OAS got hammered when they announced Q2 results that missed their production guidance. In this world of negativity, it is a BIG NO NO to "Over-promise and Under-deliver".
After taking a hard look at the company this afternoon, it is my opinion that the selling has been way overdone. "Stuff Happens" in this business, but the production miss is something they can fix. Q2 production was 84,454 Boepd (down from 91,714 Boepd in Q1). Production has already bounced back to 89,000 Boepd in July.
OAS is generating FREE CASH today!
OAS is primarily a Williston Basin company (Bakken and Three Forks).
> Most investors think Q1 is the worst weather in North Dakota. Yes, it is cold but the ground is hard during the winter months and oilfield service companies are geared to work in very cold weather.
> The Q2 is actually the worst weather to get work done. "Spring Break-up" creates very muddy conditions and this year there was a lot of flooding. Flooding and midstream facility issues are what caused well completions to be pushed back.
So, where is OAS today.
> I have lowered my valuation multiple to 3X operating cash flow per share to $8.25/share. This is down from $11.25 in the last newsletter.
> OAS closed today at $2.96
> OAS generated $1.36 CFPS in 1H2019 and they should match that in 2H2019. So, the current share price is just over 1X operating cash flow per share. Oversold for a company generating free cash flow today and over a decade of Tier One drilling inventory.
> OAS is generating and will continue generating FREE CASH FLOW FROM OPERATIONS as long as their realized oil price stays over $50/bbl. It was $56.79/bbl in Q2 and their hedges lock in more than $57/bbl for ~60% of their 2H2019 production.
> OAS has a lot of running; 1,385 Tier One horizontal drilling locations just in the Williston Basin.
> They are just getting started in the Delaware Basin, but it appears that they have several hundred Tier One HZ drilling locations in West Texas.
If you own Oasis Midstream (OMP) you should listen to the OAS Q2 CC and take a look at the updated presentation on their website. OMP has strong distribution growth locked in. OMP is now a C-Corp with annual dividend yield over 10% ($0.49/quarter).
Oasis Petroleum Update - August 12
Oasis Petroleum Update - August 12
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oasis Petroleum Update - August 12
HOUSTON, Aug. 6, 2019 /PRNewswire/ -- Oasis Midstream Partners LP (NYSE: OMP) ("OMP" or the "Partnership") today announced financial and operating results for the second quarter of 2019.
2Q 2019 Highlights:
Declared the quarterly cash distribution of $0.49 per unit, an approximate 5% increase from 1Q 2019.
Net income was $49.0 million and net cash from operating activities was $56.0 million.
Delivered $61.9 million of Adjusted EBITDA(1) and $36.1 million of net Adjusted EBITDA to the Partnership(1).
Generated $28.8 million of DCF(1), resulting in distribution coverage of 1.7x.
Experienced operational downtime at the Wild Basin gas processing complex, which was fully restored beginning mid-July. Crude oil and natural gas volumes were adversely impacted by the downtime, resulting in lower than anticipated Adjusted EBITDA, DCF and distribution coverage. Adjusting for downtime, OMP would have realized distribution coverage of approximately 1.9x.
Exceeded guidance related to water service volumes. Volumes increased 13% from 2Q 2018 to 52.4 MBowpd in Bobcat DevCo and 3% from 2Q 2018 to 143.7 MBowpd in Beartooth DevCo.
Increased third-party natural gas volumes in Bighorn DevCo by approximately 94% from 1Q 2019 to 59.3 MMscfpd (30% of total natural gas volumes of 201.6 MMscfpd).
(1) Non-GAAP measure. See "Non-GAAP Financial Measures" below for definitions of all non-GAAP measures included herein and reconciliations to the most directly comparable measures under United States generally accepted accounting principles ("GAAP").
"Oasis Midstream Partners remains on track to deliver our targeted 20% annual growth in distributions per unit while simultaneously increasing coverage in coming quarters," said Taylor Reid, Chief Executive Officer of OMP. "We successfully delivered a strong second quarter performance, despite operational downtime at our gas complex. Our resilient financial results highlight the strength and diversity of our portfolio, with strong performance in most commodities offsetting transitory weakness in natural gas. Our coverage outlook remains strong and on track to range from 1.9x to 2.0x exiting 2019. We are ahead of schedule on most infrastructure projects and we continue to build out our Panther DevCo, which will support growth for years to come while maintaining strong coverage."
Outlook Update
Estimate 2019 Adjusted EBITDA, net to the Partnership, to be $154 million to $161 million, including 2Q 2019 performance.
