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Oasis (OAS) Stock Loses 4.4% Despite Beating on Q2 Earnings

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Shares of Oasis Petroleum Inc. OAS have declined 4.4% since its second-quarter 2020 earnings announcement on Aug 5. Even though the upstream industry player reported a strong bottom line, investors were spooked by its lower-than-anticipated quarterly production. The company also has a weak balance sheet, burdened with high debt.

This Houston, TX-based company delivered June-quarter adjusted net earnings per share (EPS) of 23 cents, attributable to lower lease operating and depreciation expenses. Meanwhile, the Zacks Consensus Estimate was of a loss of 6 cents per share. Moreover, the bottom line improved from the year-ago earnings of 3 cents a share.

The company’s total operating revenues of $166.35 million missed the Zacks Consensus Estimate of $245 million on worse-than-expected production and soft commodity price realizations. Precisely, this energy player’s output of 54.11 thousand oil-equivalent barrels per day (MBOE/d) lagged the Zacks Consensus Estimate of 59.14 MBOE/d. Moreover, the top line fell from the year-ago figure of $529.41 million due to bleak production scenario.

Production & Price Realizations

Total production (comprising 67.3% oil) declined 36% from the year-ago level to 54.11 MBOE/d. While oil volume came in at 36.4 thousand barrels per day (down 40.5% year over year), natural gas totaled106,104 thousand cubic feet per day (down 23.9%).

The average realized crude oil price during the second quarter was $24.45 per barrel, reflecting a 58.5% decrease from the prior-year realization of $58.87. Moreover, the average realized natural gas price was $1.32 per thousand cubic feet, down 42.4% from the year-earlier period.

Oasis Petroleum Inc. Price, Consensus and EPS Surprise

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

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

Total Expenses

Total operating expenses in the quarter plummeted to $137.7 million from the year-ago quarter’s $425.8 million. This was mainly on account of decreased depreciation expenses, which came in at $33.1 million compared with the year-ago figure of $177.4 million. Moreover, purchased oil and gas expenses of $33.2 million declined from $109.7 million in the corresponding quarter of last year.

The company’s lease operating expenses also fell to $6.01 per barrel of oil equivalent (Boe) from the year-ago figure of $7.32 per Boe.

Financial Position

Capital spending (before acquisitions) totaled $41.5 million in the quarter. Oasis Petroleum recorded $47.9 million in net cash flow used in operations.

As of Jun 30, this Bakken-focused operator had $77.4 million in cash and cash equivalents. The company had long-term debt of $2.76 billion.

Guidance

For the second half of 2020, Oasis Petroleum estimates its E&P capex in the $60-$75 million range. The companytrimmed its current-year E&P capex outlook by 54-58% from its February 2020 guidance to the $248-$263 million band.

Oasis Petroleum projects its Midstream capex outlook for the second half of this year between $5 million and $10 million. The company further anticipates its 2020 Midstream capex view in the band of $36-$40 million with roughly 25% attributable to Oasis.

Further, the company’s third and fourth-quarter oil output is anticipated to improve almost 13% to 40-42 thousand barrels of oil per day from the second-quarter levels.

Based on its revised 2020 plan, Oasis Petroleum expects to generate free cash flow.

Zacks Rank & Key Picks

Oasis Petroleum has a Zacks Rank #3 (Hold), currently. Some better-ranked players in the energy space are Murphy USA Inc. MUSA, CNOOC Limited CEO and SilverBow Resources Inc. SBOW, each presently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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