Business context and reporting period
Entity discrepancy: The request identifies Amplify Energy Corp., but the supplied Form 10-Q is for Midstates Petroleum Company, Inc. (debtor-in-possession). This summary covers Midstates’ quarter and six months ended June 30, 2016; confirm the filing belongs to the intended company.
Midstates was an oil and gas exploration and production company operating in Oklahoma, Texas, and Louisiana. It filed for Chapter 11 protection on April 30, 2016, and continued operating as a debtor-in-possession. Its shares had been delisted from the NYSE and traded OTC as MPOY.
Financial and operating performance
Unless otherwise noted, financial amounts are in U.S. dollars.
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| Total revenue | $62.6 million | $74.8 million | $114.5 million | $185.9 million |
| Operating loss | $52.8 million | $553.6 million | $187.9 million | $719.7 million |
| Net income (loss) | $9.0 million | $(598.4) million | $(170.3) million | $(792.0) million |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $51.6 million | $138.7 million |
| Capital investment in property and equipment, net cash | Not provided for quarter | Not provided for quarter | $(100.4) million | $(150.0) million |
- Q2 oil, NGL, and natural gas sales were $61.0 million, down 34.9% year over year; six-month sales were $112.2 million, down 38.8%. Lower commodity prices and lower oil production were key factors. The 2016 periods had no commodity derivative positions.
- Average production was 30,164 Boe/day in Q2, down 11.0% year over year, and 31,091 Boe/day for the first half, down 8.6%. Six-month oil production declined 23.5%; natural gas volumes increased 5.3%.
- Q2 net income reflected an $80.5 million net reorganization gain despite a $52.8 million operating loss. The first-half results included $190.7 million of oil and gas property impairment, versus $673.1 million a year earlier. Impairments were attributed mainly to low commodity prices.
- Lease operating expense improved to $5.86/Boe in Q2 from $7.06/Boe; six-month expense was $5.63/Boe versus $7.31/Boe. Gathering and transportation costs per Boe increased.
Liquidity, debt, and capital
- Cash and cash equivalents were $281.6 million at June 30, 2016, compared with $81.1 million at year-end 2015. Current assets were $333.9 million and current liabilities $321.0 million; this presentation excludes $1.882 billion of liabilities classified as subject to compromise.
- Total debt principal was approximately $2.0 billion: $249.4 million outstanding under the revolving credit facility and approximately $1.75 billion of senior and secured notes. The notes were classified as liabilities subject to compromise. Stockholders’ deficit was $1.495 billion.
- The revolver’s borrowing base was cut to $170.0 million from $252.0 million in April, leaving an uncured borrowing-base deficiency of approximately $82.0 million. The company had drawn approximately $249.4 million in February. The Chapter 11 filing accelerated debt obligations, while the bankruptcy stay generally restricted creditor enforcement.
- First-half operating cash flow fell to $51.6 million, partly because 2015 derivative settlements had generated $94.8 million of cash and 2016 commodity revenue was lower. Financing cash flow of $249.3 million primarily reflected the revolver draw; ending cash increased by $200.5 million.
Outlook, restructuring, and risks
- Management expected 2016 capital spending of $125 million to $145 million. First-half operational capital expenditures were $97.8 million; one rig was drilling in the Mississippian Lime at quarter-end.
- The proposed restructuring contemplated an amended $170 million exit facility, an $82 million cash paydown for revolving-credit claims, cash payments of up to $60 million to second-lien noteholders, and conversion of remaining junior debt into reorganized-company equity or warrants. The plan contemplated cancellation of existing common stock with no distribution to current shareholders.
- The Bankruptcy Court approved amended versions of the plan and disclosure statement on July 13, 2016; a plan supplement was filed August 3. Confirmation and implementation remained uncertain. The company expected fresh-start accounting upon emergence, making post-emergence financial statements not comparable with prior statements.
- Midstates had no commodity hedges at June 30, leaving production exposed to price fluctuations. Oklahoma regulators had requested a roughly 40% reduction in wastewater injection into the Arbuckle formation. The company reported converting five wells and drilling two for disposal into other formations; further permits were not assured, and production could be curtailed if disposal capacity proved inadequate.
- Other notable items: approximately $31.7 million of contractual interest on compromised debt was not recorded after the bankruptcy filing; required interest payments of approximately $15.8 million and $73.8 million had not been made. The company also reported $6.5 million of Q2 advisory and restructuring costs. Management stated disclosure controls were effective as of June 30.
Important facts for investors to verify
- Confirm the issuer: the supplied filing is Midstates Petroleum, not Amplify Energy.
- Check the subsequent Chapter 11 case outcome, plan terms, distributions, and cancellation of existing equity; the filing’s proposed terms were not yet final.
- Assess the quality and permitted use of the reported cash balance, the uncured borrowing-base deficiency, and whether the proposed exit financing was ultimately available on the described terms.
- Monitor production trends, commodity prices, and wastewater disposal permits, which could affect operating volumes and cash generation.