Oasis Midstream Partners LP Announces Year Ended December 31, 2018 Earnings
HOUSTON, Feb. 26, 2019 /PRNewswire/ -- Oasis Midstream Partners LP (NYSE: OMP) (the "Partnership" or "OMP") today announced financial results for the quarter and year ended December 31, 2018 and updated its 2019 outlook.
Recent Highlights:
-- Declared the quarterly cash distribution for the fourth quarter of 2018
of $0.45 per unit, an approximate 5% increase from the cash distribution
declared for the third quarter of 2018 and in line with the
Partnership's 20% annualized distribution growth target.
-- Net income was $146.4 million and net cash provided by operating
activities was $205.0 million for the year ended December 31, 2018. Net
income was $38.6 million and net cash provided by operating activities
was $48.1 million for the quarter ended December 31, 2018.
-- Adjusted EBITDA was $48.6 million and net Adjusted EBITDA attributable
to the Partnership was $22.1 million for the quarter ended December 31,
2018. Adjusted EBITDA is a non-GAAP financial measure. See "Non-GAAP
Financial Measures" below.
-- Distributable Cash Flow ("DCF") was $18.5 million for the quarter ended
December 31, 2018, resulting in fourth quarter DCF coverage of 1.21x.
Pro forma for OMP's acquisition of additional ownership interests in
Bobcat DevCo LLC ("Bobcat DevCo") and Beartooth DevCo LLC ("Beartooth
DevCo"), including a full quarter of cash interest on new debt
associated with the dropdown acquisition, DCF coverage approximated
1.43x for the fourth quarter. DCF is a non-GAAP financial measure. See
"Non-GAAP Financial Measures" below.
-- Successfully commenced operations at OMP's new 200 MMscfpd natural gas
processing plant in Wild Basin ("Gas Plant II") in early December, and
began servicing third party natural gas volumes during the fourth
quarter of 2018.
-- Completed the acquisition from Oasis Petroleum of an additional 15%
ownership interest in Bobcat DevCo and an additional 30% ownership
interest in Beartooth DevCo for total consideration of approximately
$251.4 million, consisting of $172.4 million in cash and $79.0 million
in common units.
-- During the year ended 2018, OMP successfully signed multiple third party
agreements across all three development companies and has commenced
services pursuant to these arrangements to provide its full suite of
midstream services for third party volumes.
-- Increased water volumes in Beartooth DevCo to 151.1 thousand barrels of
water per day ("Mbwpd"), a 53% increase compared to the fourth quarter
of 2017. Approximately two-thirds of the increase was related to Oasis
Petroleum's produced water growth and approximately one-third was
associated with increased freshwater volumes, which was largely driven
by third party sales.
"Fourth quarter results mark a strong end to an impressive year at Oasis Midstream Partners," said Taylor Reid, Chief Executive Officer of OMP. "During the quarter, we successfully started our new 200 MMscfpd gas plant and executed additional third-party deals in Wild Basin. Fourth quarter pro forma coverage of 1.43x exceeded our expectations. Additionally, OMP successfully completed its first drop as a public company, improving our scale, liquidity, and financial outlook. As we look to 2019, our sponsor's Wild Basin centered program insulates OMP's financial profile, and we are in a position to deliver our EBITDA, growth, and coverage outlook despite the decline in commodity prices. OMP exceeded expectations in 2018, and we look forward to executing our business and continuing to increase the value of our partners' investment in 2019 and beyond."
Gas Plant II Update:
OMP finished construction on Gas Plant II and began processing volumes in early December. With 320 MMscfpd of natural gas processing capacity, OMP is the second largest natural gas processor in the Williston Basin. Utilization of Gas Plant II approximated 60% through the first three weeks of February. OMP expects to run at 60% utilization in the beginning of 2019, and with additional third party deals, utilization is now expected to increase to above 90% by year end 2019 (vs. over 80% at the November 2018 update). Third party volumes are expected to account for approximately 30% to 40% of Gas Plant II's throughput by the fourth quarter of 2019.
2019 Capital Spending and Outlook:
On February 22, 2019, OMP entered into a capital expenditures arrangement (the "Capital Expenditures Arrangement") with Oasis Petroleum. Pursuant to this arrangement, in exchange for increasing its percentage ownership interest in Bobcat DevCo, OMP will cover up to $80 million of the capital contributions that Oasis Petroleum would otherwise be required to contribute to Bobcat DevCo during the 2019 calendar year. The arrangement provides an opportunity for OMP to increase its scale in an accretive manner while lowering the capital requirements of its sponsor. Based on current market values, OMP's ownership interest in Bobcat DevCo is expected to increase from 25% as of December 31, 2018 to between approximately 34% and 36% by year end 2019. Increasing ownership in Bobcat DevCo is expected to drive EBITDA and coverage higher throughout 2019. Capital expenditures guidance and highlights for 2019 provided below includes the Capital Expenditures Arrangement for all of 2019.
