Oasis Petroleum Inc. Announces Quarter Ended September 30, 2014 Earnings

HOUSTON, Nov. 4, 2014 /PRNewswire/ -- Oasis Petroleum Inc. OAS ("Oasis" or the "Company") today announced financial results for the quarter ended September 30, 2014 and provided an operational update.

Highlights include:

• Increased average daily production to 45,873 barrels of oil equivalent per day ("Boepd"), a 39% increase over the third quarter of 2013 and a 5% sequential quarter increase.
• Grew Adjusted EBITDA to $238.8 million in the third quarter of 2014, an increase of $19.2 million over the third quarter of 2013. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income and net cash provided by operating activities, see "Non-GAAP Financial Measures" below.
• Invested capital expenditures ("CapEx") of $437.6 million in the third quarter of 2014.
• Completed and placed on production 66 gross (52.4 net) operated wells in the third quarter of 2014.

"We continue to test a number of things to delineate and optimize results across our extensive acreage position. We have realized some great results from our slickwater completion program, for example," said Thomas B. Nusz, Oasis' Chairman and Chief Executive Officer.  "While still in early days, results in the White unit in Indian Hills are very encouraging, including a total of seven wells completed with slickwater stimulation through the entire Bakken and Three Forks section. The single Middle Bakken well has produced nearly 37,000 barrels of oil equivalent through 25 days, which is approximately 51% over our 750 Mboe Middle Bakken type curve for the area.  The six Three Forks wells, including the lower benches, have produced on average approximately 40% better than the top end of our 600 Mboe Three Forks type curve.  Given these results, as well as positive results we are seeing with high volume proppant jobs, we continue to plan on completing over 30% of our wells in the second half of 2014 with increased intensity completions, with most of those wells coming on in the fourth quarter.  Based on our results combined with tests completed by peers, we believe the productivity gains should improve well economics and our Company's capital efficiency."

Mr. Nusz added, "We are continuing to gain a better understanding of what our large acreage position can deliver, as our drilling program has made a significant transition to full field development in the last two quarters. At the same time, we have experienced some constraints. Three main items have impacted some of our short-term operational results, but in no means impact our view of the overall quality of our asset base. We experienced production delays in the third quarter due to the interdependency of pad development operations, road restrictions, and less than expected production from lower bench Three Forks wells in North Cottonwood.  We have taken lessons learned from some of the early development work, we are adding infrastructure, and we are in a better position to forecast volumes from our drilling program with much of our delineation work now complete.  Looking forward, as we take into consideration pad cycle time and weather delays, we anticipate completing about 15 less gross operated wells than our 2014 budget, as we pushed out some completions into 2015.  With this in mind, we anticipate producing between 47,000 to 49,000 Boepd in the fourth quarter, which will result in aggregate year over year growth of approximately 35%."

Taylor Reid, Oasis' President and Chief Operating Officer added, "With the advances we have made during this transition, we are in a better position as we head into 2015 to execute our full development program and improve operational performance.  Our position in the core of the Bakken, combined with the talented people at Oasis, will enable us to continue our growth trajectory as we implement our capital plan."

Operational and Financial Update

The Company's average daily production by project area is listed in the following table:

The following table describes the Company's producing wells by project area in the Williston Basin as of September 30, 2014:

Additionally, the Company had 16 rigs running during the third quarter of 2014, and as of September 30, 2014, had an inventory of gross operated wells waiting on completion of 49 wells in West Williston and 12 wells in East Nesson.

The Company's average price per barrel of oil, without derivative settlements, was $87.17 in the third quarter of 2014, compared to $100.75 in the third quarter of 2013 and $94.48 in the second quarter of 2014. The Company's average price differential compared to NYMEX West Texas Intermediate ("WTI") crude oil index prices was 10% in the third quarter of 2014, compared to 5% in the third quarter of 2013 and 8% in the second quarter of 2014.

The Company's revenues are detailed in the following table:

The Company's operating expenses are detailed in the following table:

The sequential quarter-over-quarter increase in lease operating expenses ("LOE") per barrel of oil equivalent ("Boe") was primarily due to higher produced water volumes on wells coming on during the quarter, the operational impact of a lightning strike at one of the Company's salt water disposal locations, and higher LOE on non-operated volumes.

The increase in marketing, transportation and gathering expenses from the second quarter of 2014 to the third quarter of 2014 is primarily due to higher operated volumes flowing through third-party oil gathering pipelines in the third quarter of 2014. Currently, the Company is flowing 77% of its gross operated oil production through these gathering systems. While transporting volumes through third-party oil gathering pipelines increases marketing, transportation and gathering expenses, it improves oil price realizations by reducing transportation costs included in the Company's oil price differential for sales at the wellhead.

Production taxes as a percentage of oil and gas revenues were 10.0% in the third quarter of 2014, 9.4% in the third quarter of 2013 and 9.7% in the second quarter of 2014. The Company's production tax rate increased in the third quarter of 2014 compared to the third quarter of 2013 due to the increased weighting of production in North Dakota compared to Montana, which has lower production tax rates.

Depreciation, depletion and amortization expenses ("DD&A") totaled $107.0 million in the third quarter of 2014, $72.7 million in the third quarter of 2013 and $97.3 million in the second quarter of 2014. DD&A was $25.35 per Boe in the third quarter of 2014, $23.91 per Boe in the third quarter of 2013 and $24.48 per Boe in the second quarter of 2014.

