Filing identity and period
Important identity mismatch: The supplied filing is Midstates Petroleum Company, Inc.’s Form 10-Q for the quarter ended March 31, 2018, not an Amplify Energy Corp. filing. The summary below reflects the filing text provided and should not be attributed to Amplify without verification.
Midstates explores for and produces oil, natural gas liquids (NGLs), and natural gas in Oklahoma and Texas.
Financial results and liquidity
| Metric | Q1 2018 | Q1 2017 or prior date |
|---|---|---|
| Revenue from customer contracts | $52.8 million | $60.2 million |
| Total revenue, including derivative results | $48.9 million | $65.0 million |
| Operating income | $5.8 million | $19.5 million |
| Net income | $4.0 million; $0.15 per share | $18.5 million; $0.72 per share |
| Operating cash flow | $22.1 million | $32.4 million |
| Investing cash flow | $(31.8) million | $(24.8) million |
| Financing cash flow | $(50.5) million | No net financing cash flow |
| Cash and cash equivalents | $8.4 million | $68.5 million at Dec. 31, 2017 |
| Long-term debt | $78.1 million | $128.1 million at Dec. 31, 2017 |
| Net working capital | $(12.3) million | $48.9 million at Dec. 31, 2017 |
The company repaid $50.0 million of its revolving credit facility in March. At quarter-end, the $170.0 million borrowing base had $90.0 million of availability after accounting for borrowings and letters of credit. The facility matures September 30, 2020, carries interest at LIBOR plus 4.50% (with a 1.00% floor), and had a 6.9% weighted-average rate including financing-cost amortization. The company reported covenant compliance.
Material changes versus the prior comparable period
- Net income fell to $4.0 million from $18.5 million. Commodity derivatives contributed a $3.9 million loss versus a $4.9 million gain in Q1 2017; the 2018 loss included $3.8 million of unrealized losses.
- Production declined: combined Mississippian Lime output was 15,518 Boe/day, down 20.6% year over year; Anadarko Basin output was 3,717 Boe/day, down 7.6%.
- Oil and NGL prices increased, but lower volumes weighed on sales. Natural gas revenue fell 51% to $8.3 million, reflecting lower volumes and prices, as well as a presentation change under ASC 606.
- G&A increased 19% to $9.9 million, including $2.3 million of strategic-review costs and $1.6 million of workforce-reduction costs, partly offset by lower stock-based compensation.
- Operating cash flow declined by $10.2 million; capital investment increased, and cash fell substantially following the debt repayment.
Outlook, commentary, risks, and unusual items
- On March 29, 2018, Midstates agreed to sell substantially all Anadarko Basin assets for $58.0 million before customary adjustments. Closing was expected on or around May 30, 2018, with an effective date of January 1, 2018. The filing says no gain or loss is expected under full-cost accounting.
- Management expected to invest $100 million to $120 million in the Mississippian Lime based on a one-rig program. Q1 operational capital expenditures were $32.2 million, primarily in that basin.
- The borrowing base remained $170.0 million after an April 19 redetermination; Anadarko assets were excluded from that redetermination.
- ASC 606 adoption moved certain gathering and transportation costs from expense to a reduction of revenue. For Q1 2018, this reduced reported natural gas sales by about $3.0 million and gathering expense by the same amount, with no effect on net income.
- Key risks include commodity-price volatility, natural production declines, drilling and reserve-replacement execution, access to capital, derivative counterparty exposure, and Oklahoma saltwater-disposal restrictions and seismicity concerns. Management said it believed it was meeting applicable injection limits; regulatory changes could raise costs or constrain production.
- The company recorded no income tax expense or benefit. Its $119.0 million valuation allowance reflected management’s view that realization of deferred tax assets was not more likely than not. Tax accounting related to the 2017 Tax Act remained provisional.
- Accrued loss contingencies were $1.1 million. The filing describes ordinary-course legal and regulatory matters and states management did not expect pending legal actions to have a material adverse effect.
Important facts for investors to verify
- Confirm the registrant: the supplied text identifies Midstates Petroleum Company, Inc., not Amplify Energy Corp.
- Verify completion and final proceeds of the Anadarko Basin divestiture, including customary closing and post-closing adjustments.
- Assess post-divestiture production, cash generation, capital needs, and the borrowing base after the Anadarko assets’ exclusion.
- Review hedge positions, settlement exposure, and the effect of commodity-price movements on revenue and cash flows.
- Track production declines, the one-rig capital program, Oklahoma disposal rules, and any resulting operating constraints.