OAS Oasis Petroleum Inc

HOUSTON, Aug. 5, 2020 /PRNewswire/ -- Oasis Petroleum Inc. (NASDAQ: OAS) ("Oasis" or the "Company") today announced financial and operating results for the second quarter of 2020 and updated its 2020 outlook.

2Q20 Highlights:

• Delivered net cash used in operating activities of $47.9 million and Adjusted EBITDA⁽¹⁾ of $174.2 million in 2Q20.
• Produced 54.1 MBoepd in 2Q20 with oil volumes at 36.4 MBopd.
• E&P CapEx⁽²⁾ was $36.9 million for 2Q20.
• LOE per Boe decreased 12% to $6.01 per Boe in 2Q20 as compared to $6.83 per Boe in 1Q20.
• Crude oil differentials were solid over 2Q20, averaging $2.90 off of NYMEX WTI.
• E&P pre-tax loss was $116.4 million and E&P Free Cash Flow⁽¹⁾ was $92.7 million in 2Q20.
• Midstream pre-tax income including non-controlling interests was $25.3 million and Midstream Adjusted EBITDA⁽¹⁾ was $44.2 million in 2Q20. Oasis Midstream Partners LP (NASDAQ: OMP) declared a distribution of $0.54 per unit, unchanged from 1Q20.
• Continued to achieve industry-leading gas capture of approximately 96% across the entire Williston position and approximately 93% in the Delaware position.

Updated 2020 Outlook

• Expecting 2H20 E&P CapEx⁽²⁾ of $60 million to $75 million. Full year 2020 E&P CapEx of $248 million to $263 million is 54-58% below original February 2020 guidance and towards the low-end of the CapEx range provided in May 2020.
• Volumes have steadily increased from trough levels observed in May 2020. 3Q20 and 4Q20 oil volumes are expected to approximate 40-42 MBopd, approximately 13% above 2Q20 levels based on current market conditions.
• Expecting to generate free cash flow at strip NYMEX WTI prices based on the Company's revised 2020 plan.
• 2H20 hedged volumes of 25 MBopd drive mark-to-market value of $85 million as of June 30, 2020.
• Midstream CapEx is expected to range between $5 million to $10 million in 2H20. Full year 2020 midstream CapEx of $36 million to $40 million is more than 60% below original February 2020 guidance. Approximately 25% of 2020 midstream CapEx is attributed to Oasis. See the Oasis Midstream Partners LP ("OMP") press release issued on August 5, 2020 for more details.

Chairman and Chief Executive Officer, Thomas B. Nusz, commented, "Oasis executed well through an exceptionally tumultuous period. The Oasis team responded swiftly and effectively, powering down activity in an orderly manner, significantly lowering operating cost structure and capital while maintaining the integrity of our infrastructure to enhance flexibility for the future. The team was successful in keeping per unit lease operating expense low despite significant shut-ins reflecting meticulous cost management, including a carefully planned curtailment process, pricing concessions, labor optimization, and deferring workovers. Strip pricing has improved materially, but Oasis will maintain a prudent approach to future activity. Capital efficiency improvements and a significantly lower cost structure will improve economics for future development. Additionally, cash generation and free cash flow benefit from a robust hedge position and our midstream ownership which continues to support industry leading gas capture. As always, we remain focused on the health and safety of our employees, contractors, and communities."

Select Financial Metrics

The following table presents select financial data for the period presented:

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

G&A totaled $37.4 million in 2Q20, $30.9 million in 2Q19 and $31.2 million in 1Q20. Amortization of equity-based compensation, which is included in G&A, was $4.9 million, or $0.99 per barrel of oil equivalent ("Boe"), in 2Q20 as compared to $8.9 million, or $1.16 per Boe, in 2Q19 and $6.8 million, or $0.93 per Boe, in 1Q20. G&A for the Company's E&P segment, excluding G&A expenses attributable to other services, totaled $33.5 million in 2Q20, $25.8 million in 2Q19 and $23.3 million in 1Q20. E&P Cash G&A (non-GAAP) expenses, excluding G&A expenses attributable to other services, non-cash equity-based compensation expenses and other non-cash charges, were $5.84 per Boe in 2Q20, $2.24 per Boe in 2Q19 and $2.29 per Boe for 1Q20. For a definition of E&P Cash G&A expenses and a reconciliation of G&A expenses to E&P Cash G&A, see "Non-GAAP Financial Measures" below.

