Quarterly / Earnings Reports | Second Quarter (2Q) Update | Capital Markets | Capex Increase | Capital Expenditure - 2019

Oasis Petroleum Details Q2 Results, Ops; Adds $80MM to Budget

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| Tuesday,August 06,2019

Oasis Petroleum Inc. announced financial and operating results for the second quarter of 2019.

Recent Highlights:

Delivered net cash provided by operating activities of $214.0 million and Adjusted EBITDA⁽¹⁾of $249.6 million for the second quarter of 2019.
Produced 84.5 MBoepd, an increase of 6.3% from the second quarter of 2018.
Temporary downtime in OMP's Wild Basin natural gas processing complex caused an estimated 3.0 MBoepd and $6 million in lost production and Adjusted EBITDA⁽¹⁾, respectively. July production averaged approximately 89 MBoepd.
Achieved positive free cash flow year to date and continues to expect to be free cash flow positive in 2019 for the E&P business⁽²⁾.
Delaware Basin well costs are targeted at $9.6 million per ~10,000 foot lateral well.
LOE totaled $7.32 per Boe in the second quarter of 2019, within the Company's guidance of $7.00 to $7.75per Boe.
Both total Company G&A expense and E&P Cash G&A⁽¹⁾ expense decreased 10% from the first quarter of 2019.
Improved crude oil differentials to $0.96 off of NYMEX WTI, a significant improvement from the fourth quarter of 2018.

⁽¹⁾Non-GAAP measure. See "Non-GAAP Financial Measures" below for definitions of all non-GAAP measures included herein and reconciliations to the most directly comparable measures under United States generally accepted accounting principles ("GAAP").

⁽²⁾For more detail on E&P free cash flow, see pages six and seven of the Company's investor presentation on the Company's website at www.oasispetroleum.com.

Thomas B. Nusz, Oasis' Chairman and Chief Executive Officer, said: "Oasis continues to execute its plan of harvesting Williston free cash flow to fund growth in the Delaware. Our operational expertise and deep inventory in the Williston support full field development and we are expanding outside of Wild Basin with impressive results. In the Delaware, our learnings are advancing faster than expected, resulting in faster cycle times, lowered costs, and strong well performance. We are seeing strong performance from not only the Wolfcamp A wells, but also from recent Wolfcamp B and C wells. With assets focused in two of the best oil basins in the US, a team with a proven operating track record, and strong realizations in both basins, we are structured to succeed through volatile commodity markets."

Increases 2019 Capex by $80 Million

Production averaged 78.3 MBoepd (Williston Basin) and 6.2 MBoepd (Delaware Basin). Oasis expects production in the third quarter of 2019 to range between 87 and 90 MBoepd (approximately 71.5% oil).
Oasis updated its differential guidance to between $1.50 and $3.00 per barrel in 2019 as compared to between $1.50 and $3.50 per barrel previously.
CapEx of $295 million consisted of $206 million of E&P and other, $83 million of consolidated midstream and $6 million of acquisitions. The Company now expects 2019 E&P and other CapEx to be approximately $620to $640 million. The increase primarily reflects 1) an adjustment to deflation expectations related to a lower budgeted crude oil price, 2) improved cycle times in the Delaware Basin resulting in increased spuds with the two rig program, and 3) increased non-operated spending and a number of operating wells with higher working interests.