The terms of the Capital Expenditures Arrangement were approved by the Board of Directors of OMP GP LLC (the "General Partner") following a unanimous recommendation for approval from the conflicts committee of the Board of Directors of the General Partner, which consists entirely of independent directors. The conflicts committee was advised by Baird on financial matters and Richards, Layton & Finger, P.A. on legal matters. Oasis Petroleum was advised by Vinson and Elkins L.L.P. on legal matters.
The following table depicts our full year 2019 guidance for capital expenditures ("CapEx"):
2019 CapEx
DevCo
OMP Ownership(1)
Gross
Net(2)
---
(In millions)
Bighorn DevCo 100%
$25 - 30
$25 - 30
Bobcat DevCo 30% - 31%
100 - 110
94 - 104
Beartooth DevCo 70%
17 - 22
12 - 15
Total CapEx
$142 - 162
$131 - 149
___________________
(1) OMP ownership reflects average estimated ownership
during 2019.
(2) Net CapEx range reflects 100% of estimated
expansion CapEx for Bobcat DevCo pursuant to the
Capital Expenditures Arrangement. Maintenance CapEx
remains split by ownership.
Highlights for 2019 include:
-- Growing distributions per unit approximately 5% each quarter -- 20%
annualized rate;
-- Expecting first quarter 2019 limited partner distribution coverage of
approximately 1.5x and anticipate limited partner distribution coverage
increasing to 1.8x - 2.0x as the year progresses;
-- Maintenance CapEx of approximately 6% to 8% of Adjusted EBITDA, which is
included in total CapEx estimate;
-- Cash Interest of approximately $15 million in 2019; and
-- Adjusted EBITDA attributable to OMP of approximately $148 million to
$157 million in 2019 (an increase from the November 2018 update
primarily due to the Capital Expenditures Arrangement).
Operational and Financial Update
Select operational and financial statistics are in the following table:
Three Months Ended Year Ended December 31,
December 31, 2018 2018
OMP Gross Net Gross Net
Ownership(1)
(In millions)
Bighorn DevCo
---
Operating income 100% $
6.0 $
6.0 $
22.1 $
22.1
Depreciation and
amortization 100% 3.3 3.3 11.4 11.4
Total CapEx 100% 19.2 19.2 78.2 78.2
Bobcat DevCo
---
Operating income 25% $
19.9 $
3.4 $
74.3 $
8.9
Depreciation and
amortization 25% 2.7 0.5 9.0 1.1
Total CapEx 25% 23.7 3.5 142.6 15.4
Beartooth DevCo
---
Operating income 70% $
15.1 $
8.2 $
55.3 $
24.3
Depreciation and
amortization 70% 2.2 1.2 8.0 3.5
Total CapEx 70% 15.2 8.6 51.3 23.0
Total OMP
---
DevCo operating income $
40.9 $
17.6 $
151.7 $
55.4
Public company expenses 0.6 0.6 3.0 3.0
OMP operating income 40.3 17.0 148.8 52.4
Depreciation and
amortization 8.2 5.0 28.4 16.0
Equity-based compensation
expense 0.1 0.1 0.4 0.4
Total CapEx(2) 58.1 31.3 272.1 116.6
Maintenance CapEx 1.6 1.0 6.9 2.7
Expansion CapEx 56.5 30.3 265.1 113.8
___________________
(1) OMP ownership interest as of December 31, 2018. On
November 19, 2018, OMP acquired an additional 15%
ownership interest in Bobcat DevCo and an additional
30% ownership interest in Beartooth DevCo. Net amounts
attributable to OMP were recorded prospectively from
the closing date of the dropdown acquisition on
November 19, 2018.
(2) Excludes expansion capital expenditures of
approximately $172.4 million for the acquisition of
additional ownership interests in Bobcat DevCo and
Beartooth DevCo on November 19, 2018.
The following table shows gross volumes for the full year 2018, fourth quarter 2018 actuals compared to fourth quarter 2018 guidance, and depicts OMP's gross volumes guidance for the first quarter 2019 and full year 2019.
