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Oasis Petroleum Inc. Announces Quarter Ended September 30, 2019 Earnings

HOUSTON, Nov. 5, 2019 /PRNewswire/ -- Oasis Petroleum Inc. (OAS) ("Oasis" or the "Company") today announced financial and operating results for 3Q 2019.

Recent Highlights:

  • Delivered net cash provided by operating activities of $251.0 million and Adjusted EBITDA(1) of $256.6 million in 3Q 2019.
  • Achieved positive free cash flow during the quarter and year to date and continue to expect to be free cash flow positive in 2019 for the E&P business(2).
  • Reduced debt under the Oasis credit facility by $125.0 million during the quarter to $406.0 million as of September 30, 2019.
  • LOE per Boe decreased 15.8% to $6.16 per Boe in 3Q 2019 compared to $7.32 per Boe in 2Q 2019.
  • Crude oil differentials remained strong at $1.30 off of NYMEX WTI in 3Q 2019.
  • Produced 88.7 MBoepd in 3Q 2019, which included the impact of divested volumes of approximately 330 Boepd. Volumes grew by 5% in 3Q 2019 (3% oil) as compared to 2Q 2019.
  • Divested upstream assets in various packages in the Williston Basin, which resulted in approximately $41.0 million in cash proceeds. Transactions closed late in 3Q 2019.

 

(1) Non-GAAP measure. See "Non-GAAP Financial Measures" below for definitions of all non-GAAP measures included herein and reconciliations to the most directly comparable measures under United States generally accepted accounting principles ("GAAP").

(2) For more detail on E&P free cash flow, see pages six and seven of the Company's investor presentation on the Company's website at www.oasispetroleum.com.

"Oasis delivered a strong quarter across several fronts," said Thomas B. Nusz, Oasis' Chairman and Chief Executive Officer. "As expected, Williston production rebounded strongly compared to the second quarter, driven by Oasis's prolific well results and industry-leading infrastructure. In the Delaware, we reached our year-end 2019 volume target, driven by high-return wells. Efficiency is improving rapidly, with Williston well costs expected to improve to $7.2 million vs. $7.6 million by year end and Delaware cycle times continuing to fall. E&P free cash generation during the quarter was supplemented by strong asset sale proceeds, both of which led to a meaningful reduction in net debt. We remain focused on driving additional operating efficiencies and reducing leverage further."

Financial and Operational Update and Outlook

  • Production averaged 80.2 MBoepd (Williston Basin) and 8.5 MBoepd (Delaware Basin) in 3Q 2019.
  • Oasis expects 4Q 2019 production to range between 83.3 to 85.3 MBoepd (70.5% oil cut), which is in line with the Company's pre-divestiture prior midpoint guidance of 86 MBoepd (71% oil cut). The anticipated impact from divested volumes in 2020 is approximately 1.1 MBoepd.
  • In 3Q 2019, Oasis dropped down to one OWS crew and reduced company-wide headcount by 87, representing 12% of the workforce, resulting in a one-time G&A charge of approximately $2.4 million. The Company now expects 2019 G&A to range between $125 to $131 million, excluding $20 million of litigation contingency expenses, and the run-rate impact of the reduced headcount to be approximately $10 million. Oasis continues to focus on cost control measures across its businesses.
  • CapEx in 3Q 2019 of $187 million consisted of $148 million of E&P and other (including $3 million of capitalized interest), $37 million of consolidated midstream and $3 million of acquisitions. The Company's 2019 E&P and other CapEx guidance remains unchanged from the August range of $620 to $640 million, which excludes capitalized interest charges of approximately $12 million. Total 2019 midstream CapEx is now expected to be $212 to $222 million, which is below the August guidance range of $219 to $230 million.

The following table provides select actual metrics from 3Q 2019 and the associated guidance for 4Q 2019:

Metric


3Q 2019 Actual


4Q 2019 Guidance

Production (MBoepd)


88.7


83.3 - 85.3

Differential to NYMEX WTI ($ per Bbl)


$1.30


$3.00 - $4.00

Natural gas realized price (as a % of Henry Hub)


76%


70% - 80%

Lease operating expenses ($ per Boe)


$6.16


$6.75 - $7.50

Marketing, transportation and gathering expenses ($ per Boe)(1)


$4.01


$3.75 - $4.50

E&P Cash G&A ($ in millions)(2)


$18.1


$15.5 - $17.0

Production taxes (as a % of oil and gas revenues)


8.3%


8.2%

___________________

(1)

Marketing, transportation and gathering expenses ("MT&G") exclude the effect of non-cash valuation charges on pipeline imbalances.

(2)

E&P Cash G&A represents general and administrative ("G&A") expenses less non-cash equity-based compensation expenses and other non-cash charges included in the Company's exploration and production ("E&P") segment. Total 2019 cash G&A for Oasis is estimated at $92 to $96 million, which excludes non-cash amortization of equity-based compensation of approximately $33 to $35 million and litigation contingency expenses of $20 million. See "Non-GAAP Financial Measures" below.