Metric	2Q 2019 Actual	Prior Full Year Guidance	Updated Full Year Guidance
Production (MBoepd)	84.5	86.0 - 91.0	86.8 - 88.5
Differential to NYMEX WTI ($ per Bbl)	$0.96	$1.50 - $3.50	$1.50 - $3.00
Natural gas realized price (as a % of Henry Hub)	89%	N/A	85%
Lease operating expenses ($ per Boe)	$7.32	$7.00 - $7.75	$7.00 - $7.75
Marketing, transportation and gathering expenses ($ per Boe)⁽¹⁾	$3.69	$3.50 - $4.50	$3.50 - $4.50
E&P Cash G&A ($ in millions)⁽²⁾	$17.2	$77 - $81	$77 - $81
Production taxes (as a % of oil and gas revenues)	7.9%	8.1% - 8.4%	8.1% - 8.4%
CapEx ($ in millions)
E&P & Other CapEx⁽³⁾	$206.4	$540 - $560	$620 - $640
Midstream CapEx	$82.6	$195 - $219	$219 - $230
Midstream CapEx attributable to Oasis (included in Midstream CapEx above)	$70.9	$11 - $13	$15 - $16

___________________
(1)	Marketing, transportation and gathering expenses ("MT&G") exclude the effect of non-cash valuation charges on pipeline imbalances.
(2)	E&P Cash G&A represents general and administrative ("G&A") expenses less non-cash equity-based compensation expenses included in the Company's exploration and production ("E&P") segment. Total 2019 cash G&A for Oasis is estimated at $92 to $96 million, which excludes non-cash amortization of equity-based compensation of approximately $41 to $45 million. See "Non-GAAP Financial Measures" below.
(3)	Other CapEx includes well services and administrative capital and excludes estimated capitalized interest of approximately $15 million for 2019.

Midstream Update

OMP continues to successfully secure third party volumes to feed the Wild Basin natural gas processing complex. In June, the complex experienced temporary operational downtime, which was resolved in early July. The gas complex has recently been processing above 280 MMscfpd with the second natural gas plant processing at times above its 200 MMscfpd design capacity.
Oasis continues to work with third parties for gas infrastructure in the Delaware Basin and expects to provide an update in the coming months on the outcome of the selection process.
Total Midstream CapEx is expected to range between $219 to $230 million for 2019, which reflects capturing additional third party business, incremental plant costs and an acceleration of spending from 2020 to 2019. Net CapEx from Oasis attributable to its retained interest is expected to range between $15 and $16 million.

Operational and Financial Update

The following table presents select operational and financial data for the periods presented:

	Quarter Ended:
	June 30, 2019	March 31, 2019		June 30, 2018
Production data:
Crude oil (Bopd)	61,224	66,046		60,632
Natural gas (Mcfpd)	139,380	154,005		112,830
Total production (Boepd)	84,454	91,714		79,437
Percent crude oil	72.5%	72.0%		76.3%
Average sales prices:
Crude oil, without derivative settlements ($ per Bbl)	$ 58.87	$	53.52	$	65.82
Differential to NYMEX WTI ($ per Bbl)	0.96	1.30		2.07
Crude oil, with derivative settlements ($ per Bbl)⁽¹⁾	56.79	55.79		54.88
Crude oil derivative settlements - net cash receipts (payments) ($ in millions)⁽²⁾	(11.6)	13.5		(60.4)
Natural gas, without derivative settlements ($ per Mcf)⁽²⁾	2.29	3.66		3.38
Natural gas, with derivative settlements ($ per Mcf)⁽¹⁾⁽²⁾	2.43	3.65		3.43
Natural gas derivative settlements - net cash receipts (payments) ($ in millions)⁽²⁾	1.8	(0.1)		0.5
Selected financial data ($ in millions):
Revenues:
Crude oil revenues⁽³⁾	$ 328.0	$	318.1	$	363.2
Natural gas revenues	29.0	50.7		34.7
Purchased oil and gas sales⁽³⁾	109.4	148.5		128.1
Midstream revenues	51.6	48.0		29.3
Well services revenues	11.4	10.4		18.5
Total revenues	$ 529.4	$	575.7	$	573.8
Net cash provided by operating activities	214.0	174.9		303.7
Adjusted EBITDA⁽⁴⁾	249.6	269.3		241.2
Select operating expenses:
Lease operating expenses	$ 56.2	$	58.4	$	44.1
Midstream expenses	17.4	16.7		7.7
Well services expenses	8.5	7.0		13.6
MT&G⁽⁵⁾	28.4	32.7		23.1
Non-cash valuation charges	0.1	2.3		(0.2)
Purchased oil and gas expenses⁽³⁾	109.7	149.9		129.6
Production taxes	28.1	29.6		34.0
Depreciation, depletion and amortization	177.4	189.8		153.6
Total select operating expenses	$ 425.8	$	486.4	$	405.5
Select operating expenses data:
Lease operating expense ($ per Boe)	$ 7.32	$	7.08	$	6.11
MT&G ($ per Boe)⁽⁵⁾	3.69	3.96		3.19
Depreciation, depletion and amortization ($ per Boe)	23.08	23.00		21.24
E&P G&A ($ per Boe)	3.35	3.33		3.25
E&P Cash G&A ($ per Boe)⁽⁴⁾	2.24	2.30		2.28
Production taxes (as a % of oil and gas revenues)	7.9%	8.0%		8.6%

___________________
(1)	Realized prices include gains or losses on cash settlements for commodity derivatives, which do not qualify for or were not designated as hedging instruments for accounting purposes. Cash settlements represent the cumulative gains and losses on the Company's derivative instruments for the periods presented and do not include a recovery of costs that were paid to acquire or modify the derivative instruments that were settled.
(2)	Natural gas prices include the value for natural gas and natural gas liquids.
(3)	For the three and six months ended June 30, 2018, crude oil revenues, purchased oil and gas sales and purchased oil and gas expenses have been revised to correct errors related to the presentation of certain crude oil purchase and sale arrangements, which had no impact on reported net income (loss). The amounts presented herein reflect the impact of the revision.
(4)	Adjusted EBITDA and E&P Cash G&A represent non-GAAP measures. See "Non-GAAP Financial Measures" below for further information and reconciliations to the most directly comparable financial measures under GAAP.
(5)	Excludes non-cash valuation charges on pipeline imbalances.

G&A totaled $30.9 million in the second quarter of 2019, $28.2 million in the second quarter of 2018 and $34.5 million in the first quarter of 2019. Amortization of equity-based compensation, which is included in G&A, was $8.9 million, or $1.16 per barrel of oil equivalent ("Boe"), in the second quarter of 2019 as compared to $7.4 million, or $1.02 per Boe, in the second quarter of 2018 and $9.0 million, or $1.09 per Boe, in the first quarter of 2019. G&A for the Company's E&P segment totaled $25.8 million in the second quarter of 2019, $23.5 million in the second quarter of 2018 and $27.5 million in the first quarter of 2019.

MT&G, excluding non-cash valuation charges on pipeline imbalances, increased $5.3 million to $28.4 million in the second quarter of 2019, as compared to $23.1 million in the second quarter of 2018, primarily attributable to higher crude oil gathering and transportation expenses related to an increase in volumes being transported on the Dakota Access Pipeline to market the Company's equity barrels, which resulted in improved price realizations. MT&G, excluding non-cash valuation charges on pipeline imbalances, decreased $4.3 million in the second quarter of 2019, as compared to $32.7 million in the first quarter of 2019 primarily due to lower production volumes.

Interest expense was $43.2 million for the second quarter of 2019 as compared to $40.9 million for the second quarter of 2018 and $44.5 million for the first quarter of 2019. Capitalized interest totaled $3.6 million for the second quarter of 2019, $4.2 million for the second quarter of 2018 and $2.8 million for the first quarter of 2019. Cash Interest totaled $42.0 million for the second quarter of 2019, $40.5 million for the second quarter of 2018 and $42.6 million for the first quarter of 2019. For a definition of Cash Interest and a reconciliation of interest expense to Cash Interest, see "Non-GAAP Financial Measures" below.

