Oasis Petroleum (OAS)

[dan_s]

I am updating my forecast model now. First quarter results were good. Raised the low end of their production guidance. - Dan

Oasis Petroleum Inc. (OAS) announced financial results for the quarter ended March 31, 2015 and provided an operational update.

Highlights include:
•Exceeded production guidance range and increased average daily production to 50,446 barrels of oil equivalent per day ("Boepd"), an 18% increase over the first quarter of 2014 and a 1% sequential quarter increase.
•Invested capital expenditures ("CapEx") of $271.1 million in the first quarter of 2015, compared to a CapEx budget of $271.1 million.
•Completed and placed on production 23 gross (19.2 net) operated wells in the first quarter of 2015.
•Decreased lease operating expenses ("LOE") per barrel of oil equivalent ("Boe") to $8.62, a 17% decrease from the first quarter of 2014 and an 11% sequential quarter decrease.
•Reported Adjusted EBITDA of $208.9 million in the first quarter of 2015. For a definition of Adjusted EBITDA and a reconciliation of net income and net cash provided by operating activities to Adjusted EBITDA, see "Non-GAAP Financial Measures" below.
•Completed a public offering of 36.8 million shares, raising $463.1 million of net proceeds for the Company on March 9, 2015.

"Oasis exceeded production guidance of 47,000 to 49,000 Boepd in the first quarter of 2015, as new wells brought on during the first quarter exceeded production expectations with over 60% of the wells completed with high intensity stimulation," said Thomas B. Nusz, Oasis' Chairman and Chief Executive Officer. "Based on our first quarter performance, we expect to produce between 47,000 and 49,000 Boepd in the second quarter of 2015 and to produce between 46,000 and 49,000 Boepd for the full year 2015. Additionally, CapEx tracked in line with our budget, with drilling and completion capital coming in at $216.6 million, or $8.3 million below our budget. There were some timing differences on a few non-drilling and completion items, and we remain on track to spend our $705 million CapEx budget for 2015. Well costs are trending below our original 2015 estimates, as the team has driven down the cost for high intensity completions to approximately $9.0 million per well."

[dan_s]

I have updated my forecast model for OAS and it will be available for downloading from the website shortly. FYI: I need one of our "tech people" to load the Sweet 16 updates to the website for me. Eventually, I will figure out how to do this stuff myself.

I have increased my Fair Value Estimate for OAS by $1.00/share to $27.50/share, compared to First Call's Price Target of $18.25/share.

OAS is on-track to generate about $4.50 cash flow per share from operations. They have more than enough liquidity to fund this year's budget, which is designed to increase production by 5% to 6%. First quarter production came in more than 2,000 boepd above my forecast, so I think there is a good chance they exceed the top end of their production guidance.

There has been a dark cloud hanging over OAS because, prior to their recent moves to shore up the balance sheet, the company was on several lists of E&Ps that might be at risk of bankruptcy if oil prices stayed down for a long time. Plus, it is a pure play on the Bakken / Three Forks play and we all know that North Dakota oil sells at a deep discount to WTI. However, no one seemed to notice their hedges. 75% of their Q2 oil production is sold at $89.30/bbl and more than half of their 2H 2015 oil is hedged at $82.49/bbl.

OAS is going to be fine and IMO was grossly oversold.