Highly complementary Williston Basin and
Delaware Basin assets enhance Crestwood’s competitive positioning
in its core growth basins
Significantly expands Crestwood’s leading
position in the Williston Basin with substantial synergy value
through current asset connectivity and future integration and
optimization of existing infrastructure
Increases scale and financial strength with pro
forma enterprise value of approximately $7 billion, pro forma 2021E
Adjusted EBITDA of over $820 million, and conservative financial
metrics with a sub-3.5x leverage ratio and a distribution coverage
ratio over 2.0x
Positions Crestwood to increase the common unit
distribution to $2.62 per unit annually following the closing of
the transaction, representing an approximate 5% increase
year-over-year
Crestwood Equity Partners LP (NYSE: CEQP) (“Crestwood”) and
Oasis Midstream Partners LP (NASD: OMP) (“Oasis Midstream”) today
announced that they have entered into a definitive merger agreement
under which Crestwood will acquire Oasis Midstream in an equity and
cash transaction valued at approximately $1.8 billion including the
assumption of debt. The transaction will largely be equity financed
with approximately 33.8 million of newly issued Crestwood common
units and $160 million of cash consideration. The transaction is
expected to close in the first quarter 2022, subject to customary
closing conditions.
Robert G. Phillips, Chairman, President and Chief Executive
Officer of Crestwood, commented, “I am very excited to announce the
strategic combination with Oasis Midstream, which has strong
industrial logic and perfectly aligns with our stated strategy of
consolidating high quality midstream assets in our core operating
areas. This transaction enhances our competitive position in the
Williston and Delaware Basins, enables Crestwood to capture
substantial operational, commercial, and capacity synergies as we
integrate the Oasis Midstream assets into our existing operations,
and substantially expands the long-term contract acreage and
inventory dedications of our gathering and processing portfolio.
Importantly, we are completing this transaction during a period
when macro oil and gas fundamentals are exceptionally supportive of
upstream development and there is increasing demand for midstream
infrastructure and services.”
Mr. Phillips continued, “Additionally, this transaction is
expected to be accretive to Crestwood’s distributable cash flow per
unit in 2022, strengthens our financial position by increasing
2021E pro forma Adjusted EBITDA and positive free cash flow by
approximately 40% and maintains our strong balance sheet with
pro-forma leverage of approximately 3.5x after the merger is
completed. Given the confidence we have in the quality of the Oasis
Midstream assets, expectations for continued Bakken development by
Oasis Petroleum and our experience in efficiently integrating
assets, Crestwood plans to accelerate the return of capital to our
common unitholders through a 5% increase in the distribution once
the transaction is closed. Through this transaction, we are excited
to expand our relationship with the team at Oasis Petroleum and
will have a shared vision for how our teams can work together to
execute our Williston Basin strategies. We look forward to
advancing those strategies with them as an important customer and
equity partner going forward.”
Danny Brown, Chief Executive Officer of Oasis Petroleum Inc. and
Chairman of Oasis Midstream, commented, “The combination of
Crestwood and Oasis Midstream creates a midstream leader well
positioned with size, scale and a diversified customer base.
Crestwood’s experienced team brings a track record of operational
excellence to handle a large portion of our company’s hydrocarbons
and produced water in the Williston basin. Oasis Midstream
unitholders, including Oasis Petroleum, are receiving compelling
value in this transaction and will benefit from an ownership
position in a larger combined company that will have a strong
balance sheet and pay attractive distributions.”
Transaction Highlights and Rationale
- Significantly increases scale and strategic positioning in
core basins: In the Williston Basin, this transaction adds
significant crude oil, produced water gathering and natural gas
gathering and processing assets, doubles the inventory of tier 1
drilling locations dedicated to Crestwood’s assets to approximately
1,200 locations across 535,000 dedicated acres and further expands
Crestwood’s footprint into the western and northern parts of the
basin. As the commodity price outlook remains favorable for an
acceleration of activity across the basin, this expanded footprint
positions Crestwood to more aggressively pursue third party volumes
and incremental bolt-on consolidation opportunities to further
optimize utilization of existing infrastructure. In the Delaware
Basin, the acquired assets provide crude oil and produced water
gathering services in Loving, Ward and Winkler counties in Texas,
complementary to Crestwood’s existing Nautilus natural gas
gathering system and Desert Hills produced water gathering
system.
