Oasis Petroleum Inc. Announces Quarter Ended June 30, 2014 Earnings

HOUSTON, Aug. 5, 2014 /PRNewswire/ -- Oasis Petroleum Inc. (NYSE: OAS) ("Oasis" or the "Company") today announced financial results for the quarter ended June 30, 2014 and provided an operational update.

Highlights include:

  • Increased average daily production to 43,668 barrels of oil equivalent per day ("Boepd"), a 45% increase over the second quarter of 2013 and a 6% sequential quarter increase, excluding production from Sanish.
  • Grew Adjusted EBITDA to $254.7 million in the second quarter of 2014, an increase of $69.2 million over the second quarter of 2013 and a sequential increase of $14.9 million over the first quarter of 2014. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income and net cash provided by operating activities, see "Non-GAAP Financial Measures" below.
  • Invested capital expenditures ("CapEx") of $351.8 million in the second quarter of 2014.
  • Completed and placed on production 41 gross (30.8 net) operated wells in the second quarter of 2014.
  • Started operating Oasis Well Services' ("OWS") second fracturing fleet.

"Oasis continues to execute on its full-year plan to enhance shareholder value through completion technique changes and resource expansion initiatives," said Thomas B. Nusz, Oasis' Chairman and Chief Executive Officer. "Our first slickwater wells in Indian Hills have continued to produce well above our type curve. In addition, early production results from our first Three Forks slickwater well in Red Bank and a slickwater Bakken well in Montana are expanding the completion technique's applicability across more of our inventory. Both of these Oasis wells are producing 35% or more over comparable wells completed with our base completion design."

Mr. Nusz added, "Even as we move to completing 70% of our wells with different technology than our base design, our expectation of investing a total of $1.25 billion for drilling and completions during 2014 remains unchanged. Our base design well cost of $7.3 million in the first half of 2014, which includes the beneficial impact of OWS, provides us the ability to complete more intense frac jobs while remaining within our budget. While completions were pushed back a bit and we completed six fewer wells than planned, we were able to grow production 6% over the sequential quarter.  We expect production to range between 47,000 and 49,000 Boepd in the third quarter of 2014.  In addition, we have increased both frac spreads and cleanout crews, which will support the additional work we are doing in the second half of the year."

Operational and Financial Update

The Company's average daily production by project area is listed in the following table:


Quarter Ended:


6/30/2014


3/31/2014


6/30/2013

Average daily production (Boepd)






West Williston

30,381


28,227


18,257

East Nesson

13,287


12,980


9,312

Sanish (1)


1,649


2,602

Total

43,668


42,856


30,171

Percent Oil

89.1%


89.4%


90.6%



(1)

Includes production from certain non-operated properties in the Company's Sanish project area and other non-operated leases adjacent to its Sanish position until March 1, 2014. These properties were sold on March 5, 2014 (the "Sanish Divestiture").

The following table describes the Company's producing wells by project area in the Williston Basin as of June 30, 2014:


Bakken/Three Forks Producing Wells


West Williston


East Nesson


Total Williston Basin


Gross


Net


Gross


Net


Gross


Net

Producing on or before 3/31/2014: (1)


















Operated

338



260.1



158



125.0



496



385.1


Non-Operated

162



13.3



98



7.1



260



20.4


Production started in Q2 2014:


















Operated

26



20.0



15



10.8



41



30.8


Non-Operated

14



0.9



3



0.1



17



1.0


Total Producing Wells on 6/30/2014:


















Operated

364



280.1



173



135.8



537



415.9


Non-Operated

176



14.2



101



7.2



277



21.4




(1)

Well counts include changes that occurred in the current reporting period for wells producing on or before March 31, 2014.

Additionally, the Company had approximately 16 rigs running during the second quarter of 2014, and as of June 30, 2014, had an inventory of gross operated wells waiting on completion of 35 wells in West Williston and 32 wells in East Nesson.

The Company's average price per barrel of oil, without derivative settlements, was $94.48 in the second quarter of 2014, compared to $91.15 in the second quarter of 2013 and $89.66 in the first quarter of 2014. The Company's average price differential compared to NYMEX West Texas Intermediate ("WTI") crude oil index prices was 8% in the second quarter of 2014, compared to 3% in the second quarter of 2013 and 9% in the first quarter of 2014.