The following table presents select operational and financial data for the periods presented:


3Q 2019


2Q 2019


3Q 2018

Production data:






Crude oil (Bopd)

62,816


61,224


65,870

Natural gas (Mcfpd)

155,391


139,380


117,182

Total production (Boepd)

88,715


84,454


85,400

Percent crude oil

70.8%


72.5%


77.1%

Average sales prices:






Crude oil, without derivative settlements ($ per Bbl)

$

55.12


$

58.87


$

68.33

Differential to NYMEX WTI ($ per Bbl)

1.30


0.96


1.16

Crude oil, with derivative settlements ($ per Bbl)(1)

56.03


56.79


57.50

Crude oil derivative settlements - net cash receipts (payments) ($ in millions)(2)

5.2


(11.6)


(65.6)

Natural gas, without derivative settlements ($ per Mcf)(3)

1.81


2.29


3.72

Natural gas, with derivative settlements ($ per Mcf)(1)(3)

1.95


2.43


3.76

Natural gas derivative settlements - net cash receipts ($ in millions)(2)

1.9


1.8


0.4

Selected financial data ($ in millions):






Revenues:






Crude oil revenues(4)

$

318.6


$

328.0


$

414.1

Natural gas revenues

25.9


29.0


40.1

Purchased oil and gas sales(4)

79.4


109.4


173.0

Midstream revenues

50.0


51.6


31.2

Well services revenues

8.9


11.4


16.3

Total revenues

$

482.8


$

529.4


$

674.7

Net cash provided by operating activities

251.0


214.0


230.0

Adjusted EBITDA(5)

256.6


249.6


270.4

Select operating expenses:






Lease operating expenses

$

50.3


$

56.2


$

48.5

Midstream expenses

13.0


17.4


8.7

Well services expenses

6.2


8.5


11.4

MT&G, including non-cash valuation charges

32.7


28.5


30.7

Non-cash valuation charges

(0.1)


0.1


0.6

Purchased oil and gas expenses(4)

78.7


109.7


174.3

Production taxes

28.5


28.1


38.7

Depreciation, depletion and amortization

210.8


177.4


163.0

Total select operating expenses

$

420.2


$

425.8


$

475.3

Select operating expenses data:






Lease operating expense ($ per Boe)

$

6.16


$

7.32


$

6.18

MT&G ($ per Boe)(6)

4.01


3.69


3.84

Depreciation, depletion and amortization ($ per Boe)

25.83


23.08


20.74

E&P G&A ($ per Boe)(7)

5.68


3.35


3.88

E&P Cash G&A ($ per Boe)(5)

2.22


2.24


2.97

Production taxes (as a % of oil and gas revenues)

8.3%


7.9%


8.6%













___________________

(1)

Realized prices include gains or losses on cash settlements for commodity derivatives, which do not qualify for or were not designated as hedging instruments for accounting purposes.

(2)

Cash settlements represent the cumulative gains and losses on the Company's derivative instruments for the periods presented and do not include a recovery of costs that were paid to acquire or modify the derivative instruments that were settled.

(3)

Natural gas prices include the value for natural gas and natural gas liquids.

(4)

For the three and nine months ended September 30, 2018, crude oil revenues, purchased oil and gas sales and purchased oil and gas expenses have been revised to correct errors related to the presentation of certain crude oil purchase and sale arrangements, which had no impact on reported net income (loss). The amounts presented herein reflect the impact of the revision.

(5)

Adjusted EBITDA and E&P Cash G&A represent non-GAAP measures. See "Non-GAAP Financial Measures" below for further information and reconciliations to the most directly comparable financial measures under GAAP.

(6)

Excludes non-cash valuation charges on pipeline imbalances.

(7)

Includes $20 million of litigation contingency expenses in 3Q 2019. Excluding this accrual, E&P G&A per Boe would have been $3.23 in 3Q 2019.

G&A totaled $52.9 million in 3Q 2019, $34.9 million in 3Q 2018 and $30.9 million in 2Q 2019. In 3Q 2019, a loss accrual was recorded in the amount of $20 million, which the Company believes is the estimable amount of loss that could potentially be incurred from the Company's pending legal proceedings based upon currently available information. Amortization of equity-based compensation, which is included in G&A, was $8.4 million, or $1.03 per barrel of oil equivalent ("Boe"), in 3Q 2019 as compared to $7.5 million, or $0.95 per Boe, in 3Q 2018 and $8.9 million, or $1.16 per Boe, in 2Q 2019. G&A for the Company's E&P segment totaled $46.4 million in 3Q 2019, $30.5 million in 3Q 2018 and $25.8 million in 2Q 2019.

MT&G, excluding non-cash valuation charges on pipeline imbalances, increased $2.6 million to $32.7 million in 3Q 2019, as compared to $30.1 million in 3Q 2018, primarily attributable to higher natural gas gathering and processing expenses due to additional well connections on the Company's midstream infrastructure and the Company's second natural gas processing plant. MT&G, excluding non-cash valuation charges on pipeline imbalances, increased $4.3 million in 3Q 2019, as compared to $28.4 million in 2Q 2019 primarily due to higher crude oil gathering and transportation expenses related to an increase in volumes being transported on the Dakota Access Pipeline to market the Company's equity barrels, which resulted in improved price realizations.

Depreciation, depletion and amortization ("DD&A") expenses increased $47.8 million to $210.8 million in 3Q 2019 as compared to 3Q 2018. This increase was a result of increased production during 3Q 2019, coupled with an increase in the DD&A rate to $25.83 per Boe for 3Q 2019 as compared to $20.74 per Boe for 3Q 2018. The increase in the DD&A rate was primarily due to lower recoverable reserves in the Williston Basin and Delaware Basin, coupled with higher well costs in the Delaware Basin.

