Q4 2019 Earnings Call

Dead dead dead.

Good morning. My name is Brandon and I will be your conference operator today at this time. I'd like to welcome everyone to the fourth quarter 2019 earnings release in operations update for Oasis Midstream Partners. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0 months after today's presentation. There will be an opportunity to ask questions to ask a question. You may press * then 1 on your touchtone phone to withdraw your question, please press * then two, please note this event is being recorded. I will now turn the call over to Richard Roebuck Oasis midstream's CFO to begin the conference. Thank you. You may begin.

Thanks.

Brandon good morning, everyone. This is Richard Roebuck. And today we're reporting our fourth quarter 2019 financial and operating results who are delighted to have you on our call and I'm joined today by Taylor Reed and off blue as well as other members of the team. Please be advised that our remarks on both Oasis petroleum and Oasis Midstream Partners, including the answers to your questions include statements that we believe may be forward-looking statements with the meaning within the meaning of the private Securities litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those disclosed in our earnings release and conference calls.

Those risk include among others matters that we have described our earnings release as well as the in our filing with the security Exchange Commission, including our annual report on form 10-K and our quarterly reports on form 10-q. We disclaim any obligation to update these forward-looking statements during the conference call. You also make references to certain non-gaap Financial measures and Reconciliation to the applicable measures can be found in our earnings release and on our website offers also reference our current investor presentation, which you can find on our website that I'll turn the call over to Taylor.

Good morning, everyone.

And thanks for joining our call. We thought we'd start today by highlighting a handful of key points.

First it was another great quarter 400mp operationally, our company has really hit its stride and throughput was above the high end of guidance across most commodity strings. Even Don coverage, exceeded our guidance. Once again, as we exited the year strong and look forward to delivering and 20 22nd in the fourth quarter of wimpy final dedication of certain Delaware acreage from Oasis petroleum 200mp for oil and water this dedication in our Panther devco is a huge win for both parties and demonstrates our support of a Wimpy unit holders third. The team has done a fabulous job on third-party opportunities, exceeding our lofty expectations that's going public.

we now have over 10 customers across the Williston and Delaware and are currently

talking to a number of additional parties on different opportunities

Hats off to the team for their continued success on this front the numerous opportunities. We've secured help leverage our scale improve the financial Outlook and diversify their revenue stream as a reminder in the back half of 2019 approximately 20% of all these even came from third parties. Finally OMP remains a uniquely attractive investment opportunity the combination of pure leading distribution growth strong coverage in a double-digit yield represent a compelling value to customers long. We've greatly exceeded expectations since going public and look forward to continuing our track record of success.

Or gas complex is operating smoothly and volumes increased significantly over 2019 in the fourth quarter third-party volumes approximated 30% of our total volumes while you've seen other plants start up in recent months overall processing in the Williston Basin remains tight gas caps are in the basement was only 83% left in the fourth quarter, but with our Wild Basin infrastructure in place, we were able to capture 97% of gas volumes for Oasis in the Wild Basin Area North Dakota man, Thursday 8 % capture, or which is scheduled to increase to 91% in November of this year.

North Dakota

That's production continues to hit new records an average over 3.08 BCF per day in the fourth quarter while Basin processing end of the year at 3.16 BCF. Birth gas production continues to grow in the Basin. So total capacity will likely remain tight even with new projects online.

We continue to remain active with multiple parties regarding additional opportunities as we seek to reduce overall flaring in the Williston while capitalizing on our Strategic investment separately in the Delaware. I want these infrastructure a strong competitive positioning. There's in close proximity to several Regional oil hubs. We already signed our first third-party deal this year and think there's opportunity to do a lot more.

Now turn the call over to Michael to go over a little more detail on our operations.

Thanks Taylor. Oh and P remains focused on executing our plan and adding value to its unit holders are sponsored plans include to rig programs both the Williston and Delaware in 2020 in the Williston a significant amount of activity is expected in dedicated areas, including Wild Basin an Indian Hills in the Delaware. Our sponsor will begin to ramp up production and dedicated areas as well.

additionally

Third-party business continues to be a significant contributor to our volumes in cash flow.

