Oasis Midstream Partners LP (OMP) Update - Feb 8

[dan_s]

OMP is a midstream company in our High Yield Income Portfolio.
It is an MLP, so better suited for taxable accounts.
At the time of this post it is trading for $15.88 per unit.
It has been and should continue paying quarterly distributions of $0.54/unit ($2.16 per year) for annual yield of 13.6% tax deferred.

OMP was created by Oasis Petroleum (OAS) which recently completed a successful debt restructuring under Chapter 11. OMP was not part of the Chapter 11 process.
Because the majority of OMP's revenues come from services provided to OAS, the unit price got hammered when OAS announced the Chapter 11 plan was going to be used to restructure their balance sheet. < Despite OMP telling the market that it was not part of the planned restructuring.
OMP did have to pay $25.9 million of penalty interest in Q1 2020 because of an "Event of Default", but that issue has now been resolved.

First Call's price target is $15.40, but none of the analysts covering OMP have updated their forecasts since November.

My current valuation for OMP is $16.50, but the multiple of operating cash flow I'm using is just 3.5X. That will go up if their 2021 guidance matches up with my model.
Since most of their midstream assets are in North Dakota, OMP may have some weather related problems in February. I believe I have enough "cushion" built into my model to cover it.
Assuming modest growth, in "Post-Pandemic World" OMP should be generating close to $5.00 of operating cash flow per unit. With very low maintenance capex requirements their DCF coverage will support a much higher quarterly distribution.

PS: OAS is back on my Watch List and I will be taking a hard look at it after Q4 results are released. It is a strong candidate to be added back to our Small-Cap Growth Portfolio. On 1-26-2021 Stifel rated OAS a BUY with a $58.00 price target with upside to $72.72 based on what Stifel calls their 4P NAV analysis.