The Company's revenues are detailed in the following table:


Quarter Ended:


6/30/2014


3/31/2014


6/30/2013

Revenues ($ in thousands):









Oil

$

334,559



$

309,231



$

226,848


Bulk oil sale





5,777


Natural gas

19,623



22,616



9,217


Well services (OWS)

14,878



15,827



11,461


Midstream (OMS)

3,318



1,845



1,279


Total revenues

$

372,378



$

349,519



$

254,582


The Company's operating expenses are detailed in the following table:


Quarter Ended:


6/30/2014


3/31/2014


6/30/2013

Operating expenses ($ in thousands):









Lease operating expenses (LOE)

$

40,553



$

39,989



$

18,266


Well services (OWS)

7,200



10,359



6,420


Midstream (OMS)

1,569



561



224


Marketing, transportation and gathering expenses (1)

6,996



5,932



4,977


Bulk oil purchase





5,777


Non-cash valuation charges

118



(746)



25


Total operating expenses

$

56,436



$

56,095



$

35,689


Operating expenses ($ per Boe):









Lease operating expenses (LOE)

$

10.21



$

10.37



$

6.65


Marketing, transportation and gathering expenses (1)

1.76



1.53



1.82




(1)

Excludes bulk oil purchase and non-cash valuation charges on pipeline imbalances.

The sequential quarter-over-quarter decrease in lease operating expenses ("LOE") per barrel of oil equivalent ("Boe") was primarily due to higher workover costs in the first quarter of 2014 related to restoring wells that were down due to winter weather conditions.

The increase in marketing, transportation and gathering expenses from the first quarter of 2014 to the second quarter of 2014 is primarily due to higher operated volumes flowing through third-party oil gathering pipelines in the second quarter of 2014. Currently, the Company is flowing approximately 75% of its gross operated oil production through these gathering systems. While transporting volumes through third-party oil gathering pipelines increases marketing, transportation and gathering expenses, it improves oil price realizations by reducing transportation costs included in the Company's oil price differential for sales at the wellhead.

Production taxes as a percentage of oil and gas revenues were 9.7% in the second quarter of 2014, 9.1% in the second quarter of 2013 and 9.6% in the first quarter of 2014. The Company's production tax rate increased in the second quarter of 2014 compared to the second quarter of 2013 due to the increased weighting of production in North Dakota compared to Montana, which has lower production tax rates.

Depreciation, depletion and amortization expenses ("DD&A") totaled $97.3 million in the second quarter of 2014, $66.8 million in the second quarter of 2013 and $91.3 million in the first quarter of 2014. DD&A was $24.48 per Boe in the second quarter of 2014, $24.33 per Boe in the second quarter of 2013 and $23.66 per Boe in the first quarter of 2014. During the first two months of 2014, the Company had production from the wells sold in the Sanish Divestiture, but these wells were not depreciated because the assets were held for sale, which lowered DD&A by $0.78 per Boe in the first quarter of 2014.

General and administrative ("G&A") expenses totaled $20.8 million in the second quarter of 2014, $16.7 million in the second quarter of 2013 and $23.5 million in the first quarter of 2014. The sequential quarter-over-quarter decrease in G&A expenses was primarily due to lower consolidated OWS G&A expenses in the second quarter of 2014 compared to the first quarter of 2014. G&A expenses were $5.22 per Boe in the second quarter of 2014, $6.07 per Boe in the second quarter of 2013 and $6.10 per Boe in the first quarter of 2014. Amortization of stock-based compensation, which is included in G&A expenses, was $5.2 million, or $1.30 per Boe, in the second quarter of 2014 as compared to $3.1 million, or $1.12 per Boe, in the second quarter of 2013 and $4.5 million, or $1.17 per Boe, in the first quarter of 2014. The sequential increase in amortization of stock-based compensation is primarily due to growth in headcount.

The Company's derivative activities are detailed in the following table: 


Quarter Ended:


6/30/2014


3/31/2014


6/30/2013

Derivative activities (1) ($ in thousands)









Derivative settlements

$

(11,405)



$

(2,239)



$

1,246


Non-cash change in fair value of derivative instruments

(54,165)



(15,364)



11,345


Net gain (loss) on derivative instruments

$

(65,570)



$

(17,603)



$

12,591




(1)

The Company's derivative instruments do not qualify for and were not designated as hedging instruments for accounting purposes.

