Oasis Petroleum makes another entrance into the Public Trading Market under MLP
The current US administration is promoting the US E&P industry companies with the hope that one day, the US will not have to depend on any other country for its energy needs. Even with the current oil glut, that’s good news for US-based oil companies. Earlier this year, some E&Ps even started expanding their operations to make the most of the current energy industry climate. The move paid off when a few of these companies discovered big new oil deposits in US basins, among them Spain-based Repsol Inc. and Houston-TX-based Oil Petroleum Inc.
Oasis Petroleum (NASDAQ: OAS) is one of the largest E&P firms in the US at the moment. Oasis has plants all over the North Dakota and Montana regions. The firm started operating in 2013 and has been growing financially despite the harsh climate of the US energy industry.
So what does Oasis Petroleum do exactly? Oasis Petroleum extracts and transports both crude oil and natural gas. The firm also does its own oil and natural gas-related water treatments. Oasis Petroleum is dominant in the US Williston area mainly because it owns assets in the Williston Basin but also because it’s technologically advanced for an E&P.
Oasis Petroleum formed a master limited company known as Oasis Midstream Partners LP back in 2016. The LP was supposed to help Oasis Petroleum expand its midstream ventures. Oasis Petroleum ceded several key assets to the MLP, which began operating in the Williston Basin almost immediately after it was formed. In the twelve months ending March 31st, 2017, Oasis Midstream booked $129 million in sales revenue. The blank check company’s projections will rise over the coming years, and Oasis Petroleum wants to capitalize on this by taking Oasis Midstream public this year.
Oasis Petroleum did not disclose the number of Oasis Midstream shares it would be putting on the public market when it made the IPO announcement. However, the company stated that the Oasis Midstream placeholder amount in the SEC filing was about $100 million. Many people agree that the MLP is likely to get a whole lot more in proceeds than this amount. Oasis Midstream will list on the NYSE under the stock label OMP. Morgan Stanley, JP Morgan, Goldman Sachs, Citigroup, Deutsche Bank, Wells Fargo Securities, Credit Suisse and RBC Capital Markets will act as the underwriters on the deal.
Oasis Petroleum will remain the majority shareholder in the MLP post-IPO. The E&P firm plans to use the proceeds from the minority interest sale to expand its operations. In the last two years alone, Oasis Petroleum has increased the number of locations it drills in by an estimated 25%. With the MLP holding Oasis Petroleum’s assets and directing its energy into more Williston Basin operations, the firm could increase its EBITDA to $155 million by the end of 2017. This may be a good sign, but the IPO also has its own risk. Between 2015 and 2016, Oasis Petroleum made a net loss of about 11%, with the decrease in revenue going from $789.7 million in 2015 to $704.7 million in 2016. So long as the company cannot guarantee increased production in the coming months, the risk of continuing losses remains.