Why Oasis Petroleum Is A Story Of Improving Fundamentals Wrapped In An Attractive Valuation

While Oasis Petroleum Inc. OAS's fundamentals are improving, the stock valuation appears attractive since the share price has declined due to “outsized pressure on the group in recent trading,” BMO Capital Markets’ Dan McSpirit said in a report.

McSpirit upgraded Oasis Petroleum to Outperform while raising the price target to $18.

Valuation And Fundamentals

“We once considered OAS shares as little more than torque to the oil trade, with higher oil prices needed to make competitive returns at the field and corporate levels,” the analyst wrote.

He added, however, Oasis Petroleum is now “a pure-play Bakken producer” that has improved returns in a manner that allows for “a more sustainable growth model,” and its debt-adjusted growth measures and cash-on-cash returns now appear more competitive “even when compared to certain Permian producers”

The gap between capital spending and cash flow is expected to turn positive in 2018, McSpirit mentioned. He added that the company seems to be posting among the highest recycle ratios in the group.

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Posted In: Analyst ColorLong IdeasUpgradesPrice TargetCommoditiesMarketsAnalyst RatingsMoversTrading IdeasBMO Capital MarketsDan McSpirit
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