Press release from PR Newswire
Oasis Petroleum Inc. Announces Quarter Ending September 30, 2011 Earnings
Monday, November 07, 2011
Oasis Petroleum Inc. Announces Quarter Ending September 30, 2011 Earnings16:01 EST Monday, November 07, 2011HOUSTON, Nov. 7, 2011 /PRNewswire/ -- Oasis Petroleum Inc. (NYSE: OAS) ("Oasis" or the "Company") today announced financial and operational results for the quarter ended September 30, 2011. Highlights for the three months ended September 30, 2011 include:Grew average daily production to 11,583 barrels of oil equivalent per day ("Boepd"), a 110% increase over the third quarter of 2010. Daily production increased by 47% compared to the second quarter of 2011.Increased Adjusted EBITDA to $62.9 million, an increase of $40.9 million over the third quarter of 2010 and a sequential increase of $18.4 million over the second quarter of 2011. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income (loss) and net cash provided by operating activities, see "Non-GAAP Financial Measure" below."Our team's continued execution of our business plan resulted in production growth in the third quarter of 2011 of 47% over the second quarter 2011 and 110% over the third quarter of 2010. Additionally, production continues to grow into the fourth quarter of 2011," said Thomas B. Nusz, Oasis' Chairman and Chief Executive Officer. "Our multi-year inventory of oil drilling locations in the Williston Basin provides us with strong visible growth potential. Consistent with our plan, we just added our eighth and ninth operated rigs."Financial UpdateAverage price per barrel of oil, without realized derivatives, was $83.52 in the third quarter of 2011, compared to $66.42 in the third quarter of 2010 and $95.48 in the second quarter of 2011. The average price differential compared to West Texas Intermediate ("WTI") crude oil index prices was 6% in the third quarter of 2011, compared to 13% in the third quarter of 2010 and 7% in the second quarter of 2011. The Company's differentials have improved due to higher quoted prices for Bakken crude in markets such as Clearbrook, Minnesota, and Guernsey, Wyoming.Total revenue for the third quarter of 2011 was $87.6 million compared to $33.0 million for the third quarter of 2010, an increase of 166%. Sequential quarter-over-quarter revenue growth was $20.4 million, or 30%.Lease operating expenses ("LOE") increased $6.6 million to $9.8 million for the third quarter 2011 compared to the third quarter 2010 and increased by $3.6 million in the third quarter 2011 compared to the second quarter 2011. Lease operating expenses increased by $2.90 per Boe, or 46%, to $9.23 per Boe in the third quarter 2011 compared to the third quarter 2010. Lease operating expenses increased by $0.60 per Boe, or 7%, in the third quarter 2011 compared to the second quarter 2011 of $8.63 per Boe. This increase was due to an increased number of producing wells, increased water production combined with increased costs associated with salt water disposal, and the continuing impact of the inclement weather experienced during the first half of 2011.General and administrative ("G&A") expenses totaled $7.3 million in the third quarter of 2011, $4.8 million in the third quarter 2010, and $6.6 million in the second quarter 2011. The increase in G&A expenses from the second quarter of 2011 to the third quarter of 2011 was primarily due to the impact of higher compensation costs from organizational growth, additional audit fees related to our registration statements and additional consulting costs related to our 2011 Sarbanes-Oxley compliance project. G&A expenses were $6.86 per Boe in the third quarter of 2011, $9.57 per Boe in the third quarter 2010, and $9.21 per Boe in the second quarter 2011. On a per unit basis, G&A expenses were down 26% from the second quarter of 2011 to the third quarter of 2011 due to production growth. Additionally, the Company recorded approximately $1.0 million, or $0.96 per Boe, for the amortization of restricted stock-based compensation, which is included in G&A expenses for the third quarter