Interest expense was $43.9 million in 3Q 2019 as compared to $39.6 million in 3Q 2018 and $43.2 million in 2Q 2019. Capitalized interest totaled $3.0 million in 3Q 2019, $4.5 million in 3Q 2018 and $3.6 million in 2Q 2019. Cash Interest totaled $41.9 million in 3Q 2019, $39.4 million in 3Q 2018 and $42.0 million in 2Q 2019. For a definition of Cash Interest and a reconciliation of interest expense to Cash Interest, see "Non-GAAP Financial Measures" below.

The Company's income tax benefit for the nine months ended September 30, 2019 was recorded at 25.0% of pre-tax loss. In 3Q 2019, the Company recorded an income tax benefit of $17.4 million, resulting in a (134.3)% effective tax rate as a percentage of its pre-tax income for the quarter. In 2Q 2019, the Company recorded an income tax expense of $12.2 million, resulting in a 19.3% effective tax rate as a percentage of its pre-tax income for the quarter.

In 3Q 2019, the Company reported net income of $20.3 million, or $0.06 per diluted share, as compared to net income of $62.3 million, or $0.20 per diluted share, in 3Q 2018. Excluding certain non-cash items and their tax effect, Adjusted Net Loss Attributable to Oasis was $16.0 million, or $0.05 per diluted share, in 3Q 2019, as compared to Adjusted Net Income Attributable to Oasis of $26.3 million, or $0.08 per diluted share, in 3Q 2018. Adjusted EBITDA in 3Q 2019 was $256.6 million, as compared to Adjusted EBITDA of $270.4 million in 3Q 2018. For definitions of Adjusted Net Income (Loss) Attributable to Oasis and Adjusted EBITDA and reconciliations to the most directly comparable GAAP measures, see "Non-GAAP Financial Measures" below.

Capital Expenditures and Completions

The following table depicts the Company's total capital expenditures ("CapEx") by category:


1Q 2019


2Q 2019


3Q 2019


YTD - 3Q 2019










(In millions)

CapEx:








E&P

$

165.7


$

202.1


$

143.5


$

511.3

Well services

0.1



0.2


0.3

Other(1)

3.9


4.3


4.2


12.4

Total E&P & other CapEx

169.7


206.4


147.9


524.0

Midstream(2)

57.1


82.6


36.9


176.6

Total CapEx before acquisitions

226.8


289.0


184.8


700.6

Acquisitions


5.8


2.5


8.3

Total CapEx(3)

$

226.8


$

294.8


$

187.3


$

708.9

___________________

(1)

Other CapEx includes such items as administrative capital and capitalized interest. Capitalized interest totaled $3.0 million and $9.5 million for the three and nine months ended September 30, 2019, respectively.

(2)

Midstream CapEx attributable to Oasis Midstream Partners ("OMP") was $45.2 million, $70.9 million and $27.6 million for 1Q 2019, 2Q 2019 and 3Q 2019, respectively.

(3)

Total CapEx (including acquisitions) reflected in the table above differs from the amounts shown in the statements of cash flows in the Company's condensed consolidated financial statements because amounts reflected in the table above include changes in accrued liabilities from the previous reporting period for CapEx, while the amounts presented in the statements of cash flows is presented on a cash basis.

Oasis completed and placed on production 22 gross (16.8 net) operated wells and 3.4 net non-operated wells during 3Q 2019. Completions included 17 gross (11.9 net) operated wells in the Williston Basin and 5 gross (4.9 net) operated wells in the Delaware Basin.

Liquidity and Balance Sheet

As of September 30, 2019, Oasis had cash and cash equivalents of $19.4 million, total elected commitments under the Oasis credit facility of $1,350.0 million and total elected commitments under the OMP credit facility of $575.0 million. In addition, Oasis had $406.0 million of borrowings and $14.0 million of outstanding letters of credit issued under the Oasis credit facility and $431.0 million of borrowings and $8.2 million of outstanding letters of credit under the OMP credit facility, resulting in a total unused borrowing capacity of $1,065.8 million for both revolving credit facilities as of September 30, 2019.

On November 4, 2019, Oasis completed its fall redetermination of its borrowing base under the Oasis credit facility. As a result, Oasis's borrowing base decreased to $1,300.0 million. The next redetermination is scheduled for April 1, 2020. Additionally, Oasis entered into an amendment to the Oasis credit facility, which decreased the aggregate elected commitment to $1,100.0 million.

Hedging Activity

The Company's crude oil contracts will settle monthly based on the average NYMEX West Texas Intermediate crude oil index price ("NYMEX WTI") for fixed price swaps and two-way and three-way costless collars. The Company's natural gas contracts will settle monthly based on the average NYMEX Henry Hub natural gas index price ("NYMEX HH") for fixed price swaps. As of November 4, 2019, the Company had the following outstanding commodity derivative contracts:



Three Months Ending


Six Months Ending



December 31, 2019


June 30, 2020


December 31, 2020


June 30, 2021

Crude Oil (Volume in MBopd)









Fixed Price Swaps









Volume


25.0


18.0


3.0


Price


$

57.42


$

57.68


$

58.85


$

Two-Way Collars









Volume


14.0


9.0


2.0


Floor


$

58.07


$

50.83


$

50.50


$

Ceiling


$

74.64


$

60.31


$

60.70


$

Three-Way Collars









Volume


12.0


13.0


12.0


2.0

Sub-Floor


$

40.00


$

40.00


$

40.00


$

40.00

Floor


$

51.57


$

54.13


$

52.48


$

50.00

Ceiling


$

65.40


$

64.81


$

63.86


$

64.25

Total Crude Oil Volume


51.0


40.0


17.0


2.0










Natural Gas (Volume in MMBtupd)









Fixed Price Swaps









Volume


30,000




Price


$

2.92


$


$


$

The September 2019 crude oil derivative contracts settled at a net $1.4 million received in October 2019 and will be included in the Company's 4Q 2019 derivative settlements.

Conference Call Information

Investors, analysts and other interested parties are invited to listen to the conference call:

Date:


Wednesday, November 6, 2019

Time:


10:00 a.m. Central Time

Live Webcast:


https://www.webcaster4.com/Webcast/Page/1052/32112  

Website:


www.oasispetroleum.com

Sell-side analysts with a question may use the following dial-in:

Dial-in:


888-317-6003

Intl. Dial in:


412-317-6061

Conference ID:


2649560

A recording of the conference call will be available beginning at 12:00 p.m. Central Time on the day of the call and will be available until Wednesday, November 13, 2019 by dialing:

Replay dial-in:


877-344-7529

Intl. replay:


412-317-0088

Replay code:


10136374

The conference call will also be available for replay for approximately 30 days at www.oasispetroleum.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including the Company's drilling program, production, derivative instruments, capital expenditure levels and other guidance included in this press release. These statements are based on certain assumptions made by the Company based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include, but are not limited to, changes in crude oil and natural gas prices, weather and environmental conditions, the timing of planned capital expenditures, availability of acquisitions, the ability to realize the anticipated benefits from the previously announced Delaware midstream assets assignment from Oasis to OMP, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as the Company's ability to access them, the proximity to and capacity of transportation facilities, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting the Company's business and other important factors that could cause actual results to differ materially from those projected as described in the Company's reports filed with the Securities and Exchange Commission.

Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

About Oasis Petroleum Inc.

Oasis is an independent exploration and production company focused on the acquisition and development of onshore, unconventional crude oil and natural gas resources in the United States. For more information, please visit the Company's website at www.oasispetroleum.com.

Oasis Petroleum Inc.

Condensed Consolidated Balance Sheets

(Unaudited)



September 30, 2019


December 31, 2018






(In thousands, except share data)

ASSETS




Current assets




Cash and cash equivalents

$

19,425


$

22,190

Accounts receivable, net

381,617


387,602

Inventory

36,758


33,128

Prepaid expenses

5,302


10,997

Derivative instruments

52,180


99,930

Intangible assets, net


125

Other current assets

332


183

Total current assets

495,614


554,155

Property, plant and equipment




Oil and gas properties (successful efforts method)

9,374,506


8,912,189

Other property and equipment

1,339,268


1,151,772

Less: accumulated depreciation, depletion, amortization and impairment

(3,624,164)


(3,036,852)

Total property, plant and equipment, net

7,089,610


7,027,109

Assets held for sale, net

6,700


Derivative instruments

9,729


6,945

Long-term inventory

14,395


12,260

Operating right-of-use assets

21,255


Other assets

29,674


25,673

Total assets

$

7,666,977


$

7,626,142





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities




Accounts payable

$

18,003


$

20,166

Revenues and production taxes payable

213,773


216,695

Accrued liabilities

325,445


331,651

Accrued interest payable

21,329


38,040

Derivative instruments

830


84

Advances from joint interest partners

3,649


5,140

Current operating lease liabilities

8,050


Other current liabilities

2,782


Total current liabilities

593,861


611,776

Long-term debt

2,798,859


2,735,276

Deferred income taxes 

291,215


300,055

Asset retirement obligations

55,502


52,384

Liabilities held for sale

6,700


Derivative instruments 


20

Operating lease liabilities

19,095


Other liabilities

2,084


7,751

Total liabilities

3,767,316


3,707,262

Commitments and contingencies




Stockholders' equity




Common stock, $0.01 par value: 900,000,000 shares authorized; 324,235,047 shares issued and 321,343,995 shares outstanding at September 30, 2019 and 320,469,049 shares issued and 318,377,161 shares outstanding at December 31, 2018

3,186


3,157

Treasury stock, at cost: 2,891,052 and 2,091,888 shares at September 30, 2019 and December 31, 2018, respectively

(33,650)


(29,025)

Additional paid-in capital

3,104,938


3,077,755

Retained earnings

630,852


682,689

Oasis share of stockholders' equity

3,705,326


3,734,576

Non-controlling interests

194,335


184,304

Total stockholders' equity

3,899,661


3,918,880

Total liabilities and stockholders' equity

$

7,666,977


$

7,626,142

 

Oasis Petroleum Inc.

