Q4 2020 Oasis Midstream Partners LP Earnings Call

My name is Jason and I'll be your conference operator today at this time I'd like to welcome everyone to the fourth quarter 'twenty 'twenty earnings release and 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 zero after today's presentation.

Patients there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded and now I'd like to turn the conference over to Richard Robuck Oasis Midstream CFO to begin the conference. Thank you you may begin your conference.

Great. Thanks, a lot Jason good morning, everyone. This is Richard Grubhub as noted today, we are reporting our year end and fourth quarter 'twenty, eight 'twenty financial and operational results.

We were delighted to have you on our call today I'm joined by Taylor Reid and Michael Lou as well as some other members of the team.

Be advised that our remarks.

The Oasis petroleum and Oasis midstream partners, including the answers to your questions include statements that we believe to be forward looking statements 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.

Currently disclosed our earnings release and conference call. Those risks include among others matters that we described in our earnings release as well as our filings with the Securities and Exchange Commission, including our.

Our annual report and form 10 on form 10-K, and our quarterly reports on form 10-Q, we disclaim any obligation to update these forward looking statements. During this conference call. We will also make references to certain non-GAAP financial measures reconciliations to applicable GAAP.

Measures can be found on our earnings release and on our website. We will also reference our current investor presentation, which you will be able to find on our website with that I'll turn the call over to Taylor.

Good morning, everyone and thanks for joining our call.

Fourth quarter results reflect another quarter of solid operating and financial performance.

<unk> Midstream partners continues to adjust to the new normal and remains focused on the health and safety of our employees contractors and our communities.

The team did an exceptional job in 2020 pivoting to a slimmed down capital program and delivered strong cost control.

Which kept our margins healthy despite the headwind from lower upstream activity.

In January 2021, Oasis, our sponsor outlined a new strategy sharply focused on enhanced returns.

Our return of capital to shareholders.

Naturally all investors have questions on what the implications are for RMP.

So I think it's worth spending some time here.

The new Oasis is a great anchor tenant what kind of amazing outlook, which we feel is positive for all of you as well.

First oasis is in a much stronger financial position with pure leading leverage and a leaner cost structure.

This gives oasis the ability to run a steady resilient development program, which is less likely to shift with market prices.

Second because oasis improved position add stability to own piece financial outlook, we now have a better hand in negotiating and capturing third party opportunities.

The team has done a great job building an extensive diverse portfolio of third party business and we're currently negotiating multiple projects, which could further expand that.

And finally Oasis deep development inventory in two premier basins remains intact.

<unk> has a strong track record of involving a one P through mutually beneficial arrangements and.

And we expect to continue that in the future.

Additionally, oasis strong operating team clean balance sheet, and lean cost structure make it a natural consolidator of assets, which could ultimately benefit O M. P.

Having a strong balance sheet is an important part of our strategy as well.

M. P was deliberately structured at its IPO to stand on its own and be resilient to customer and market fluctuations.

Oh piece financial leverage was maintained at relatively modest levels compared to many G&P peers during 2020.

As the only pizza judiciously elected to hold the distribution flat in 2020, while prioritizing the long term strength of the balance sheet.

Moving on to the quarter fourth quarter performance benefited from strong third party volumes, which offset expected natural declines from our sponsor.

Additionally, good cost control drove substantial cash generation.

And strong coverage of one six times on our distribution of 54 per share.

We will continue to monitor the environment, you know in Pes operational and financial outlook to inform decisions on future distributions would be largely directed by the targeted long term leverage target of $2 75 to $3 two five times.

Capital spending remain light in the fourth quarter as our sponsor deferred some activity into 2021.

Overall 2020 capital was down about 70% from our original budget.

Our capital efficient infrastructure allowed us to reduce spending to very low levels, while maintaining strong margins.

While speeding was curtailed significantly in 2020, reflecting the environment as we will discuss in a bit of spending will pick up again. This year as we prepare for Oasis next series of projects.