I'll give a bit more color on the fourth quarter before diving into twenty-twenty projections at Bighorn both crude and gas volumes exceeded the top end of guidance during the course or reflecting strong volumes from our sponsor and third parties as well as high utilization at our gas complex utilization for the gas complex was around 80%.

At the Bobcat devco volumes exceeded guidance across the board and the water volumes were within our guidance range.

Looking forward to 20 20. We provided a preliminary even suggesting double-digit growth year-over-year while we've exceeded our expectations on this front for multiple years. We typically take a a conservative approach to guidance and challenging the team to deliver above and beyond our plan.

on

Totally basis, we would expect first quarter ebitda to decline a bit versus the fourth quarter reflecting typical seasonality of the Wilson and well timing in the Permian.

In the second quarter and Beyond volumes and ebitda should ramp significantly with the fourth quarter 2020 being the highest.

We provided gross guidance by devco in our investor presentation on page eleven consistent with how we report.

On capital O M P we're expecting a range of 68 to $75 million dollars with the majority of spending being in the bobcat and panther death goes.

The 64% decline in spending versus 2019 reflects the completion of several major projects and the end of the capital expenditures agreeing with bobcat.

The budget includes some capital for third-party projects we have in hand.

the year

Moves along we have the potential to bring in more third-party agreements. This would result in higher spending, but obviously increased cash flow as well once the projects commence.

Lastly in 2019 concluded the capital arrangement with awaysis which resulted in owning approximately 35% of the Bobcat devco with that all jobs all over to Richard.

Thanks, Michael MPS financial position and Ford Outlook remains strong even has grown from forty three million. When we rode back in 2017 to 159 million months in 2019 driven by are a combination of support from our sponsor as well as growing third-party business for twenty twenty Outlook calls for double-digit growth yet again and continued strong coverage which supports our 20% annualized distribution growth. We declared fourth-quarter distribution of 54 cents per unit growing our distribution 5% versus the prior quarter distribution coverage was well above our guidance 2.2 times in the fourth quarter net debt the fourth quarter annualized Eva. Was 2.3 times with 459 Million drawing a revolver. We plan to maintain a similar leverage ratio as we exit 20 20 finally in November o m p began servicing Oasis and third parties in the Delaware Basin home.

reimbursed Oasis approximately $25

And assumed approximately ten million of liabilities incurred by Oasis prior to the effective date this transaction further diversifies our Revenue stream and enhances our financial outlook on closing. We're very pleased with these results this quarter and look forward to delivering strong performance in the future. I will now hand the call over to the office to Brandon for questions. Thank you. We will now begin the question-and-answer session to ask a question. You may press star then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys wage at any time. Your question has been addressed and you would like to withdraw your question, please press star at them to at this time. We will pause momentarily to assemble our roster.

Our first question comes from Jeremy internet with JPMorgan, please go ahead.

Hey guys, this is James off Jeremy.

Just want to start off with us on the side that you guys have a 50% Target for third-party contribution. Do you guys have a timeline in terms of when you click the meeting a Target?

Yeah, we we've been able James to to really grow that third-party business. Obviously we've gone from when we IPO this thing about two years ago. I really know focus on the third party side really started building into that in 2018 and what your seat where you see us now is kind of 25% or 25% of revenues on the third-party side. So we made really good progress. Obviously. We'd like to continue that progress. We don't have an exact timeline on that but we're working very hard towards continue to diversify our customer base. We've we've a growing the customer base pretty significantly. It's not just one or two guys that you know, it's double digit number of new customers, which is significant. We're doing that across basins Thursday.

well and

Across Commodities. So we've really got just a ton of great momentum on that front. We've been able to service those customers really well and and will continue to do so long and hopefully continue to grow our market share with those customers as well as as new customers.

Got it. Thanks. And and then just on Panther you mentioned, you know, the opportunity to pursue produced water recycling. What is the what is the kind of cap requirements there? And is that a 2020 event you think would that would be in the finance for?