of 2011, as compared to $0.6 million, or $1.11 per Boe, in the third quarter of 2010 and $1.0 million, or $1.45 per Boe, in the second quarter of 2011.Production taxes increased by $5.4 million to $8.9 million for the third quarter of 2011 compared to the third quarter of 2010 and increased by $1.8 million in the third quarter 2011 compared to the second quarter 2011. Production taxes as a percent of revenue were 10.1% in the third quarter 2011, 10.7% in the third quarter 2010, and 10.5% in the second quarter 2011. The production tax rate decreased primarily due to certain new wells in Montana subject to lower incentivized production tax rates. The following table compares Oasis' actual results with preliminary results provided on October 27, 2011:MetricActual 3Q 2011Preliminary3Q 2011LOE ($/Boe)$9.23$9.15 - $9.30G&A ($/Boe) $6.86$6.80 - $6.90Production Taxes (% of revenue)10.1% 10.0% - 10.2%Depreciation, depletion and amortization totaled $20.9 million in the third quarter of 2011, $9.8 million in the third quarter 2010, and $13.1 million in the second quarter 2011. Depreciation, depletion and amortization was $19.57 per Boe in the third quarter of 2011, $19.25 per Boe in the third quarter 2010, and $18.24 per Boe in the second quarter 2011. The increase in DD&A expense for the three months ended September 30, 2011 was primarily due to the increase in production quarter over quarter during 2011.The Company recorded non-cash charges related to impairment of oil and natural gas properties of $0.4 million in the third quarter of 2011 related to unproved property leases that expired during the period. Interest expense increased $6.6 million to $6.8 million for the third quarter 2011 compared to the third quarter 2010 and remained consistent in the third quarter 2011 compared to the second quarter 2011. The increase was the result of interest related to the Company's senior unsecured notes issued in February 2011 at an interest rate of 7.25%. There were no borrowings under the Company's revolving credit facility during the three months ended September 30, 2011 and 2010, respectively.Income tax expense was $38.9 million for the three months ended September 30, 2011, resulting in an effective tax rate of 37.01%. Our effective tax rate is expected to continue to closely approximate the statutory rate applicable to the U.S. and the blended state rate of the states in which we conduct business. Our income tax expense for the three months ended September 30, 2010 was recorded at 39.4% of pre-tax net income. In addition, we recorded a $6.2 million discrete deferred tax expense in September 2010 for changes in estimates to our deferred tax liability for the initial book and tax basis differences recorded at the time of our corporate reorganization in June 2010.Adjusted EBITDA for the third quarter of 2011 was $62.9 million, an increase of $40.9 million, or 186%, over the third quarter of 2010 of $22.0 million, and a 41% increase over the second quarter of 2011 of $44.6 million.The Company reported net income of $66.3 million, or $0.72 per weighted average diluted share, for the third quarter of 2011 as compared to a net loss of $1.7 million, or $0.02 per weighted average diluted share, for the third quarter of 2010. The third quarter of 2011 included an unrealized gain on derivative instruments of $71.4 million, an increase of $39.7 million, or 125%, over the second quarter of 2011 of $31.7 million. Operational UpdateAverage daily production for the third quarter of 2011 was 11,583 Boepd. The following table shows the Company's drilling activity by project area as of September 30, 2011:Bakken and Three Forks WellsWest WillistonEast NessonSanishTotal WillistonBasinProducing Wells:Producing on or before 12/31/10:Gross Operated (Net)20(17.0)31(25.8)--51(42.8)Gross Non-Operated (Net)33(3.0)35(3.5)123(9.6)191(16.1)Production started in 1Q 2011:Gross Operated (Net)8(5.5)----8(5.5)Gross Non-Operated (Net)--4(0.3)11(0.6)15(0.9)Production started in 2Q 2011:Gross Operated (Net)14(11.0)2(1.6)--16(12.6)Gross Non-Operated (Net)2(0.1)5(0.3)7(0.5)14(0.9)Production