- Asset integration provides opportunity to realize
approximately $45 million in commercial and cost reduction
synergies: Crestwood estimates it can capture over $20 million
in incremental annual cash flow over the next several years through
the successful integration of the Crestwood and Oasis Midstream
assets. In the Williston Basin, Crestwood expects to physically
connect its Arrow system with Oasis Midstream’s Wild Basin system
and the combined footprint will have 430 MMcf/d of total processing
capacity and current natural gas throughput of approximately 330
MMcf/d. This excess processing capacity eliminates potential
processing constraints for existing Arrow customers and creates
opportunities to more aggressively commercialize the Oasis
Midstream assets as gas volumes across the basin continue to
rapidly increase due to heightened gas capture efforts and rising
gas-to-oil ratios. Additionally, Crestwood has identified
approximately $25 million in annual cost synergies that it expects
to realize shortly after close in 2022, driven by operations and
maintenance (O&M) reductions from the overlapping asset
footprints and the elimination of duplicative G&A
expenses.
- Enhanced financial strength, flexibility and credit
profile: This transaction increases Crestwood’s pro forma 2021E
Adjusted EBITDA and free cash flow by approximately 40%. The
combined entity is expected to generate more than $820 million in
pro forma 2021E Adjusted EBITDA, which significantly enhances
Crestwood’s financial strength and flexibility. The transaction
will be deleveraging with an expected FY 2022 leverage ratio below
3.5x. This will result in a stronger balance sheet and substantial
liquidity under Crestwood’s current revolving credit facility,
providing even greater flexibility to execute its future business
plans. This increased cash flow scale and enhanced credit profile
is expected to be viewed positively by the rating agencies.
- Accelerates return of capital strategy: Based on the
long-term outlook of the combined business, the transaction drives
substantial accretion to distributable cash flow (DCF) per unit,
resulting in a robust distribution coverage ratio in FY 2022 in
excess of 2.0x. As a result of the improved long-term free cash
flow profile of the business, the combination will allow Crestwood
to accelerate its return of capital strategy to its common
unitholders. In connection with the close of the transaction,
Crestwood expects to increase its common distribution to $2.62/unit
annually, representing an approximate 5% increase year-over-year.
Additionally, Crestwood continues to maintain flexibility under its
previously announced $175 million common and preferred unit buyback
program to further enhance returns and cost of capital
opportunistically.
- Advances leading G&P sustainability initiatives:
Following the close of the transaction, Crestwood will implement
its MLP leading sustainability best practices as it assumes
operatorship of the acquired assets in the Williston and Delaware
Basins. This includes managing the acquired assets with an intense
focus on flare minimization and increased methane emissions
monitoring, as well as a strong commitment to biodiversity,
environmental stewardship, safety, and community engagement
efforts. Additionally, Crestwood intends to incorporate material
ESG metrics including a baseline of Scope 1 and Scope 2 emissions
from the acquired assets that it will publish in its 2021
sustainability report along with a strategy to further manage its
carbon footprint across the Williston Basin.
Transaction Details
Under the terms of the agreement, Oasis Petroleum Inc. (NASD:
OAS) (“Oasis Petroleum”) will receive $150 million in cash plus an
aggregate of 21.0 million common units in exchange for its 33.8
million common units held in Oasis Midstream. Oasis Midstream
public unitholders will receive an aggregate of 12.9 million
Crestwood common units in exchange for the 14.8 million Oasis
Midstream common units outstanding. This represents a total
transaction value of approximately $1.8 billion, including the
assumption of Oasis Midstream’s outstanding debt of approximately
$660 million as of September 30, 2021. In addition, Oasis Petroleum
will receive a $10 million cash payment for its ownership of the
General Partner interest of Oasis Midstream. Upon closing, Oasis
Midstream former unitholders will own approximately 35% of
Crestwood’s outstanding common units, of which, approximately 22%
will be owned by Oasis Petroleum.
