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Oasis (OAS) Drops Down Permian to Become Williston Pure Play

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Oasis Petroleum Inc. OAS recently announced that it is leaving the Permian Basin to focus only on the Williston Basin.The company is selling its Permian acreage for a total gross price of approximately  $481 million to an unnamed buyer. The divested assets add up to 24,000 net acres and produced 7,200 barrels of oil equivalent (Boe) per day in the first quarter.

Upon fulfilling all the customary conditions and pending approvals, the deal will be closed by the end of next month. Post the completion of the transaction, Oasis Petroleum will receive $406 million. In addition, if West Texas Intermediate oil prices average above $60 per barrel in each calendar year, the company will get up to three $25-million annual contingent payments in 2023, 2024 and 2025.

CEO Danny Brown considers the divested Permian position a valuable asset. However, given the amount of consolidation that has occurred since the asset was purchased in 2018, Oasis Petroleum’s ability to build a meaningful scale around that position became relatively constrained.

Management’s decision to quit the Permian Basin while expanding in the Williston Basin is based on aligning the company funds with its major areas of strength and strategy to establish a sustainable operation that generates considerable free cash flow for itself and its shareholders.

He further added, "The successful conclusion of our Permian divestiture process allows us to bring substantial value forward from an asset that was difficult to scale, strengthens our balance sheet from already peer-leading levels, and allows us to focus our attention on driving significant value from our world-class Williston acreage position, where we see a great upside opportunity and a long-term running room.”

Oasis Petroleum recently increased its presence in Williston by purchasing 95,000 net acres of properties from Diamondback Energy Inc. FANG for $745 million in cash. During the first quarter, the Williston assets produced roughly 27,000 boe per day of oil and gas.

The Permian divestiture prompted Oasis Petroleum to revise its volume and capex guidance for the current year. The company now expects to churn out 63,500-66,500 Boe per day in 2021 and in its fourth quarter, it envisions to produce in the 74,500-77,500 Boe per day band.

As planned incremental activity in the Permian shifts to the Williston in the second half of this year, the firm adjusted its current-year capex outlook to $205-$220 million.

Oasis Petroleum is now assessing potential development scenarios for the year 2022 and beyond with the goal of improving its operational efficiency, returns on capital and long-term free cash generation.

About Oasis Petroleum

Established in 2007, Houston, TX-based Oasis Petroleum is an independent explorer, engaged in acquiring and developing oil and natural gas resources. The company’s asset base primarily focuses on the Bakken shale oil play of the Williston Basin where it has more than 400,000 net leasehold acres.

Zacks Rank & Key Picks

Oasis Petroleum has a Zacks Rank #3 (Hold), currently.  Some better-ranked players in the energy  space are Matador Resources Company MTDR and Continental Resources, Inc. CLR, each presently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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