Oasis Midstream Partners LP Announces Quarter Ended March 31, 2020 Earnings and Updated 2020 Outlook

HOUSTON, May 18, 2020 /PRNewswire/ -- Oasis Midstream Partners LP OMP ("OMP" or the "Partnership") today announced financial and operating results for the first quarter of 2020 and updated its 2020 outlook.

Highlights

• Delivered net cash from operating activities of $61.7 million.
• Adjusted EBITDA⁽¹⁾ was $72.9 million and Adjusted EBITDA attributable to Oasis Midstream Partners LP⁽¹⁾ was $46.4 million.
• Capital expenditures decreased approximately 30% from 4Q19 to $24.7 million in 1Q20.
• Exceeded the high-end of 1Q20 volumes guidance ranges across most commodity streams.
• Natural gas processing volumes increased 25% from 1Q19 to 242.4 MMscfpd. Third party gas processing volumes increased approximately 140% from 1Q19 and were approximately 30% of total gas processing volumes in 1Q20.
• Beartooth DevCo water volumes increased approximately 6% from 4Q19 to 133.4 MBowpd.
• Commenced third-party produced water gathering and disposal services in Wild Basin.
• Declared the 1Q20 quarterly cash distribution of $0.54 per unit.

⁽¹⁾ Non-GAAP measure. See "Non-GAAP Financial Measures" below for definitions of all non-GAAP measures included herein and reconciliations to the most directly comparable financial measures under United States generally accepted accounting principles ("GAAP").

Chief Executive Officer, Taylor Reid commented, "During these unprecedented times, Oasis Midstream Partners is chiefly focused on the health and safety of our employees, contractors, and communities. Like Oasis Petroleum, we are aligning our operations and capital spending plan with the current market reality. I am extremely proud of our team, not only because we exceeded both operating and financial objectives in the first quarter, but also because we have rapidly adapted to the new environment we are facing. During the first quarter of 2020, we exceeded guidance across most commodity streams, which in combination with exceptional cost control led us to exceed our EBITDA expectations. Due to challenging macro conditions, OMP is now watching customers curtail volumes, which puts significant downward pressure on our second quarter of 2020 volumes and cash flow.  OMP expects to manage its cost structure tightly and will make decisions on its distribution plans in light of the conditions that unfold for the remainder of the year."

Outlook Update

• OMP plans to significantly reduce its 2020E capital expenditures ("CapEx"). The original 2020 plan called for $110 million to $120 million of gross midstream CapEx with $68 million to $75 million net to OMP. The updated 2020 plan expects $35 million to $40 million of gross midstream CapEx with $22.2 million to $26.5 million net to OMP.
• Activity will be reduced across all of OMP's DevCos with remaining spending concentrated in Bobcat DevCo and Panther DevCo. OMP currently expects the capital curtailments will offset the cash flow loss from reduced volumes and activity in 2020.
• The Partnership will continue to communicate with its customer base and is well positioned to further adjust its capital program, as needed.
• OMP is suspending volume and EBITDA guidance given ongoing uncertainty, continued market volatility and the uncertainty around the size and duration of volume curtailments over the coming months.

Operational and Financial Update

The following table presents select operational and financial data:

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The following table shows actual throughput volumes for 1Q20 compared to volumes guidance for 1Q20:

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Liquidity

As of March 31, 2020, the Partnership had cash and cash equivalents of $23.9 million, $487.5 million of borrowings outstanding under its revolving credit facility and an outstanding letter of credit of $1.7 million.

The aggregate commitments on the Partnership's revolving credit facility were $575.0 million at March 31, 2020, and the Partnership had an unused borrowing capacity of $85.8 million. The Partnership has the ability to further increase the commitments on the revolving credit facility to $775.0 million.

The Partnership was in compliance with the covenants under its revolving credit facility at March 31, 2020, except as follows:

As a result of ongoing internal oversight processes, the Partnership identified that a Control Agreement (as defined in the Partnership's amended credit agreement) had not been executed for a certain bank account (the "JPM Account") held at JPMorgan Chase Bank, N.A. ("JPMorgan"), who is a lender under the Partnership's revolving credit facility. The Control Agreement serves to establish a lien in favor of the lenders under the Partnership's revolving credit facility with respect to the JPM Account. On May 11, 2020, the Partnership executed a Control Agreement with both Wells Fargo Bank, N.A., as administrative agent under the revolving credit facility, and JPMorgan, thereby completing the documentation required under the revolving credit facility. Despite the Control Agreement's execution, the failure to have had it in place before the JPM Account was initially funded with cash represents a past Event of Default (as defined in the Partnership's amended credit agreement). On May 15, 2020, the Partnership entered into a limited waiver (the "Limited Waiver") of this past Event of Default with the Majority Lenders (as defined in the Partnership's amended credit agreement), which provides forbearance of additional interest owed arising from this past Event of Default until the earlier of (i) November 10, 2020 and (ii) an Event of Default. Pursuant to the Limited Waiver, the Partnership recorded an additional interest charge of approximately $25.9 million in the unaudited condensed consolidated financial statements as of March 31, 2020. Additionally, the Limited Waiver excludes the additional interest from the calculation of the interest coverage ratio financial covenant.

