Crestwood Equity Partners: (NYSE: CEQP) becomes much bigger. Master Limited Partnership (MLP) acquires a competitor Oasis Midstream Partners: (NASDAQ: OMP) In a $ 1.8 billion deal. The combination will create a $ 7 billion medium-sized cash flow company, while significantly increasing its cash flow. It will give him fuel for his already large growth payment of dividends.

Here’s a closer look at the deal – what it means Stock of high-yield dividends.

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Drills in the deal

Crestwood Equity Partners acquires Oasis Midstream Partners in cash: shares. In total, it pays $ 160 million in cash, issues $ 33.8 million of its total units, and borrows $ 660 million to acquire Oasis Midstream Partners. All cash goes oil և gas producer Oasis Petroleum: (NASDAQ: OAS)With 21 million units, Oasis Midstream’s 33.8 million shares դիմաց owned by its general partner MLPs. At the same time, Crestwood is issuing total equity balance to its public shareholders for 14.8 million units.

The combination will significantly increase Crestwood’s position in its main Williston և Delaware basins. It will create the first three medium-flow operators in the Williston Basin, tripling its processing capacity. It will also expand its oil and water collection system in the Delaware Basin.

The deal will also significantly increase Crestwood’s revenue and cash flow. It will increase its adjusted profit for 2021 to interest, taxes, depreciation and amortization (EBITDA:) By 37%, its distributed cash flows by 51%, and free cash flows by 38%.

Dividend moving needle transaction

Greater cash flow will put Crestwood’s already solid high returns on a stronger footing. The company estimates that it will generate enough cash to pay more than twice as much next year. Moreover, it expects its leverage ratio to be 3.5 times lower than its debt to EBITDA next year. These are conservative levels for a mid-stream company.

That’s why Crestwood plans to accelerate its return on investment strategy. It expects to increase its distribution by 5% when it closes the deal, which is due to take place early next year. In addition, the deal should allow the company to return more capital to investors through its $ 175 million repurchase the program.

Merger, meanwhile, provides more long-term growth potential. Crestwood thinks it could save about $ 45 million in trade costs in the coming years. It found $ 25 million in cost savings to attract next year due to overlapping operations և service cuts և eliminating double total և administrative costs. MLP also expects to raise $ 20 million in annual cash flow by integrating the two Williston Basin systems by physically connecting them.

The new growth strategy is in the spotlight

Crestwood is pulling out of a multi-year expansion plan that has invested $ 1 billion to expand its footprint in the Delaware, Williston & Powder River basins. However, as oil and gas producers such as Oasis have run into financial difficulties in recent years due to instability in the oil market, the industry is not increasing its production these days. As a result, Crestwood has significantly reduced its growing capital expenditures. This raises some questions about its prospects for further growth.

With this deal, it becomes clear that Crestwood intends to be a unifier in the middle stream. It believes that the consolidation of the middle stream is necessary for capacity optimization, cost savings and long-term returns for investors. By merging with Oasis Midstream, it has greater financial flexibility to pursue additional merger opportunities.

The M&A started to heat up in the mid-range. APA:– supports Altus Midstream: (NASDAQ: ALTM) has recently partnered with privately held EagleClaw to establish a leading integrated medium flow company in the Perm Basin. At the same time, Brookfield Infrastructure Partners: (NYSE: BIP)(NYSE: BIPC) won the competition war Inter pipeline. Other energy companies currently control several mid-range MLPs, many more in private hands, making them excellent candidates for merging with Crestwood և other plaintiffs. Future deals can give buyers more fuel to increase their dividends.

Ideal combination

Oasis Midstream inspects all Crestwood Equity Partners boxes. It raises its position in the two main pools, while significantly increasing its revenues and cash flows. Moreover, the company will maintain a strong financial profile, giving it fuel to increase its high-yield dividend. The deal also envisions future growth, giving it the scale to be unifying in the industry.

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