Interest expense was $39.0 million for the second quarter of 2014 compared to $21.4 million for the second quarter of 2013 and $40.2 million for the first quarter of 2014. The $1.2 million decrease from the first quarter of 2014 was primarily due to lower weighted average borrowings under the Company's revolving credit facility coupled with an increase in capitalized interest in the second quarter of 2014. Capitalized interest totaled $2.3 million for the second quarter of 2014, $1.1 million for the second quarter of 2013 and $1.6 million for the first quarter of 2014.

Income tax expense was $23.3 million for the three months ended June 30, 2014, resulting in an effective tax rate of 37.5%. The Company's income tax expense for the three months ended June 30, 2013 was recorded at 36.0% of pre-tax net income. The Company's effective tax rate is expected to continue to closely approximate the statutory rate applicable to the U.S. and the blended rate for each of the states in which the Company conducts business.

Adjusted EBITDA for the second quarter of 2014 was $254.7 million, a 37% increase over the second quarter of 2013 of $185.5 million, and an increase of 6% from the first quarter of 2014 of $239.8 million. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income and net cash provided by operating activities, see "Non-GAAP Financial Measures" below.

For the second quarter of 2014, the Company reported net income of $38.8 million, or $0.39 per diluted share, as compared to net income of $67.1 million, or $0.72 per diluted share, for the second quarter of 2013. The Company's second quarter 2014 results were impacted by several non-cash items, including a $54.2 million non-cash mark-to-market loss on derivative instruments. Excluding these items and their tax effect, the second quarter 2014 Adjusted Net Income (non-GAAP) was $70.5 million, or $0.70 per diluted share. Excluding similar non-cash items and their tax effect, Adjusted Net Income (non-GAAP) for the second quarter of 2013 was $60.1 million, or $0.65 per diluted share. For a definition of Adjusted Net Income and a reconciliation of net income to Adjusted Net Income, see "Non-GAAP Financial Measures" below.

Capital Expenditures

The following table depicts the Company's exploration and production ("E&P") CapEx by project area and total CapEx by category:


1Q 2014


2Q 2014


YTD 2014

CapEx ($ in thousands):









 E&P CapEx by Project Area









West Williston

$

189,288



$

223,526



$

412,814


East Nesson

107,843



103,370



211,213


Total E&P CapEx (1)

297,131



326,896



624,027


OWS

6,410



18,903



25,313


Non E&P (2)

3,957



6,036



9,993


               Total Company CapEx (3)

$

307,498



$

351,835



$

659,333




(1)

Year-to-date total E&P CapEx includes $12.5 million for Oasis Midstream Services ("OMS"), primarily related to pipelines and salt water disposal systems.

(2)

Non-E&P CapEx includes such items as administrative capital and capitalized interest.

(3)

CapEx reflected in the table above differs from the amounts shown in the statement of cash flows in the Company's condensed consolidated financial statements because amounts reflected in the table above include accrued liabilities for capital expenditures, while the amounts presented in the statement of cash flows are presented on a cash basis.

Liquidity

On June 30, 2014, Oasis had total cash and cash equivalents of $27.0 million. As of June 30, 2014, the Company had $100.0 million of LIBOR loans and $5.2 million of outstanding letters of credit issued under its revolving credit facility, resulting in an unused borrowing base capacity of $1,394.8 million.

Update to Outlook for Operating Metrics

Oasis is updating its full year 2014 guidance range for LOE to $8.50 to $10.00 per Boe and production taxes to 9.7% to 10.2%.

Hedging Activity

As of August 5, 2014, the Company had the following outstanding commodity derivative contracts, all of which are priced off of WTI and settle monthly:





Weighted Average Prices ($/Bbl)









Remaining Term


Sub-Floor


Floor


Ceiling


Swaps


BOPD


Total Barrels

2014





















Full Year





















Swaps


Jul - Dec











$

95.90



9,500



1,738,500


Swaps with sub-floors


Jul - Dec


$

70.00









$

92.60



6,000



1,098,000


Two-way collars


Jul - Dec





$

95.22



$

106.39






11,500



2,104,500


Three-way collars


Jul - Dec


$

70.59



$

90.59



$

105.25






8,500



1,555,500


Total 2014 hedges (weighted average)


