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Will Cost Cuts Drive Oasis Petroleum's (OAS) Q2 Earnings?

Zacks Equity Research

Oasis Petroleum Inc. OAS is set to release second-quarter 2020 results before the opening bell on Wednesday, Aug 5. The current Zacks Consensus Estimate for the to-be-reported quarter is a loss of 6 cents per unit on revenues of $245.1 million.

Let’s delve into the factors that might have influenced the leading Bakken-focused upstream operator’s performance in the June quarter. But it’s worth taking a look at Oasis Petroleum’s previous-quarter performance first.

Highlights of Q1 Earnings & Surprise History

In the last reported quarter, the Houston, TX-based energy oil and gas producer missed the consensus mark due to lower realized commodity prices. Oasis Petroleum reported adjusted loss per share of 20 cents, wider than the Zacks Consensus Estimate of a loss of 17 cents. However, the company’s quarterly revenues of $387.8 million surpassed the Zacks Consensus Estimate of $323 million on higher-than-expected production.

As far as earnings surprises are concerned, Oasis Petroleum beat the Zacks Consensus Estimate in two of the last four quarters and missed in the other two, delivering a negative earnings surprise of 75.25%, on average. This is depicted in the graph below:

Oasis Petroleum Inc. Price and EPS Surprise

Oasis Petroleum Inc. Price and EPS Surprise
Oasis Petroleum Inc. Price and EPS Surprise

Oasis Petroleum Inc. price-eps-surprise | Oasis Petroleum Inc. Quote

Trend in Estimate Revision

The Zacks Consensus Estimate for second-quarter bottom line has been revised 20% downward in the last seven days. Moreover, the estimated figure indicates 300% deterioration year over year. The Zacks Consensus Estimate for revenues, meanwhile, is $245.1 million, suggesting a 53.7% decline year over year.

Factors to Consider This Quarter

Amid the coronavirus-induced price and demand destruction for crude, Oasis Petroleum has also done a fairly admirable job at reducing costs. The company trimmed its current-year E&P capital expenditure outlook by 50-60%, indicating a decline from the previously issued guided range of $575-$595 million, with the spending for the second to fourth-quarter period projected in the $80-$140 million band. The sizeable savings are expected to have pushed Oasis Petroleum’s second-quarter earnings and cash flows higher.

Moreover, Oasis Petroleum has hedged a meaningful portion of its production at attractive prices, which should protect the company even in an extended low-price oil environment. This is because Oasis Petroleum would be able to extract decent price realizations for the barrels and preserve its cash flows.

Why a Likely Positive Surprise?

Our proven model predicts an earnings beat for Oasis Petroleum this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Oasis Petroleum has an Earnings ESP of +51.16% and a Zacks Rank #3.

Other Stocks to Consider

Oasis Petroleum is not the only energy company looking up this earnings cycle. Here are some other firms from the space you may want to consider on the basis of our model:

USA Compression Partners, LP USAC has an Earnings ESP of +25% and a Zacks Rank #1. The firm is scheduled to release earnings on Aug 4.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bonanza Creek Energy, Inc. BCEI has an Earnings ESP of +13.66% and is Zacks #1 Ranked. The firm is scheduled to release earnings on Aug 6.

NOW Inc. DNOW has an Earnings ESP of +3.04% and is Zacks #3 Ranked. The firm is scheduled to release earnings on Aug 5.

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Oasis Petroleum Inc. (OAS) : Free Stock Analysis Report
 
NOW Inc. (DNOW) : Free Stock Analysis Report
 
USA Compression Partners, LP (USAC) : Free Stock Analysis Report
 
Bonanza Creek Energy, Inc. (BCEI) : Free Stock Analysis Report
 
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