Business Context and Reporting Period
This Form 8-K Current Report was filed by Midstates Petroleum Company, Inc. on May 24, 2017. The filing discloses the entry into a material definitive agreement regarding the company's credit facilities and reports the results of the 2017 Annual Meeting of Stockholders held on the same date.
Key Financial Metrics and Agreements
The filing details a First Amendment to the Senior Secured Credit Agreement (RBL Credit Agreement) with SunTrust Bank, N.A. as administrative agent. Key financial terms modified include:
- Cash Collateral: Removed the requirement to maintain a $40,000,000 cash collateral account.
- Liquidity Covenant: Removed the requirement to maintain at least 20% liquidity of the effective Borrowing Base.
- Debt-to-EBITDA Ratio: Amended to 2.25:1.00 for fiscal quarters ending December 31, 2016, and March 31, 2017; increased to 4.00:1.00 for all subsequent fiscal quarters.
- Mortgage Threshold: Reduced from 95% to 90% of the discounted present value of future net income (using a 9% discount rate) attributable to proved reserves.
- Capital Expenditures: Removed limitations on capital expenditures.
- Borrowing Base Redetermination: Moved the first scheduled redetermination from April 2018 to October 2017.
The filing does not provide specific revenue, profit, cash flow, or total debt figures for the reporting period.
Material Changes and Voting Results
The primary material change is the relaxation of financial covenants and the removal of liquidity and collateral restrictions, providing the company with greater operational flexibility. Additionally, the company reported the following voting results from its Annual Meeting (24,994,867 shares outstanding):
- Director Elections: All seven nominees were elected. Notably, nominee Alan J. Carr received 19,321,325 votes for and 2,195,554 votes withheld, while other nominees received over 21.5 million votes for with minimal withholdings.
- Executive Compensation: The non-binding advisory proposal was approved with 21,008,067 votes for and 508,811 votes against.
- Accountant Ratification: Grant Thornton LLP was ratified with 23,413,396 votes for and zero votes against.
Guidance, Outlook, and Risks
The filing does not contain forward-looking guidance, management commentary on future outlook, or specific risk factors beyond the implications of the amended credit agreement terms. The amendment to the debt-to-EBITDA ratio to 4.00:1.00 for future quarters suggests an expectation of higher leverage or lower EBITDA relative to debt in the coming periods.
Investor Verification Checklist
- Verify the full text of the First Amendment to the Senior Secured Credit Agreement (Exhibit 10.1) for detailed covenant definitions.
- Review the company's most recent 10-Q or 10-K to understand the current EBITDA and debt levels relative to the new 4.00:1.00 covenant threshold.
- Assess the impact of the accelerated borrowing base redetermination scheduled for October 2017 on future liquidity.
- Investigate the significant number of votes withheld for director Alan J. Carr compared to other board members.