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Midstates Petroleum Company, Inc. (NYSE: MPO) (“Midstates” or the “Company”) announced today its financial and operating results for the three months and full year ended December 31, 2012. Midstates’ fourth quarter results were driven by a 91% sequential quarter increase in production, primarily resulting from the successful integration of the Eagle Energy Production, LLC (“Eagle”) property acquisition which closed October 1, 2012.
Average daily production rose 91% to 15,592 net barrels of oil equivalent (“Boe”) per day from 8,182 net Boe per day in the third quarter of 2012; production from Mid-Continent operations (which includes Midstates’ Oklahoma and Kansas properties) averaged 7,207 Boe per day while production from Gulf Coast operations (which includes Midstates’ Louisiana properties) averaged 8,385 Boe per day.
Adjusted EBITDA totaled $48.6 million, up 49% from $32.7 million in the third quarter of 2012. See “Non-GAAP Financial Measures” in the tables below for a definition of Adjusted EBITDA and a reconciliation to net income (loss) and net cash provided by operating activities.
Adjusted Net Income (which excludes unrealized gains/losses on derivatives and transaction costs associated with the Eagle property acquisition and the related income tax effect) was $5.5 million compared with $1.7 million in the third quarter of 2012. See “Non-GAAP Financial Measures” in the tables below for a definition of Adjusted Net Income and a reconciliation to net income (loss).
Cash Operating Expenses (which includes lease operating and workover expenses, severance and ad valorem taxes, and the cash portion of general and administrative expenses, but excludes transaction costs associated with the Eagle property acquisition) were reduced 24% to $20.26 per Boe from $26.67 per Boe in the third quarter of 2012. See “Non-GAAP Financial Measures” in the tables below for a definition of Cash Operating Expenses and a reconciliation to Operating Expenses.
30 gross wells were spud during the fourth quarter of 2012 and 34 were placed into production. At quarter end, 12 were awaiting completion and seven were drilling. Since December 31, 2012, Midstates has spud 14 additional wells.
In the North Cowards Gully field, the McFatter 8H-1 was drilled to a total measured depth of 16,870 feet, including a 3,350-foot lateral. The well was completed in the first quarter of 2013 with 10 stages of fracture stimulation and had an initial 14-day IP rate of 1,157 Boe per day comprised of 80% liquids. The McFatter 8H-1 is the first follow up well to the previously announced Musser-Davis 8H-1 drilled during the fall of 2012.
Year-end 2012 proved reserves increased 188% to 75.5 million barrels of oil equivalent (“MMBoe”) from 26.2 MMBoe at year-end 2011. Organic drilling reserve additions (before revisions to previous reserve estimates) totaled 20.9 MMboe at a cost of $21.48 per Boe, while acquisitions added 35.0 MMBoe at a cost of $19.03 per Boe. All-in finding, development and acquisition costs for 2012 were $21.08 per Boe. See “Non-GAAP Financial Measures” in the tables below for a definition of all-in finding, development and acquisition costs.
The following previously-disclosed events occurred during the fourth quarter and were effective October 1, 2012:
Closing of the Eagle property acquisition for $325 million in cash (before customary post-closing adjustments and adjustments for expenses incurred and revenue received by Eagle since June 1, 2012) and 325,000 shares of Midstates’ Series A Mandatorily Convertible Preferred Stock with an initial liquidation preference value of $1,000 per share.
Amendment of the Company’s revolving credit facility to increase the borrowing base (subject to semiannual redetermination) to $250 million.
Closing of the private issuance of $600 million in aggregate principal amount of 10.75% senior unsecured notes (the “Notes”) due 2020. A portion of the net proceeds was used to fund the cash portion of the Eagle property acquisition.
John Crum, Midstates’ Chief Executive Officer and President commented, “Our fourth quarter results clearly reflect the strong positive benefits of production from and drilling on the Mississippian Lime properties that were acquired effective October 1, 2012, as well as successful drilling in Louisiana. The newly acquired properties and the Eagle staff are being quickly integrated into Midstates and we are very pleased with the better-than-expected results we are experiencing. Our cash operating expenses on a Boe basis fell 24% reflecting the higher production volumes as well as lower overall costs associated with our newly acquired assets. We are likewise very pleased with our 188% proved reserve growth in 2012 which was driven by the Eagle property acquisition as well as strong organic growth from our successful drilling programs in both Louisiana and Oklahoma.”