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Oasis Midstream Partners LP Announces Quarter Ended September 30, 2019 Earnings

HOUSTON, Nov. 5, 2019 /PRNewswire/ -- Oasis Midstream Partners LP (OMP) ("OMP" or the "Partnership") today announced financial and operating results for the third quarter of 2019.

Highlights

  • Declared the quarterly cash distribution of $0.515 per unit for 3Q 2019, an approximate 5% increase from 2Q 2019.
  • Net income was $55.3 million and net cash from operating activities was $58.1 million in 3Q 2019.
  • Delivered $68.9 million of Adjusted EBITDA(1) and $42.0 million of net Adjusted EBITDA to the Partnership(1) in 3Q 2019.
  • Generated $35.7 million of DCF(1) in 3Q 2019, resulting in distribution coverage of 2.0x. Distribution coverage exceeded the top-end of 3Q 2019 guidance of 1.8x to 1.9x.
  • Continued to sign additional third-party agreements in the Delaware and Williston basins.
  • Oasis Petroleum and OMP executed commercial agreements for Panther DevCo, with the assets assigned to OMP in November 2019.
  • Water service volumes remain strong. Combined Bobcat and Beartooth water volumes of 198.4 MBowpd in 3Q 2019 increased 1% from 2Q 2019 and exceeded the top-end of 3Q 2019 guidance.
  • Exceeded 3Q 2019 guidance related to natural gas processing volumes in Bighorn DevCo. Gas processing volumes increased 17% from 2Q 2019 to 236.0 MMscfpd in 3Q 2019. Third-party gas volumes were approximately 32% of total gas processing volumes and increased 28% from 2Q 2019 to 75.7 MMscfpd in 3Q 2019.

(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 financial measures under United States generally accepted accounting principles ("GAAP").

"Oasis Midstream Partners executed extremely well in the third quarter, with the continued ramp up of our gas complex driving record high EBITDA and distribution coverage," said Taylor Reid, Chief Executive Officer of OMP. "We exceeded guidance across most commodity streams and remain on track to deliver a strong fourth quarter of 2019, while growing the distribution 20% year over year. The team has done an exceptional job growing third-party business, which is approximately 20% of our third quarter EBITDA and is projected to be approximately 20% in the fourth quarter as well. Looking forward, OMP stands to benefit from its diversified asset base, growing third-party business and strong operational momentum heading into 2020."

Outlook Update

  • Expect 2019 Adjusted EBITDA, net to the Partnership, to be $154 million to $158 million.
  • Expect 4Q 2019 distribution coverage of 1.9x to 2.0x.
  • Estimate gross Adjusted EBITDA by DevCo in 2019 – Bighorn DevCo: $72 million to $74 million, Bobcat DevCo: $124 million to $127 million, Beartooth DevCo: $64 million to $67 million, and Panther DevCo: less than $1 million due to the updated timing of the assignment.
  • Updated 2019 CapEx plan to a range of $197 to $206 million, net to OMP, a 3% decrease compared to prior guidance of $203 million to $214 million. CapEx in 4Q 2019 is expected to increase compared to 3Q 2019 with the closing of the Panther DevCo assignment.

Operational and Financial Update

The following table presents select operational and financial data:


3Q 2019


OMP
Ownership(1)


Gross


Net










(In millions)

Bighorn DevCo






Operating income

100

%


$

17.1


$

17.1

Depreciation and amortization

100

%


3.1


3.1

Total CapEx

100

%


2.1


2.1

Bobcat DevCo






Operating income

34.4

%


$

29.4


$

9.8

Depreciation and amortization

34.4

%


3.5


1.2

Total CapEx(2)

34.4

%


22.9


22.5

Beartooth DevCo






Operating income

70

%


$

14.1


$

9.9

Depreciation and amortization

70

%


2.4


1.7

Total CapEx

70

%


4.1


2.8

Total OMP






DevCo operating income



$

60.6


$

36.8

Public company expenses



0.9


0.9

Partnership operating income



59.7


35.9

Depreciation and amortization



9.0


6.0

Equity-based compensation expense



0.1


0.1

Capitalized interest



0.2


0.2

Total CapEx(3)



29.3


27.6

Maintenance CapEx



2.7


1.8

Expansion CapEx



26.6


25.9


__________________

(1) Represents OMP's ownership in each DevCo as of September 30, 2019.