Before I hand, it over to Michael.

Just want to recognize the O N P team for their strong contributions in 2020.

He was certainly a difficult year on a lot of fronts, but.

But the team was able to remain focus and our.

A successful and aggressively lowering both capital and operating cost, which helps the whole organization.

I'll now turn the call over to Michael to get into a little more operational detail.

Thanks, Taylor operating performance remained strong at LP capture rates remain at very high levels as one piece system experienced little downtime and allowed our sponsor to maintain its pure leading performance in gas capture as well as oil and water capture to our pipeline in the <unk>.

Fourth quarter, we saw improvement in third party activity and we continue to see momentum early in 2021.

It's worth noting that <unk> asset base is situated in one of the best parts of the Williston basin in close proximity to strong levels of activity.

While base and capture was about 98% in the fourth quarter, which compares to approximately 93% across North Dakota.

I commend the operating team for strong performance in both cost control and product capture and challenge them to keep up the good work.

As a reminder, natural gas related business is the primary driver of <unk> financials accounting for approximately 60% of our fee based revenue.

As we look into 2021 capital spending is expected to increase as we prepare for our sponsors next project South Nesson.

This project is adjacent to the waitresses Wild basin acreage and is expected to be as prolific which supports a strong fee based cash flow stream for LNP.

Full year 2021, Capex net to own Pea is expected to be $56 million to $60 million and the south nurses spend.

In 2021 range is between 40 and $44 million with cash flow benefits from south net and expected in 2022.

Importantly, leverage exiting 2021 is expected to remain around current levels. Despite the increase in spending this year.

As always our capital.

<unk> do not include the impact of incremental third party business that might be one over the course of the year.

2021, EBITDA net to LP is expected to range.

Between $137 million to $146 million, reflecting a steady program at Oasis and third parties.

We feel we've provided growth EBITDA guidance by Dev co in our Investor presentation on page 12, consistent with how we report.

<unk> is anchored by assets situated in the two of the best oil basins in the U S and has had a strong track record in making accretive investments and.

And leveraging our scale by securing a diverse portfolio of third party customers.

We look forward to continued operational excellence in 2021 and beyond.

With that I'll hand, the call over to Richard.

Yes.

Thanks, Michael.

These financial position and outlook continues to be a differential in our industry EBITDA has grown from $43 million when we IPO Ed back in 2000 $17 million to $144 million in 2020, driven by a combination of support from our sponsor as well as growing third party business. Additionally, you've seen the operations team.

<unk> deliver on operating cost as they adapted quickly to ensure we have an optimized cost structure for whatever environment. We're operating in the midstream team continues to find ways to drive more efficient operations last night, we announced that we were holding distributions flat once again, even with strong distribution coverage of one six times.

In the fourth quarter throughout 2020, you saw <unk> show commitment to its long term financial health as we generated $36 million of free cash flow after distributions, while protecting our balance sheet with positive free cash flow leverage of about just over three times and $130 million of liquid.

We are an extremely enviable position, especially on the heels of the impact to 2020 had on the broader energy sector. Our commitment to financial strength will continue as we March four and we currently expect leverage to remain at similar levels through the end of 2021.

In closing this is <unk>.

<unk> year for the industry LNP rose to the challenge and once again executed exceptionally well given the circumstances conditions improved in the back half of the year, but volatility remains high LP will manage the business prudently, but keeping a laser focus on costs, while maintaining flexibility.

I'll now hand, the call over to Jason to open up the line for questions.

Thank you we will begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.

Okay.

There are no questions in the queue.

This concludes our question and answer session.

To turn the conference back over to Taylor Reid for any closing remarks.

Thanks, Jason.

Closing fourth quarter results demonstrate continued execution.

<unk> managed cost well and benefited from resilient third party volumes.

The team is focused on controlling everything in its power to improve operations and maximize shareholder value.

As always we will make ourselves available for any follow up questions. Thanks again for joining the call today.

Yeah.

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

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