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Oasis Petroleum’s 3Q17 Earnings: What Happened to the Stock?

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Oasis Petroleum’s 3Q17 Earnings: What Happened to the Stock? PART 2 OF 4

Oasis Petroleum’s 3Q17 Production and Key Operational Updates

3Q17 production

Oasis Petroleum’s (OAS) production volume was more than 66 Mboepd (thousand barrels of oil equivalent per day) in 3Q17. In comparison, OAS’s 3Q16 production volume was 48.5 Mboepd while its 2Q17 production volume was 61.9 Mboepd.

Oil accounted for 78% of Oasis Petroleum’s total production in 3Q17.

Oasis Petroleum’s 3Q17 Production and Key Operational Updates

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In the 3Q17 press release, Oasis Petroleum’s management noted that its completion activity primarily drove the increase in its production volumes during the quarter.

OAS management added, “Well performance across our core acreage position, including Wild Basin, Indian Hills, and Alger, continues to deliver impressive results, and our wells remain highly economic in the current commodity price environment.”

4Q17 and fiscal 2017 production guidance

Oasis Petroleum’s production guidance for 4Q17 is 69 Mboepd–72 Mboepd. For fiscal 2017, Oasis Petroleum provided guidance of 65.1 Mboepd–65.8 Mboepd. OAS management expects to exit 2017 with production of 72 Mboepd—a 16% rise compared to exit levels in 2016.

Capex guidance

The company’s capex guidance for 2017 is $620 million. Exploration and production expenditure make up ~77% of Oasis Petroleum’s total 2017 capex. OAS noted that that the proceeds from its Oasis Midstream Partners (OMP) initial public offering of $131.6 million, and adjustments for the “Gas Plant II” assignment to OMP in the Wild basis region, caused the company to generate positive free cash flow of $39.0 million year-to-date.

Key operational updates

In mid-September, OAS launched an IPO for Oasis Midstream Partners, a master limited partnership whose assets are located in the Williston Basin. In the 3Q17 earnings conference, OAS management noted that this partnership has allowed the company to invest its capital in midstream activities “in a more efficient manner” and help manage its product takeaway capacity in the Wild Basin region.

In early November, Oasis and OMP signed an agreement. OAS decided to assign the construction of its second gas plant or “Gas Plant II” in the Wild basin to OMP. In exchange, OMP reimbursed Oasis with $66.7 million of capital spent YTD (year-to-date) by OAS through October 2017. Total expected capex on the project is ~$140 million. OMP intends to fund the remainder of the project under its $200 million revolver.

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