20% Distribution Growth Through 2021, Guidance Up Again, Record Earnings, 8.6% Yield

Summary

  • The yield is 8.6%, with strong 1.19x trailing coverage, and robust distribution coverage guidance of 1.6X to 1.7X in 2019.
  • Management reaffirmed 20% annual distribution growth through 2021.
  • Management raised EBITDA guidance again to 65% growth in 2019.
  • It's -16% below analysts' lowest price target and -23% below the consensus price target.
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Looking for strong distribution growth in the high-yield space? Coupled with good trailing coverage and robust forward distribution coverage guidance? How about rising EBITDA guidance? And maybe a side of fries and a milk shake with your order?

The fact is, you can have it all with Oasis Midstream Partners LP (NASDAQ:OMP), a one-year old MLP whose management has reaffirmed its guidance for 20% annual distribution growth through 2021. (Well, maybe not the fries and milk shake, but with those rising quarterly payouts, you can even afford to add a burger or two into the mix at your local DQ.)

OMP has delivered an impressive total return of 14.81% since we first covered it on 6/19/18. Indeed, it has outperformed the benchmark Alerian MLP ETF (AMLP) and the S&P 500, which were both in the red for this time period, by a wide margin. And that's in spite of falling from just below $24 in late August, to $20.00 recently, in the wake of falling crude oil prices, and a secondary offering of 2M units in early November '18.

With its recent price decline, OMP is now significantly below analysts' lowest and consensus price targets. This seems like a "baby with the bathwater" scenario to us, with OMP 16.6% below the lowest $24.00 price target, and 23% below the $23.00 average price target:

Profile:

The parent/GP of OMP is Oasis Petroleum (OAS), which owns a 68.6% interest in OMP. There are three developments companies - "Devcos," which OMP owns varying amounts: Bighorn, Bobcat and BearTooth. OMP was founded in 2013, IPO'd in late September 2017, and is based in Houston, Texas.

OMP's assets are focused on the Williston basin, and it generates most of its revenues through 15-year, fixed-fee contracts for providing crude oil, natural gas and water-related midstream services for OAS. However, there's room

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This article was written by

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Robert Hauver, MBA, was VP of Finance for an industry-leading corporation for 18 years, and publishes SA articles under the name DoubleDividendStocks. TipRanks rates DoubleDividendStocks in the Top 25 of all financial bloggers, and Seeking Alpha rates us in the Top 5 of several categories, including Dividend Ideas, Basic Materials, and Utilities. 

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Disclosure: I am/we are long OMP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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