Condensed Consolidated Statements of Operations

(Unaudited)



Three Months Ended September 30,


Nine Months Ended September 30,


2019


2018


2019


2018










(In thousands, except per share data)

Revenues








Oil and gas revenues

$

344,470


$

454,195


$

1,070,256


$

1,218,639

Purchased oil and gas sales

79,352


172,985


337,212


368,758

Midstream revenues

50,023


31,187


149,617


88,451

Well services revenues

8,898


16,262


30,795


46,344

Total revenues

482,743


674,629


1,587,880


1,722,192

Operating expenses








Lease operating expenses

50,313


48,534


164,985


137,456

Midstream expenses

12,967


8,652


47,064


24,325

Well services expenses

6,151


11,405


21,595


32,352

Marketing, transportation and gathering expenses

32,659


30,713


96,097


74,559

Purchased oil and gas expenses

78,655


174,269


338,221


374,442

Production taxes

28,461


38,722


86,221


103,748

Depreciation, depletion and amortization

210,832


162,984


578,023


465,819

Exploration expenses

652


22,315


2,369


23,701

Impairment



653


384,228

General and administrative expenses

52,860


34,859


118,245


91,029

Total operating expenses

473,550


532,453


1,453,473


1,711,659

Gain (loss) on sale of properties

(752)


36,869


(3,950)


38,823

Operating income

8,441


179,045


130,457


49,356

Other income (expense)








Net gain (loss) on derivative instruments

47,922


(48,544)


(34,940)


(239,945)

Interest expense, net of capitalized interest

(43,897)


(39,560)


(131,551)


(117,616)

Loss on extinguishment of debt


(47)



(13,698)

Other income

473


111


706


146

Total other income (expense), net

4,498


(88,040)


(165,785)


(371,113)

Income (loss) before income taxes

12,939


91,005


(35,328)


(321,757)

Income tax benefit (expense)

17,372


(24,782)


8,835


75,391

Net income (loss) including non-controlling interests

30,311


66,223


(26,493)


(246,366)

Less: Net income attributable to non-controlling interests

10,023


3,882


25,344


10,907

Net income (loss) attributable to Oasis

$

20,288


$

62,341


$

(51,837)


$

(257,273)

Earnings (loss) attributable to Oasis per share:








Basic

$

0.06


$

0.20


$

(0.16)


$

(0.84)

Diluted

0.06


0.20


(0.16)


(0.84)

Weighted average shares outstanding:








Basic

315,135


313,167


314,863


305,533

Diluted

315,135


316,387


314,863


305,533

 

Oasis Petroleum Inc.

Selected Financial and Operational Statistics

(Unaudited)



Three Months Ended September 30,


Nine Months Ended September 30,


2019


2018


2019


2018

Operating results (in thousands):








Revenues








Crude oil revenues(1)

$

318,564


$

414,082


$

964,662


$

1,103,575

Natural gas revenues

25,906


40,113


105,594


115,064

Purchased oil and gas sales(1)

79,352


172,985


337,212


368,758

Midstream revenues

50,023


31,187


149,617


88,451

Well services revenues

8,898


16,262


30,795


46,344

Total revenues

$

482,743


$

674,629


$

1,587,880


$

1,722,192

Production data:








Crude oil (MBbls)

5,779


6,060


17,294


16,862

Natural gas (MMcf)

14,296


10,781


40,840


30,825

Oil equivalents (MBoe)

8,162


7,857


24,101


21,999

Average daily production (Boe per day)

88,715


85,400


88,283


80,583

Average sales prices:








Crude oil, without derivative settlements (per Bbl)

$

55.12


$

68.33


$

55.78


$

65.45

Crude oil, with derivative settlements (per Bbl)(2)

56.03


57.50


56.19


55.78

Natural gas, without derivative settlements (per Mcf)(3)

1.81


3.72


2.59


3.73

Natural gas, with derivative settlements (per Mcf)(2)(3)

1.95


3.76


2.67


3.77

Costs and expenses (per Boe of production):








Lease operating expenses

$

6.16


$

6.18


$

6.85


$

6.25

MT&G(4)

4.01


3.84


3.89


3.36

Production taxes

3.49


4.93


3.58


4.72

Depreciation, depletion and amortization

25.83


20.74


23.98


21.17

G&A(5)

6.48


4.44


4.91


4.14

E&P G&A(5)

5.68


3.88


4.14


3.52

 ___________________

(1)

For the three and nine months ended September 30, 2018, crude oil revenues, purchased oil and gas sales and purchased oil and gas expenses have been revised to correct errors related to the presentation of certain crude oil purchase and sale arrangements, which had no impact on reported net income (loss). The amounts presented herein reflect the impact of the revision.

(2)

Realized prices include gains or losses on cash settlements for commodity derivatives, which do not qualify for or were not designated as hedging instruments for accounting purposes. Cash settlements represent the cumulative gains and losses on the Company's derivative instruments for the periods presented and do not include a recovery of costs that were paid to acquire or modify the derivative instruments that were settled.

(3)

Natural gas prices include the value for natural gas and natural gas liquids.

(4)

Excludes non-cash valuation charges on pipeline imbalances.

(5)

Includes $20 million of litigation contingency expenses in 3Q 2019. Excluding this accrual, G&A per Boe would have been $4.03 and E&P G&A per Boe would have been $3.23 in 3Q 2019.

