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

HOUSTON, Nov. 5, 2019 /PRNewswire/ -- Oasis Petroleum Inc. (NYSE: 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.

"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:

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

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:

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:

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:

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

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:

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.

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:

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:

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:

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:

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: