Oasis Petroleum Is Substantially Undervalued

| About: Oasis Petroleum (OAS)

Shale oil and gas production continues to impress. North Dakota, driven by its huge Bakken reserve is producing 500,000 barrels a day and is poised to pass Alaska as the leading oil producing state. E&P outfits continue to announce significant increases in production and reserves in this region. One Bakken focused E&P company that is showing remarkable growth and appears substantially undervalued is Oasis Petroleum (NYSE:OAS).

7 reasons Oasis is a solid growth pick at just $30 a share:

  • Production is growing prodigiously. The company just announced production rose 16% Q/Q and over 100% Y/Y.
  • Its sells for just over 11 times forward earnings, which is a 60% discount to its historical average. Its production is 88% oil & liquids and has over 300,000 acres in the Bakken.
  • Earnings are set to explode. The company made 64 cents in FY2011, and analysts project $1.64 a share in earnings for FY2012 and $2.69 in FY2013.
  • Projected revenue growth is astounding, over 90% in FY2012 and 50% in FY2013.
  • It is significantly under analysts' price targets. The median analysts' price target by the 20 analysts is $38.50 a share.
  • Operating cash flow more than tripled from FY2010 to FY2011.
  • The reversal of the Seaway pipeline at Cushing will have positive impacts for Bakken producers when it takes effect in May. Bakken producers have generally been getting $10 a barrel less than the Cushing price because of the current glut of oil in the middle of the country.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OAS over the next 72 hours.