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Why Is Oasis (OAS) Down 14.8% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Oasis Petroleum (OAS). Shares have lost about 14.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Oasis due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Oasis Petroleum Posts Weaker Y/Y Results in Q3

Oasis Petroleum Inc. incurred third-quarter 2019 adjusted loss per share of 5 cents, wider than the Zacks Consensus Estimate of a loss of a cent. The bottom line also deteriorated from the year-ago income of 8 cents a share. The loss can be attributed to weaker year-over-year commodity price realizations.

The company’s total operating revenues of $482.7 million in the third quarter marginally missing the Zacks Consensus Estimate of $487 million. Moreover, the top line declined from the year-ago figure of $674.7 million.

Production & Price Realizations

Production of oil and natural gas was up 3.8% from the year-ago level to 88.7 thousand oil-equivalent barrels per day (MBOE/d) comprising 70.8% oil. Oasis Petroleum’s production of oil and natural gas was 62.8 thousand barrels per day (down 4.6% year over year) and 155,391 thousand cubic feet per day (up 32.6%), respectively.

The average realized crude oil price during the third quarter was $55.12 per barrel, reflecting a 19.3% decrease from the prior-year realization of $68.33. Moreover, the average realized natural gas price was $1.81 per thousand cubic feet, down 51.3% from the year-earlier period.

Total Expenses

Total operating expenses in the quarter declined 11.1% year over year to $473.5 million, primarily owing to lower commodity purchase costs. Notably, purchased oil and gas expenses were $78.7 million compared with $174.3 million in the corresponding quarter of last year.

The company’s lease operating expenses decreased to $6.16 per barrel of oil equivalent (Boe) from the year-ago figure of $6.18 per Boe.

Financial Position

Capital spending (before acquisitions) totaled $187.2 million in the quarter. Oasis Petroleum recorded $250.9 million in net cash flow from operations, higher than the year-ago period’s $229.9 million.

The company posted a positive free cash flow of 16.9 million in the quarter under review.

As of Sep 30, the Bakken-focused operator with a market capitalization of almost $1 billion had $19.4 million in cash and cash equivalents. The company had a long-term debt of $2.8 billion, representing a debt-to-capitalization ratio of 41.7%.

Guidance

Oasis Petroleum expects full-year capital spending from the midstream segment within $212-$222 million, lower than the previous guided range of $219-$230 million. The company’s E&P and other capex view for 2019 is intact within $620-$640 million. It further projects its annual G&A outlook in the band of $125-$131 million.

Fourth-quarter output is anticipated within 83.3-85.3 MBOE/d (70.5% oil).
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -3900% due to these changes.

VGM Scores

At this time, Oasis has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Oasis has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.



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