Oasis Midstream (OMP) Update - May 21

Oasis Midstream (OMP) Update - May 21

Postby dan_s » Fri May 21, 2021 9:36 am

This should be a positive development for OMP, one of the C-Corps in our High Yield Income Portfolio.

HOUSTON, May 20, 2021 /PRNewswire/ -- Oasis Petroleum Inc. (NASDAQ: OAS) ("Oasis" or the "Company") announced today it has entered into a series of definitive agreements to sell its entire Permian Basin position for total gross potential consideration of $481MM. The total consideration consists of $406MM at closing and up to three $25MM annual contingent payments in 2023, 2024 and 2025 if WTI averages over $60 per barrel in each respective calendar year. The primary transaction is expected to close around June 30, 2021, subject to customary closing conditions, and two smaller transactions have already closed. Oasis has updated its 2021 outlook to reflect the divestment.

"The decision to exit the Permian Basin while building scale in the Williston Basin is fundamentally based on aligning Company resources with our core competitive strengths and strategic focus of building a sustainable enterprise which generates significant free cash flow for the benefit of the Company and shareholders," said Danny Brown, Oasis' Chief Executive Officer. "The successful conclusion of our Permian divestiture process allows us to bring substantial value forward from an asset that was difficult to scale, strengthens our balance sheet from already peer-leading levels, and allows us to focus our attention on driving significant value from our world-class Williston acreage position, where we see great upside opportunity and long-term running room. The combined Williston and Permian transactions are highly accretive, position Oasis to take advantage of expanded scale, result in very low leverage, and demonstrate our commitment to shareholders. We believe Oasis represents a compelling investment opportunity, and we will continue to be aggressive in pursuing strategies to unlock value."

Transaction Highlights:

Positions Oasis exclusively in the Williston Basin, where the Company expects to drive significant value creation through its size, scale and robust inventory life as one of the basin's largest operators;

Divests non-strategic Permian position consisting of approximately 24k net acres and 1Q21 production of 7.2 MBoe/d;

Purchase price of $481MM values production at $67k/Boepd and 1Q21 annualized Adjusted EBITDA(1) at 4.6x;

When combined with the recent Williston acquisition, the transactions result in paying approximately 1.7x for $145MM – $165MM of net EBITDA(1,2);

OMP retains midstream assets in Panther DevCo and expects to benefit from incremental activity based on plans from the new operator;

Lowers full-year G&A by approximately $1MM – Oasis expects cash E&P G&A(1) per boe of $1.30 – $1.40 in 4Q21;

Reduces Oasis' pro forma leverage to approximately 0.3x, based on 1Q21 annualized Adjusted EBITDA to Oasis and pro forma for the recently announced Williston acquisition, which remains well below Oasis's 1.0x target and far below peers.
Dan Steffens
Energy Prospectus Group
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Re: Oasis Midstream (OMP) Update - May 21

Postby dan_s » Fri May 21, 2021 9:52 am

From my friends at Stifel

Oasis Petroleum Inc. (OAS, $80.00, Buy; Target $133.00)
Announces strategic exit from the Permian and provides pro forma 2021 guidance - Derrick Whitfield
After the close on Thursday, Oasis announced the divestiture of the company's Permian assets that consist of 24,000 net acres in the Delaware Basin and 7.2 mboepd (81% oil) of production during Q121. The divestiture was achieved via multiple sales to undisclosed sellers for $406 million due at closing and $25 million contingent payments in 2023, 2024, and 2025 if WTI averages over $60/bbl WTI in each respective year. We view this transaction positively as it allows the company to focus on driving value from the Williston by leveraging its extensive operational expertise to accelerate the return of capital to shareholders, further deleverages the balance sheet, and was executed at a favorable price ($8.6k/acre) based on transaction comps. Net-net, management continues to quickly achieve its strategic objectives designed to deliver strong shareholder returns. We believe the next likely item on the list (monetization of midstream shares) could unlock substantial shareholder value.
Dan Steffens
Energy Prospectus Group
dan_s
 
Posts: 25564
Joined: Fri Apr 23, 2010 8:22 am

Re: Oasis Midstream (OMP) Update - May 21

Postby dan_s » Fri May 21, 2021 9:58 am

I am updating my forecast/valuation model for OMP this morning and should post it to the EPG website by noon.

HOUSTON, May 20, 2021 /PRNewswire/ -- Oasis Midstream Partners LP (Nasdaq: OMP) ("OMP" or the "Partnership") today commented on Oasis Petroleum's recently announced Permian divestiture and Williston acquisition.

Highlights

Oasis Petroleum Inc. (NASDAQ: OAS) announced it entered into a series of definitive agreements to sell its entire Permian Basin position. The primary transaction is expected to close around June 30, 2021;

OMP retains its Permian midstream assets in Panther DevCo and expects to benefit from incremental activity versus status quo on the Permian asset, based on plans from the new operator;

OMP's customer base continues to diversify with Oasis's Permian assets moving to third-party revenue up to 17% pro forma for Oasis' Permian divestiture. Additionally, with 1Q21 earnings results, OMP announced multiple incremental third-party contracts and continues to work a robust pipeline of new opportunities in the Williston and Permian Basins;

OMP continues to benefit from its mutually beneficial relationship with Oasis, whose compelling financial position and deep low-cost inventory are expected to provide strong support to OMP's financial outlook;

Following its recently announced Williston acquisition and Permian divestiture, Oasis has indicated it is likely to accelerate activity at OMP dedicated areas in 2022 and beyond;

OMP's 2021 guidance is unchanged from the May 4th update.

Chief Executive Officer, Taylor Reid, commented, "Oasis Midstream Partners continues to improve due to Oasis's announced divestiture of its Permian assets and recent Williston acquisition. The change in Permian operator will further diversify our customer base, and anticipated incremental activity by the new operator enhances OMP's financial outlook. Oasis's recent Williston acquisition enhances its free cash flow outlook, allowing Oasis to redirect activity from the Permian to OMP dedicated areas in the Williston in 2022 and beyond. OMP believes it is well positioned to capture volumes derived from resilient activity levels at Oasis, which are supported by our sponsor's strong balance sheet and attractive asset base that generates significant free cash flow. We look forward to solid execution and continuing to increase the value of our partners' investment."
Dan Steffens
Energy Prospectus Group
dan_s
 
Posts: 25564
Joined: Fri Apr 23, 2010 8:22 am


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