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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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No More Gas Flaring: the Permian's Double E Pipeline is brought into service in West Texas

Permian Basins gas infrastructure boom: Summit Midstream puts into service a new pipeline system, aimed at reducing gas flaring in the area. Besides ecological concerns, the project will also transport almost 1,5 billion cubic feet of gas per day — enough to supply 5 million U.S. homes every day. According to Federal Energy Statistics, the project cost a whopping $450 million.

Ironwood Midstream expanded its operations in the Eagle Ford region through its merger with Nuevo Midstream. Thanks to this, Ironwood II has increased its crude oil and natural gas throughput capacities in the famous shale to approximately 400,000 bbl/d and 410 MMcf/d, respectively. With 390 miles of pipelines, the company manages 245,000 acres of dedicated land.

Oil output in the Permian Basin in Texas and New Mexico is supposed to go up 88,000 bbl/d to a record 5.219 million bbl/d in June, as the U.S. Energy Information Administration (EIA) announced in its report on May 16. Additionally, gas productivity in the Permian Basin and the Haynesville in Texas, Louisiana and Arkansas will rise to record highs of 20 Bcf/d and 15.1 Bcf/d in June, respectively. Given that this growth has been expected, recent global market changes make forecasting the output even more challenging. Learning how production will change is easier with early activity tracking, a new service recently launched by Rextag – Pad Activity Monitor. With the help of PAM, you are able to monitor well pad clearing, drilling operations, fracking crew deployment and completions with new data collected approximately every 2 days. Additionally, it cuts down activity reporting lag times by at least 98%, from 120-180 days down to just 5-8 days. In order to access reports, charts, tables, and mapping visualizations via Rextag’s Energy DataLink use a web-based application allowing users to filter, download and identify activity on a map or data table. Moreover, customers will be able to set up daily, weekly, and monthly email report notifications.

The EIA forecasts that total output in the main U.S. shale oil basins will increase 142,000 bbl/d to 8.761 million bbl/d in June, the most since March 2020. Oil productivity in the Permian Basin in Texas and New Mexico is supposed to go up 88,000 bbl/d to a record 5.219 million bbl/d in June, as the U.S. Energy Information Administration (EIA) announced in its report on May 16. In the largest shale gas basin, the productivity in Appalachia in Pennsylvania, Ohio and West Virginia will grow up to 35.7 Bcf/d in June, its highest since beating a record 36 Bcf/d in December 2021. Gas output in the Permian Basin and the Haynesville in Texas, Louisiana and Arkansas will rise to record highs of 20 Bcf/d and 15.1 Bcf/d in June, respectively. Speaking of the Permian future output, putting hands on upcoming changes in production has recently been made easier with the new Rextag's service - Pad Activity Monitor. Thanks to satellite imagery and artificial intelligence, customers are able to monitor the oil and gas wells and are provided with near real-time activity reports related to drilling operations. However, it is noticed that productivity in the largest oil and gas basins has decreased every month since setting records of new oil well production per rig of 1,544 bbl/d in December 2020 in the Permian Basin, and new gas well production per rig of 33.3 MMcf/d in March 2021 in Appalachia.

No sooner had the crude prices soared above $100/bbl than the industry professionals believed in an incredible growth of drilling activity in North America’s largest shale patch. Analysts speculate that additional output of 500,000 barrels of oil daily would become a significant part (4%) of overall U.S. daily production. That is going to flatter oil and gasoline prices. Drilling permits in the Permian Basin are persistently growing, averaging approximately 210 at the beginning of April. Moreover, the permits trend is noticed as an all-time high as a total of 904 horizontal drilling permits were awarded last month. Nowadays, learning and analysing the current situation and predicting the future development become easier with early activity tracking, a new service recently launched by Rextag. Rextag's Pad Activity monitor (PAM) allows you to see well pad clearing, drilling operations, fracking crew deployment and completions with new data collected approximately every 2 days with the help of satellite imagery and artificial intelligence. While the increase in drilling will result in higher production, U.S. shale producers will have to overcome several hurdles including labor shortages and supply constraints.

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