Business Context and Reporting Period
This Form 8-K filing by Midstates Petroleum Company, Inc. (the "Company") reports material events occurring on October 1, 2012, with the report dated September 28, 2012. The filing details the closing of a $600 million senior notes offering and the completion of the Eagle Energy Acquisition. Note: The input metadata references "Amplify Energy Corp.," but the filing text explicitly identifies the registrant as Midstates Petroleum Company, Inc.
Key Financial Metrics and Capital Structure
- Debt Issuance: Sold $600 million aggregate principal amount of 10.75% Senior Notes due 2020.
- Acquisition Cost: Total purchase price for Eagle Energy assets was $325 million in cash plus 325,000 shares of Series A Preferred Stock (initial liquidation preference of $1,000 per share, totaling $325 million).
- Preferred Stock Terms: 8.0% annual dividend rate; mandatory conversion into common stock on September 30, 2015, at a price between $11.00 and $13.50 per share.
- Credit Facility: Borrowing base increased to an initial $250 million; maturity extended to October 1, 2017; allowance for unsecured indebtedness increased to $600 million.
- Liquidity: Cash portion of the acquisition was funded by proceeds from the Senior Notes offering.
Material Changes Versus Prior Period
The Company has significantly altered its capital structure and asset base through two concurrent transactions:
- Increased Leverage: Incurred $600 million in new long-term debt obligations.
- Asset Expansion: Acquired producing oil and natural gas assets, unevaluated leasehold acreage in Oklahoma and Kansas, and related hedging instruments from Eagle Energy Production, LLC.
- Equity Structure: Issued Series A Mandatorily Convertible Preferred Stock, granting holders specific voting rights and the ability to elect one member to the Board of Directors.
Guidance, Risks, and Covenants
Covenants: The Indenture for the Senior Notes restricts the Company's ability to incur additional indebtedness, pay dividends, repurchase stock, create liens, or sell assets. These covenants are suspended if the Notes are rated investment grade by both Moody's and S&P and no Default exists.
Redemption Rights: The Company may redeem Notes at a premium starting October 1, 2016. Prior to October 1, 2015, up to 35% of the Notes may be redeemed using proceeds from equity offerings at 110.750% of principal.
Registration Rights: The Company must file registration statements for the Notes and Preferred Stock. Failure to do so timely may increase the interest rate on the Notes by up to 1.0% per annum.
Change of Control: Holders of the Notes have the right to require repurchase at 101% of principal plus accrued interest upon certain change of control events.
Investor Verification Checklist
- Verify the exact terms of the Indenture (Exhibit 4.1) regarding debt covenants and suspension conditions.
- Confirm the conversion mechanics and voting rights of the Series A Preferred Stock via the Certificate of Designations (Exhibit 3.1).
- Review the Eagle Purchase Agreement (Exhibit 2.1) for details on the acquired assets and hedging instruments.
- Monitor the Company's credit ratings to determine if debt covenants remain active or are suspended.
- Check the status of the Registration Rights Agreements (Exhibits 4.2 and 4.3) to ensure no interest rate penalties are triggered.