Oasis Petroleum Executing Well; Williams Capital Initiates At Buy

Williams Capital is bullish on Oasis Petroleum Inc. OAS, saying the company is on a path to a production inflection point amid improving commodity prices.

The brokerage started coverage on the stock with a Buy rating $13 price target, driven by Oasis' extensive Bakken oil play position (about 485,000 net acres), experienced management team and its strong growth and execution profile.

Based on rig count assumptions for 2017 and 2018, Williams expects year-over-year production of 6.8 percent and 12.2 percent, respectively, ahead of the consensus of 2.3 percent and 6.0 percent. If oil prices approach $60/bbl, there could be upside to this estimate, as the company's drilling/completion cadence would be twice the 2016 pace.

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Williams projects 2016 production of 49.4 Mboe/d and 52.8 Mboe/d in 2017.

"We believe our production estimates will prove to be conservative," analyst Gabriele Sorbara wrote in a note.

The key catalysts include expected completion of Wild Basin area infrastructure in fall, update on the Bakken/TFS drilling/completion activity and potential joint venture/spinoff/sale of infrastructure/midstream assets.

"We believe OAS' balance sheet is in good shape, with total liquidity of approximately $1.1 billion and a net debt-to-EBITDA of 4.4x as of the end of 2Q16. While OAS has above average leverage, we believe it is manageable and the Company de-levers into 2018, based on our commodity price assumptions," Sorbara added.

At time of writing, shares of Oasis were up 1.20 percent at $9.70. Based on Friday's close, the target price of $13 implies a potential upside of 35.56 percent.

Full ratings data available on Benzinga Pro.