$

70.34



$

93.25



$

105.91



$

94.62



35,500



6,496,500























2015





















Full Year





















Swaps


Jan - Dec











$

90.15



10,000



3,650,000


Two-way collars


Jan - Dec





$

86.00



$

103.42






5,000



1,825,000


First Half





















Swaps


Jan - June











$

91.26



9,000



1,629,000


Deferred premium puts


Jan - June





$

90.00









6,000



1,086,000


Two-way collars


Jan - June





$

90.00



$

99.10






2,000



362,000


Total 2015 hedges (weighted average)





$

87.77



$

102.70



$

90.49



23,430



8,552,000


Total 1H15 hedges








32,000





Total 2H15 hedges








15,000





Conference Call Information

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

Date:


Wednesday, August 6, 2014

Time:


9:00 a.m. Central Time

Dial-in:


877-621-0256

Intl. Dial in:


706-634-0151

Conference ID:


74680357

Website:


www.oasispetroleum.com

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, August 13, 2014 by dialing:

Replay dial-in:


855-859-2056

Intl. replay:


404-537-3406

Conference ID:


74680357

The conference call will also be available for replay 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 oil and natural gas prices, weather and environmental conditions, the timing of planned capital expenditures, availability of acquisitions, 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 SEC.

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 unconventional oil and natural gas resources, primarily operating in the Williston Basin. For more information, please visit the Company's website at www.oasispetroleum.com.

Contact:

Oasis Petroleum Inc.
Matt Ultis, (281) 404-9600
Manager – Finance and Investor Relations

 

Oasis Petroleum Inc.
Condensed Consolidated Balance Sheet
(Unaudited)



June 30, 2014


December 31, 2013


(In thousands, except share data)

ASSETS






Current assets






Cash and cash equivalents

$

26,957



$

91,901


Accounts receivable — oil and gas revenues

216,764



175,653


Accounts receivable — joint interest partners

147,056



139,459


Inventory

17,636



20,652


Prepaid expenses

8,907



10,191


Deferred income taxes

25,390



6,335


Derivative instruments



2,264


Advances to joint interest partners

97



760


Other current assets

421



391


Total current assets

443,228



447,606


Property, plant and equipment






Oil and gas properties (successful efforts method)

5,141,582



4,528,958


Other property and equipment

231,129



188,468


Less: accumulated depreciation, depletion, amortization and impairment

(823,500)



(637,676)


Total property, plant and equipment, net

4,549,211



4,079,750


Assets held for sale



137,066


Derivative instruments



1,333


Deferred costs and other assets

44,540



46,169


Total assets

$

5,036,979



$

4,711,924


LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities






Accounts payable

$

32,402



$

8,920


Revenues and production taxes payable

217,414



146,741


Accrued liabilities

288,813



241,830


Accrued interest payable

49,444



47,910


Derivative instruments

62,415



8,188


Advances from joint interest partners

6,910



12,829


Other current liabilities

3,311




Total current liabilities

660,709



466,418


Long-term debt

2,300,000



2,535,570


Deferred income taxes

460,897



323,147


Asset retirement obligations

37,542



35,918


Derivative instruments

11,844



139


Other liabilities

1,963



2,183


Total liabilities

3,472,955



3,363,375


Commitments and contingencies






Stockholders' equity






Common stock, $0.01 par value: 300,000,000 shares authorized; 101,396,597 and 100,866,589 shares issued at June 30, 2014 and December 31, 2013, respectively

999



996


Treasury stock, at cost: 244,729 and 167,155 shares at June 30, 2014 and December 31, 2013, respectively

(8,677)



(5,362)


Additional paid-in capital

995,024



985,023


Retained earnings

576,678



367,892


Total stockholders' equity

1,564,024



1,348,549


Total liabilities and stockholders' equity

$

5,036,979



$

4,711,924


 

Oasis Petroleum Inc.
Condensed Consolidated Statement of Operations
(Unaudited)




Three Months Ended June 30,


Six Months Ended June 30,



2014



2013



2014



2013




(In thousands, except per share data)

Revenues













Oil and gas revenues


$

354,182



$

241,842



$

686,029



$

483,493


Well services and midstream revenues


18,196



12,740



35,868



19,393


Total revenues


372,378



254,582



721,897



502,886


Expenses













Lease operating expenses


40,553



18,266



80,542



37,755


Well services and midstream operating expenses


8,769



6,644



19,689



9,558


Marketing, transportation and gathering expenses


7,114



10,779



12,300



14,168


Production taxes


34,493



21,397



66,296



43,486


Depreciation, depletion and amortization


97,276



66,790



188,548



133,051


Exploration expenses


475



392



855



2,249


Impairment of oil and gas properties


42



208



804



706


General and administrative expenses


20,751



16,656



44,271



30,510


Total expenses


209,473



141,132



413,305



271,483


Gain on sale of properties


3,640





187,033




Operating income


166,545



113,450



495,625



231,403


Other income (expense)













Net gain (loss) on derivative instruments


(65,570)



12,591



(83,173)



(2,021)


Interest expense, net of capitalized interest


(38,990)



(21,392)



(79,148)



(42,575)


Other income (expense)


135



294



288



1,074


Total other income (expense)


(104,425)



(8,507)



(162,033)



(43,522)


Income before income taxes


62,120



104,943



333,592



187,881


Income tax expense


23,287



37,824



124,806



68,911


Net income


$

38,833



$

67,119



$

208,786



$

118,970


Earnings per share:













Basic


$

0.39



$

0.73



$

2.10



$

1.29


Diluted


0.39



0.72



2.08



1.28


Weighted average shares outstanding:













Basic


99,663



92,399



99,612



92,387


Diluted


100,260



92,702



100,328



92,812


 

Oasis Petroleum Inc.
Selected Financial and Operational Statistics
(Unaudited)



Three Months Ended June 30,


Six Months Ended June 30,


2014



2013



2014



2013


Operating results ($ in thousands):












Revenues












Oil

$

334,559



$

232,625



$

643,790



$

464,300


Natural gas

19,623



9,217



42,239



19,193


Well services and midstream

18,196



12,740



35,868



19,393


Total revenues

372,378



254,582



721,897



502,886


Production data:












Oil (MBbls)

3,541



2,489



6,990



4,971


Natural gas (MMcf)

2,596



1,540



5,045



2,929


Oil equivalents (MBoe)

3,974



2,746



7,831



5,459


Average daily production (Boe/d)

43,668



30,171



43,264



30,162


Average sales prices:












Oil, without derivative settlements (per Bbl) (1)

$

94.48



$

91.15



$

92.10



$

92.24


Oil, with derivative settlements (per Bbl) (1) (2)

91.26



91.65



90.15



92.83


Natural gas (per Mcf) (3)

7.56



5.98



8.37



6.55


Costs and expenses (per Boe of production):












Lease operating expenses

$

10.21



$

6.65



$

10.29



$

6.92


Marketing, transportation and gathering expenses (4)

1.76



1.82



1.65



1.54


Production taxes

8.68



7.79



8.47



7.97


Depreciation, depletion and amortization

24.48



24.33



24.08



24.37


General and administrative expenses

5.22



6.07



5.65



5.58




(1)

For the three and six months ended June 30, 2013, average sales prices for oil are calculated using total oil revenues, excluding bulk oil sales of $5.8 million, divided by oil production.

(2)

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

(3)

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

(4)

Excludes bulk oil purchase and non-cash valuation charges on pipeline imbalances.

 

Oasis Petroleum Inc.
Condensed Consolidated Statement of Cash Flows
(Unaudited)



Six Months Ended June 30,


2014



2013



(In thousands)

Cash flows from operating activities:






Net income

$

208,786



$

118,970


Adjustments to reconcile net income to net cash provided by operating activities:






Depreciation, depletion and amortization

188,548



133,051


Gain on sale of properties

(187,033)




Impairment of oil and gas properties

804



706


Deferred income taxes

118,695



67,974


Derivative instruments

83,173



2,021


Stock-based compensation expenses

9,678



5,371


Debt discount amortization and other

3,220



1,753


Working capital and other changes:






Change in accounts receivable

(37,132)



(13,768)


Change in inventory

3,016



(4,200)


Change in prepaid expenses

1,284



(4,402)


Change in other current assets

(30)



330


Change in other assets

(1,477)




Change in accounts payable and accrued liabilities

91,543



48,701


Change in other current liabilities

3,311



688


Change in other liabilities

(132)



612


Net cash provided by operating activities

486,254



357,807


Cash flows from investing activities:






Capital expenditures

(606,924)



(428,630)


Acquisition of oil and gas properties

(8,116)