started in 3Q 2011:Gross Operated (Net)18(14.9)4(2.5)--22(17.4)Gross Non-Operated (Net)----20(1.3)20(1.3)Wells Waiting on Completion on 9/30/11:Gross Operated (Net)17(13.1)4(2.5)--21(15.6)Gross Non-Operated (Net)--2(0.1)12(1.0)14(1.1)Wells Drilling on 9/30/11:Gross Operated (Net)6(4.7)1(0.7)--7(5.4)Gross Non-Operated (Net)2(0.4)1-8(0.5)11(0.9)Capital ExpendituresOasis' exploration and production capital expenditures were $198.9 million for the third quarter of 2011 and $399.4 million year to date ending September 30, 2011. The following table depicts the Company's capital expenditures by category:($ in millions)1Q 112Q 113Q 11YTD 2011E&P Capital by Project AreaWest Williston$ 61.3$ 101.0153.8$ 316.1East Nesson9.817.937.365.0Sanish18.104.22.1688.1Other (Barnett shale)-0.2-0.2Total E&P Capital Expenditures$ 75.5$ 125.0$ 198.9$ 399.4Oasis Well Services-22.214.171.124Field Office-1.00.61.6Non E&P0.52.23.25.9Total Company Capital Expenditures (1)$ 76.0$ 131.8$ 206.5$ 414.3(1) Total Company capital expenditures reflected in the table above differ from the amounts shown in the statement 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 statement of cash flows are presented on a cash basis. The capital expenditures amount presented in the statement of cash flows also includes cash paid for asset retirement obligations.LiquidityOn September 30, 2011, Oasis had total cash and cash equivalents of $163.6 million and short-term investments of $124.9 million. The Company had no outstanding indebtedness under its $137.5 million revolving credit facility. Subsequent to the end of the third quarter of 2011, Oasis increased its borrowing base to $350 million and priced a $400 million offering of senior unsecured notes due 2021.Risk ManagementAs of November 7, 2011, the Company had the following outstanding commodity derivative contracts, all of which settle monthly:Critical Prices ($ / Barrel)TypeRemaining TermSub-FloorFloorWtd. Avg. CeilingBarrels of Oil per DayTwo-Way Collar2 Months (Nov-Dec)$60.00$80.25448Two-Way Collar2 Months (Nov-Dec)$70.00$98.85400Two-Way Collar2 Months (Nov-Dec)$75.00$92.451,200Two-Way Collar2 Months (Nov-Dec)$85.00$101.612,500Two-Way Collar2 Months (Nov-Dec)$90.00$104.651,000Two-Way Collar2 Months (Nov-Dec)$95.00$123.392,500Total 2011 Collars (Weighted Average Price)$84.43$105.378,048Three-Way Collar2 Months (Nov-Dec)$60.00$80.00$94.98500Total 2011 Three-Ways (Weighted Average Price)$60.00$80.00$94.98500Total 2011 Hedges8,548Two-Way Collar12 Months (Jan-Dec)$75.00$93.00500Two-Way Collar12 Months (Jan-Dec)$80.00$103.251,000Two-Way Collar12 Months (Jan-Dec)$85.00$102.421,000Two-Way Collar12 Months (Jan-Dec)$90.00$112.621,500Two-Way Collar12 Months (Jan-Dec)$95.00$116.30500Total 2012 Collars (Weighted Average Price)$85.56$106.504,500Three-Way Collar12 Months (Jan-Dec)$60.00$90.00$105.754,000*Three-Way Collar12 Months (Jan-Dec)$65.00$85.00$108.081,500Three-Way Collar12 Months (Jan-Dec)$70.00$90.00$118.30500Three-Way Collar12 Months (Jan-Dec)$75.00$95.00$120.001,000Total 2012 Three-Ways (Weighted Average Price)$63.93$89.64$109.187,000Total 2012 Deferred Puts12 Months (Jan-Dec)$70.00$90.002,000*Total 2012 Hedges13,500Two-Way Collar12 Months (Jan-Dec)$90.00$112.782,000Total 2013 Collars (Weighted Average Price)$90.00$112.782,000Three-Way Collar12 Months (Jan-Dec)$70.00$90.00$108.804,000*Three-Way Collar12 Months (Jan-Dec)$75.00$95.00$130.001,000Total 2013 Three Ways (Weighted Average Price)$71.25$91.25$113.045,000Total 2013 Hedges7,000* Trades completed in October and before November 7, 2011. 