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Ain't Nothing Like a $2 Billion Deal: Oasis Sells Midstream Affiliate to Crestwood

Houston-based independent E&P company Oasis Petroleum Inc. agreed to sell its midstream unit for $1.8 billion to Crestwood Equity in a deal that gives it an edge over future acquisitions and puts the company in a good position to participate in industry consolidation going forward.

In a bid to become the dominant force in the Williston Basin, Oasis had already acquired Diamondback Energy's Bakken asset a couple of weeks earlier, and with this transaction, its transformation into a pure-play midwestern operator is now complete. It was a strategic play, which the company had originally started back when it sold its upstream position in the Permian Basin at the beginning of the year.

Additionally, a press release on Oct. 26 signified, that Oasis Midstream Partners LP and Crestwood Equity Partners LP have entered into a definitive agreement to merge. As it happens, the total transaction value of roughly $1.8 billion includes assumed debt of approximately $660 million owed by OMP.

The transaction will result in a 21.7% ownership stake for Oasis in Crestwood common units. The remaining ownership of Oasis in Crestwood will also be of benefit to the company since it will create a diversified midstream player with a strong balance sheet and a bullish outlook after this accretive merger.

As for Crestwood, Oasis' acquisition will allow it to capture substantial operational, commercial, and capacity synergies, and to significantly expand the collection and processing portfolio of long-term contract acreage and inventory commitments.

In retrospect, this was exactly the reason why Oasis formed OMP back in 2007: to own, operate, develop, and acquire a wide portfolio of midstream assets.

For its part, formed in 2010, CEQP focuses on investments in midstream assets located in unconventional resource plays; its primary operations are in Delaware, Powder River, and Appalachian basins.

This deal is particularly relevant given that Oasis completes it during a period in which the macroeconomic environment is exceptionally supportive of upstream development, and midstream infrastructure and services demand is increasing.

According to the closing prices for OMP and CEQP on Oct. 25, the total consideration for the transaction represents an at-the-market transaction with a combined enterprise value of about $6.9 billion.

The transaction also provides Oasis Petroleum with the right to nominate two directors to Crestwood's board of directors, subject to ongoing ownership thresholds.

OMP's conflict committee reviewed, negotiated, and approved the transaction terms. Oasis Petroleum has also committed to voting its common units in favor of the transaction in a support agreement.

Both companies will be better positioned in the Williston and Delaware basins as a result of this deal, which is expected to close during the Q1 of 2022.

Crestwood’s financial advisers were J.P. Morgan Securities, Intrepid Partners LLC, and Baker Botts LLP.

Oasis Petroleum and its affiliates were advised financially by Morgan Stanley & Co. LLC and Tudor, Pickering, Holt & Co. The company's legal counsel was Vinson & Elkins LLP.

As for Oasis Midstream's conflicts committee, Jefferies, Richards, Layton & Finger, PA provided their support.

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