Filing summary
Entity discrepancy: The supplied filing is Midstates Petroleum Company, Inc.’s Form 10-Q, not an Amplify Energy Corp. filing. It covers the three months ended March 31, 2016; the financial statements are unaudited.
Business context and reporting period
Midstates explored for and produced oil, natural gas liquids (NGLs), and natural gas in Oklahoma, Texas, and Louisiana. Its common stock had been delisted from the NYSE in February 2016 and traded over the counter as MPOY.
Financial and operating results
| Metric | Q1 2016 | Q1 2015 |
|---|---|---|
| Total revenue | $52.0 million | $111.2 million |
| Oil, NGL, and gas sales, excluding derivative gains | $51.1 million | $89.4 million |
| Operating loss | $135.1 million | $166.1 million |
| Net loss | $179.3 million | $193.6 million |
| Net loss per share | $16.88 | $28.80 |
| Cash from operating activities | $29.9 million | $113.0 million |
| Cash used in investing activities | $58.7 million | $111.2 million |
- Average production was 32,018 Boe/day, down 6.3%. Oil production fell 21.8%; NGL volumes were nearly flat; natural gas volumes rose 8.2%.
- Average realized prices without derivatives declined year over year: oil to $29.09/Bbl (down 35.7%), NGLs to $11.30/Bbl (down 36.4%), and gas to $1.86/Mcf (down 33.3%).
- Lease operating and workover expense fell to $15.8 million from $23.3 million; DD&A fell to $24.8 million from $58.4 million. The company recorded a $127.7 million noncash oil and gas property impairment, versus $174.7 million a year earlier.
- Interest expense, net of capitalized amounts, was $44.2 million versus $36.5 million. The increase primarily reflected the second- and third-lien notes issued in 2015.
- Cash was $301.4 million at quarter-end, up from $81.1 million at year-end, principally after a $249.2 million draw on the revolving credit facility. The company reported approximately $2.045 billion of debt principal and $2.135 billion of debt carrying value; all debt was classified as current. Stockholders’ deficit was $1.505 billion.
Material changes, outlook, and risks
- Chapter 11: On April 30, 2016, after quarter-end, Midstates and its subsidiary filed for Chapter 11 and continued operating as debtors in possession. The filing accelerated debt obligations, with creditor actions generally stayed under bankruptcy proceedings.
- Proposed restructuring: A Plan Support Agreement contemplated an $82 million cash paydown to credit facility lenders, a $170 million exit facility, cash payments of up to $60 million to second-lien noteholders, and conversion of remaining junior debt into equity. The proposal provided for cancellation of existing common equity with no distribution; the company stated existing shares were highly likely to be cancelled. The plan remained subject to court and other approvals, and outcomes were uncertain.
- Liquidity and going concern: The April 1 borrowing-base redetermination reduced the facility base to $170 million, creating an approximately $82 million deficiency. The company also did not pay approximately $15.8 million of interest due on its 2020 notes within the grace period. It cited substantial doubt about its ability to continue as a going concern; the quarter-end statements did not reflect possible effects of the bankruptcy outcome.
- Capital spending and impairment: Q1 capital expenditures incurred were $56.3 million. Management expected $95–$125 million of 2016 capital spending, but this outlook was subject to severe liquidity and restructuring uncertainty. Management estimated a further $45–$70 million Q2 impairment based on then-current commodity prices and expected a potentially material full-year impairment.
- Operational and market risks: The company had no commodity derivatives outstanding, leaving production exposed to price volatility. Oklahoma regulators had requested an approximately 40% reduction in wastewater injection into the Arbuckle formation; inability to secure alternative disposal capacity could force production curtailments. Low commodity prices, declining production, limited financing access, bankruptcy costs, and possible loss of employees or business counterparties were also significant risks.
- Management reported disclosure controls and procedures were effective as of March 31, 2016. No material change in internal control over financial reporting was reported.
Most important facts for investors to verify
- Confirm the intended issuer: this filing is for Midstates Petroleum, not Amplify Energy.
- Check subsequent bankruptcy-court filings and the final restructuring outcome, including treatment of existing common shares and creditor recoveries.
- Verify post-petition liquidity, cash use, exit financing, and the status of the borrowing-base deficiency and debt claims.
- Track subsequent production curtailments or disposal permits related to wastewater injection, and any effect on operations.
- Compare later commodity prices and reserve valuations with management’s impairment estimates and capital-spending outlook.