3,000 of the 4,000 three-way collars in calendar year 2013 were done in October and before November 7, 2011.Conference Call InformationThe Company will host a conference call on Tuesday, November 8, 2011 at 10:00 a.m. Central Time to discuss its third quarter 2011 financial and operational results. Investors, analysts and other interested parties are invited to listen to the conference call via the Company's website at www.oasispetroleum.com or by dialing 877-621-0256 (U.S. participants) or 706-634-0151 (International participants); the Conference ID is 21146603. A recording of the conference call will be available by dialing 800-642-1687 (U.S.) or 706-645-9291 (International), using the Conference ID 21146603 beginning at 1:00 p.m. Central Time on the day of the call, and available until Tuesday, November 15, 2011. The conference call will also be available for replay for approximately 30 days at www.oasispetroleum.com.Forward-Looking StatementsThis 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.Richard Robuck, (281) 404-9600Director ? Investor RelationsOasis Petroleum Inc. Financial StatementsOasis Petroleum Inc.Condensed Consolidated Balance Sheet(Unaudited)September 30, 2011December 31,2010(In thousands, except share data)ASSETSCurrent assets Cash and cash equivalents $ 163,601$ 143,520Short-term investments124,939-Accounts receivable ? oil and gas revenues 40,70325,909Accounts receivable ? joint interest partners 55,11528,596Inventory 2,8131,323Prepaid expenses 817490Advances to joint interest partners 3,8463,595Derivative instruments 33,284-Deferred income taxes-2,470Other current assets337-Total current assets 425,455205,903Property, plant and equipment Oil and gas properties (successful efforts method) 983,768580,968Other property and equipment 13,8251,970Less: accumulated depreciation, depletion, amortization and impairment (148,121)(99,255)Total property, plant and equipment, net 849,472483,683Derivative instruments 28,166-Deferred costs and other assets 11,2832,266Total assets$ 1,314,376$ 691,852LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilitiesAccounts payable $ 43,825$ 8,198Advances from joint interest partners 11,1943,101Revenues and production taxes payable14,9536,180Accrued liabilities 82,38658,239Accrued interest payable 4,8352Derivative instruments -6,543Deferred income taxes11,684-Total current liabilities 168,87782,263Long-term debt 400,000-Asset retirement obligations 11,5667,640Derivative instruments -3,943Deferred income taxes 86,29145,432Other liabilities 1,027780Total liabilities 667,761140,058Commitments and contingencies Stockholders' equityCommon stock, $0.01 par value; 300,000,000 shares authorized; 92,474,193 issued and 92,453,471 outstanding at September 30, 2011 and 92,240,345 issued and outstanding at December 31, 2010921920Treasury stock, at cost; 20,722 shares(562)-Additional paid-in-capital 646,310643,719Retained deficit(54)(92,845)Total stockholders' equity 646,615551,794Total liabilities and stockholders' equity $ 1,314,376$ 691,852Oasis Petroleum Inc.Condensed Consolidated Statement of Operations(Unaudited)Three Months Ended September 30,Nine Months Ended September 30,2011201020112010(In thousands, except per share amount)Oil and gas revenues $87,596$32,978$213,546$79,780ExpensesLease operating expenses 9,8353,20821,9759,112Production taxes 8,8733,51922,0418,131Depreciation, depletion and amortization 20,8599,75347,77124,385Exploration expenses 54(6)34536Impairment of oil and gas properties 3968253,31311,809Stock-based compensation expenses ---5,200General and administrative expenses 7,3064,84819,87012,107Total expenses 47,32322,147115,31570,780Operating income 40,27310,83198,2319,000Other income (expense)Net gain (loss) on derivative instruments 71,224(3,124)67,105(175)Interest expense (6,786)(236)(18,745)(1,083)Other income 524671,21582Total other income (expense) 64,962(3,293)49,575(1,176)Income before income taxes 105,2357,538147,8067,824Income tax expense38,9469,23955,01539,106Net income (loss) $ 66,289$ (1,701)$ 92,791$ (31,282)Income (loss) per share:Basic and diluted $ 0.72$ (0.02)$ 1.01$ (0.93)Weighted average shares outstanding:Basic92,06092,00092,05233,700Diluted92,16492,00092,20833,700Oasis Petroleum Inc.Selected Financial and Operational Statistics(Unaudited)Three Months Ended September 30,Nine Months Ended September 30,2011201020112010Operating results ($ in thousands):RevenuesOil $ 85,870$ 32,082$ 208,442$ 76,641Natural gas 1,7268965,1043,139Total oil and gas revenues 87,59632,978213,54679,780Production data:Oil (MBbls) 1,0284832,4071,134Natural gas (MMcf) 225142627451Oil equivalents (MBoe) 1,0665072,5121,209Average daily production (Boe/d) 11,5835,5079,2014,429Average sales prices:Oil, without realized derivatives (per Bbl) $ 83.52$ 66.42$ 86.58$ 67.58Oil, with realized derivatives (per Bbl) (1) 83.3566.4284.5867.53Natural gas (per Mcf) 7.666.318.146.96Cost and expense (per Boe of production):Lease operating expenses $ 9.23$ 6.33$ 8.75$ 7.54Production taxes 8.336.958.776.72Depreciation, depletion and amortization 19.5719.2519.0220.17Stock-based compensation expenses---4.30General and administrative expenses 6.869.577.9110.01(1) Realized prices include realized gains or losses on cash settlements for commodity derivatives, which do not qualify for and were not designated as hedging instruments for accounting purposes. Oasis Petroleum Inc.Condensed Consolidated Statement of Cash Flows(Unaudited)Nine Months Ended September 30,20112010(In thousands)Cash flows from operating activities:Net income (loss) $ 92,791$ (31,282)Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation, depletion and amortization 47,77124,385Impairment of oil and gas properties 3,31311,809Deferred income taxes 55,01539,106Derivative instruments (67,105)175Stock-based compensation expenses 2,5925,810Debt discount amortization and other 1,041422Working capital and other changes:Change in accounts receivable (41,286)(22,895)Change in inventory (1,850)(745)Change in prepaid expenses (297)(711)Change in other current assets (337)-Change in other assets (103)(84)Change in accounts payable and accrued liabilities 47,8204,887Change in other liabilities 3178Net cash provided by operating activities 139,68230,885Cash flows from investing activities:Capital expenditures (386,927)(164,666)Derivative settlements (4,831)(59)Purchases of short-term investments (124,939)-Advances to joint interest partners (408)(1,198)Advances from joint interest partners 8,0931,218Net cash used in investing activities (509,012)(164,705)Cash flows from financing activities:Proceeds from sale of common stock-399,669Proceeds from credit facility-72,000Principal payments on credit facility-(107,000)Proceeds from issuance of senior notes400,000-Purchases of treasury stock(562)-Debt issuance costs (10,027)(1,788)Net cash provided by financing activities 389,411362,881Increase in cash and cash equivalents Cash and cash equivalents:20,081229,061Beginning of period 143,52040,562End of period $ 163,601$ 269,623Supplemental non-cash transactions:Change in accrued capital expenditures $ 23,422$ 22,585Asset retirement obligations 3,925261Non-GAAP Financial MeasureAdjusted 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 and amortization, property impairments, exploration expenses, unrealized derivative gains and losses and non-cash stock-based compensation expense. 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 tables present a reconciliation of the non-GAAP financial measure of Adjusted EBITDA to the GAAP financial measures of net income (loss) and net cash provided by operating activities, respectively. Adjusted EBITDA ReconciliationsThree Months EndedSeptember 30,Nine Months EndedSeptember 30,2011201020112010(In thousands)Adjusted EBITDA reconciliation to Net Income (Loss): Net income (loss)$ 66,289$ (1,701)$ 92,791$ (31,282)Change in unrealized (gain) loss on derivative instruments(71,403)3,124(71,936)116Interest expense6,78623618,7451,083Depreciation, depletion and amortization20,8599,75347,77124,385Impairment of oil and gas properties3968253,31311,809Exploration expenses54(6)34536Stock-based compensation expenses1,0215612,5925,810Income tax expense 38,9469,23955,01539,106Adjusted EBITDA$ 62,948$ 22,031$ 148,636$ 51,063Adjusted EBITDA reconciliation to Net Cash Provided by Operating Activities:Net cash provided by operating activities$ 37,587$ 10,255$ 139,682$ 30,885Realized loss on derivative instruments(179)-(4,831)(59)Interest expense6,78623618,7451,083Exploration expenses54(6)34536Debt discount amortization and other(393)(90)(1,041)(422)Changes in working capital19,09311,636(4,264)19,540Adjusted EBITDA$ 62,948$ 22,031$ 148,636$ 51,063SOURCE Oasis Petroleum Inc.