Oasis Midstream Partners LP (OMP) Update - April 18

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dan_s
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Joined: Fri Apr 23, 2010 8:22 am

Oasis Midstream Partners LP (OMP) Update - April 18

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3/30/2021: RBC Capital analyst Elvira Scotto raised the firm's price target on Oasis Midstream Partners to $22 from $19 and keeps a Sector Perform rating on the shares. The company's announced simplification whereby it will buy out remaining interests in the Bobcat and Beartooth DevCos from its sponsor is "prudent" as it will be "accretive" to its DCF per unit and also simplify its structure, the analyst tells investors in a research note.

HOUSTON, March 30, 2021 /PRNewswire/ -- Oasis Midstream Partners LP (Nasdaq: OMP) (the "Partnership" or "OMP") successfully closed the acquisition of all remaining interests in Bobcat DevCo LLC ("Bobcat DevCo") and Beartooth DevCo LLC ("Beartooth DevCo") from Oasis Petroleum Inc. (Nasdaq: OAS) ("Oasis") as well as eliminated the Partnership's incentive distribution rights ("IDRs") in exchange for $231.5 million cash and 14.8 million units for total consideration of approximately $512.5 million based on OMP's 20 day volume weighted average price ending on March 19, 2021 (the "Simplification"). The Simplification also includes a right of first refusal in favor of OMP with respect to midstream opportunities in the Painted Woods and City of Williston operating areas of Oasis. Closing occurred on Tuesday, March 30, 2021. Upon closing, OMP's interest in Bobcat DevCo increased to 100% from 35.3%, OMP's interest in Beartooth DevCo increased to 100% from 70%, and all IDRs were eliminated from OMP's capital structure.

Additionally, on March 30, 2021, OMP successfully closed its private placement to eligible purchasers of $450 million in aggregate principal amount of 8.00% senior unsecured notes due 2029 (the "Notes Offering").

Of the total $512.5 million purchase consideration, $231.5 million was financed by the Notes Offering. The remaining amount was funded through the issuance of 14,800,000 common units, 1,850,356 of which were issued to the holders of Class A and Class B Units representing membership interests in OMP GP LLC with the remaining 12,949,644 common units issued directly to OMS Holdings LLC.

"We are pleased to announce the successful closing of OMP's previously announced purchase of the remaining interest in Bobcat DevCo and Beartooth DevCo, as well as the simplification of its financial structure," said Taylor Reid, Chief Executive Officer of OMP. "This accretive transaction enhances our scale and strengthens OMP's attractive position in the core of the Williston Basin. OMP is uniquely positioned to benefit from Oasis's development program and capture additional third party business. Volumes from both Oasis and third parties provide a solid foundation through 2021 and beyond. This transaction is extremely attractive for our investors by allowing OMP to increase its scale in an accretive manner, while improving its competitive position to capitalize on future opportunities. Our sponsor, Oasis, is a proven operator with over 10 years of low-breakeven inventory. OMP believes it is well positioned to capture volumes derived from resilient activity levels at Oasis supported by our sponsor's strong balance sheet and attractive asset base that generates significant free cash flow."

I have updated my forecast valuation model to agree with OMP's fresh EBITDA guidance. I was going to update the profile, but I will wait on that until they release Q1 results and provide more details on their guidance for 2021. The good news is that they should generate more than enough DCF coverage to hold their quarterly dividends at $0.54 for annual yield of 9.8% based on last Friday's closing price. OMP's growth is highly dependent on Oasis Petroleum's growth, which is dependent on oil prices. I agree with RBC Capital's price target of $22/share.
Dan Steffens
Energy Prospectus Group
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