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Must-know: The essentials of Oasis Petroleum’s Bakken activity

Ingrid Pan, CFA

A must-know overview of the Bakken Shale oil play (Part 7 of 12)

(Continued from Part 6)

Oasis Petroleum and the Bakken

Oasis Petroleum is a company with substantially all of its assets in the Bakken/Williston area, and is therefore highly levered to the region.

Summary facts

Bakken Acreage: 492,000
2013 Bakken Capex: ~$1.0 billion
3Q13 Bakken Production: ~33 thousand barrels of oil equivalent per day
3Q13 Total Company Production: ~33 thousand barrels of oil equivalent per day
Percentage Bakken Production: Substantially 100%
Market Cap (12/4/13): $4.6 billion
Enterprise Value (12/4/13): $7.3 billion
3Q13 EBITDAX: $220 million
2014 Consensus EBITDAX: $1.2 billion
EV/3Q13 Annualized EBITDAX: 8.3x
EV/2014 Consensus EBITDAX: 5.9x

The company recently announced a $7 million share stock offering for gross proceeds of $315 million. Oasis noted that it will use the proceeds to repay borrowings under its revolving credit facility (to repay debt) and for general corporate purposes.

Note that in October, Oasis just completed a $1.48 billion acquisition, and in September, the company closed $63 million of acquisitions. It funded the purchases with $1.0 billion of senior notes and borrowings under its credit facility, which the recent equity offering helped pay down. The acquisitions came with 161,000 net acres, 9.3 thousand barrels of oil equivalent per day of production (as of September 2013), and 45.7 million barrels of oil equivalent of reserves. Given the acquisitions, OAS expects its 4Q13 production rate to be between 42 and 46 mboepd (thousands of barrels of oil equivalent per day), up from 33 mboepd in 3Q13.

Like other companies in the region, Oasis notes that its well costs have trended down over time. In 1H12, Oasis states that its wells were costing ~$10.5 million per well. In 3Q13, wells cost $8.0 million without the benefit of its in-house services operations (called Oasis Well Services or “OWS”), and using OWS wells cost ~$7.5 million. For 2014, the company expects that wells will cost $7.5 million without OWS and $7.3 million with OWS.

Over the past several years, large cap companies have been entering hot U.S. shale plays by buying smaller companies with a significant foothold. For instance, Petrohawk was bought by BHP Billiton for its Eagle Ford position, Atlas Energy was acquired by Chevron for its Marcellus position, and Brigham Exploration was acquired by Statoil for its Bakken position. Oasis, given its Bakken assets and relatively smaller size compared to companies like Continental Resources (enterprise value: ~$25 billion) could also be an acquisition candidate.

Continue to the next section to see what little-known sign could indicate that a company has been attracting potential buyers.

Continue to Part 8

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