Oasis Petroleum Inc’s (NYSE:OAS) Path To Profitability
Oasis Petroleum Inc’s (NYSE:OAS): Oasis Petroleum Inc., an independent exploration and production company, focuses on the acquisition and development of unconventional oil and natural gas resources in the North Dakota and Montana regions of the Williston Basin. The US$2.80B market-cap posted a loss in its most recent financial year of -US$243.02M and a latest trailing-twelve-month loss of -US$55.51M shrinking the gap between loss and breakeven. Many investors are wondering the rate at which OAS will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for OAS, its year of breakeven and its implied growth rate.
Check out our latest analysis for Oasis Petroleum
According to the industry analysts covering OAS, breakeven is near. They expect the company to post a final loss in 2017, before turning a profit of US$11.58M in 2018. OAS is therefore projected to breakeven around a few months from now. How fast will OAS have to grow each year in order to reach the breakeven point by 2018? Working backwards from analyst estimates, it turns out that they expect the company to grow 109.35% year-on-year, on average, which is rather optimistic! If this rate turns out to be too aggressive, OAS may become profitable much later than analysts predict.
Underlying developments driving OAS’s growth isn’t the focus of this broad overview, but, take into account that generally an oil and gas business has lumpy cash flows which are contingent on the natural resource and stage at which the company is operating. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.
One thing I would like to bring into light with OAS is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in OAS’s case is 76.53%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
Next Steps:
This article is not intended to be a comprehensive analysis on OAS, so if you are interested in understanding the company at a deeper level, take a look at OAS’s company page on Simply Wall St. I’ve also put together a list of key aspects you should further research:
Historical Track Record: What has OAS’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Oasis Petroleum’s board and the CEO’s back ground.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