Proceeds from sale of properties

324,888




Costs related to sale of properties

(2,337)




Redemptions of short-term investments



25,000


Derivative settlements

(13,644)



2,932


Advances from joint interest partners

(5,919)



(5,593)


Net cash used in investing activities

(312,052)



(406,291)


Cash flows from financing activities:






Proceeds from revolving credit facility

100,000




Principal payments on revolving credit facility

(335,570)




Purchases of treasury stock

(3,315)



(364)


Debt issuance costs

(85)



(2,998)


Other

(176)




Net cash used in financing activities

(239,146)



(3,362)


Decrease in cash and cash equivalents

(64,944)



(51,846)


Cash and cash equivalents:






Beginning of period

91,901



213,447


End of period

$

26,957



$

161,601


Supplemental non-cash transactions:






Change in accrued capital expenditures

$

51,129



$

(6,085)


Change in asset retirement obligations

1,624



3,441


Non-GAAP Financial Measures

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of the Company's consolidated 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. Adjusted EBITDA is not a measure of net income or cash flows as determined by United States generally accepted accounting principles, or GAAP.

The following table presents reconciliations of the non-GAAP financial measure of Adjusted EBITDA to the GAAP financial measures of net income and net cash provided by operating activities, respectively.


Three Months Ended June 30,


Six Months Ended June 30,


2014



2013



2014



2013



(In thousands)

Adjusted EBITDA reconciliation to net income:












Net income

$

38,833



$

67,119



$

208,786



$

118,970


Gain on sale of properties

(3,640)





(187,033)




Non-cash change in fair value of derivative instruments

54,165



(11,345)



69,529



4,953


Interest expense

38,990



21,392



79,148



42,575


Depreciation, depletion and amortization

97,276



66,790



188,548



133,051


Impairment of oil and gas properties

42



208



804



706


Exploration expenses

475



392



855



2,249


Stock-based compensation expenses

5,173



3,082



9,678



5,371


Income tax expense

23,287



37,824



124,806



68,911


Other non-cash adjustments

118



25



(628)



74


Adjusted EBITDA

$

254,719



$

185,487



$

494,493



$

376,860














Adjusted EBITDA reconciliation to net cash provided by operating activities:







Net cash provided by operating activities

$

277,987



$

187,260



$

486,254



$

357,807


Derivative settlements

(11,405)



1,246



(13,644)



2,932


Interest expense

38,990



21,392



79,148



42,575


Exploration expenses

475



392



855



2,249


Debt discount amortization and other

(1,733)



(1,007)



(3,220)



(1,753)


Current tax expense

3,345



837



6,111



937


Changes in working capital

(53,058)



(24,658)



(60,383)



(27,961)


Other non-cash adjustments

118



25



(628)



74


Adjusted EBITDA

$

254,719



$

185,487



$

494,493



$

376,860


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

The following table provides reconciliations of net income (GAAP) to Adjusted Net Income (non-GAAP) and diluted earnings per share (GAAP) to Adjusted Diluted Earnings Per Share (non-GAAP):



Three Months Ended June 30,


Six Months Ended June 30,



2014



2013



2014



2013




(In thousands, except per share data)

Net income


$

38,833



$

67,119



$

208,786



$

118,970


Non-cash change in fair value of derivative instruments


54,165



(11,345)



69,529



4,953


Gain on sale of properties


(3,640)





(187,033)




Impairment of oil and gas properties


42



208



804



706


Other non-cash adjustments


118



25



(628)



74


     Tax impact (1)


(19,000)



4,045



43,896



(2,145)


Adjusted Net Income


$

70,518



$

60,052



$

135,354



$

122,558















Diluted earnings per share


$

0.39



$

0.72



$

2.08



$

1.28


Non-cash change in fair value of derivative instruments


0.54



(0.12)



0.69



0.05


Gain on sale of properties


(0.04)





(1.86)




Impairment of oil and gas properties






0.01



0.01


Other non-cash adjustments






(0.01)




     Tax impact (1)


(0.19)



0.05



0.44



(0.02)


Adjusted Diluted Earnings Per Share


$

0.70



$

0.65



$

1.35



$

1.32















Diluted weighted average shares outstanding


100,260



92,702



100,328



92,812















Effective tax rate


37.5

%


36.0

%


37.4

%


36.7

%



(1)

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

 

SOURCE Oasis Petroleum Inc.



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