(2) Pursuant to the 2019 Capital Expenditures Arrangement, OMP is funding up to $80.0 million of expansion capital expenditures to Bobcat DevCo that Oasis Petroleum would otherwise be required to contribute during the 2019 calendar year. See "2019 Capital Expenditures Arrangement" below.

(3) Includes capitalized interest recorded on OMP Operating LLC of $0.2 million for 3Q 2019.

The following table shows actual volumes for 3Q 2019 and provides volumes guidance for 4Q 2019:



Metric


3Q 2019 Actual


4Q 2019 Guidance

Bighorn DevCo







Crude oil service volumes


MBopd


47.0


39 - 44

Natural gas service volumes


MMscfpd


236.0


240 - 250

Bobcat DevCo







Crude oil service volumes


MBopd


36.9


34 - 36

Natural gas service volumes


MMscfpd


277.7


280 - 295

Water service volumes


MBowpd


54.5


48 - 50

Beartooth DevCo







Water service volumes


MBowpd


143.9


120 - 140

2019 Capital Expenditures Arrangement

On February 22, 2019, the Partnership entered into a capital expenditures arrangement with Oasis Petroleum (the "2019 Capital Expenditures Arrangement"). Pursuant to this arrangement, in exchange for increasing its percentage ownership interest in Bobcat DevCo, the Partnership will cover up to $80.0 million of the capital contributions that Oasis Petroleum would otherwise be required to contribute to Bobcat DevCo during the 2019 calendar year. This arrangement provides an opportunity for the Partnership to increase its scale in an accretive manner while lowering the capital requirements of its sponsor. During the nine months ended September 30, 2019, the Partnership made capital contributions to Bobcat DevCo pursuant to the 2019 Capital Expenditures Arrangement of $66.2 million, and the Partnership's ownership interest in Bobcat DevCo increased from 25% as of December 31, 2018 to 34.4% as of September 30, 2019. The Partnership's average ownership interest in Bobcat DevCo during the third quarter of 2019 was approximately 33%.

Liquidity and CapEx

As of September 30, 2019, the Partnership had cash and cash equivalents of $4.7 million, $431.0 million of borrowings outstanding under its revolving credit facility and an $8.2 million outstanding letter of credit. On August 16, 2019, the Partnership entered an amendment to the credit agreement governing its revolving credit facility to (i) increase the aggregate amount of commitments from $475.0 million to $575.0 million and (ii) provide for the ability to further increase commitments to $775.0 million. The Partnership's unused borrowing capacity as of September 30, 2019 was $135.8 million.

Quarterly Distribution

On August 28, 2019, the Partnership paid the quarterly cash distribution of $0.49 per unit related to the second quarter of 2019.

On November 5, 2019, the Board of Directors of the General Partner declared the quarterly cash distribution for the third quarter of 2019 of $0.515 per unit. This distribution will be payable on November 27, 2019 to unitholders of record as of November 15, 2019. In addition, the General Partner will receive a cash distribution of $0.7 million attributable to the incentive distribution rights related to the earnings for the third quarter of 2019.

Delaware Midstream Assets

Effective on November 1, 2019, Oasis Petroleum agreed to assign to Panther DevCo LLC ("Panther DevCo"), an indirect, wholly-owned subsidiary of the Partnership, certain crude oil gathering and produced water gathering and disposal assets (the "Delaware Midstream Assets") under development to support Oasis Petroleum's production in the Delaware Basin. The Partnership has agreed to reimburse Oasis Petroleum for all capital expenditures previously made with respect to the Delaware Midstream Assets, which the Partnership expects to fund with borrowings under its revolving credit facility. Also effective November 1, 2019, Panther DevCo entered into long-term commercial agreements with Oasis Petroleum, including a Crude Oil Gathering Agreement and a Produced Water Gathering and Disposal Agreement, for crude oil and produced water midstream services in the Delaware Basin, which generally contain terms similar to those contained in the existing commercial agreements between the Partnership and Oasis Petroleum for midstream services in the Williston Basin.

