A restructuring of Tulsa-based Mid-Con Energy Partners, LP saw the company’s top executive and some board members leave the company.
Randy Olmstead, who has been the President and CEO at Mid-Con since it was founded in 1986 resigned as did Fred Ball Jr., John “J.W.” Brown and Peter A. Leidel. Wilkie S. Colyer, Jr., who was the President and CEO of Contango, the parent of the new operator of the partnership’s properties also resigned from the board of directors.
Mid-Con’s Chief Operating Officer, Chad B. Roller offered his thanks to the departing executives.
“On behalf of management, staff, and investors, I extend our gratitude to the departing board members for their time, experience, and thoughtfulness in working through the recapitalization,” said Mr. Roller. “Management worked very closely with the Board over many hours and in tough conditions brought about by the current pandemic afflicting our communities, the US and abroad.
The Partnership also announced that Contango Resources, Inc. , a subsidiary of Contango Oil & Gas Company will be the new operator of the Partnership’s properties, replacing Mid-Con Energy Operating, LLC. The move is expected to generate pro-forma annual cash savings of approximately $6.5 million compared to 2019.
The company’s strategic recapitalization and transfer of ownership also resulted in new members to the board of directors and the departure of six other members.
Robert Boulware, Travis Goff and Fred Reynolds have been elected to constitute the Board of Directors of the General Partner. Bouleware served as President and CEO of ING Funds Distributor,LLC.
Travis Goff is President of Goff Capital, a Fort Worth, Texas-based family office. Goff Capital is the family office of John Goff, which directly invests in public securities as well as private equity in a variety of industries. Mr. Goff manages all existing and potential private and public investments for Goff Capital.
Fred N. Reynolds is the principal owner of Fred S. Reynolds & Associates, a petroleum engineering consulting firm located in Fort Worth, Texas. Mr. Reynolds graduated in 1979 with a Bachelor of Science in Petroleum Engineering from the University of Oklahoma. Following graduation, Mr. Reynolds worked for Chevron U.S.A. and Equity Oil Company as a drilling and completion engineer and Engineering Manager, before joining his father and forming the petroleum engineering consulting firm of Fred S. Reynolds & Associates in 1983.
As part of the restructuring, the holders of the partnership’s Class A and B preferred units, led by Goff Capital, Inc. agree to convert their preferred units to common units at an average conversion price of $3.12 a unit. The equity holders of the General Partner also agreed to contribute the ownership of the General Partner to the Partnership in exchange for common units.
As a result, it led to the resignation of the directors of the general partner followed by a new Board of Directors who were chosen with written consent of affiliates of Goff Capital because they now hold a majority of the outstanding common units.
“These actions simplify our capital structure and align the ownership and governance of the Partnership through a Board of Directors elected by the holders of a single class of common units,” said Roller. “Our new Board members will collectively represent beneficial ownership of more than 50% of the Partnership’s units. The changes in capital structure and governance also will allow the Partnership to focus on cash flow and debt reduction by eliminating dividends on the Preferred Units and the overhang of upcoming maturities of the Preferred Units.”
The Partnership also announced Friday the close of the spring redetermination of the borrowing base under its senior secured revolving credit facility and an amendment of the Credit Facility. The borrowing base is now set at $64 million.
Source: Mid-Con Energy Partners
Mid-Con Energy Parties Enters into Transformational Capital Restructuring
Mid-Con, an upstream production company focused on conventional assets in Oklahoma and Wyoming, today announced that it has completed a strategic recapitalization transaction, resulting in significant changes to its capital structure and governance to strengthen its balance sheet, create alignment across all unit holders, reduce costs and streamline operations, thereby creating immediate and sustainable value for all unit holders.
“Our low decline assets bring stability quarter-to-quarter with minimal maintenance capital requirements. The assets have been robust as we continually adjust to volatile oil prices through deactivation and re-activation of wells in order to optimize cash flow,” said Mr. Roller. “The Agreement allows the Partnership to optimize near-term cash flow without the burden of servicing the Preferred Units.”
Our Board exhibited patience and perseverance from beginning to execution. As the partnership flips to a new page, we enthusiastically welcome our new Board members. Their experience and vested ownership, coupled with technical expertise, will be invaluable as the Partnership navigates through the eventual recovery in the energy sector.”
Resignation of Senior Executive Management
The Partnership announced the resignation of Randy Olmstead from his current positions as CEO and Chairman of the Board. “We want to sincerely thank Mr. Olmstead for his service to the Partnership, both before and after the Partnership went public in 2011. His leadership and experience over three decades was invaluable in guiding the Partnership through both up and down cycles in oil prices. We wish Mr. Olmstead the very best in his future endeavors,” said Mr. Roller.
15th Amendment to Credit Facility and June 1, 2020 Borrowing Base Determination
The Partnership also announced the spring determination of the borrowing base under its senior bank debt (the “Credit Facility”). The new borrowing base is set at $64 million and is a reduction from the previous borrowing base of $95 million. The reduction in the borrowing base is a result of the unprecedented downturn in the oil markets. In addition, the Partnership announced the 15th Amendment to the Credit Facility (the “Amendment”), effective as of June 1, 2020. The Amendment aims to achieve $10 million in debt reduction through the next regularly scheduled redetermination of the borrowing base on or around November 2020. In addition, the Partnership will cease capital expenditures for the remainder of 2020 and look to divest non-core assets to accelerate debt repayment.
“The Partnership would like to thank our bank group for their unanimous support and efforts to establish a mutually agreeable plan for our future operations,” said Mr. Roller. “The Amendment allows for a constructive approach to right size the balance sheet and position the Partnership to succeed in the second half of 2020 and going into 2021.”
Appointment of Contango Resources as Operator for the Partnership
The Partnership has entered into a Management Services Agreement (“MSA”) with Contango Resources effective as of July 1, 2020, under which Contango Resources will serve as operator of the Partnership’s assets for a flat fee arrangement, which is expected to generate pro forma annual cash savings of approximately $6.5 million compared with 2019. Contango will also receive warrants to acquire common units of the Partnership, further aligning it with equityholders. “The Partnership continues to focus on managing operational costs and the shift of operations will allow us to leverage the larger scale of Contango to ultimately reduce cost,” said Mr. Roller. “Contango has existing production in our core areas and an operations team with a proven track record, who will be joined by key members of the Partnership’s existing operations team.” Contango Resources will take over operations in the third quarter of 2020, replacing Mid-Con Energy Operating.
