Oasis Midstream Partners LP
Q4 2020 Earnings Call Transcript

Published: 25 Feb 2021

[Operator:]

Good morning. 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 2020 earnings release and operations update for Oasis Midstream Partners. . Please note this event is being recorded. I'd now like to turn the conference over to Richard Robuck, Oasis Midstream's CFO, to begin the conference. Thank you. You may begin your conference.

[Richard Robuck:]

Great. Thanks a lot, Jason. Good morning, everyone. This is Richard Robuck. As noted today, we are reporting our year-end and fourth quarter 2020 financial and operational results. We are delighted to have you on our call today joined by Taylor Reid and Michael Lou as well as some 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 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 in our earnings release and conference call.

[Taylor Reid:]

Good morning, everyone, and thanks for joining our call. Fourth quarter results reflect another quarter of solid operating and financial performance. Oasis 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 slim 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 and return of capital to shareholders. Naturally, OMP investors have questions on what the implications are for OMP. So I think it's worth spending some time here. The new Oasis is a great anchor tenant with an amazing outlook, which we feel is positive for OMP as well. First, Oasis is in a much stronger financial position with peer-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 OMP's 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 2 premier basins remains intact. Oasis has a strong track record of involving OMP through mutually beneficial arrangements, and we expect to continue to add in the future. Additionally, Oasis' strong operating team, clean balance sheet and lean cost structure may get a natural consolidator of assets, which could ultimately benefit OMP. Having a strong balance sheet is an important part of our strategy as well. OMP was deliberately structured at its IPO to stand on its own and be resilient to customer and market fluctuations.

[Michael Lou:]

Thanks, Taylor. Operating performance remains strong at OMP. Capture rates remain at very high levels as OMP system experienced little downtime and allowed our sponsor to maintain its peer-leading performance in gas capture as well as oil and water captured on pipeline. In the fourth quarter, we saw improvement in third party activity, and we continue to see momentum early in 2021. It's worth noting that OMP's asset base is situated in one of the best parts of the Williston Basin in close proximity to strong levels of activity. Wild Basin 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 OMP's financials, accounting for approximately 60% of our fee-based revenue.

[Richard Robuck:]

Thanks, Michael. OMP's financial position and outlook continues to be differential in our industry. EBITDA has grown from $43 million when we IPO-ed back in 2017 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 at OMP deliver on operating costs, 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 1.6x in the fourth quarter. Throughout 2020, you saw OMP 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 3x at $130 million of liquidity, we are in an extremely enviable position, especially on the heels of the impact that 2020 had on the broader energy sector. Our commitment to financial strength will continue as we march forward, and we currently expect leverage to remain at similar levels through the end of 2021.

[Operator:]

[Taylor Reid:]

Thanks, Jason. In closing, fourth quarter results demonstrate continued execution. As OMP managed costs 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.

[Operator:]

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