Qualified Notice

This release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat one hundred percent (100.0%) of the Partnership's distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business. Accordingly, the Partnership's distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.

Conference Call Information

Investors, analysts and other interested parties are invited to listen to the webcast and call:

Date:


Wednesday, November 6, 2019

Time:


11:30 a.m. Central Time

Live Webcast:


https://www.webcaster4.com/Webcast/Page/1777/32113

Website:


www.oasismidstream.com

Sell-side analysts with a question may use the following dial-in:

Dial-in:


888-317-6003

Intl. Dial in:


412-317-6061

Conference ID:


1033646

A recording of the conference call will be available beginning at 1:30 p.m. Central Time on the day of the call and will be available until Wednesday, November 13, 2019 by dialing:

Replay dial-in:


877-344-7529

Intl. replay:


412-317-0088

Replay code:


10136377

The conference call will also be available for replay for approximately 30 days at www.oasismidstream.com.

Contact:

Oasis Midstream Partners LP
Bob Bakanauskas, (281) 404-9600
Director, Investor Relations

Forward-Looking Statements

This press release contains forward-looking statements. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Partnership expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Partnership, including the Partnership's capital expenditure levels and other guidance included in this press release. These statements are based on certain assumptions made by the Partnership based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Partnership, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include, but are not limited to, the Partnership's ability to integrate acquisitions into its existing business, the ability to integrate the Delaware Midstream Assets and realize the anticipated benefits therefrom, changes in crude oil and natural gas prices, weather and environmental conditions, the timing of planned capital expenditures, availability of acquisitions, uncertainties in the estimates of proved reserves and forecasted production results of the Partnership's customers, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as the Partnership's ability to access them, the proximity to and capacity of transportation facilities, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting the Partnership's business and other important factors. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, the Partnership's actual results and plans could differ materially from those expressed in any forward-looking statements.

Any forward-looking statement speaks only as of the date on which such statement is made and the Partnership undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

About Oasis Midstream Partners LP

Oasis Midstream Partners LP is a growth-oriented, fee-based master limited partnership formed by its sponsor, Oasis Petroleum Inc. to own, develop, operate and acquire a diversified portfolio of midstream assets in North America that are integral to the crude oil and natural gas operations of Oasis Petroleum Inc. and are strategically positioned to capture volumes from other producers. For more information, please visit the Partnership's website at www.oasismidstream.com.

 

OASIS MIDSTREAM PARTNERS LP

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)




September 30, 2019


December 31, 2018






(In thousands, except unit data)

ASSETS




Current assets




Cash and cash equivalents

$

4,672


$

6,649

Accounts receivable

7,793


2,481

Accounts receivable – Oasis Petroleum

77,393


80,805

Prepaid expenses

964


1,418

Other current assets

1,810


22

Total current assets

92,632


91,375

Property, plant and equipment

1,089,696


933,155

Less: accumulated depreciation and amortization

(89,129)


(62,730)

Total property, plant and equipment, net

1,000,567


870,425

Operating lease right-of-use assets

5,945


Other assets

3,383


2,452

Total assets

$

1,102,527


$

964,252

LIABILITIES AND EQUITY




Current liabilities




Accounts payable

$

2,855


$

2,180

Accounts payable – Oasis Petroleum

26,769


33,014

Accrued liabilities

47,533


57,657

Accrued interest payable

273


442

Current operating lease liabilities

2,973


Other current liabilities

9


Total current liabilities

80,412


93,293

Long-term debt

431,000


318,000

Asset retirement obligations

1,596


1,514

Operating lease liabilities

2,979


Other liabilities

557


Total liabilities

516,544


412,807

Equity




Limited partners




Common units (20,045,196 and 20,029,026 issued and outstanding at September 30, 2019 and December 31, 2018, respectively)