For the three months ended June 30, 2019, the Company recorded an income tax expense of $12.2 million, resulting in a 19.3% effective tax rate as a percentage of its pre-tax income for the quarter. The Company recorded an income tax benefit of $3.7 million, resulting in a 3.3% effective tax rate as a percentage of its pre-tax loss for the three months ended March 31, 2019.

For the second quarter of 2019, the Company reported net income of $42.8 million, or $0.14 per diluted share, as compared to a net loss of $320.2 million, or $1.02 per diluted share, for the second quarter of 2018. Excluding certain non-cash items and their tax effect, Adjusted Net Income Attributable to Oasis was $11.0 million, or $0.03 per diluted share, in the second quarter of 2019, as compared to Adjusted Net Income Attributable to Oasis of $28.9 million, or $0.09 per diluted share, in the second quarter of 2018. Adjusted EBITDA for the second quarter of 2019 was $249.6 million, as compared to Adjusted EBITDA of $241.2 million for the second quarter of 2018. For definitions of Adjusted Net Income (Loss) Attributable to Oasis and Adjusted EBITDA and reconciliations to the most directly comparable GAAP measures, see "Non-GAAP Financial Measures" below.

Capital Expenditures and Completions

The following table depicts the Company's total capital expenditures ("CapEx") by category:

	1Q 2019	2Q 2019		YTD - 2Q 2019
		(In millions)
CapEx:
E&P	$ 165.7	$	202.1	$	367.8
Well services	0.1	-		0.1
Other⁽¹⁾	3.9	4.3		8.2
Total CapEx before midstream	169.7	206.4		376.1
Midstream⁽²⁾	57.1	82.6		139.7
Total CapEx before acquisitions	226.8	289.0		515.8
Acquisitions	-	5.8		5.8
Total CapEx⁽³⁾	$ 226.8	$	294.8	$	521.6

___________________
(1)	Other CapEx includes such items as administrative capital and capitalized interest.
(2)	Midstream CapEx attributable to Oasis Midstream Partners ("OMP") was $45.2 million and $70.9 million for the three months ended March 31, 2019 and June 30, 2019, respectively.
(3)	Total CapEx (including acquisitions) reflected in the table above differs from the amounts shown in the statements of cash flows in the Company's condensed consolidated financial statements because amounts reflected in the table above include changes in accrued liabilities from the previous reporting period for CapEx, while the amounts presented in the statements of cash flows is presented on a cash basis.

Oasis completed and placed on production 27 gross (20.6 net) operated wells and 0.8 net non-operated wells during the second quarter of 2019. Completions included 24 gross (17.6 net) operated wells in the Williston Basin and 3 gross (3.0 net) operated wells in the Delaware Basin. The completions cadence was back weighted during the quarter with only 2 wells completed in April.

Liquidity and Balance Sheet

As of June 30, 2019, Oasis had cash and cash equivalents of $20.3 million, total elected commitments under the Oasis credit facility of $1,350.0 million and total elected commitments under the OMP credit facility of $475.0 million. In addition, Oasis had $531.0 million of borrowings and $14.0 million of outstanding letters of credit issued under the Oasis credit facility and $408.0 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 $863.8 million for both revolving credit facilities as of June 30, 2019.

Hedging Activity

The Company's crude oil contracts will settle monthly based on the average NYMEX West Texas Intermediate crude oil index price ("NYMEX WTI") for fixed price swaps and two-way and three-way costless collars. The Company's basis swaps for crude oil will settle monthly based on the fixed basis differential from Argus WTI Houston crude oil index price ("Houston") to NYMEX WTI. The Company's natural gas contracts will settle monthly based on the average NYMEX Henry Hub natural gas index price ("NYMEX HH") for fixed price swaps.

Related Categories :

Quarterly Report Basic

Recent Highlights:

Increases 2019 Capex by $80 Million

Midstream Update

Operational and Financial Update

Capital Expenditures and Completions

Liquidity and Balance Sheet

Hedging Activity

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