OMP - Oasis Midstream Partners. All the catalysts for 30% upside. [Plus a 9.8% dividend yield]

OMP - Oasis Midstream Partners. – $OMP is the oil field logistics arm of domestic oil giant Oasis Petroleum. News: Today they announced the addition of Johnson’s corner gather/processing pipe which will add a nice boost to their already 9.8% estimated payout. The pullback: Oasis had recently reduced its percentage ownership in $OMP from 77% to 69% which caused almost a 30% peak to low decline in the stock price. (It is worth noting that all of $OAS holding were redeemed in an offering at above market price. $25.60). They still have an option to sell another 400k shares at the same number for 30 days. Which is about 10 days or so in. That still leaves a delta of $2.50 from today’s price of $23.10. None of this offering was dilutive to unit holders as all proceeds purchased units back from $OAS. The next earnings announcement, which is due August 10th, will likely see a nice run into it. The high yield distribution is something many investors chase. In MLP’s such as $OMP most of the income from distributions are classified as returns of capital. As such they are completely tax deferred until the owner of the units (shares) decides to sell their position. This can provide a great benefit to buy and hold as you are effectively reducing your cost basis every quarter when the distribution comes. Many of the buyers will hold through multiple years for that reason. On balance volume: Following the nice up trend in $OMP has put us into an on balance net positive of 8.38 million shares. At or around +9.6 million we should be sitting at $26.00+ per share. I expect some resistance at 26.20 then when that breaks right back to the $30’s is where it should head. It only took +1 million shares to go from $24.60 to $28 in its last run up. There will not be much resistance to overcome in that range this time either as most of the people who are still holding above 24.60 are going to be holding long term to collect the distributions. Payout increases: $OMP has issued 8 payout increases in the last 3 years and no decreases. It is not uncommon for MLP’s to payout less when their revenue drops. $OMP has a unique relationship in having a very strong oil and gas producing parent co it has much better market resilience than some of their competitors. The Johnson’s corner project mentioned above will add to that capability and with increased revenue for $OMP. Debt Ratios: This is another bright spot for $OMP their debt-to-equity ratios is a low 2.19 in an industry where 5.xx is not uncommon. Most importantly their Interest coverage (Which is EBIT/interest) is 11.57. Which means they have no issue paying their notes with current operations. Targets: I am conservatively thinking $26.75-28.00 by the next earnings report is not unreasonable. Given the volume profile it could be a matter of 4 days or less before the $24.20 resistance is broken and that becomes support. In any case given the price of oil and gas the next year for $OMP should be very good in terms of revenue and comparative returns.

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Original Post

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apuxcom

Jul 7, 2021

-4.49%

Change % Since Posting

23.37

Price When Posted

-1.05

Change Since Posting

OMP

Oasis Midstream Partners LP - Unit

22.32

-0.02
-0.09%
Current Price

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OMP - Oasis Midstream Partners. All the catalysts for 30% upside. [Plus a 9.8% dividend yield]

bullish

OMP - Oasis Midstream Partners. – $OMP is the oil field logistics arm of domestic oil giant Oasis Petroleum.

News: Today they announced the addition of Johnson’s corner gather/processing pipe which will add a nice boost to their already 9.8% estimated payout.

The pullback: Oasis had recently reduced its percentage ownership in $OMP from 77% to 69% which caused almost a 30% peak to low decline in the stock price. (It is worth noting that all of $OAS holding were redeemed in an offering at above market price. $25.60). They still have an option to sell another 400k shares at the same number for 30 days. Which is about 10 days or so in. That still leaves a delta of $2.50 from today’s price of $23.10. None of this offering was dilutive to unit holders as all proceeds purchased units back from $OAS.

The next earnings announcement, which is due August 10th, will likely see a nice run into it. The high yield distribution is something many investors chase. In MLP’s such as $OMP most of the income from distributions are classified as returns of capital. As such they are completely tax deferred until the owner of the units (shares) decides to sell their position. This can provide a great benefit to buy and hold as you are effectively reducing your cost basis every quarter when the distribution comes. Many of the buyers will hold through multiple years for that reason.

On balance volume: Following the nice up trend in $OMP has put us into an on balance net positive of 8.38 million shares. At or around +9.6 million we should be sitting at $26.00+ per share. I expect some resistance at 26.20 then when that breaks right back to the $30’s is where it should head. It only took +1 million shares to go from $24.60 to $28 in its last run up. There will not be much resistance to overcome in that range this time either as most of the people who are still holding above 24.60 are going to be holding long term to collect the distributions.

Payout increases: $OMP has issued 8 payout increases in the last 3 years and no decreases. It is not uncommon for MLP’s to payout less when their revenue drops. $OMP has a unique relationship in having a very strong oil and gas producing parent co it has much better market resilience than some of their competitors. The Johnson’s corner project mentioned above will add to that capability and with increased revenue for $OMP.

Debt Ratios: This is another bright spot for $OMP their debt-to-equity ratios is a low 2.19 in an industry where 5.xx is not uncommon. Most importantly their Interest coverage (Which is EBIT/interest) is 11.57. Which means they have no issue paying their notes with current operations.

Targets: I am conservatively thinking $26.75-28.00 by the next earnings report is not unreasonable. Given the volume profile it could be a matter of 4 days or less before the $24.20 resistance is broken and that becomes support. In any case given the price of oil and gas the next year for $OMP should be very good in terms of revenue and comparative returns.

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read-time
3 min

28.00

Target Price

8/ 10

Confidence

1-2 Months

Timeframe
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Earnings Release
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News
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SEC Filing
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Sentiment
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Other Catalyst

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