General and administrative ("G&A") expenses totaled $23.9 million in the third quarter of 2014, $16.7 million in the third quarter of 2013 and $20.8 million in the second quarter of 2014. Of the $3.1 million sequential quarter-over-quarter increase in G&A expenses, approximately $1.9 million was due to the impact of the Company's personnel growth and associated employee compensation and approximately $0.9 million was due to the amortization of restricted stock awards and performance share units. G&A expenses were $5.67 per Boe in the third quarter of 2014, $5.50 per Boe in the third quarter of 2013 and $5.22 per Boe in the second quarter of 2014. Amortization of stock-based compensation, which is included in G&A expenses, was $6.1 million, or $1.44 per Boe, in the third quarter of 2014 as compared to $3.0 million, or $1.00 per Boe, in the third quarter of 2013 and $5.2 million, or $1.30 per Boe, in the second quarter of 2014.

The Company's derivative activities are detailed in the following table: 

Interest expense was $39.4 million for the third quarter of 2014 compared to $22.9 million for the third quarter of 2013 and $39.0 million for the second quarter of 2014. The $0.4 million increase from the second quarter of 2014 was primarily due to higher weighted average borrowings under the Company's revolving credit facility in the third quarter of 2014. Capitalized interest totaled $2.3 million for the third quarter of 2014, $1.4 million for the third quarter of 2013 and $2.3 million for the second quarter of 2014.

Income tax expense was $76.5 million for the three months ended September 30, 2014, resulting in an effective tax rate of 38.6%. The Company's income tax expense for the three months ended September 30, 2013 was recorded at 38.2% of pre-tax net income. The Company's effective tax rate is expected to continue to closely approximate the statutory rate applicable to the U.S. and the blended rate for each of the states in which the Company conducts business.

Adjusted EBITDA for the third quarter of 2014 was $238.8 million, a 9% increase over the third quarter of 2013 of $219.6 million, and a decrease of 6% from the second quarter of 2014 of $254.7 million. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income and net cash provided by operating activities, see "Non-GAAP Financial Measures" below.

For the third quarter of 2014, the Company reported net income of $121.6 million, or $1.21 per diluted share, as compared to net income of $54.5 million, or $0.59 per diluted share, for the third quarter of 2013. The Company's third quarter 2014 results were impacted by several non-cash items, including a $114.6 million non-cash mark-to-market gain on derivative instruments. Excluding these items and their tax effect, the third quarter 2014 Adjusted Net Income (non-GAAP) was $52.3 million, or $0.52 per diluted share. Excluding similar non-cash items and their tax effect, Adjusted Net Income (non-GAAP) for the third quarter of 2013 was $74.5 million, or $0.80 per diluted share. For a definition of Adjusted Net Income and a reconciliation of net income to Adjusted Net Income, see "Non-GAAP Financial Measures" below.

Capital Expenditures

The following table depicts the Company's exploration and production ("E&P") CapEx by project area and total CapEx by category:

Liquidity

On September 30, 2014, Oasis had total cash and cash equivalents of $67.2 million. As of September 30, 2014, the Company had $350.0 million of LIBOR loans and $5.2 million of outstanding letters of credit issued under its revolving credit facility, resulting in an unused borrowing base capacity of $1,144.8 million.

Update to Outlook for Operating Metrics

Oasis is updating its full year 2014 guidance on operational metrics:

Hedging Activity

As of November 4, 2014, the Company had the following outstanding commodity derivative contracts, all of which are priced off of WTI and settle monthly:

Conference Call Information

Investors, analysts and other interested parties are invited to listen to the conference call:

A recording of the conference call will be available beginning at 12:00 p.m. Central Time on the day of the call and will be available until Wednesday, November 12, 2014 by dialing:

The conference call will also be available for replay at www.oasispetroleum.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including the Company's drilling program, production, derivative instruments, capital expenditure levels and other guidance included in this press release. These statements are based on certain assumptions made by the Company based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include, but are not limited to, changes in oil and natural gas prices, weather and environmental conditions, the timing of planned capital expenditures, availability of acquisitions, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as the Company's ability to access them, the proximity to and capacity of transportation facilities, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting the Company's business and other important factors that could cause actual results to differ materially from those projected as described in the Company's reports filed with the SEC.

Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

About Oasis Petroleum Inc.

Oasis is an independent exploration and production company focused on the acquisition and development of unconventional oil and natural gas resources, primarily operating in the Williston Basin. For more information, please visit the Company's website at www.oasispetroleum.com.

Contact:

Oasis Petroleum Inc.
Matt Ultis, (281) 404-9600
Manager – Finance and Investor Relations

 

 

 

 

Non-GAAP Financial Measures

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of the Company's consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDA as earnings before interest expense, income taxes, depreciation, depletion, amortization, exploration expenses and other similar non-cash or non-recurring charges. Adjusted EBITDA is not a measure of net income or cash flows as determined by United States generally accepted accounting principles, or GAAP.

The following table presents reconciliations of the non-GAAP financial measure of Adjusted EBITDA to the GAAP financial measures of net income and net cash provided by operating activities, respectively.

Adjusted Net Income and Adjusted Diluted Earnings Per Share are supplemental non-GAAP financial measures that are used by management and external users of the Company's consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted Net Income as net income after adjusting first for (1) the impact of certain non-cash and non-recurring items, including non-cash changes in the fair value of derivative instruments, impairment of oil and gas properties, and other similar non-cash and non-recurring charges, and then (2) the non-cash and non-recurring items' impact on taxes based on the Company's effective tax rate in the same period. Adjusted Net Income is not a measure of net income as determined by GAAP. The Company defines Adjusted Diluted Earnings Per Share as Adjusted Net Income divided by diluted weighted average shares outstanding.

The following table provides reconciliations of net income (GAAP) to Adjusted Net Income (non-GAAP) and diluted earnings per share (GAAP) to Adjusted Diluted Earnings Per Share (non-GAAP):

 

SOURCE Oasis Petroleum