A key factor that will facilitate Oasis Petroleum’s (OAS) production growth in 2017 and 2018 is its expanding takeaway capacity. Bakken crude has historically traded at a discount to WTI (West Texas Intermediate), as its production has been overwhelmed by existing takeaway capacity. In its 10-K annual report, Oasis noted that its price has been $5 per barrel lower than WTI’s since 3Q15. However, with the addition of new takeaway capacity, Bakken producers could fetch better prices for their production volumes.
The image on the right shows that production in the Williston Basin has increased with increased takeaway capacity since 2010. The chart on the left shows that Oasis expects an addition of 470 Mboepd (thousand barrels of oil equivalent per day) in 2017. In its 10-K report, the company noted that it expects price differentials to improve if the Dakota Access Pipeline is completed and put in service, even as takeaway capacity in the Williston Basin increases by over 500,000 barrels of oil per day. The Dakota Access Pipeline project, led by Energy Transfer Partners (ETP), was blocked by the Obama administration but has been given the green light by President Trump. The pipeline started shipping in early June.