Quarterly / Earnings Reports | Third Quarter (3Q) Update

Oasis Petroleum Details Q3 Results

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Oasis Petroleum reported its Q3 2019 results.

Recent Highlights:

• Delivered net cash provided by operating activities of $251.0 million and Adjusted EBITDA⁽¹⁾ of $256.6 million in 3Q 2019.
• 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⁽²⁾.
• 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.
• 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.
• 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

Thomas B. Nusz, Oasis' Chairman and Chief Executive Officer, said: "Oasis delivered a strong quarter across several fronts. 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.

Capital Expenditures and Completions

Oasis completed and placed on production 22 gross (16.8 net) operated wells and 3.4 net non-operated wells during 3Q 2019. Completions included 17 gross (11.9 net) operated wells in the Williston Basin and 5 gross (4.9 net) operated wells in the Delaware Basin.

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

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.

Financials

G&A totaled $52.9 million in 3Q 2019, $34.9 million in 3Q 2018 and $30.9 million in 2Q 2019. In 3Q 2019, a loss accrual was recorded in the amount of $20 million, which the Company believes is the estimable amount of loss that could potentially be incurred from the Company's pending legal proceedings based upon currently available information. Amortization of equity-based compensation, which is included in G&A, was $8.4 million, or $1.03 per barrel of oil equivalent ("Boe"), in 3Q 2019 as compared to $7.5 million, or $0.95 per Boe, in 3Q 2018 and $8.9 million, or $1.16 per Boe, in 2Q 2019. G&A for the Company's E&P segment totaled $46.4 million in 3Q 2019, $30.5 million in 3Q 2018 and $25.8 million in 2Q 2019.

MT&G, excluding non-cash valuation charges on pipeline imbalances, increased $2.6 million to $32.7 million in 3Q 2019, as compared to $30.1 million in 3Q 2018, primarily attributable to higher natural gas gathering and processing expenses due to additional well connections on the Company's midstream infrastructure and the Company's second natural gas processing plant. MT&G, excluding non-cash valuation charges on pipeline imbalances, increased $4.3 million in 3Q 2019, as compared to $28.4 million in 2Q 2019 primarily due 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.

Depreciation, depletion and amortization ("DD&A") expenses increased $47.8 million to $210.8 million in 3Q 2019 as compared to 3Q 2018. This increase was a result of increased production during 3Q 2019, coupled with an increase in the DD&A rate to $25.83 per Boe for 3Q 2019 as compared to $20.74 per Boe for 3Q 2018. The increase in the DD&A rate was primarily due to lower recoverable reserves in the Williston Basin and Delaware Basin, coupled with higher well costs in the Delaware Basin.

Interest expense was $43.9 million in 3Q 2019 as compared to $39.6 million in 3Q 2018 and $43.2 million in 2Q 2019. Capitalized interest totaled $3.0 million in 3Q 2019, $4.5 million in 3Q 2018 and $3.6 million in 2Q 2019. Cash Interest totaled $41.9 million in 3Q 2019, $39.4 million in 3Q 2018 and $42.0 million in 2Q 2019.

The Company's income tax benefit for the nine months ended September 30, 2019 was recorded at 25.0% of pre-tax loss. In 3Q 2019, the Company recorded an income tax benefit of $17.4 million, resulting in a (134.3)% effective tax rate as a percentage of its pre-tax income for the quarter. In 2Q 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.

In 3Q 2019, the Company reported net income of $20.3 million, or $0.06 per diluted share, as compared to net income of $62.3 million, or $0.20 per diluted share, in 3Q 2018. Excluding certain non-cash items and their tax effect, Adjusted Net Loss Attributable to Oasis was $16.0 million, or $0.05 per diluted share, in 3Q 2019, as compared to Adjusted Net Income Attributable to Oasis of $26.3 million, or $0.08 per diluted share, in 3Q 2018. Adjusted EBITDA in 3Q 2019 was $256.6 million, as compared to Adjusted EBITDA of $270.4 million in 3Q 2018.