amount of borrowing capacity.

Production Declines Remain Concerning

I had mentioned before that Mid-Con's production declines were concerning, and this still seems to be an issue. Mid-Con's Q4 2017 production came in lower than expected at 3,359 BOEPD. This includes the effect of the Southern Oklahoma divestiture, which closed in late December. Without that divestiture, Q4 2017 would have been an estimated 3,410 BOEPD, which is a 2.6% decrease from Q3 2017 production levels. The relatively low Q4 2017 production resulted in full year 2017 production coming in at 3,510 BOEPD, which is towards the lower end of its previous 3,500 to 3,600 BOEPD guidance.

It should also be noted that the Southern Oklahoma divestiture closed on December 22, while it was previously expected to close on or before November 30. If the divestiture had closed on November 30, Mid-Con's full-year 2017 production would have finished at around 3,480 BOEPD, lower than the guidance range it gave at the time of the divestiture announcement.

Mid-Con's December 2017 average production was 3,163 BOEPD, which becomes approximately 2,920 BOEPD after factoring out the estimated Southern Oklahoma production during the month

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Comments (15)

New CFO...
Based on past performance I wouldn't hold your breath...................
$64 WTI...hopefully they can demonstrate growth in production..
iconstockkilledme profile picture
This is a $20 stock in a couple years IMO
Many have stated like you lose the shirts and pants and underwear too
make capex in lower prices of oil. problems. The common sense is not make capex in oil low prices.
huh? the common sense is not make capex in oil low prices

The grammatical sense is to use proper English when trying to explain yourself
mcep is not a cheap producer. may be bankrupcy.
It has no bond debt, so how can it be in bankruptcy? oh wait, you don't know what bankruptcy actually means.....
Thanks. Your adjusted Q4 is 11% below Q4 ‘16. Which was well below Q4 ‘15 (not adjusted).

LOE was $15.35/boe in 2015, with midpoint guidance of $18.50 in 2018. Mainly due to shrinking production.

Their initial guidance for 2017 was 3500-3900. Came in near low end.

Overall it hasn’t been pretty.
Their promises of production from currrent cap-ex spend is a joke. Management has missed on this so many times in the last year hard to give them any credibility at all.

They should sell the company has no business being a public MLP.

Maybe another small to mid cap E&P would be interested in acquiring them. I would think that there large % oil mix would be attractive to an acquirer or small E&P they could merge with.

It’s just hard sticking with a position which you have no confidence at all in management. The only reason I’m hanging around is I believe NAV is appreciably higher than it’s trading. GLTA
JSG_DRIP profile picture
EA - agreed. The production declines are the reason why I am out of MCEP. Management has missed production I would argue at least the last 3 qtrs when controlling for acquisitions/sales. At current WTI price levels and various production decline rate assumptions, MCEP today is fairly priced by the market (upper 1s). Looking forward, I calculate a best case price scenario of low 2s for the common units 2019 through 2021. Just not enough upside for me here. GLTA
LongonOil profile picture
Now's the time to load up, this thing is undervalued
Patrick Irish profile picture
Thanks for the update, great article.
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