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Bakken Play in Spotlight: Oasis or Whiting, Which is Better?

Zacks Equity Research

While the Permian Basin is the largest hotspot for U.S. oil and gas explorers, it is suffering from pipeline crunch, resulting in discounted crude prices and hurting the producers in the region. Amid the pipeline pinch in Permian, output growth witnessed a surge in the third-largest U.S. play, Bakken, amid recovering prices and the launch of Dakota Access Pipeline in 2017. The pipeline’s service has bolstered the revival of Bakken output, with large operators counting on the Dakota Access Pipeline to send a major portion of their products to the market. In this context, we put the spotlight on two small-cap Bakken players — Oasis Petroleum OAS and Whiting Petroleum WLL. Since both the stocks currently carry a Zacks Rank #3 (Hold), it will be interesting to see which stock is better positioned in terms of fundamentals.

Oasis Beats on the Bourses

Over the past three months, both Oasis and Whiting surpassed the broader industry’s growth of 4.1%. However, Oasis’ price gain of 9.1% outshined Whiting’s growth of 5.5%.


Performance and Projections

While both Oasis and Whiting’s earnings per share lagged the Zacks Consensus Estimate in the last reported quarter (amid weak oil prices) and slipped to loss, Oasis’s bottom line also declined y/y, unlike Whiting. Considering a more comprehensive earnings history, Whiting managed to surpass estimates in three out of the trailing four quarters, whereas Oasis topped estimates in two of the last four quarters.

Notably, Oasis produced 82.5 thousand oil-equivalent barrels per day (MBOE/d) in 2018, whereas Whiting recorded an output of 129.6 MBoe/d. With Whiting already faring better in the output department, it projects y/y production growth of 11% in 2019. On the contrary, Oasis expects 2019 output to record a y/y increase of around 7% at the midpoint of the guided range of 86-91 MBOE/d. The successful completion of the Generation 4 wells and the buyout of top-tier acreage in the Williston Basin from Oasis in 2018 are likely to boost Whiting’s production prospects in 2019. 

While both the companies’ debt stands at around $2.7 billion, Whiting fares better in the cash flow parameter, which is a key metric to gauge the financial position of the firm. While Whiting generated positive FCFs of $280 million in 2018, Oasis recorded negative FCFs of $1,406.8 million.

Other Readings

Valuation

Oasis and Whiting have respective P/E ratio of 22.73 and 10.59. Clearly, Whiting is the cheaper proposition in comparison. While Whiting is underpriced, Oasis is overpriced compared with the industry’s P/E ratio of 14.5.

Liquidity

The liquidity of a company is determined through current ratio, which is a measure of the capability of a firm or industry to pay both short- and long-term obligations.

While both have lower liquidity than the industry’s 1.03, Oasis fares better with a ratio of 0.91, higher than Whiting’s 0.74. 

Leverage Ratio

While both the companies have lower leverage metrics than the industry’s level of 43%, Whiting carries a debt-to-capital ratio of 39.54%, lower than Oasis’s 41.11%. Hence, Whiting holds an edge over Oasis in this department. 

Return on Capital (ROC)

Oasis and Whiting’s ROC in the trailing 12 months is 1.23% and 3.22%, respectively, below the industrial sector’s level of 6%. However, Whiting still carries an upper hand.

Bottom Line

Our comparative analysis shows that Whiting holds an edge over Oasis in terms of valuation, leverage, ROC, output, cash flows and 2019 forecasts. On overall comparison, the scale is slightly tilted in favor of Whiting.

However, we prefer to remain on the sidelines and ask investors to hold the stocks for now as reflected in their current Zacks Rank.

Some better-ranked stocks in the same industry are Antero Resources Corporation AR and Jones Energy, Inc. JONE. While Antero Resources sports a Zacks Rank #1 (Strong Buy), Jones Energy carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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Antero Resources Corporation (AR) : Free Stock Analysis Report
 
Oasis Petroleum Inc. (OAS) : Free Stock Analysis Report
 
Jones Energy, Inc. (JONE) : Free Stock Analysis Report
 
Whiting Petroleum Corporation (WLL) : Free Stock Analysis Report
 
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