Oasis Midstream Partners LP is a growth-oriented, fee-based master limited
partnership formed by its sponsor, Oasis Petroleum Inc. (NYSE: OAS) (“Oasis
Petroleum”), to own, develop, operate and acquire a diversified portfolio
of midstream assets in North America that are integral to the oil and natural
gas operations of Oasis Petroleum and are strategically positioned to capture
volumes from other producers. Our current midstream operations are performed
exclusively within the Williston Basin, one of the most prolific crude oil producing
basins in North America. We expect to grow acquisitively through accretive,
dropdown acquisitions, as well as organically as Oasis Petroleum continues to
develop its acreage. Additionally, we expect to grow by offering our services
to third parties and through acquisitions of midstream assets from third parties.
Through our entry into an Omnibus Agreement (as defined below), Oasis Petroleum
has also granted us a right of first offer (“ROFO”), which converts
into a right of first refusal (“ROFR”) from any successor upon a
change of control of Oasis Petroleum with respect to its retained interests
in each of our three development companies (the “DevCos”) and any
other midstream assets that Oasis Petroleum or any successor to Oasis Petroleum
builds with respect to its current acreage and elects to sell in the future.
We operate in two primary areas with developed midstream infrastructure, both
of which are supported by significant acreage dedications from Oasis Petroleum.
In Wild Basin, Oasis Petroleum has dedicated to us approximately 65,000 acres,
of which approximately 29,000 acres are within Oasis Petroleum’s current
gross operated acreage position, and in which we have the right to provide oil,
gas and water services to support Oasis Petroleum’s existing and future
production. Outside of the Wild Basin, Oasis Petroleum has dedicated to us approximately
581,000 acres for produced and flowback water services, of which approximately
299,000 acres are within Oasis Petroleum’s current gross operated acreage.
In addition, Oasis Petroleum has dedicated to us approximately 364,000 acres
for freshwater services, of which approximately 203,000 are within Oasis Petroleum’s
current gross operated acreage.
We generate substantially all of our revenues through long-term, fee-based contractual
arrangements with wholly owned subsidiaries of Oasis Petroleum as described
below, which minimize our direct exposure to commodity prices. Furthermore,
we generally do not take ownership of the crude oil or natural gas that we handle
for our customers, including Oasis Petroleum. We believe our contractual arrangements
will provide us with stable and predictable cash flows over the long-term. We
have entered into 15-year, fixed-fee contracts for natural gas services (gathering,
compression, processing and gas lift), crude oil services (gathering, stabilization,
blending and storage), produced and flowback water services (gathering and disposal)
and freshwater services (fracwater and flushwater distribution) with Oasis Petroleum
and Oasis Midstream Services LLC (“OMS”). OMS is a wholly owned
subsidiary of OMS Holdings LLC (“OMS Holdings”), which is the managing
member of our general partner, OMP GP LLC (“General Partner”) and
a wholly owned subsidiary of Oasis Petroleum. We are also a party to the long-term,
Federal Energy Regulatory Commission (“FERC”) regulated transportation
services agreement governing the transportation of crude oil via pipeline from
the Wild Basin area to Johnson’s Corner, which OMS previously entered
into with Oasis Petroleum Marketing LLC (“OPM”), a wholly owned
subsidiary of Oasis Petroleum. This agreement is renewable at OPM’s option.
Our Strategic Affiliation with Oasis Petroleum. We believe that, as a result
of owning a 90% controlling interest in our General Partner, which owns all
of our incentive distribution rights (“IDRs”), its ownership of
68.6% of our outstanding units and its significant retained interest in two
of the DevCos, Oasis Petroleum is incentivized to promote and support our growth
plan and to pursue projects that enhance the overall value of our business as
well as its retained interests in two of the DevCos. We believe our assets are
highly efficient, with demonstrated high rates of availability and operational
reliability designed to withstand harsh winter conditions, and can be operated
at what we consider to be relatively low costs. Additionally, our assets are
strategically located within Oasis Petroleum’s acreage position and are
in close proximity to other operators in the Williston Basin, positioning us
as a leading provider of midstream services in the Williston Basin.
