Business Context and Reporting Period
This Form 8-K Current Report is filed by Midstates Petroleum Company, Inc. (the "Company") for the reporting period ending May 31, 2013. The filing details the closing of a significant debt offering and the completion of a major asset acquisition in the Anadarko Basin.
Key Financial Metrics and Transactions
- Debt Issuance: The Company and its subsidiary, Midstates Petroleum Company LLC, issued $700 million aggregate principal amount of 9.25% senior notes due 2021. The offering closed on May 31, 2013.
- Asset Acquisition: The Company completed the "Panther Acquisition" of producing properties and undeveloped acreage in Texas and Oklahoma for an aggregate purchase price of $620 million in cash.
- Funding Source: The Panther Acquisition was funded using proceeds from the $700 million senior notes offering.
- Credit Facility Amendment: The Company's Second Amended and Restated Credit Facility was amended to provide an initial borrowing base of $425 million and extend the maturity date to May 31, 2018.
- Interest Payments: Interest on the new senior notes is payable semi-annually in arrears on June 1 and December 1, commencing December 1, 2013.
Material Changes and Covenants
The filing discloses material changes to the Company's capital structure and debt covenants:
- Debt Covenants: The Indenture for the new notes restricts the Company's ability to incur additional indebtedness, make restricted payments, pay dividends, create liens, or dispose of assets. These covenants are suspended if the notes are rated investment grade by both Moody's and S&P.
- Leverage Ratios: The amended Credit Facility imposes a total net indebtedness to EBITDA ratio cap of 4.50:1.0 for fiscal quarters ending between June 30, 2013, and June 30, 2014, stepping down to 4.00:1.0 thereafter.
- Redemption Rights: The Company may redeem the notes at a premium starting June 1, 2016. Prior to May 31, 2014, up to $100 million of notes may be redeemed using equity offering proceeds at 103% of principal.
- Change of Control: Holders have the right to require repurchase of notes at 101% of principal plus accrued interest upon certain change of control events.
Guidance, Risks, and Contingencies
The filing does not provide specific financial guidance or outlook projections for future periods. However, it highlights the following risks and contingencies:
- Registration Rights Risk: If the Company fails to file a registration statement for the exchange or resale of the notes on a timely basis, the annual interest rate on the notes will increase by up to 1.0% per annum.
- Covenant Compliance: The Company must adhere to strict leverage ratios and negative covenants under both the new Indenture and the amended Credit Facility.
- Market Risk: The redemption prices for the notes vary by year, with premiums decreasing from 106.938% in 2016 to 100% in 2019 and thereafter.
Investor Verification Checklist
- Verify the final adjusted purchase price of the Panther Acquisition after customary post-closing adjustments.
- Confirm the credit rating status of the new senior notes to determine if negative covenants are currently suspended.
- Review the full text of the Indenture (Exhibit 4.1) and Registration Rights Agreement (Exhibit 4.2) for detailed terms.
- Monitor the Company's ability to meet the 4.50:1.0 net indebtedness to EBITDA ratio under the amended Credit Facility.
- Check for any subsequent filings regarding the effectiveness of the shelf registration statement for the notes to avoid interest rate penalties.