In connection with the transaction, Oasis Petroleum will receive
the right to appoint two representatives to Crestwood’s Board of
Directors, subject to on-going ownership thresholds. This
transaction has been unanimously approved by the Boards of
Directors of both general partners of Crestwood and Oasis
Midstream. The transaction terms were reviewed, negotiated and
approved by the conflicts committee of the board of directors of
the general partner of Oasis Midstream. Additionally, Oasis
Petroleum has agreed in a Support Agreement to vote its Oasis
Midstream common units representing approximately 70% of Oasis
Midstream common units in favor of the transaction.
Presentation and Third Quarter Earnings Conference
Call
Crestwood has posted an investor deck highlighting the
transaction with Oasis Midstream on its corporate website.
Crestwood management will host a conference call to discuss the
merger transaction and its third quarter earnings on Tuesday,
October 26, 2021, at 8:00 am Central Time (9:00 am Eastern Time)
which will be broadcast live over the internet. Interested parties
will be able to connect to the webcast via the Investors page of
Crestwood’s website at www.crestwoodlp.com. Please log in at least
10 minutes in advance to register and download any necessary
software.
Advisors
J.P. Morgan Securities served as lead financial advisor,
Intrepid Partners, LLC served as financial advisor, and Baker Botts
L.L.P. served as legal advisor to Crestwood. Morgan Stanley &
Co. LLC and Tudor, Pickering, Holt & Co. served as financial
advisors to Oasis Petroleum and its affiliates and Vinson &
Elkins L.L.P. served as legal advisor to Oasis Petroleum and its
affiliates. Jefferies served as financial advisor, and Richards,
Layton & Finger, P.A. served as legal advisor to the Conflicts
Committee of Oasis Midstream.
Forward-Looking Statements
This news release contains forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of
1995 and Section 21E of the Securities and Exchange Act of 1934.
The words “expects,” “believes,” “anticipates,” “plans,” “will,”
“shall,” “estimates,” and similar expressions identify
forward-looking statements, which are generally not historical in
nature. Forward-looking statements, including statements regarding
our revised 2021 outlook, the anticipated completion of the
proposed transaction and the timing thereof, the expected benefits
of the proposed transaction to our unitholders and to unitholders
of Oasis Midstream, and the anticipated impact of the proposed
transaction on the combined business and future financial and
operating results, are subject to risks and uncertainties and are
based on the beliefs and assumptions of management, based on
information currently available to them. Although Crestwood and
Oasis Midstream believe that these forward-looking statements are
based on reasonable assumptions, it can give no assurance that any
such forward-looking statements will materialize. Important factors
that could cause actual results to differ materially from those
expressed in or implied from these forward-looking statements
include the risks and uncertainties described in Crestwood’s and
Oasis Midstream’s reports filed with the Securities and Exchange
Commission, including its Annual Report on Form 10-K and its
subsequent reports, which are available through the SEC’s EDGAR
system at www.sec.gov and on our website, and risks that the
proposed transaction may not be consummated or the benefits
contemplated therefore may not be realized, the ability to obtain
requisite regulatory and unitholder approval and the satisfaction
of the other conditions to the consummation of the proposed
transaction, the ability of Crestwood to successfully integrate
Oasis Midstream’s operations and employees and realize anticipated
synergies and cost savings, the potential impact of the
announcement or consummation of the proposed transaction on
relationships, including with employees, suppliers, customers,
competitors and credit rating agencies. Readers are cautioned not
to place undue reliance on forward-looking statements, which
reflect management’s view only as of the date made, and Crestwood
assumes no obligation to update these forward-looking
statements.
No Offer or Solicitation
This communication relates to the proposed transaction between
Oasis Midstream and Crestwood. This communication is for
informational purposes only and does not constitute an offer to
sell or the solicitation of an offer to buy any securities or a
solicitation of any vote approval, in any jurisdiction, pursuant to
the proposed transaction or otherwise, nor shall there be any sale,
issuance, exchange or transfer of the securities referred to in
this document in any jurisdiction in contravention of applicable
law. No offer of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended.
