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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.

TC Energy, the Canadian gas giant, recently announced its environmental, social, and governance goals, as well as emission reduction strategies. The company aims to become 100% emission-free by 2050 while promising to cut greenhouse gas emissions intensity from its operations by 30% by 2030 as an interim measure.

Shareholder’s payout target was increased by 50% after the largest U.S. independent oil producer surpassed Wall Street’s earnings estimates on growing energy prices, said Houston-based Conoco Phillips Co. on Aug. 4. Due to Western sanctions on major producer Russia throttling energy supply amid a rebound in demand from pandemic lows, oil and gas #prices have soared. Crude has been trading more than 25% higher since the start of the year and results also benefited from high natural gas prices. Meanwhile, shares were down a fraction, to $91.03, in early trading but are up about 26% year to date. Conoco Phillips stated, that the average price obtained for a barrel of oil and gas accelerated 77% from a year earlier to $88.57. The company acknowledges that it has not hedged any of its oil and gas sales to make the most of higher market prices. The capacity of 1.69 million boe/d was in line with Wall Street estimates, however, the company expected the current quarter’s output would be between 1.71 million and 1.76 million boe/d.

California oil joint venture, Aera Energy, of Exxon Mobil Corp. and ShellPlc is being sold to German asset manager IKAV, according to the agreement of Sept. 1. Shell noted that the sale of its 51.8% membership interest in Aera Energy is for a total consideration of about $2 billion in cash with additional contingent payments based on future oil prices, subject to regulatory approval. However, the total transaction value was not disclosed. Being one of California’s largest oil and gas producers, Aera Energy accounts for nearly 25% of the state’s production. The sale by Exxon Mobil and Shell ends a 25-year-long partnership in California, meanwhile, it persists a streak of divestments of mature oil and gas properties by the two supermajors. Aera Energy LLC operates about 13,000 wells in the San Joaquin Valley in California, producing oil and associated gas. In 2021, Aera took out about 95,000 boe/d. Exxon Mobil’s interests in the Aera oil-production operation in California contained a 48.2% share of Aera Energy LLC and a 50% share of Aera Energy Services Co. held by Mobil California Exploration & Producing Co. Moreover, Exxon Mobil affiliates have signed a separate agreement for the sale of an associated loading facility and pipeline system. The sale effectively ends Shell’s upstream position in California. The company reported that the divestiture is valued to result in a post-tax impairment of $300 million to $400 million, subject to adjustments.

The completion of the merger between Centennial Resource Development Inc. and Colgate Energy Partners II LLC happened on Sept. 1, sealing the debut of Permian Resources Corp., which is considered the largest pure-play E&P company in the Delaware Basin. Permian Resources’ idea was to combine two successful E&P companies, creating a better, stronger, and more strategically compelling company. Centennial and Colgate announced an agreement to merge in May, denying rumors that Colgate, a privately held independent Midland-based company, had been seeking an IPO. The merger estimated Colgate at about $3.9 billion and consists of 269.3 million shares of Centennial stock, $525 million of cash, and the assumption of approximately $1.4 billion of Colgate’s outstanding net debt. Permian Resources, being the combined company, has a deep inventory of “high-quality” drilling locations on around 180,000 net acres the companies anticipate will provide more than $1 billion of free cash flow in 2023 at current strip prices, in accordance with the company release on Sept. 1.

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