 

Oasis Petroleum Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



Nine Months Ended September 30,


2019


2018






(In thousands)

Cash flows from operating activities:




Net loss including non-controlling interests

$

(26,493)


$

(246,366)

Adjustments to reconcile net loss including non-controlling interests to net cash provided by operating activities:




Depreciation, depletion and amortization

578,023


465,819

Loss on extinguishment of debt


13,698

(Gain) loss on sale of properties

3,950


(38,823)

Impairment

653


384,228

Deferred income taxes

(8,840)


(75,418)

Derivative instruments

34,940


239,945

Equity-based compensation expenses

26,370


21,586

Deferred financing costs amortization and other

18,190


20,074

Working capital and other changes:




Change in accounts receivable, net

1,555


(61,275)

Change in inventory

(3,676)


(12,076)

Change in prepaid expenses

4,153


1,196

Change in accounts payable, interest payable and accrued liabilities

22,280


50,308

Change in other assets and liabilities, net

(11,211)


(895)

Net cash provided by operating activities

639,894


762,001

Cash flows from investing activities:




Capital expenditures

(714,270)


(841,088)

Acquisitions

(8,337)


(579,886)

Proceeds from sale of properties

41,039


333,029

Costs related to sale of properties


(2,707)

Derivative settlements

10,752


(162,013)

Other


(1,038)

Net cash used in investing activities

(670,816)


(1,253,703)

Cash flows from financing activities:




Proceeds from revolving credit facilities

1,651,000


2,499,000

Principal payments on revolving credit facilities

(1,600,000)


(1,959,000)

Repurchase of senior unsecured notes


(423,190)

Proceeds from issuance of senior unsecured notes


400,000

Deferred financing costs

(852)


(7,650)

Purchases of treasury stock

(4,625)


(6,806)

Distributions to non-controlling interests

(15,551)


(10,393)

Payments on finance lease liabilities

(1,423)


Other

(392)


(87)

Net cash provided by financing activities

28,157


491,874

Increase (decrease) in cash and cash equivalents

(2,765)


172

Cash and cash equivalents:




Beginning of period

22,190


16,720

End of period

$

19,425


$

16,892

Supplemental non-cash transactions:




Change in accrued capital expenditures

$

(42,751)


$

79,011

Change in asset retirement obligations

4,114


2,854

Issuance of shares in connection with acquisition


371,220

Non-GAAP Financial Measures

E&P Cash G&A is defined as the total general and administrative expenses included in the Company's exploration and production segment less non-cash equity-based compensation expenses and other non-cash charges included in its exploration and production segment. E&P Cash G&A is not a measure of general and administrative expenses as determined by GAAP. Management believes that the presentation of E&P Cash G&A provides useful additional information to investors and analysts to assess the Company's operating costs in comparison to peers without regard to equity-based compensation programs, which can vary substantially from company to company.

The following table presents a reconciliation of the GAAP financial measure of general and administrative expenses included in its exploration and production segment to the non-GAAP financial measure of E&P Cash G&A for the periods presented:

Exploration and Production


Three Months Ended September 30,


Nine Months Ended September 30,


2019


2018


2019


2018










(In thousands)

E&P general and administrative expenses

$

46,377


$

30,454


$

99,665


$

77,425

Equity-based compensation expenses

(8,246)


(7,102)


(25,348)


(20,565)

Litigation contingency expenses(1)

(20,000)



(20,000)


E&P Cash G&A

$

18,131


$

23,352


$

54,317


$

56,860

___________________

(1)

In 3Q 2019, the Company incurred a charge to establish a loss accrual of $20 million, which the Company believes is the estimable amount of loss that could potentially be incurred from the Company's pending legal proceedings based upon currently available information.

Cash Interest is a supplemental non-GAAP financial measure that is used by management and external users of the Company's financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Cash Interest as interest expense plus capitalized interest less amortization and write-offs of deferred financing costs and debt discounts included in interest expense. Cash Interest is not a measure of interest expense as determined by GAAP.

The following table presents a reconciliation of the GAAP financial measure of interest expense to the non-GAAP financial measure of Cash Interest for the periods presented:


Three Months Ended September 30,


Nine Months Ended September 30,


2019


2018


2019


2018










(In thousands)

Interest expense

$

43,897


$

39,560


$

131,551


$

117,616

Capitalized interest

3,001


4,531


9,464


13,209

Amortization of deferred financing costs

(1,861)


(1,813)


(5,454)


(5,511)

Amortization of debt discount

(3,137)


(2,852)


(9,027)


(8,201)

Cash Interest

$

41,900


$

39,426


$

126,534


$

117,113

Adjusted EBITDA and Free Cash Flow are supplemental non-GAAP financial measures that are used by management and external users of the Company's financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDA as earnings before interest expense, income taxes, depreciation, depletion, amortization, exploration expenses and other similar non-cash or non-recurring charges. The Company defines Free Cash Flow as Adjusted EBITDA attributable to Oasis less Cash Interest and CapEx, excluding capitalized interest. Adjusted EBITDA and Free Cash Flow are not measures of net income (loss) or cash flows as determined by GAAP.