Dropdown Acquisition Opportunities. Oasis Petroleum retains a substantial ownership
interest in our midstream systems through its 90% economic interest in Bobcat
DevCo and 60% economic interest in Beartooth DevCo. In addition, we believe
Oasis Petroleum will continue to build crude oil, natural gas and water-related
midstream assets to support its production growth. We anticipate that we will
have the opportunity to make accretive acquisitions from Oasis Petroleum by
acquiring the remaining equity interests in both of our DevCos. In addition,
we anticipate acquiring midstream assets that Oasis Petroleum elects to develop
and sell to support its production activities in the Williston Basin and the
Delaware Basin.
The Development of the Williston Basin is a Strategic Priority for Oasis Petroleum.
Oasis Petroleum owns and operates an extensive and contiguous land position
with a large inventory of leasehold acreage in the core areas of the Williston
Basin, of which approximately 95% was held by production as of December 31,
2017. We believe we will directly benefit from Oasis Petroleum’s continued
development of its Williston Basin acreage, where it serves as operator with
respect to substantially all of its net wells.
Strategically Located Midstream Assets. Our midstream assets are strategically
located in the Williston Basin and provide critical midstream infrastructure
to Oasis Petroleum in a cost-efficient manner. We believe that the strategic
location of our assets within the highly economic core of the Williston Basin,
combined with our cost-advantaged midstream service offering, will enable us
to attract volumes from third-party operators in the basin.
Demand for Midstream Infrastructure Services in the Williston Basin. The Wild
Basin area in McKenzie County, North Dakota is the primary area of focus for
Oasis Petroleum’s drilling plan given its core location within the Williston
Basin. We believe the extensive midstream infrastructure we have built and are
continuing to build in this area provide a strategic footprint in the core of
the Williston Basin and provide opportunities to connect other third-party operators.
We believe our midstream assets will be able to compete for third-party business
based on the cost-effective nature of our midstream services compared to the
current alternatives for transportation of crude oil, natural gas and water
in the Williston Basin. Additionally, due to the core location of our assets,
we believe that extensive development will occur in and around our assets in
the current commodity price environment, and future development activity will
be highly levered to any commodity price recovery.
Strategically Located Near Key Demand Centers. We believe our crude oil pipeline
to Johnson’s Corner provides a highly strategic takeaway alternative for
operators in the core of the Williston Basin. Johnson’s Corner is a receipt
point for the Dakota Access Pipeline, which has significantly improved in-basin
pricing realizations for producers since coming online.
Full-Service Operational Flexibility. In addition to our crude oil, natural
gas and water gathering capabilities, our midstream assets include crude oil
blending, stabilization and storage facility, and a mainline FERC-regulated
crude oil pipeline to the sales destination, Johnson’s Corner. In addition,
Gas Plant I is fully operational with approximately 80 MMscfpd natural gas processing
capacity and an enhanced propane recovery refrigeration unit. We are currently
constructing Gas Plant II, which will have approximately 200 MMscfpd natural
gas processing capacity, once completed, to service natural gas production from
Oasis Petroleum’s highly economic inventory. As production increases in
the Williston Basin, our interconnected system is constructed to provide optionality,
which increases our growth prospects and value proposition to potential third-party
customers.
Stable and Predictable Cash Flows. We provide substantially all of our gas gathering,
compression, processing and gas lift; crude gathering, stabilization, blending
and storage; produced and flowback water gathering and disposal; and freshwater
distribution services to Oasis Petroleum on a fixed-fee basis under 15-year
contracts. Our assets are newly constructed, leading to relatively low maintenance
capital expenditure requirements, which also enhances the stability of our cash
flows. We believe that the operating history of Oasis Petroleum and other companies
in the Williston Basin has reduced development risk and increased the predictability
of future production of new wells. This operating history, combined with the
structure of our commercial contracts, is expected to promote the generation
of stable and predictable cash flows. Based on historical performance and operating
and economic assumptions, we expect the majority of the wells within Oasis Petroleum’s
estimated proved reserves in the Williston Basin as of December 31, 2017 to
have producing lives in excess of 30 years.
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