Mid-Con Energy Partners LP (NASDAQ: MCEP) is raising $25 million through the sale of Class A convertible preferred units in a private offering arrangement. The preferred units will convert into common unit after some time. But Mid-Con retains the rights to redeem the preferred units about five months after their issuance.
The preferred units that Mid-Con Energy Partners LP (NASDAQ: MCEP) is offering have been priced at $2.15 apiece. The company said that holders of the preferred units will receive quarterly cash distribution that will be worked out at an annual rate of 8%. Other than cash, holders of the preferred units could receive additional preferred units, except that where additional units are being awarded, the rate will be worked out at 10% annually.
Conversion of the preferred units
Holders of the preferred unit will have the opportunity to convert part or all of their units into the common units of Mid-Con Energy Partners LP (NASDAQ: MCEP). But such conversion can only happen after the six-month anniversary of the closing of the offering.
Besides holders electing to convert their preferred units, Mid-Con could also redeem them after the fifth anniversary.
If only a portion of the preferred units are redeemed, the rest can convert to common units Mid-Con.
Putting the money to use
Mid-Con Energy Partners LP (NASDAQ: MCEP) intends to use the proceeds from the preferred unit offering to finance the acquisition of certain assets in Nolan County, Texas. It will cost $19.5 million to acquire the assets. The deal to acquire the Nolan County assets is expected to close on August 12.
The remaining funds after the acquisition of the Nolan Country properties will go into repaying Mid-Con’s outstanding borrowing under its revolver credit facility.
Asset divestiture – Mid-Con Energy Partners LP (NASDAQ: MCEP)
Mid-Con Energy Partners LP (NASDAQ: MCEP)’s fundraiser through securities offering and plans to acquire assets in Nolan comes after the company recently divested some of its oil and gas properties. The company unlocked $18 million from the divestiture of certain of its assets in Hugoton area. The assets were sold to an entity known as PO&G Panhandle, LP. The company said at the time of the asset monetization that the net proceeds would go into repaying its revolver credit.