Oasis Petroleum: Breakeven Cash Flow Long Term At $66 WTI Oil, Probable $150 Million Cash Deficit In 2015
Oasis Petroleum: Breakeven Cash Flow Long Term At $66 WTI Oil, Probable $150 Million Cash Deficit In 2015
- Oasis is looking at a $150 million cash deficit in 2015 with $50 per barrel WTI oil.
- Longer term, it should be able to maintain production and reach breakeven cash flow with $66 per barrel WTI oil.
- Liquidity is sufficient to handle lower oil prices for a while.
- However, if Oasis wants to maintain 2015 production levels going forward, it faces a $230 million cash deficit at $50 per barrel WTI oil.
- $90 per barrel WTI oil would result in positive cash flow of $344 million though.
Oasis Petroleum Is One Of The Few Activist Targets In Oil & Gas
- Oasis has been one of the worst performing oil and gas names in the space.
- And it’s attracted the interest of an activist investor.
- But it appears that investing in oil and gas names is still akin to trying to catch the proverbial falling knife.
- Oasis is bound to adjust 2015 capex budget downwards.
- The company expects to be slightly cash flow negative in 2015.
- Hedges provide significant revenue protection for 2015 and will help avoid possible breach of EBITDAX/interest coverage covenant.
Oasis Petroleum - Leverage, Capital Intensive Production And Losses Create Little Appeal
- Oasis Petroleum cuts back on its 2015 capital expenditures, like the rest of the energy complex.
- Shares are quite risky however, given the smaller scale of the business, high leverage, and capital-intensive production, as well as current losses.
- For these reasons, I shun the shares despite the dramatic move seen in the share price.
- After three months of a deep consistent decline, the exploration & production sector finally had a significant surge in the market this week as oil prices started to stabilize.
- Sometimes the best time to invest is when there is "blood in the streets". The E&P sector certainly qualifies. Encouragingly insiders are also increasing their purchases in this space recently.
- One stock with recent insider activity is Bakken play Oasis Petroleum. Why I believe this energy concern will be a long term winner for patient investors is detailed below.
Bakken Update: Poor SW Williams County Results Have Caused Oasis To Move Rigs
- Southwest Williams County may not be economic at today's oil price, adversely affecting the operators.
- The lower oil price caused Oasis to cut 2015 Capex and move rigs to Indian Hills Field.
- Oasis wells have underperformed both EOG and STO in SW Williams.
- Oasis may have more exposure to reserve writedowns given its acreage position.
Bakken Update: The Majority Of Oasis' Acreage Isn't Economic At Today's Oil Price
- OPEC's failure to cut production could push Bakken light realized prices below economic levels in the majority of Oasis acreage.
- The influx of oil may widen the Bakken/WTI differentials, decreasing realized prices further.
- We expect Oasis may cut 2015 cap-ex and move rigs to its core acreage.
- Oasis Petroleum will remain profitable even at low oil prices.
- OAS has 75% of their remaining oil this year and 50% of next year's production hedged.
- Operating margin will be about 41.8% in 4th quarter even if oil is at $80 a barrel.
Recent Carnage In The E&P Sector Makes Oasis Petroleum A Great Buy
- The recent fall in oil prices has substantially lowered Oasis Petroleum's stock price, creating an attractive entry point.
- Strong double-digit production growth, coupled with lower well completion costs should eventually lead to valuation expansion.
- Returning to slickwater fracking will help lower well costs while boosting productivity, keeping the growth story alive.
- Bakken/Three Forks takeaway capacity will double in roughly three years, compensating for the drop in oil prices as Oasis narrows its pricing differential.
- As Oasis explores the lower benches of the Three Forks, it will uncover plenty of new drilling locations.
Oasis Petroleum Getting Less Than Its Full Due
- New completion techniques are improving well economics and may upgrade the sentiment on Oasis's so-called "fringe" acreage.
- Downspacing and lower Three Forks tests due in late 2014/early 2015 could offer additional upside, as could management's willingness to add acreage outside the Bakken.
- Oasis looks like a name worth considering as a relative value call in the Bakken.
Bakken E&P Oasis Petroleum May Be A Good Buy On This Dip
- OAS has 507,000 net acres in the prolific Bakken play.
- Recent completion technique improvements have seen OAS get about a +35% improvement in IP rates. This should pump future production numbers up.
- After a -20%+ drop in stock price, OAS is a buy with good fundamentals and positive geopolitical events for oil.
- Read further to see more details in what may be a great long-term trade.
Rosetta Resources And Oasis Petroleum Are 2 Growth Explorers And Producers With Bright Futures
- Both ROSE and OAS are strong long term good growers.
- The Ukraine troubles and the Iraq troubles could both act to push oil prices upward.
- Higher oil prices would strengthen both companies financially. Higher oil prices would encourage them both to produce more oil faster (possibly increase growth).