Additional Information and Where You Can Find It
In connection with the proposed transaction, Crestwood will file
a registration statement on Form S-4, including a preliminary
consent statement/prospectus for the unitholders of Oasis Midstream
with the U.S. Securities and Exchange Commission (“SEC”). INVESTORS
AND UNITHOLDERS OF CRESTWOOD AND OASIS MIDSTREAM ARE ADVISED TO
CAREFULLY READ THE REGISTRATION STATEMENT AND THE PRELIMINARY
CONSENT STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND
SUPPLEMENTS THERETO) WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION, THE PARTIES TO
THE TRANSACTION AND THE RISKS ASSOCIATED WITH THE TRANSACTION. The
definitive consent statement/prospectus, when available, will be
sent to unitholders of Oasis Midstream in connection with the
solicitation of consents of Oasis Midstream unitholders relating to
the proposed transactions. Investors and unitholders may obtain a
free copy of the preliminary or definitive consent
statement/prospectus (each when available) filed by Crestwood or
Oasis Midstream with the SEC from the SEC’s website at www.sec.gov.
Unitholders and other interested parties will also be able to
obtain, without charge, a copy of the preliminary or definitive
consent statement/prospectus and other relevant documents (when
available) from Crestwood’s website at
https://www.crestwoodlp.com/investors/ or from Oasis Midstream’s
website at http://oasismidstream.investorroom.com.
Participants in the Solicitation
Crestwood, Oasis Midstream and their respective directors,
executive officers and general partners, and Oasis Petroleum and
its directors and executive officers may be deemed to be
participants in the solicitation of consents from the unitholders
of Oasis Midstream in respect of the transactions. Information
about these persons is set forth in the Crestwood’s Annual Report
on Form 10-K for the year ended December 31, 2020, which was filed
with the SEC on February 26, 2021, Oasis Midstream’s Annual Report
on Form 10-K for the year ended December 31, 2020, which was filed
with the SEC on March 8, 2021, and subsequent statements of changes
in beneficial ownership on file for each of Crestwood and Oasis
Midstream with the SEC. Unitholders and investors may obtain
additional information regarding the interests of such persons,
which may be different than those of the respective companies’
unitholders generally, by reading the preliminary or definitive
consent statement/prospectus, or other relevant documents regarding
the transaction (if and when available), which may be filed with
the SEC.
About Crestwood Equity Partners LP
Houston, Texas, based Crestwood Equity Partners LP (NYSE: CEQP)
is a master limited partnership that owns and operates midstream
businesses in multiple shale resource plays across the United
States. Crestwood is engaged in the gathering, processing,
treating, compression, storage and transportation of natural gas;
storage, transportation, terminalling and marketing of NGLs;
gathering, storage, terminalling and marketing of crude oil; and
gathering and disposal of produced water. Visit Crestwood Equity
Partners LP at www.crestwoodlp.com; and to learn more about
Crestwood’s sustainability efforts, please visit
https://esg.crestwoodlp.com.
About Oasis Midstream Partners LP
Oasis Midstream Partners LP is a leading 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.
About Oasis Petroleum Inc.
Oasis Petroleum Inc. is an independent exploration and
production company with quality and sustainable long-lived assets
in the Williston Basin. The company is uniquely positioned with a
best-in-class balance sheet and is focused on rigorous capital
discipline and generating free cash flow by operating efficiently,
safely and responsibly to develop its unconventional onshore
oil-rich resources in the continental United States. For more
information, please visit the company's website at
www.oasispetroleum.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20211026005463/en/
Crestwood Equity Partners LP Investor Contacts
Josh Wannarka, 713-380-3081 josh.wannarka@crestwoodlp.com Senior
Vice President, Investor Relations, ESG & Corporate
Communications
Rhianna Disch, 713-380-3006 rhianna.disch@crestwoodlp.com Director, Investor
Relations Sustainability and Media Contact Joanne Howard,
832-519-2211 joanne.howard@crestwoodlp.com Vice President,
Sustainability and Corporate Communications Oasis Midstream
Partners Contact Bob Bakanauskas, Director, Investor
Relations (281) 404-9600 ir@oasispetroleum.com
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