Oasis Petroleum (OAS) Q3 Results - Nov 6

[dan_s]

HOUSTON, Nov. 5, 2019 /PRNewswire/ -- Oasis Petroleum Inc. (NYSE: OAS) ("Oasis" or the "Company") today announced financial and operating results for 3Q 2019.

Recent Highlights:

Delivered net cash provided by operating activities of $251.0 million and Adjusted EBITDA of $256.6 million in 3Q 2019. < My forecast for Q3 operating cash flow per share was $199.5 million or $0.62/share, so this is VERY GOOD NEWS.

Achieved positive free cash flow during the quarter and year to date and continue to expect to be free cash flow positive in 2019 for the E&P business.

Reduced debt under the Oasis credit facility by $125.0 million during the quarter to $406.0 million as of September 30, 2019.

LOE per Boe decreased 15.8% to $6.16 per Boe in 3Q 2019 compared to $7.32 per Boe in 2Q 2019. < I used $7.30/boe as my LOE forecast for Q4 and 2020.

Crude oil differentials remained strong at $1.30 off of NYMEX WTI in 3Q 2019.

Produced 88.7 MBoepd in 3Q 2019, which included the impact of divested volumes of approximately 330 Boepd. Volumes grew by 5% in 3Q 2019 (3% oil) as compared to 2Q 2019. < Tops my Q3 forecast of 88.5 MBoepd (71.5% crude oil).

Divested upstream assets in various packages in the Williston Basin, which resulted in approximately $41.0 million in cash proceeds. Transactions closed late in 3Q 2019.

"Oasis delivered a strong quarter across several fronts," said Thomas B. Nusz, Oasis' Chairman and Chief Executive Officer. "As expected, Williston production rebounded strongly compared to the second quarter, driven by Oasis's prolific well results and industry-leading infrastructure. In the Delaware, we reached our year-end 2019 volume target, driven by high-return wells. Efficiency is improving rapidly, with Williston well costs expected to improve to $7.2 million vs. $7.6 million by year end and Delaware cycle times continuing to fall. E&P free cash generation during the quarter was supplemented by strong asset sale proceeds, both of which led to a meaningful reduction in net debt. We remain focused on driving additional operating efficiencies and reducing leverage further."

Financial and Operational Update and Outlook

Production averaged 80.2 MBoepd (Williston Basin) and 8.5 MBoepd (Delaware Basin) in 3Q 2019.

Oasis expects 4Q 2019 production to range between 83.3 to 85.3 MBoepd (70.5% oil cut), which is in line with the Company's pre-divestiture prior midpoint guidance of 86 MBoepd (71% oil cut).

The anticipated impact from divested volumes in 2020 is approximately 1.1 MBoepd.

In 3Q 2019, Oasis dropped down to one OWS crew and reduced company-wide headcount by 87, representing 12% of the workforce, resulting in a one-time G&A charge of approximately $2.4 million. The Company now expects 2019 G&A to range between $125 to $131 million, excluding $20 million of litigation contingency expenses, and the run-rate impact of the reduced headcount to be approximately $10 million. Oasis continues to focus on cost control measures across its businesses.

CapEx in 3Q 2019 of $187 million consisted of $148 million of E&P and other (including $3 million of capitalized interest), $37 million of consolidated midstream and $3 million of acquisitions. The Company's 2019 E&P and other CapEx guidance remains unchanged from the August range of $620 to $640 million, which excludes capitalized interest charges of approximately $12 million. Total 2019 midstream CapEx is now expected to be $212 to $222 million, which is below the August guidance range of $219 to $230 million.

[dan_s]

I have updated my forecast/valuation model for OAS and it will be posted to the EPG website this afternoon. I'm now updating the OMP forecast model.

Things to consider for OAS:
> The company is now generating free cash flow from operations and they are on-track to increase production by 6% YOY, net of asset sales.
> Proceeds from asset sales have also improved the balance sheet.
> Operating cash flow of $838 million in 2019 is all but locked in by hedges at this point. Compares to their E&P capex spending budget of $620 to $640 million.
> OAS is trading just over 1X operating cash flow per share. A valuation this low is only justified for companies heading to Chapter 11. OAS has plenty of liquidity to survive and continue growing. Read the note below.
> First Call's target price is $4.79, which only makes sense to me if you believe WTI will average $50/bbl in 2020.

Liquidity and Balance Sheet

As of September 30, 2019, Oasis had cash and cash equivalents of $19.4 million, total elected commitments under the Oasis credit facility of $1,350.0 million and total elected commitments under the OMP credit facility of $575.0 million. In addition, Oasis had $406.0 million of borrowings and $14.0 million of outstanding letters of credit issued under the Oasis credit facility and $431.0 million of borrowings and $8.2 million of outstanding letters of credit under the OMP credit facility, resulting in a total unused borrowing capacity of $1,065.8 million for both revolving credit facilities as of September 30, 2019.

On November 4, 2019, Oasis completed its fall redetermination of its borrowing base under the Oasis credit facility. As a result, Oasis's borrowing base decreased to $1,300.0 million. The next redetermination is scheduled for April 1, 2020. Additionally, Oasis entered into an amendment to the Oasis credit facility, which decreased the aggregate elected commitment to $1,100.0 million.