- These two stocks could be short squeezed upward by momentum/HFT traders on oil supply problems. High short interest for both stocks would multiply this effect.
- The ability of the company to replace its reserves should allow it to continue growth in its revenues as well as earnings.
- Oasis has been able to decrease the cost per well, which should result in increased gross margins.
- Growing sales and earnings should result in continued upward momentum in the stock price over the next few months.
Oasis Petroleum: Cheap Bakken Growth Play And Possible Buyout Candidate
- Oasis Petroleum is down some 15% from its highs late last year on a weather-related earnings disappointment.
- This is a good entry point to accumulate shares, as the company is fairly cheap given its growth prospects.
- Oasis has been also rumored to be a buyout candidate, could soon join the S&P 500, and reports earnings after the bell today.
Oasis Petroleum Offers A Familiar Story In The Bakken
Mon, Jan. 12, 10:59 AM
- Oasis Petroleum (OAS -8.8%) CEO Tommy Nusz says he is "happy to have" hedge fund SPO Partners as its largest shareholder, after John Scully's fund bought 2.1M OAS shares across three separate transactions on Jan. 7, 8 and 9.
- SPO raised its stake in OAS to 11.9% from 9.6% to become the largest shareholder with ~11.5M shares; Paulson & Co. is the second-largest OAS shareholder, with ~9.9M shares.
Mon, Jan. 5, 3:42 PM
- Add Oasis Petroleum (OAS -9.5%) and Southwestern Energy (SWN -3.5%) to the long list of today's energy-related downgrades, as Susquehanna cuts shares to Neutral from Positive while lowering its oil price assumptions for 2015-16 to $60-$70/bbl from its earlier range of $77-$85 as well as its long-term price assumption to $75/bbl.
- For OAS, "leverage metrics expand significantly based on our new oil price assumptions," the firm writes, and for SWN, the prospects of completing a ~$2B equity deal in a low gas price environment is likely to be a significant headwind.
- Most of SWN's near-term growth is coming from the northeast Marcellus Shale, where "wider basis differentials are limiting the company's cash flow growth," Susquehanna says.
Dec. 8, 2014, 3:37 PM
- Energy stocks are hammered again as oil prices tumble to fresh five-year lows, and Oasis Petroleum (OAS -16.1%), Emerald Oil (EOX -12.7%), Cobalt International Energy (CIE -10.1%) and Canadian Natural Resource (CNQ -4.8%) are slammed more than most as they suffered analyst downgrades today.
- SunTrust's Ryan Otaman cuts OAS and EOX to Neutral from Buy to account for their large debt loads, while Citi's Robert Morris lowers CIE and CNQ to Neutral from Buy.
- However, Morris thinks at least some stocks warrant upgrades after precipitous declines, raising Antero Resources (AR -9.1%), Apache (APA -6.1%) and Newfield Exploration (NFX -8.3%) even while acknowledging they probably will not bottom until oil does - a common view among analysts such as Raymond James' Marshall Adkins, who writes that "trying to figure out appropriate oilfield service valuations under a collapsing oil price environments is an exercise in futility."
Nov. 28, 2014, 12:45 PM
Nov. 28, 2014, 10:28 AM
- Ladenburg Thalman throws in the towel on Oasis Petroleum (OAS -30%), Denbury Resources (DNR -14.9%), Resolute Energy (REN -18.3%) following OPEC's decision yesterday to hold production levels and the resulting tumble in crude oil, with WTI crude -6.4% to $69.95 per barrel.
- Some others: Bonanza Creek (BCEI -21.5%), Northern Oil & Gas (NOG -16.2%), Warren Resources (WRES -16.3%), Halcon Resources (HK -22%), Triangle Petroleum (TPLM -21%), Emerald Oil (EOX -26.4%), Kodiak Oil & Gas (KOG -19.3%).
Nov. 28, 2014, 9:17 AM| 13 Comments
Nov. 5, 2014, 2:59 PM
- Oasis Petroleum (OAS -4%) is sharply lower after Q3 earnings lag Wall Street expectations by $0.20/share.
- Q3 production rose 39% Y/Y and 5% Q/Q to 45,873 boe/day, but OAS says delays caused by bad weather and other logistical challenges kept it from expanding into its North Dakota holdings as much as it hoped, which it says will result in 15 fewer wells drilled this year than originally planned and produce 47K-49K boe/day in Q4.
- OAS would cut capital spending and limit spending to core wells if crude oil prices stay below $80/bbl for an extended time, CFO Michael Lou says in today's earnings conference call.
Oct. 13, 2014, 5:38 PM
Jul. 22, 2014, 12:56 PM
- Oasis Petroleum (OAS +2.4%) is upgraded to Buy from Hold with a $65 price target, up from $54, at Global Hunter, which sees OAS as a core pure-play Bakken holding that should deliver 30%-plus production growth over the next two years that boasts an adept management team with a history of strong execution.