The following table presents reconciliations of the GAAP financial measures of net income (loss) including non-controlling interests and net cash provided by (used in) operating activities to the non-GAAP financial measures of Adjusted EBITDA and Free Cash Flow for the periods presented:


Three Months Ended September 30,


Nine Months Ended September 30,


2019


2018


2019


2018










(In thousands)

Net income (loss) including non-controlling interests

$

30,311


$

66,223


$

(26,493)


$

(246,366)

(Gain) loss on sale of properties

752


(36,869)


3,950


(38,823)

Loss on extinguishment of debt


47



13,698

Net (gain) loss on derivative instruments

(47,922)


48,544


34,940


239,945

Derivative settlements(1)

7,123


(65,190)


10,752


(162,013)

Interest expense, net of capitalized interest

43,897


39,560


131,551


117,616

Depreciation, depletion and amortization

210,832


162,984


578,023


465,819

Impairment



653


384,228

Exploration expenses

652


22,315


2,369


23,701

Equity-based compensation expenses

8,446


7,456


26,370


21,586

Income tax (benefit) expense

(17,372)


24,782


(8,835)


(75,391)

Litigation contingency expenses(2)

20,000



20,000


Other non-cash adjustments

(79)


574


2,316


557

Adjusted EBITDA

256,640


270,426


775,596


744,557

Adjusted EBITDA attributable to non-controlling interests

13,606


5,194


35,501


14,647

Adjusted EBITDA attributable to Oasis

243,034


265,232


740,095


729,910

Cash Interest

(41,900)


(39,426)


(126,534)


(117,113)

Capital expenditures(3)

(187,216)


(372,343)


(708,884)


(1,898,105)

Capitalized interest

3,001


4,531


9,464


13,209

Free Cash Flow

$

16,919


$

(142,006)


$

(85,859)


$

(1,272,099)









Net cash provided by operating activities

$

250,962


$

229,985


$

639,894


$

762,001

Derivative settlements(1)

7,123


(65,190)


10,752


(162,013)

Interest expense, net of capitalized interest

43,897


39,560


131,551


117,616

Exploration expenses

652


22,315


2,369


23,701

Deferred financing costs amortization and other

(5,945)


(9,556)


(18,190)


(20,074)

Current tax (benefit) expense

84


(93)


5


27

Changes in working capital

(60,054)


52,831


(13,101)


22,742

Litigation contingency expenses(2)

20,000



20,000


Other non-cash adjustments

(79)


574


2,316


557

Adjusted EBITDA

256,640


270,426


775,596


744,557

Adjusted EBITDA attributable to non-controlling interests

13,606


5,194


35,501


14,647

Adjusted EBITDA attributable to Oasis

243,034


265,232


740,095


729,910

Cash Interest

(41,900)


(39,426)


(126,534)


(117,113)

Capital expenditures(3)

(187,216)


(372,343)


(708,884)


(1,898,105)

Capitalized interest

3,001


4,531


9,464


13,209

Free Cash Flow

$

16,919


$

(142,006)


$

(85,859)


$

(1,272,099)

___________________

(1)

Cash settlements represent the cumulative gains and losses on the Company's derivative instruments for the periods presented and do not include a recovery of costs that were paid to acquire or modify the derivative instruments that were settled.

(2)

In 3Q 2019, the Company incurred a charge to establish a loss accrual of $20 million, which the Company believes is the estimable amount of loss that could potentially be incurred from the Company's pending legal proceedings based upon currently available information.

(3)

Capital expenditures (including acquisitions) reflected in the table above differ from the amounts shown in the statements of cash flows in the Company's condensed consolidated financial statements because amounts reflected in the table include changes in accrued liabilities from the previous reporting period for capital expenditures, while the amounts presented in the statements of cash flows are presented on a cash basis. Acquisitions totaled $2.5 million and $8.3 million for the three and nine months ended September 30, 2019, respectively, and $55.6 million and $950.1 million for the three and nine months ended September 30, 2018, respectively. In addition, capital expenditures (including acquisitions) reflected in the table above includes consideration paid through the issuance of common stock in connection with an acquisition for the nine months ended September 30, 2018.

The following tables present reconciliations of the GAAP financial measure of income (loss) before income taxes including non-controlling interests to the non-GAAP financial measure of Adjusted EBITDA for the Company's three reportable business segments on a gross basis for the periods presented:

Exploration and Production


Three Months Ended September 30,


Nine Months Ended September 30,


2019


2018


2019


2018










(In thousands)

Income (loss) before income taxes including non-controlling interests

$

(42,605)


$

59,375


$

(184,138)


$

(423,470)

(Gain) loss on sale of properties

752


(46,459)


3,950


(48,413)

Loss on extinguishment of debt


47



13,698

Net (gain) loss on derivative instruments

(47,922)


48,544


34,940


239,945

Derivative settlements(1)

7,123


(65,190)


10,752


(162,013)

Interest expense, net of capitalized interest

39,385


39,398


119,082


117,009

Depreciation, depletion and amortization

205,902


158,630


563,408


453,083

Impairment



653


384,228

Exploration expenses

652


22,315


2,369


23,701

Equity-based compensation expenses

8,246


7,102


25,348


20,565

Litigation contingency expenses(2)

20,000



20,000


Other non-cash adjustments

(79)


574


2,316


557

Adjusted EBITDA

$

191,454


$

224,336


$

598,680


$

618,890

___________________

(1)

Cash settlements represent the cumulative gains and losses on the Company's derivative instruments for the periods presented and do not include a recovery of costs that were paid to acquire or modify the derivative instruments that were settled.

(2)

In 3Q 2019, the Company incurred a charge to establish a loss accrual of $20 million, which the Company believes is the estimable amount of loss that could potentially be incurred from the Company's pending legal proceedings based upon currently available information.