Metric FY18 4Q18 4Q18 1Q19 FY19
Actual Actual Guidance Guidance Guidance
Bighorn DevCo
---
Crude oil
service
volumes
Mbopd 43.6 45.1
40 - 46
41 - 46
44 - 48
Natural gas
service
volumes
MMscfpd 102.8 113.0
125 - 140
160 - 190
200 - 240
Bobcat DevCo
---
Crude oil
service
volumes
Mbopd 36.1 36.9
35 - 40
37 - 40
38 - 42
Natural gas
service
volumes
MMscfpd 147.7 166.8
175 - 195
220 - 240
270 - 290
Water service
volumes
Mbwpd 49.4 53.9
48 - 53
47 - 50
50 - 55
Beartooth
DevCo
---
Water service
volumes
Mbwpd 137.7 151.1
105 - 120
95 - 115
95 - 115
Liquidity and CapEx
As of December 31, 2018, OMP had cash and cash equivalents of $6.6 million and $318.0 million of borrowings outstanding under its revolving credit facility with an unused borrowing capacity of $82.0 million. OMP has the flexibility to expand the aggregate commitment amount under its revolving credit facility from $400 million to $600 million, subject to certain conditions. Expansion capital expenditures attributable to OMP during the fourth quarter of 2018 of $30.3 million, which excludes expansion capital expenditures of approximately $172.4 million for OMP's acquisition of additional ownership interests in Bobcat DevCo and Beartooth DevCo, were also in-line with expectations.
Quarterly Distribution
On February 5, 2019, the Board of Directors of the General Partner declared the quarterly distribution for the fourth quarter of 2018 of $0.45 per unit, a 20% increase from the fourth quarter of 2017 and 20% above the minimum quarterly distribution. In addition, the General Partner will receive a cash distribution of $0.1 million attributable to its incentive distribution rights related to earnings for the fourth quarter of 2018. These distributions will be paid on February 28, 2019 to unitholders of record as of February 15, 2019.
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, February 27, 2019
Time:
11:30 a.m. Central Time
Live
Webcast:
https://www.webcaster4.com/Webcast/Page/1777/29263
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: 5081699
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, March 6, 2019 by dialing:
Replay dial-in:
877-344-7529
Intl. replay:
412-317-0088
Replay code: 10128591
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 within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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, 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
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, 2018 December 31, 2017
---
(In thousands)
ASSETS
Current assets
Cash and cash equivalents $
6,649 $
883
Accounts receivable 2,481 834
Accounts receivable -Oasis
Petroleum 80,805 85,818
Prepaid expenses 1,418 778
Other current assets 22
Total current assets 91,375 88,313
Property, plant and equipment 933,155 653,928
Less: accumulated depreciation
and amortization (62,730) (34,348)
Total property, plant and
equipment, net 870,425 619,580
Other assets 2,452 2,013
Total assets $
964,252 $
709,906
LIABILITIES AND EQUITY
Current liabilities
Accounts payable $
2,180
$
Accounts payable -Oasis
Petroleum 33,014 11,638
Accrued liabilities 57,657 58,818
Accrued interest payable 442 114
Total current liabilities 93,293 70,570
Long-term debt 318,000 78,000
Asset retirement obligations 1,514 1,316
Total liabilities 412,807 149,886
Partners' Equity
Limited Partners
Common units (20,029 and 13,762
units issued and outstanding
at December 31, 2018 and 2017,
respectively) 192,581 167,401
Subordinated units (13,750
units issued and outstanding
at December 31, 2018 and 2017) 45,937 79,173
General Partner 112
Total partners' equity 238,630 246,574
Non-controlling interests 312,815 313,446
Total equity 551,445 560,020
Total liabilities and equity $
964,252 $
709,906
OASIS MIDSTREAM PARTNERS LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended December 31, Year Ended December 31,
---
2018 2017 2018 2017
---
(In thousands, except per unit data)
Revenues
Midstream services -
Oasis Petroleum $
64,115 $
52,453 $
248,216 $
168,205
Midstream services -
third parties 1,164 458 2,604 1,973
Product sales - Oasis
Petroleum 6,884 3,620 17,476 11,644
Product sales - third
parties 14 352 3,327 394
Total revenues 72,177 56,883 271,623 182,216
Operating expenses
Costs of product sales 1,968 1,874 7,433 6,085
Operating and maintenance 15,322 12,544 63,123 39,441
Depreciation and
amortization 8,192 4,371 28,404 15,730
General and
administrative 6,401 4,729 23,897 18,597
Total operating expenses 31,883 23,518 122,857 79,853
Operating Income 40,294 33,365 148,766 102,363
Other income (expense)
Interest expense, net of
capitalized interest (1,735) (2,343) (6,965)
Other income (expense) 1 (14) 7
Total other expense (1,734) (2,357) (6,958)
Income before income
taxes 38,560 33,365 146,409 95,405
Income tax expense - (22,858)
Net income 38,560 33,365 146,409 72,547
Less: Net income prior to
initial public offering - 37,577
Net income subsequent to
initial public offering 38,560 33,365 146,409 34,970
Less: Net income
attributable to non-
controlling interests
subsequent to initial
public offering 23,279 22,253 96,354 23,332
Net income attributable
to Oasis Midstream
Partners LP 15,281 11,112 50,055 11,638
Less: Net income
