Entering text into the input field will update the search result below

Valuing Mid-Con Energy Partners Based On PV-10 And EBITDA

Apr. 09, 2018 4:33 PM ETMid-Con Energy Partners, LP (MCEP)50 Comments


  • Based on the PV-10 of its reserves and other mature asset sales, Mid-Con's value is estimated at $1.88 per common unit.
  • An EBITDA-based valuation would estimate Mid-Con's value at a bit above its current unit price when looking at forward strip prices a couple years out.
  • Mid-Con needs to start growing production again (or long-term oil prices need to increase from the low $50s) for its common units to have major upside.
  • There also are some risks involved with Mid-Con's preferred units, which may need to be redeemed in cash in 2021 if its common unit price remains low.

I'd have to say that I don't consider Mid-Con Energy Partners (NASDAQ:MCEP) to be dirt cheap at the moment. It does appear to be decently undervalued based on general asset sale transaction values, but with EBITDA-based metrics it would need to start growing production again for the common units to have much upside.

Mid-Con's enterprise value is mostly composed of its credit facility debt and preferred units at the moment, with its common units accounting for only 25% of the total enterprise value. This means that a surge in longer-term oil prices would likely make Mid-Con's unit prices increase very significantly. However, I'm somewhat skeptical at the moment about the ability of long-term oil prices to reach the $65, $70-plus level. US production growth would certainly accelerate if producers were able to hedge at those prices for several years forward.

Asset Based Valuation

One way to estimate Mid-Con's value is to look at the PV-10 of its reserves. The standardized measure (essentially PV-10) of Mid-Con's estimated proved reserves was $207 million as of the end of 2017. This was based on $51.34 NYMEX oil and $2.98 NYMEX natural gas. This is generally pretty close to long-term oil and gas prices. Oil futures are higher than that for the next few years, but decline to around $51 by 2022.

Linn Energy has sold off a number of long life (mature) producing assets for an average of approximately 1.15x proved developed PV-10 at $50 oil and $3 natural gas. Linn received a higher multiple for what it termed its emerging growth assets, but Mid-Con's assets would fall into the mature property category.

Mid-Con's reserve report indicates that its proved developed PV-10 value is approximately $164 million (based on total proved reserve value of $212 million, which differs slightly from the $207 million mentioned above). Multiplying $164 million by 1.15

This article was written by

Elephant Analytics profile picture
Unique insight into distressed opportunities to target outsized returns.
Elephant Analytics has 15 years of analytical experience and unique skills in numerical analysis and practical mathematics. He is currently ranked in the top 2% of analysts by TipRanks.
Elephant Analytics has also achieved a top 50 score on the Bloomberg Aptitude Test measuring financial aptitude (out of nearly 200,000 test takers). He has also achieved a score (153) in the 99.98th percentile on the WAIS-III IQ test and has led multiple teams that have won awards during business and strategy competitions involving numerical analysis. In one such competition, he captained his team to become North American champions, finishing ahead of top Ivy League MBA teams, and represented North America in the Paris finals.

Elephant Analytics co-founded a company that was selected as one of 20 companies to participate in an start-up incubator program that spawned several companies with $100+ million valuations (Lyft, Life360, Wildfire). He also co-founded a mobile gaming company and designed the in-game economic models for two mobile apps (Absolute Bingo and Bingo Abradoodle) with over 30 million in combined installs.

Legal Disclaimer: Elephant Analytics' reports, premium research service and other writings are personal opinions only and should not be considered as investment advice. Only registered investment advisors can provide personalized investment advice. While Elephant Analytics attempts to provide reports that include accurate facts, investors should do their own diligence and fact checking prior to making their own decisions.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.