Quarterly Distribution

Net cash from operating activities was $61.7 million and Distributable Cash Flow ("DCF") was $14.7 million for the three months ended March 31, 2020. Excluding the additional interest charge of $25.9 million that was accrued but not paid at March 31, 2020, DCF and distribution coverage would have been $40.6 million and 2.1x, respectively.

On May 18, 2020, the board of directors of OMP GP LLC (our "General Partner") declared the quarterly cash distribution for the first quarter of 2020 of $0.54 per unit. This distribution will be payable on June 8, 2020 to unitholders of record as of May 28, 2020. In addition, our General Partner will receive a cash distribution of $1.0 million attributable to its incentive distribution rights.

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:

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 Monday, May 25, 2020 by dialing:

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. 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, developments in the global economy, particularly the public health crisis related to the novel coronavirus 2019 ("COVID-19") pandemic and the adverse impact thereof on demand for crude oil and natural gas and our customers' demand for our services, the risk of further impairments, 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, an inability of Oasis Petroleum Inc. ("Oasis Petroleum") or our other customers to meet their operational and development plans on a timely basis or at all 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. In addition, certain of our forward-looking statements address the various risks and uncertainties associated with the extraordinary market environment and impacts resulting from the COVID-19 pandemic and the actions of foreign oil producers (most notably Saudi Arabia and Russia) to increase crude oil production and the expected impact on our businesses, operations, earnings and results. Because considerable uncertainty exists with respect to foreign oil production and the future pace and extent of a global economic recovery from the effects of the COVID-19 pandemic, we cannot predict whether or when crude oil production and economic activities will return to normalized levels.

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.

Non-GAAP Financial Measures

Cash Interest, Adjusted EBITDA and DCF are supplemental non-GAAP financial measures that are used by management and external users of the Partnership's financial statements, such as industry analysts, investors, lenders and rating agencies. These non-GAAP financial measures should not be considered in isolation or as a substitute for interest expense, net income, operating income, net cash provided by operating activities or any other measures prepared under GAAP. Because Cash Interest, Adjusted EBITDA and DCF exclude some but not all items that affect interest expense, net income and net cash provided by operating activities and may vary among companies, the amounts presented may not be comparable to similar metrics of other companies.

Cash Interest

Cash Interest is defined 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 GAAP. Management believes that the presentation of Cash Interest provides useful additional information to investors and analysts for assessing the interest charges incurred on the Partnership's debt, excluding non-cash amortization, and the Partnership's ability to maintain compliance with its 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:

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Adjusted EBITDA

Adjusted EBITDA is defined as earnings (loss) before interest expense (net of capitalized interest), income taxes, depreciation, amortization, impairment, equity-based compensation expenses and other similar non-cash adjustments. Adjusted EBITDA attributable to Oasis Midstream Partners LP is defined as Adjusted EBITDA less Adjusted EBITDA attributable to Oasis Petroleum's retained interests in two of the Partnership's DevCos, Bobcat DevCo and Beartooth DevCo. Adjusted EBITDA should not be considered an alternative to net income (loss), 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 the Partnership's ability to generate cash from its business operations without regard to the Partnership's 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 (loss) and net cash provided by operating activities.

Distributable Cash Flow

DCF is defined as Adjusted EBITDA attributable to Oasis Midstream Partners LP less Cash Interest attributable to Oasis Midstream Partners LP and maintenance capital expenditures attributable to Oasis Midstream Partners LP. DCF should not be considered an alternative to net income (loss), 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 the Partnership's ability to generate cash from its business operations without regard to the Partnership's financing methods or capital structure, coupled with the Partnership's ability to make distributions to its unitholders. The GAAP measures most directly comparable to DCF are net income (loss) and net cash provided by operating activities.

The following table presents reconciliations of the GAAP financial measures of net income (loss) and net cash provided by operating activities to the non-GAAP financial measures of Adjusted EBITDA and DCF for the periods presented:

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SOURCE Oasis Midstream Partners LP