Estimate gross Adjusted EBITDA by DevCo in 2019 – Bighorn DevCo: $74 million to $76 million, Bobcat DevCo: $124 million to $127 million, Beartooth DevCo: $61 million to $64 million, and Panther DevCo: $1 million to $3 million.
Panther DevCo is expected to be assigned to OMP by September 1, 2019.
Anticipate distribution coverage for 3Q 2019 of 1.8x to 1.9x and 4Q 2019 of 1.9x to 2.0x, unchanged from last update.
Updated 2019 CapEx plan to a range of $203 million to $214 million, net to OMP. Incremental spending primarily relates to capturing third-party business, incremental plant costs, and an acceleration of certain gathering infrastructure from 2020 to 2019. CapEx in 3Q 2019 is expected to increase compared to 2Q 2019 with the closing of the Panther DevCo assignment.
Expect maintenance CapEx for full year 2019 to range between 6% of Adjusted EBITDA and 8% of Adjusted EBITDA, with 3Q 2019 around 10% of Adjusted EBITDA.
OMP continues to pursue incremental third-party business in both the Williston and Delaware basins.
2Q 2019 Highlights:
Declared the quarterly cash distribution of $0.49 per unit, an approximate 5% increase from 1Q 2019.
Net income was $49.0 million and net cash from operating activities was $56.0 million.
Delivered $61.9 million of Adjusted EBITDA(1) and $36.1 million of net Adjusted EBITDA to the Partnership(1).
Generated $28.8 million of DCF(1), resulting in distribution coverage of 1.7x.
Experienced operational downtime at the Wild Basin gas processing complex, which was fully restored beginning mid-July. Crude oil and natural gas volumes were adversely impacted by the downtime, resulting in lower than anticipated Adjusted EBITDA, DCF and distribution coverage. Adjusting for downtime, OMP would have realized distribution coverage of approximately 1.9x.
Exceeded guidance related to water service volumes. Volumes increased 13% from 2Q 2018 to 52.4 MBowpd in Bobcat DevCo and 3% from 2Q 2018 to 143.7 MBowpd in Beartooth DevCo.
Increased third-party natural gas volumes in Bighorn DevCo by approximately 94% from 1Q 2019 to 59.3 MMscfpd (30% of total natural gas volumes of 201.6 MMscfpd).
(1) Non-GAAP measure. See "Non-GAAP Financial Measures" below for definitions of all non-GAAP measures included herein and reconciliations to the most directly comparable measures under United States generally accepted accounting principles ("GAAP").
"Oasis Midstream Partners remains on track to deliver our targeted 20% annual growth in distributions per unit while simultaneously increasing coverage in coming quarters," said Taylor Reid, Chief Executive Officer of OMP. "We successfully delivered a strong second quarter performance, despite operational downtime at our gas complex. Our resilient financial results highlight the strength and diversity of our portfolio, with strong performance in most commodities offsetting transitory weakness in natural gas. Our coverage outlook remains strong and on track to range from 1.9x to 2.0x exiting 2019. We are ahead of schedule on most infrastructure projects and we continue to build out our Panther DevCo, which will support growth for years to come while maintaining strong coverage."
Outlook Update
Estimate 2019 Adjusted EBITDA, net to the Partnership, to be $154 million to $161 million, including 2Q 2019 performance.
Estimate gross Adjusted EBITDA by DevCo in 2019 – Bighorn DevCo: $74 million to $76 million, Bobcat DevCo: $124 million to $127 million, Beartooth DevCo: $61 million to $64 million, and Panther DevCo: $1 million to $3 million.
Panther DevCo is expected to be assigned to OMP by September 1, 2019.
Anticipate distribution coverage for 3Q 2019 of 1.8x to 1.9x and 4Q 2019 of 1.9x to 2.0x, unchanged from last update.
Updated 2019 CapEx plan to a range of $203 million to $214 million, net to OMP. Incremental spending primarily relates to capturing third-party business, incremental plant costs, and an acceleration of certain gathering infrastructure from 2020 to 2019. CapEx in 3Q 2019 is expected to increase compared to 2Q 2019 with the closing of the Panther DevCo assignment.
Expect maintenance CapEx for full year 2019 to range between 6% of Adjusted EBITDA and 8% of Adjusted EBITDA, with 3Q 2019 around 10% of Adjusted EBITDA.
OMP continues to pursue incremental third-party business in both the Williston and Delaware basins.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group