Oil and gas pipeline operator Crestwood Equity Partners LP (CEQP.N) will buy Oasis Petroleum Inc’s (OAS.O) midstream unit (OMP.O) in a $1.8 billion deal to expand its footprint in U.S. shale basins.
The cash-and-stock deal comes as oil and gas prices have touched multi-year highs, boosting shareholders’ confidence in the sector and encouraging mergers.
“As the commodity price outlook remains favorable for an acceleration of activity across the basin, this expanded footprint positions Crestwood to more aggressively pursue third party volumes,” the company said in its statement, referring to the Williston basin in North Dakota.
Last week, Altus Midstream Co announced a merge with BCP Raptor, a holding company for pipeline assets in the Permian Basin, with the combined entity to be valued at $9 billion, inclusive of debt.
Crestwood estimates it can capture over $20 million in incremental annual cash flow over the next several years from the Oasis deal and identified about $25 million in annual cost savings shortly after the transaction closes in 2022.
Crestwood also said on Tuesday it expects to increase its distribution to $2.62 per unit annually, an about 5% increase year-over-year, after the deal closes.
Oasis Petroleum will receive $150 million in cash and an aggregate of 21 million units in exchange for 33.8 million units held in its midstream company. It will also receive a $10 million cash payment for its ownership of the General Partner interest of Oasis Midstream.
Shareholders of Oasis Midstream, which had an outstanding debt of about $660 million as of Sept. 30, will receive an aggregate of 12.9 million Crestwood units in exchange for 14.8 million shares held.
The enterprise value for the combined companies will be about $7 billion.
Unitholders of Oasis Midstream will own about 35% of Crestwood’s units, of which, about 22% will be owned by Oasis Petroleum.