midcon energy companions an

Summary

Mid-Con managed to significantly lower lease operating costs. Administration hedged 4Q 2016 generation at more than $sixty four per barrel. Mid-Con can cover its distribution with extremely low recognized prices, because of to sector-major EBITDA margin.

The last handful of months have noticed worry marketing during the upstream MLP sector. Thereis certainly a sense that most upstream MLPs will not fare as well properly in an atmosphere ofsustained, low crude oil rates. Very last 7 days Linn Energy (NASDAQ:LINE) eradicated itsdistribution, and while administration might say otherwise, the distribution minimize came out ofnecessity. Other upstream names will adhere to, particularly the ones that are likewise leveredand have acquired aggressively when instances ended up excellent.Believe it or not, some upstream MLPs took a conservative path and even now are undertakingalright. Mid-Con Strength Companions (NASDAQ:MCEP) is a single of individuals names.Mid-Con focuses on one issue and 1 factor only: Waterflooding. Waterflooding is a secondaryrecovery approach. When the classic stress-pumping technique alone ceases to be commerciallyfeasible, producers could opt to flood numerous reservoirs with drinking water in get to migratethe oil to yet another field. Mid-Con did not get also aggressively when instances had been verygood, and when Mid-Con did purchase, it relied far more intensely on equity than on debt.Therefore, Mid-Con has financial versatility the place other people do not.Like most upstream MLPs, Mid-Con received 'caught offsides' when the price tag of oil plungedand then stayed minimal. The partnership hedged out only a few quarters. So when the time tolower distributions came, Mid-Con slashed its distribution by three/4ths. Administration alsoseemed to have uncovered its lesson about hedging: Pursuing the lower, Mid-Con bought hedgesfor 6 or seven quarters out, even though understood prices would be lower as a result. The'saving grace' was that, even at reduced realized rates, Mid-Con nonetheless produced heaps offunds flow to unit holders thanks to a lower value of generation and low debt obligations. Thisquarter in particular confirmed Mid-Con's distinctive strengths between upstream MLPs. Thisarticle will go in excess of the highlights of this most current quarter and how these 'points of light'make Mid-Con a diverse upstream MLP.A vivid quarterFinal quarter Mid-Con gave us an market-top distribution protection ratio. DCF was two.35occasions distributions. That ratio is only so higher since of hedges. The distribution coverageratio will appear back down to earth in 2016 when the highly-priced hedges roll off. Still,management explained this soft ratio will final for 'another few quarters.' Mid-Con is doing exactlywhat it is supposed to do with that excessive cash circulation paying off financial debt. Thisquarter Mid-Con paid out off $3 million toward its debt, and administration expects to pay $tenmillion in whole this year. (Overall Mid-Con has about $two hundred million in excellent credit carddebt.)Probably much more importantly, Mid-Con brought its for each-barrel lease working bills down toa terrific $eighteen.fourteen per barrel, down sixteen% 12 months-more than-yr. Just awhile back

LOE was in the lower $20s and growing, so Mid-Con has carried out a excellent work reigning infees. Even though a lot of this lower in price originates in industrywide value deflation,management believes 'a good deal of' the savings will be long lasting. If so, that would be awonderful boon to unitholders.Very last quarter administration displayed its newfound zeal for securing income stream. For acouple months WTI surged from the lower $40s to the minimal $60s. Mid-Con took thatopportunity to lock in 31% of 4Q 2016 creation at an common price tag of $sixty four.18 for eachbarrel. Even with a understood price tag of $sixty for each barrel, Mid-Con generates $eleven.70for every barrel of funds flow in excess of both capex and the distribution.In accordance to management, the 'breakeven,' at which Mid-Con would have 1. momentsdistribution protection, is in the high $40s for every barrel, with no thought for hedges. Providedthe recent local weather, any extra margin is likely to be applied to financial debt.ConclusionKnowledge from newest ten-K type. Does not consist of $three million of deleveraging from verylast quarter.Even with EBITDA declining because of to the crash in WTI, Mid-Con's trailing financial debt-to-EBITDA ratio is nevertheless only three.one instances. This quarter Mid-Con shown two things:Its potential to reign in LOE and its willingness to hedge production and lock in income flow. Evenbefore this quarter, Mid-Con normally has experienced market-major EBITDA margins. Thisquarter's benefits showed that Mid-Con is in significantly far better condition than most otherupstream MLPs are. For that cause, I proceed to feel that this partnership is, at the very minimum,value holding.Editor's Note: This write-up addresses one particular or much more shares buying and selling atconsiderably less than $1 per share and/or with considerably less than a $one hundred millionindustry cap. Make sure you be informed of the hazards associated with these stocks.mini storage tsuen wan