We don't have an exact number on on produced water recycling the the cost. We're we're still looking into all that that's usually not a 2020 event. That's that's a little further out than that, but we think it it is a big opportunity in in the Permian in the Delaware in particular. Obviously. There's a lot of water that comes out. It's it's not as it's it's actually a little bit easier to work with than produce water from other other basins and so off there won't be quite as much that you need to do to get it ready to to reuse. So we're still looking into it. It's a big opportunity, but it's probably a little further out for us.

That's it for me. Thanks.

Perfect. Thanks. Our next question comes from peers Hammond with Simmons energy, please. Go ahead. Good morning. And thanks for taking my questions Richard right now. You're about 80% drawn on the revolver. And do you anticipate exercising the accordion figure and if if so a feature sorry, and if so, what are the conditions that you need to meet with increase the revolver by the $200 million called for with the accordion?

Yeah. That's a great question. You know, the the good news from our perspective is you know, we're really at you know, basically the peak where we think we're going to be, you know, drawn wage. Um, yeah right now with you know, as we as we ramped up business, um, you know last year and Drew for you know, the acquisition of the panther devco, you know, spending two grown know that Bobcat asset and and then also doing that Bobcat Capital arrangement. We were we we outspent a little bit last year, but you know right now feel good about the, you know, four hundred and fifty million four hundred thousand a million drawn on the revolver. And so yeah, the the way we think about is if you know there is incremental third-party opportunity or there's large projects that you know, you know, come along our way will jump back to the the bankrupt the way the process is worked in the past as you, you know, you just show your you know, your bank group your your your thoughts on the future and you know, they look at leverage, you know profiles and wage.

They're willing to extend Capital to you. If you've you know, if if it makes sense and if when you have a leverage profile like we do we think there's you know, we have a lot.

More capacity for for growth if we need it, but right now I don't feel like we we definitely need it. Okay, perfect. Thank you. And then my follow-up given the level of the distribution of right now in the fact that he's not being rewarded for that level of distribution. Does it make sense to cut the distribution and use the the funds for deleveraging?

Yeah. This is something that we continue to discuss and analyze internally. There's many factors that come in and play and so as we look at the tone P has done over the past few years our accomplishments in growing the business have more than supported the growth rate that we've had. So from barely over One X coverage ratio, when we went public to what two point two times in two thousand and fourth quarter or 2019, you know, we've had no trouble more than outpacing our distribution growth rate, you know even has been up like three point seven times since going public and we continue to see, you know, Decades of inventory at Oasis and and we're closely linked with that drilling operations from Oasis as well as the opportunities from third-party customers, you know, additionally, we have two slides in our investor deck off slide eight and nine that focus on what we've been able to do.

to the benefit of our unit holders since

Going public and every key can transaction that we've done has really been extremely accretive for the unit holders. And we believe we have a proven track record of being aligned with all of our unit holders. I think that will probably continue to try to find ways to do the right thing for our unit holders as we analyze options around, you know, you know the growth rates going forward and and we'll work through this month and the coming quarters. I think you're the the second part of your question was about, you know leverage and with industry-leading leverage at like two point three times we feel you know, really, you know, really good about the way that you know, the year sets up and even as we exit the year with leverage great and then finally any updates in the past you guys had talked about maybe selling a devco or JV purchased anything on the Strategic front.

Yes, we're obviously we're looking at stuff all the time right now. We've got good asset diversification amongst the basins. We think we're dead in the right part of those basins. So really looking for a continued operation opportunities to grow with our sponsor as well as build that third-party business Pierce. And so that's kind of the um, the the main focus obviously if there's opportunities here and there to to pair off assets on the opportunistic basis. Well, we'll take a look at that. But we're not we're not focused on that right now.

Thank you.

Thank you. This concludes our question answer session. I would like to turn the conference back over for any closing remarks.

Thanks, Brandon.

And closing fourth-quarter results Mark another strong quarter for Oasis Midstream Partners. We continue to deliver on our promises and exceed expectations. Thanks again for joining the call Thursday, and as always we will make ourselves available for any follow-up questions that you might have. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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