- The firm believes the Bakken is still undergoing an inflection point in terms of geologic understanding that should continue to drive improvements in drilling and completion techniques, yet OAS shares have underperformed other Bakken operators YTD.
Jul. 14, 2014, 2:21 PM
- Whiting Petroleum's (WLL +7.4%) $6B buyout of Kodiak Oil & Gas (KOG +5.1%) is renewing investor attention on independent energy firms with operations in the Bakken Shale, especially those significantly owned by hedge funds; Paulson & Co. is the single biggest owner of KOG stock, with just under 10% of shares outstanding as of the last filing date.
- While many of the largest Bakken producers are huge companies or parts of huge companies - Hess (NYSE:HES), EOG, Statoil (NYSE:STO), Marathon Oil (NYSE:MRO), XTO Energy (NYSE:XOM) - a few small and mid-cap independent players show hedge fund interest, CNBC's Brian Sullivan writes.
- The single biggest holder of Oasis Petroleum (OAS +0.5%) also is John Paulson's hedge fund, which owns 9.9M shares (~9.8% of shares outstanding), Jana Partners owns 16M-plus shares in QEP Resources (QEP +1.4%), and WPX Energy (WPX +1.1%) has substantial hedge fund ownership.
Jun. 30, 2014, 3:49 PM
- Oasis Petroleum's (OAS +2%) price target is raised to $64 from $56 at Topeka Capital, which also reiterates its Buy rating for OAS shares based on improving drilling from the Forman Butte, Indian Hills and Red Bank areas in the Bakken shale.
- With WTI crude oil prices on track to average $103/bbl for the quarter, the firm says it is projecting 2Q14 earnings and cash flow of $0.81 and $2.30, vs. respective consensus of $0.73 and $2.15; it also "conservatively" raises its 2015 and 2016 production outlook by 1.6% and 3.9% for the improved well performance.
Feb. 4, 2014, 12:31 PM
- Investors aren't happy with Oasis Petroleum's (OAS -5.2%) plans to increase spending significantly this year to ramp up production.
- OAS plans to spend $1.43B in 2014, a 40% Y/Y increase, to achieve its goal of producing 46K-50K boe/day from 33,904 boe/day in 2013.
- For the year, OAS expects to complete 205 Bakken wells, up from 136 last year.
Jan. 2, 2014, 2:21 PM
- Some companies that produce oil in the Bakken region are seeing weakness amid lower crude prices and concerns about safety issues of transporting crude oil following the recent rail accident in North Dakota.
- The Pipeline and Hazardous Materials Safety Administration today issued a safety alert noting the type of crude oil being transported from the Bakken region may be more flammable than traditional heavy crude oil.
- Experts have said that unusually large amounts of naturally occurring and highly flammable petroleum products such as propane and ethane may be coming out of the ground with the Bakken crude.
- Among Bakken producers: NOG -5.3%, OAS -5.2%, CLR -4.9%, KOG -4.6%, WLL -3.5%, EOX -3.1%.
Dec. 3, 2013, 5:15 PM| Comment!
Oct. 23, 2013, 12:56 PM
- Continental Resources (CLR -5.5%) falls sharply after Global Hunter downgrades shares to Neutral from Buy because the price has breached the firm’s $120 target.
- Despite CLR’s “strong production growth trajectory,” the firm is no longer urging investors to accumulate shares “due to limited estimated upside.”
- Global Hunter downgraded several other energy companies to Neutral: PDCE -4.3%, REXX -6.5%, EOX +0.2%, EPL -7.8% and OAS -0.4%.
- The firm upgraded RRC, SFY and KOG to Buy, and KOG to Accumulate.
Sep. 24, 2013, 12:26 PM
- Goldman Sachs is bullish on Bakken after it came away from a trip to North Dakota with greater confidence in its outlook that activity in the shale play should exceed expectations, citing producers and drillers who were "uniformly confident" in resource expansion, efficiency gains and potential for improving well performance in coming years.
- The firm sees production growth of 130K bbl/day to 210K bbl/day through 2016, above the average of 110K bbl/day for the six months up to this July.
- Buy-rated Oasis Petroleum (OAS +3.4%) and Continental Resources (CLR +3.3%) (earlier) are Goldman's favorites among Bakken-exposed oil E&P companies; also listed as ready to reap Bakken benefits are Northern Tier Energy (NTI +4%), Halliburton (HAL +0.7%), Enbridge (ENB +0.2%) and Canadian Pacific Railway (CP +0.6%).
OAS vs. ETF Alternatives
Oasis Petroleum Inc is an exploration and production company. The Company acquires and develops unconventional oil and natural gas resources in the Montana and North Dakota regions of the Williston Basin.
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