 

Midstream Services


Three Months Ended September 30,


Nine Months Ended September 30,


2019


2018


2019


2018










(In thousands)

Income before income taxes including non-controlling interests

$

59,787


$

30,959


$

156,861


$

100,754

Loss on sale of properties


9,590



9,590

Interest expense, net of capitalized interest

4,512


162


12,469


607

Depreciation, depletion and amortization

9,340


7,373


27,420


20,902

Equity-based compensation expenses

383


442


1,363


1,222

Adjusted EBITDA

$

74,022


$

48,526


$

198,113


$

133,075

 

Well Services


Three Months Ended September 30,


Nine Months Ended September 30,


2019


2018


2019


2018










(In thousands)

Income before income taxes including non-controlling interests

$

375


$

9,158


$

2,694


$

25,316

Depreciation, depletion and amortization

3,206


3,940


10,493


11,560

Equity-based compensation expenses

42


354


1,130


1,149

Adjusted EBITDA

$

3,623


$

13,452


$

14,317


$

38,025

Adjusted Net Income (Loss) Attributable to Oasis and Adjusted Diluted Earnings (Loss) Attributable to Oasis Per Share are supplemental non-GAAP financial measures that are used by management and external users of the Company's financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted Net Income (Loss) Attributable to Oasis as net income (loss) after adjusting first for (1) the impact of certain non-cash items, including non-cash changes in the fair value of derivative instruments, impairment, and other similar non-cash charges, or non-recurring items, (2) the impact of net income attributable to non-controlling interests and (3) the non-cash and non-recurring items' impact on taxes based on the Company's effective tax rate applicable to those adjusting items in the same period. Adjusted Net Income (Loss) Attributable to Oasis is not a measure of net income (loss) as determined by GAAP. The Company defines Adjusted Diluted Earnings (Loss) Attributable to Oasis Per Share as Adjusted Net Income (Loss) Attributable to Oasis divided by diluted weighted average shares outstanding.

The following table presents reconciliations of the GAAP financial measure of net income (loss) attributable to Oasis to the non-GAAP financial measure of Adjusted Net Income (Loss) Attributable to Oasis and the GAAP financial measure of diluted earnings (loss) attributable to Oasis per share to the non-GAAP financial measure of Adjusted Diluted Earnings (Loss) Attributable to Oasis Per Share for the periods presented:


Three Months Ended September 30,


Nine Months Ended September 30,


2019


2018


2019


2018










(In thousands, except per share data)

Net income (loss) attributable to Oasis

$

20,288


$

62,341


$

(51,837)


$

(257,273)

(Gain) loss on sale of properties

752


(36,869)


3,950


(38,823)

Loss on extinguishment of debt


47



13,698

Net (gain) loss on derivative instruments

(47,922)


48,544


34,940


239,945

Derivative settlements(1)

7,123


(65,190)


10,752


(162,013)

Impairment



653


384,228

Amortization of deferred financing costs

1,861


1,814


5,454


5,512

Amortization of debt discount

3,137


2,852


9,027


8,201

Litigation contingency expenses(2)

20,000



20,000


Other non-cash adjustments

(79)


574


2,316


557

Tax impact(3)

(21,173)


12,214


(28,026)


(108,028)

Adjusted Net Income (Loss) Attributable to Oasis

$

(16,013)


$

26,327


$

7,229


$

86,004









Diluted earnings (loss) attributable to Oasis per share

$

0.06


$

0.20


$

(0.16)


$

(0.84)

(Gain) loss on sale of properties


(0.12)


0.01


(0.13)

Loss on extinguishment of debt




0.04

Net (gain) loss on derivative instruments

(0.15)


0.15


0.11


0.78

Derivative settlements(1)

0.02


(0.21)


0.03


(0.52)

Impairment




1.24

Amortization of deferred financing costs

0.01


0.01


0.02


0.02

Amortization of debt discount

0.01


0.01


0.03


0.03

Litigation contingency expenses(2)

0.06



0.06


Other non-cash adjustments



0.01


Tax impact(3)

(0.06)


0.04


(0.09)


(0.34)

Adjusted Diluted Earnings (Loss) Attributable to Oasis Per Share

$

(0.05)


$

0.08


$

0.02


$

0.28









Diluted weighted average shares outstanding(4)

315,135


316,387


315,944


308,985









Effective tax rate applicable to adjustment items

(140.0)

%


25.3

%


32.2

%


23.9

%

















___________________

(1)

Cash settlements represent the cumulative gains and losses on the Company's derivative instruments for the periods presented and do not include a recovery of costs that were paid to acquire or modify the derivative instruments that were settled.

(2)

In 3Q 2019, the Company incurred a charge to establish a loss accrual of $20 million, which the Company believes is the estimable amount of loss that could potentially be incurred from the Company's pending legal proceedings based upon currently available information.

(3)

The tax impact is computed utilizing the Company's effective tax rate applicable to the adjustments for certain non-cash and non-recurring items.

(4)

No unvested stock awards were included in computing Adjusted Diluted Loss Attributable to Oasis Per Share for the three months ended September 30, 2019 because the effect was anti-dilutive due to the Adjusted Net Loss Attributable to Oasis. For the nine months ended September 30, 2019 and three and nine months ended September 30, 2018, the Company included 1,081,000, 3,220,000 and 3,452,000, respectively, of unvested stock awards in computing Adjusted Diluted Earnings Attributable to Oasis Per Share due to the dilutive effect under the treasury stock method.

 

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