Benzinga | Mar 22, 2021 07:39AM EDT

Oasis Midstream Partners Announces Acquisition of Midstream Interests from Oasis Petroleum and IDR Elimination For Total Consideration of ~$510M

Oasis Midstream Partners LP (NASDAQ:OMP) (the "Partnership" or "OMP") today announced it has entered into a contribution and simplification agreement to acquire 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 to eliminate the Partnership's incentive distribution rights ("IDRs") in exchange for $229 million cash and 14.8 million units for total consideration of approximately $510 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.

OMP separately announced today that, subject to market conditions, it intends to offer $450 million in aggregate principal amount of senior unsecured notes due 2029 in a private placement to eligible purchasers. The Partnership intends to use the net proceeds from the senior unsecured notes offering to make a distribution to Oasis Midstream Services LLC, a wholly-owned subsidiary of Oasis, in connection with the Simplification in the amount of approximately $229 million and to repay approximately $208 million of outstanding borrowings under OMP's revolving credit facility.

Transaction Highlights:

Simplification is expected to be accretive, both immediately and over the long-term, to distributable cash flow per unit; Acquired interests include approximately $81 million to $84 million in estimated 2021 Adjusted EBITDA1, generated from long-term fixed fee contracts, as well as approximately $4 million in estimated 2021 IDR distributions; YE2020 leverage2 pro forma for expected financing, net of transaction expenses, is expected to remain unchanged at approximately 3.1x with pro forma YE2020 liquidity of $213 million; OMP's current operational and financial outlook supports holding its distribution flat at $0.54/unit with 2021 coverage expected to approximate 1.6x to 1.7x versus 1.4x prior to the Simplification; Scaled asset base continues to provide peer-leading gas capture for Oasis and other customers, as OMP remains focused on its ESG initiatives. (1) Non-GAAP financial measure. See "Non-GAAP Financial Measures" below for definition of Adjusted EBITDA and reconciliation to the most directly comparable measure under United States generally accepted accounting principles ("GAAP").

(2) Leverage based on pro forma Partnership net debt of $692.0 million and 2020 EBITDA of $222.2 million. Adjusted EBITDA is a non-GAAP financial measure. See "Non-GAAP Financial Measures."

"We are pleased to announce Oasis Midstream Partners is simplifying its financial structure by eliminating its IDRs and buying the remaining interest in Bobcat DevCo and Beartooth DevCo," 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."