213,468


192,581

Subordinated units (13,750,000 units issued and outstanding at September 30, 2019 and December 31, 2018)

57,989


45,937

General Partner

745


112

Total partners' equity

272,202


238,630

Non-controlling interests

313,781


312,815

Total equity

585,983


551,445

Total liabilities and equity

$

1,102,527


$

964,252

 

OASIS MIDSTREAM PARTNERS LP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



Three Months Ended September 30,


Nine Months Ended September 30,


2019


2018


2019


2018










(In thousands, except per unit data)

Revenues








Midstream services – Oasis Petroleum

$

78,327


$

65,674


$

224,641


$

184,103

Midstream services – third parties

1,840


567


4,792


1,438

Product sales – Oasis Petroleum

20,517


3,189


60,517


10,591

Product sales – third parties

9


2,037


38


3,314

Total revenues

100,693


71,467


289,988


199,446

Operating expenses








Costs of product sales

7,001


2,704


27,088


5,465

Operating and maintenance

17,316


17,112


52,169


47,801

Depreciation and amortization

8,983


7,189


26,474


20,212

General and administrative

7,579


5,449


24,108


17,496

Total operating expenses

40,879


32,454


129,839


90,974

Operating income

59,814


39,013


160,149


108,472

Other expense








Interest expense, net of capitalized interest

(4,512)


(163)


(12,469)


(608)

Other expense


(15)


(4)


(15)

Total other expense

(4,512)


(178)


(12,473)


(623)

Net income

55,302


38,835


147,676


107,849

Less: Net income attributable to non-controlling interests

23,866


26,459


68,499


73,075

Net income attributable to Oasis Midstream Partners LP

31,436


12,376


79,177


34,774

Less: Net income attributable to General Partner

745



1,474


Net income attributable to limited partners

$

30,691


$

12,376


$

77,703


$

34,774

Earnings per limited partner unit








Common units – basic

$

0.91


$

0.45


$

2.30


$

1.27

Common units – diluted

0.91


0.45


2.30


1.26

Weighted average number of limited partner units outstanding








Common units – basic

20,027


13,751


20,022


13,750

Common units – diluted

20,038


13,769


20,039


13,764

Non-GAAP Financial Measures

Cash Interest, Adjusted EBITDA and Distributable Cash Flow are supplemental non-GAAP financial measures that are used by management and external users of the Partnership's financial statements, such as industry analysts, investors, lenders and rating agencies. These non-GAAP financial measures should not be considered in isolation or as a substitute for interest expense, net income, operating income, net cash provided by operating activities or any other measures prepared under GAAP. Because Cash Interest, Adjusted EBITDA and Distributable Cash Flow exclude some but not all items that affect interest expense, net income and net cash provided by operating activities and may vary among companies, the amounts presented may not be comparable to similar metrics of other companies.

Cash Interest

Cash Interest is defined as interest expense plus capitalized interest less amortization of deferred financing costs included in interest expense. Cash Interest is not a measure of interest expense as determined by GAAP. Management believes that the presentation of Cash Interest provides useful additional information to investors and analysts for assessing the interest charges incurred on the Partnership's debt, excluding non-cash amortization, and the Partnership's ability to maintain compliance with its debt covenants.

The following table presents a reconciliation of the GAAP financial measure of interest expense, net of capitalized interest, to the non-GAAP financial measure of Cash Interest for the periods presented:


Three Months Ended
September 30,


Nine Months Ended
September 30,


2019


2018


2019


2018










(In thousands)

Interest expense, net of capitalized interest

$

4,512


$

163


$

12,469


$

608

Capitalized interest

235


1,708


423


3,905

Amortization of deferred financing costs

(243)


(128)


(660)


(361)

Cash Interest

4,504


1,743


12,232


4,152

Less: Cash Interest attributable to non-controlling interests(1)

(3)



(8)


Cash Interest attributable to Oasis Midstream Partners LP

$

4,501


$

1,743


$

12,224


$

4,152


__________________

(1) Amounts represent Cash Interest attributable to non-controlling interests associated with finance leases.

