Partnership Equity and Distributions

On September 25, 2017, the Partnership completed its initial public offering of 7,500,000 common units representing limited partner interests in the Partnership at a price to the public of $17.00 per common unit. Additionally, on October 10, 2017, the Partnership issued an additional 1,125,000 common units representing limited partner interests in the Partnership, pursuant to the underwriters’ over-allotment option at the same price and on the same terms. The Partnership received net proceeds of $134.2 million, after deducting underwriting discounts, structuring fees and offering costs. The initial public offering was pursuant to the Partnership’s registration statement on Form S-1, as amended, filed with the SEC and declared effective on September 20, 2017.

On November 14, 2018, the Partnership completed a public offering of 2,300,000 common units (including 300,000 common units issued pursuant to the underwriters’ option to purchase additional common units), representing limited partnership interests, at a purchase price to the public of $20.00 per common unit. Net proceeds from the offering were $44.5 million, after deducting underwriting discounts, commissions and offering costs. The Partnership used the net proceeds to fund a portion of its acquisition of additional ownership interests in Bobcat DevCo and Beartooth DevCo (see Note 4 — Dropdown of DevCo Ownership Interests). This public offering was made pursuant to an effective shelf registration statement on Form S-3 filed with the SEC on October 1, 2018.

Cash distributions. On February 5, 2019, the Board of Directors of the General Partner declared the quarterly distribution for the fourth quarter of $0.4500 per unit. In addition, the General Partner will receive a cash distribution of $0.1 million attributable to its incentive distribution rights (“IDRs”) related to earnings for the fourth quarter. These distributions were be paid on February 28, 2019 to unitholders of record as of February 15, 2019.

The following table details the distributions paid in respect of each period in which the distributions were earned:



					Distributions
					Limited Partners				General Partner
Period	Record Date	Distribution Date	Distribution per limited partner unit		Common units		Subordinated units		IDRs
					(In thousands)
Q3 2017⁽¹⁾	February 16, 2018	February 26, 2018	$	0.0245	$	337	$	337	$	—
Q4 2017	February 16, 2018	February 26, 2018	0.3750		5,161		5,156		—
Q1 2018	May 17, 2018	May 29, 2018	0.3925		5,406		5,397		—
Q2 2018	August 16, 2018	August 28, 2018	0.4100		5,649		5,638		—
Q3 2018	November 9, 2018	November 27, 2018	0.4300		5,925		5,913		—
Q4 2018	February 15, 2019	February 28, 2019	0.4500		9,020		6,188		112

__________________

(1) Distribution prorated from the closing of the Partnership’s initial public offering on September 25, 2017.

Minimum quarterly distribution. The partnership agreement requires that all of the Partnership’s available cash be distributed quarterly. Under the current cash distribution policy, the Partnership intends to distribute to the holders of common units and subordinated units on a quarterly basis at least the minimum quarterly distribution of $0.3750 per unit, or $1.50 on an annualized basis, to the extent the Partnership has sufficient cash after establishment of cash reserves and payment of fees and expenses, including payments to the general partner and its affiliates.

Subordinated units. Oasis Petroleum owns all of the Partnership’s subordinated units. The partnership agreement provides that, during the subordination period, the common units have the right to receive distributions of available cash from operating surplus each quarter in an amount equal to the minimum quarterly distribution, plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units. No arrearages will accrue or be payable on the subordinated units.

When the subordination period ends, each outstanding subordinated unit will convert into one common unit and will thereafter participate pro rata with the other common units in distributions of available cash.

The subordination period will end on December 31, 2020 if each of the following tests are met:


•	for each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date, aggregate distributions from operating surplus equaled or exceeded the sum of the minimum quarterly distribution multiplied by the total number of common units and subordinated units outstanding in each quarter in each period;


•	for the same three consecutive, non-overlapping four-quarter periods, the “adjusted operating surplus” (as defined in the partnership agreement) equaled or exceeded the sum of the minimum quarterly distribution multiplied by the total number of common units and subordinated units outstanding during each quarter on a fully diluted weighted average basis; and


•	there are no arrearages in payment of the minimum quarterly distribution on the common units.

Notwithstanding the foregoing, the subordination period will automatically terminate, and all of the subordinated units will convert into common units on a one-for-one basis, on the first business day after the distribution to unitholders in respect of any quarter, beginning with the quarter ended December 31, 2018, if each of the following has occurred:


•	for one four-quarter period immediately preceding that date, aggregate distributions from operating surplus exceeded 150.0% of the minimum quarterly distribution multiplied by the total number of common units and subordinated units outstanding in each quarter in the period;

•

for the same four-quarter period, the “adjusted operating surplus” (as defined in the Partnership’s Amended and Restated Agreement of Limited Partnership) equaled or exceeded 150.0% of the sum of the minimum quarterly distribution multiplied by the total number of common and subordinated units outstanding during each quarter on a fully diluted weighted average basis, plus the related distribution on the incentive distribution rights; and


•	there are no arrearages in payment of the minimum quarterly distributions on the common units.

Incentive distribution rights. The General Partner owns all of the Partnership’s IDRs, which entitle it to receive increasing percentages, up to a maximum of 50.0% of the cash the Partnership distributes in excess of $0.4313 per unit per quarter. The maximum distribution of 50.0% does not include any distributions that Oasis Petroleum may receive on common units or subordinated units that it owns.

Percentage allocations of available cash from operating surplus. For any quarter in which the Partnership has distributed cash from operating surplus to the common and subordinated unitholders in an amount equal to the minimum distribution, the Partnership will distribute any additional available cash from operating surplus for that quarter among the unitholders and the incentive distribution rights holders in the following manner:



		Marginal Percentage Interest in Distributions
	Total Quarterly Distribution Per Unit	Unitholders		IDR Holders
Minimum Quarterly Distribution	up to $0.3750	100	%	—	%
First Target Distribution	above $0.3750 up to $0.4313	100	%	—	%
Second Target Distribution	above $0.4313 up to $0.4688	85	%	15	%
Third Target Distribution	above $0.4688 up to $0.5625	75	%	25	%
Thereafter	above $0.5625	50	%	50	%