Crestwood Equity to buy midstream unit in $1.8bn deal

January 2022 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

January 2022 Issue

In a deal that significantly enhances its competitive positioning in its core growth basins, Crestwood Equity Partners is to acquire the midstream unit of Oasis Petroleum (OAS), Oasis Midstream Partners LP, in a transaction valued at approximately $1.8bn, including the assumption of debt.

Under the terms of the definitive merger agreement, the transaction will largely be equity financed with approximately 33.8m of newly issued Crestwood common units and $160m of cash consideration.

In addition, OAS will receive $150m in cash plus an aggregate of 21.0 million common units in exchange for its 33.8 million common units held in Oasis Midstream. Oasis Midstream public unitholders will receive an aggregate of 12.9 million Crestwood common units in exchange for the 14.8 million Oasis Midstream common units outstanding.

Crestwood estimates it can capture over $20m in incremental annual cash flow over the next several years through the successful integration of the Crestwood and Oasis Midstream assets. Crestwood has also identified approximately $25m in annual cost synergies that it expects to realise shortly after close of the transaction.

Based in Houston, Texas, Crestwood is a master limited partnership that owns and operates midstream businesses in multiple shale resource plays across the US. Crestwood is engaged in the gathering, processing, treating, compression, storage and transportation of natural gas.

“The strategic combination with Oasis Midstream has strong industrial logic and perfectly aligns with our stated strategy of consolidating high quality midstream assets in our core operating areas,” said Robert G. Phillips, chair, president and chief executive of Crestwood. “Importantly, we are completing this transaction during a period when macro oil and gas fundamentals are exceptionally supportive of upstream development and there is increasing demand for midstream infrastructure and services.”

The transaction has been unanimously approved by the boards of directors of both general partners of Crestwood and Oasis Midstream.

A leading fee-based master limited partnership formed by its sponsor OAS, Oasis Midstream owns, develops and operates a diversified portfolio of midstream assets in North America that are integral to the crude oil and natural gas operations of OAS and are strategically positioned to capture volumes from other producers.

“The combination of Crestwood and Oasis Midstream creates a midstream leader well-positioned with size, scale and a diversified customer base,” said Danny Brown, chief executive of OAS and chair of Oasis Midstream. “Oasis Midstream unitholders, including OAS, are receiving compelling value in this transaction and will benefit from an ownership position in a larger combined company that will have a strong balance sheet and pay attractive distributions.”

JP Morgan Securities served as lead financial adviser, Intrepid Partners, LLC served as financial adviser and Baker Botts LLP served as legal adviser to Crestwood. Morgan Stanley & Co. LLC and Tudor, Pickering, Holt & Co. served as financial adviser to OAS and its affiliates, while Vinson & Elkins LLP served as legal adviser.

The transaction is expected to close in the first quarter of 2022, subject to customary closing conditions.

Mr Phillips concluded: “This transaction enhances our competitive position and enables Crestwood to capture substantial operational, commercial and capacity synergies as we integrate the Oasis Midstream assets into our existing operations.”

Fraser Tennant