Adjusted EBITDA

Adjusted EBITDA is defined as earnings before interest expense (net of capitalized interest), income taxes, depreciation, amortization, impairment, equity-based compensation expenses and other similar non-cash adjustments. Adjusted EBITDA attributable to Oasis Midstream Partners LP is defined as Adjusted EBITDA less Adjusted EBITDA attributable to Oasis Petroleum's retained interests in two of the Partnership's DevCos, Bobcat DevCo and Beartooth DevCo. Adjusted EBITDA should not be considered an alternative to net income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Management believes that the presentation of Adjusted EBITDA provides information useful to investors and analysts for assessing the Partnership's results of operations, financial performance and the Partnership's ability to generate cash from its business operations without regard to the Partnership's financing methods or capital structure, coupled with the Partnership's ability to maintain compliance with its debt covenants. The GAAP measures most directly comparable to Adjusted EBITDA are net income and net cash provided by operating activities.

Distributable Cash Flow

Distributable Cash Flow ("DCF") is defined as Adjusted EBITDA attributable to Oasis Midstream Partners LP less Cash Interest attributable to Oasis Midstream Partners LP and maintenance capital expenditures attributable to Oasis Midstream Partners LP. DCF should not be considered an alternative to net income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Management believes that the presentation of DCF provides information useful to investors and analysts for assessing the Partnership's results of operations, financial performance and the Partnership's ability to generate cash from its business operations without regard to the Partnership's financing methods or capital structure, coupled with the Partnership's ability to make distributions to its unitholders. The GAAP measures most directly comparable to DCF are net income and net cash provided by operating activities.

The following table presents reconciliations of the GAAP financial measures of net income and net cash provided by operating activities to the non-GAAP financial measures of Adjusted EBITDA and DCF for the periods presented:


Three Months Ended
September 30,


Nine Months Ended
September 30,


2019


2018


2019


2018










(In thousands)

Net income

$

55,302


$

38,835


$

147,676


$

107,849

Depreciation and amortization

8,983


7,189


26,474


20,212

Equity-based compensation expense

84


114


303


280

Interest expense, net of capitalized interest

4,512


163


12,469


608

Adjusted EBITDA

68,881


46,301


186,922


128,949

Less: Adjusted EBITDA attributable to non-controlling interests

26,913


29,739


77,396


82,250

Adjusted EBITDA attributable to Oasis Midstream Partners LP

41,968


16,562


109,526


46,699

Less: Cash Interest attributable to Oasis Midstream Partners LP

4,501


1,743


12,224


4,152

Less: Maintenance capital expenditures attributable to Oasis Midstream Partners LP

1,760


418


6,594


1,711

Distributable Cash Flow attributable to Oasis Midstream Partners LP

$

35,707


$

14,401


$

90,708


$

40,836









Net cash provided by operating activities

$

58,094


$

40,753


$

170,186


$

156,900

Interest expense, net of capitalized interest

4,512


163


12,469


608

Changes in working capital

6,518


5,516


4,927


(28,324)

Other non-cash adjustments

(243)


(131)


(660)


(235)

Adjusted EBITDA

68,881


46,301


186,922


128,949

Less: Adjusted EBITDA attributable to non-controlling interests

26,913


29,739


77,396


82,250

Adjusted EBITDA attributable to Oasis Midstream Partners LP

41,968


16,562


109,526


46,699

Less: Cash Interest attributable to Oasis Midstream Partners LP

4,501


1,743


12,224


4,152

Less: Maintenance capital expenditures attributable to Oasis Midstream Partners LP

1,760


418


6,594


1,711

Distributable Cash Flow attributable to Oasis Midstream Partners LP

$

35,707


$

14,401


$

90,708


$

40,836









Distributions declared








Limited partners

$

17,405


$

11,837


$

49,848


$

33,928

Incentive distribution rights

745



1,474


Total distributions

$

18,149


$

11,837


$

51,321


$

33,928









DCF coverage ratio

2.0x


1.2x


1.8x


1.2x

















 

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