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What's in Store for Oasis Midstream's (OMP) Q2 Earnings?

Zacks Equity Research

Oasis Midstream Partners LP OMP is scheduled to release second-quarter 2019 results after the closing bell on Aug 6. The current Zacks Consensus Estimate for the quarter to be reported is earnings per share of 77 cents on revenues of $108.75 million.

In the last reported quarter, the Texas-based midstream player beat the consensus mark by 2.21% on strong transportation and processing volumes. As far as earnings surprises are concerned, the firm has a mixed record, having outpaced the Zacks Consensus Estimate twice in the last four quarters. This is depicted in the graph below:

Oasis Midstream Partners LP Price and EPS Surprise

Oasis Midstream Partners LP Price and EPS Surprise

Oasis Midstream Partners LP price-eps-surprise | Oasis Midstream Partners LP Quote

While investors are keeping their fingers crossed and anticipating that Oasis Midstream will surpass earnings estimates this time around, our model does not predict the same.

Let’s see which way are top and bottom-line estimates trending.

The Zacks Consensus Estimate for revenues is pegged at $108.75 million, indicating a significant increase from $61 million recorded in the prior-year quarter. The Zacks Consensus Estimate for second-quarter earnings of 77 cents per share also suggests growth from 45 cents recorded in the corresponding period of the prior year. However, earnings estimates for the to-be-reported quarter have been revised downward by 4 cents in the past 30 days.

Let’s delve deeper into the factors that are likely to influence Oasis Midstream’s second-quarter earnings.

Factors at Play

Oasis Midstream’s strong execution in the Williston Basin, wherein its parent company Oasis Petroleum OAS is witnessing solid output growth, is likely to fuel the partnership’s upcoming results. Strong transportation and processing volumes from the partnership’s subsidiaries, namely Bighorn and Bobcat, are likely to boost the firm’s results in the to-be-reported quarter. The partnership expects second-quarter 2019 natural gas service volumes from Bighorn in the range of 230-250 million standard cubic feet per day (MMscfpd), implying an increase from 104.2 MMscfpd recorded in the year-ago quarter. Growing third-party volumes and the ramp up of its new 200 million cubic feet per day processing plant will drive contributions from Bighorn. Bobcat volumes for second-quarter 2019 are projected at 270-290 MMscfpd, pointing to y/y growth of 97% at the midpoint.

However, water services volumes from Beartooth are expected within 115-125 Mbowpd, indicating a fall from 139.2 Mbowpd recorded in the year-ago period. The partnership is bearing the brunt of increased costs over the last few quarters and the trend is likely to continue, which may dent overall profit margins. Additional spending to form a new entity called Panther DevCo will also add to the capex of the firm, in turn hurting cash flows. 

While higher y/y natural gas service volumes from Bighorn and Bobcat will boost the firm’s profits, lower volumes from Beartooth, along with high costs and capex may dent margins.

What Our Model Says

Our proven model does not conclusively predict that Oasis Midstream will beat the Zacks Consensus Estimate in the to-be-reported quarter. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP:  Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -21.88%. This is because the Zacks Consensus Estimate of 77 cents is pegged higher than the Most Accurate Estimate of 60 cents.

Zacks Rank: Oasis Midstream currently has a Zacks Rank #3, which increases the predictive power of ESP. But we need to have a positive ESP to be sure of an earnings beat.

Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

Stocks to Consider

While earnings beat looks uncertain for Oasis Midstream, here are some firms from the energy space that you may want to consider on the basis of our model, which shows that these have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

NuStar Energy L.P. NS is set to report second-quarter 2019 earnings on Aug 8. The stock has an Earnings ESP of +14.58% and a Zacks Rank #3.

Cheniere Energy, Inc. LNG is set to report second-quarter 2019 earnings on Aug 8. The stock has an Earnings ESP of +88.46% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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