attributable to General
Partner 112 112
Net income attributable
to limited partners $
15,169 $
11,112 $
49,943 $
11,638
Earnings per limited partner unit
Common units -Basic and
diluted $
0.54 $
0.41 $
1.82 $
0.43
Weighted average number of limited
partners units outstanding
Common units -Basic 16,740 13,628 14,504 13,566
Common units -Diluted 16,751 13,630 14,519 13,568
Non-GAAP Financial Measures
Cash Interest
Cash Interest is a supplemental non-GAAP financial measure that is used by management and external users of the Partnership's financial statements, such as industry analysts, investors, lenders and rating agencies. The Partnership defines Cash Interest 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 United States generally accepted accounting principles, or GAAP. Management believes that the presentation of Cash Interest provides useful additional information to investors and analysts for assessing the interest charges incurred on our debt, excluding non-cash amortization, and our ability to maintain compliance with our 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 Year Ended December 31,
December 31,
2018 2017 2018 2017
(In thousands)
Interest expense, net of
capitalized interest $
1,735
$ $
2,343 $
6,965
Capitalized interest 965 562 4,870 1,220
Amortization of deferred
financing costs (164) (119) (525) (126)
Cash Interest $
2,536 $
443 $
6,688 $
8,059
Less: Cash Interest prior
to the initial public
offering 7,603
Cash Interest
attributable to Oasis
Midstream Partners LP $
2,536 $
443 $
6,688 $
456
Adjusted EBITDA
Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of the Partnership's financial statements, such as industry analysts, investors, lenders and rating agencies. The Partnership defines Adjusted EBITDA as earnings before interest expense (net of capitalized interest), income taxes, depreciation, amortization, equity-based compensation expenses and other similar non-cash adjustments. 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 its ability to generate cash from its business operations without regard to its 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 ("DCF")
DCF is a supplemental non-GAAP financial measure that is used by management and external users of the Partnership's financial statements, such as industry analysts, investors, lenders and rating agencies. The Partnership defines DCF as Adjusted EBITDA attributable to the Partnership less Cash Interest and maintenance capital expenditures attributable to the Partnership. Maintenance capital expenditures are cash expenditures (including expenditures for the construction or development of new capital assets or the replacement, improvement or expansion of existing capital assets) made to maintain, over the long term, system operating capacity, operating income or revenue. 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 ability to generate cash from its business operations without regard to its financing methods or capital structure, coupled with the Partnerships 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 Year Ended December 31,
December 31,
2018 2017 2018 2017
(In thousands)
Net income $
38,560 $
33,365 $
146,409 $
72,547
Income tax expense 22,858
Depreciation and
amortization 8,192 4,371 28,404 15,730
Equity-based compensation
expenses 76 53 356 1,052
Interest expense, net of
capitalized interest 1,735 2,343 6,965
Adjusted EBITDA 48,563 37,789 177,512 119,152
Less: Adjusted EBITDA prior
to the initial public
offering 79,484
Adjusted EBITDA subsequent
to the initial public
offering 48,563 37,789 177,512 39,668
Less: Adjusted EBITDA
attributable to non-
controlling interests 26,504 24,740 108,754 25,955
Adjusted EBITDA attributable
to Oasis Midstream Partners
LP 22,059 13,049 68,758 13,713
Cash Interest attributable
to Oasis Midstream Partners
LP 2,536 443 6,688 456
Maintenance capital
expenditures 1,036 1,098 2,747 1,183
Distributable Cash Flow
attributable to Oasis
Midstream Partners LP $
18,487 $
11,508 $
59,323 $
12,074
Net cash provided by
operating activities $
48,112 $
8,274 $
205,012 $
79,843
Current tax expense 17,618
Interest expense, net of
capitalized interest 1,735 2,343 6,965
Changes in working capital (2,038) 29,635 (30,362) 14,853
Other non-cash adjustments 754 (120) 519 (127)
Adjusted EBITDA 48,563 37,789 177,512 119,152
Less: Adjusted EBITDA prior
to the initial public
offering 79,484
Adjusted EBITDA subsequent
to the initial public
offering 48,563 37,789 177,512 39,668
Less: Adjusted EBITDA
attributable to non-
controlling interests 26,504 24,740 108,754 25,955
Adjusted EBITDA attributable
to Oasis Midstream Partners
LP 22,059 13,049 68,758 13,713
Cash Interest attributable
to Oasis Midstream Partners
LP 2,536 443 6,688 456
Maintenance capital
expenditures 1,036 1,098 2,747 1,183
Distributable Cash Flow
attributable to Oasis
Midstream Partners LP $
18,487 $
11,508 $
59,323 $
12,074
Distributions Declared
Limited partners $
15,208 $
10,317 $
49,135 $
10,991
Incentive distribution
rights 112 112
Total distributions $
15,320 $
10,317 $
49,247 $
10,991
DCF coverage ratio 1.21x 1.12x 1.20x 1.10x
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SOURCE Oasis Midstream Partners LP
