Oasis Midstream bonds pop on Crestwood Equity merger news

Bonds backing Oasis Midstream Partners LP are trading higher this morning on news that Crestwood Equity Partners LP has agreed to buy the company.

In a statement this morning, Oasis Midstream Partners, or OMP, said it has entered into a definitive merger agreement under which Crestwood will buy the company in an equity and cash transaction valued at around $1.8 billion, including the assumption of debt. The deal is expected to expand Crestwood's midstream position in the Williston and Delaware basins.

OMP's $450 million of 8% eight-year unsecured notes, which were placed in March and have traded in the 104.5-105.5 range since September, were more than 4 points higher this morning at a fresh high of 109.375, to yield about 5.387%. As of Sept. 30, OMP had cash and cash equivalents of $29.7 million and $210 million of borrowings outstanding and $5.5 million of outstanding letters of credit under its revolver. The borrower has no other bonds outstanding.

In a separate statement, OMP declared a third-quarter cash distribution of 56 cents per unit, payable Nov. 29 and said it would continue to pay dividends until the Crestwood deal closes. That should happen in the first quarter of 2022. The company will file its third-quarter 2021 earnings by Nov. 9 and has canceled an investor call scheduled for Nov. 5 as a result of the pending transaction.

Oasis Midstream, along with its subsidiaries, provides crude oil, natural gas and water-related midstream services in North America. Issuer corporate ratings are B/B2, with a stable outlook at S&P Global Ratings and a positive outlook at Moody's. Ratings on March 22 said it expects the company's adjusted debt-to-EBITDA ratio to be in a 3x-4x range over the next two years.

Crestwood Equity Partners, which provides a range of infrastructure solutions to liquids-rich natural gas and crude oil shale plays in the U.S., is rated BB-/Ba2, with a stable outlook from Ratings and Moody's.