Impairment expense was $2.3 million in 2Q20 as compared to $4.8 billion in 1Q20. In 2Q20, the Company recorded impairment charges of $1.0 million on its equipment and materials inventory, $0.8 million on its unproved oil and gas properties and $0.6 million on its prepaid midstream equipment. In 1Q20, the Company recorded impairment charges of $4.4 billion on its proved oil and gas properties in the Williston Basin and the Delaware Basin, $291.3 million on its unproved oil and gas properties, $108.3 million on its midstream assets and $15.8 million on its well services assets.

Interest expense was $44.4 million in 2Q20 as compared to $43.2 million in 2Q19 and $95.8 million in 1Q20. Capitalized interest totaled $1.8 million in 2Q20, $3.6 million in 2Q19 and $2.3 million in 1Q20. Cash Interest (non-GAAP) totaled $39.0 million in 2Q20, $42.0 million in 2Q19 and $93.5 million in 1Q20. For a definition of Cash Interest and a reconciliation of interest expense to Cash Interest, see "Non-GAAP Financial Measures" below.

In 2Q20, the Company recorded an income tax benefit of $2.6 million, resulting in a 2.7% effective tax rate as a percentage of its pre-tax loss for the quarter. In 1Q20, the Company recorded an income tax benefit of $254.7 million, resulting in a 5.6% effective tax rate as a percentage of its pre-tax loss for the quarter.

In 2Q20, the Company reported a net loss of $92.9 million, or $0.29 per diluted share, as compared to net income of $42.8 million, or $0.14 per diluted share, in 2Q19. Excluding certain non-cash items and their tax effect, Adjusted Net Income Attributable to Oasis (non-GAAP) was $73.5 million, or $0.23 per diluted share, in 2Q20, as compared to Adjusted Net Income Attributable to Oasis of $11.0 million, or $0.03 per diluted share, in 2Q19. Adjusted EBITDA (non-GAAP) in 2Q20 was $174.2 million, which included $25.3 million for derivatives monetized in 2Q20, as compared to Adjusted EBITDA of $249.6 million in 2Q19. For definitions of Adjusted Net Income (Loss) Attributable to Oasis and Adjusted EBITDA and reconciliations to the most directly comparable financial measures under GAAP, see "Non-GAAP Financial Measures" below.

Capital Expenditures and Completions

The following table presents the Company's total capital expenditures ("CapEx") by category for the periods presented:

Oasis completed 3 gross (1.9 net) operated wells in the Williston Basin and 6 gross (5.0 net) operated wells in the Delaware Basin.

Liquidity and Balance Sheet

As of June 30, 2020, Oasis had cash and cash equivalents of $77.4 million, total elected commitments under its revolving credit facility (the "Oasis Credit Facility") of $612.5 million and total elected commitments under the revolving credit facility among OMP, as parent, OMP Operating LLC, a subsidiary of OMP, as borrower, Wells Fargo Bank, N.A., as administrative agent and the lenders party thereto (the "OMP Credit Facility") of $575.0 million. In addition, Oasis had $502.0 million of borrowings and $71.6 million of outstanding letters of credit issued under the Oasis Credit Facility and $487.5 million of borrowings and a de minimis outstanding letter of credit issued under the OMP Credit Facility.

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. During 2Q20, the Company liquidated certain NYMEX WTI three-way costless collars for $25.3 million. As of August 5, 2020, the Company had the following outstanding commodity derivative contracts:

The June 2020 crude oil derivative contracts settled at a net $22.5 million, which was received in July 2020 and will be included in the Company's 3Q20 derivative settlements.

Conference Call Information

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

Or:

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 12, 2020 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, as well as the impact of the novel coronavirus 2019 ("COVID-19") pandemic on the Company's operations. 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, developments in the global economy, particularly the public health crisis related to the COVID-19 pandemic and the adverse impact thereof on demand for crude oil and natural gas, the outcome of government policies and actions, including actions taken to address the COVID-19 pandemic and to maintain the functioning of national and global economies and markets, the impact of Company actions to protect the health and safety of employees, vendors, customers, and communities, weather and environmental conditions, the timing of planned capital expenditures, availability of acquisitions, the ability to realize the anticipated benefits from the previously announced assignment by Oasis of Delaware Basin midstream assets 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 U.S. Securities and Exchange Commission. Additionally, the actions of foreign oil producers (most notably Saudi Arabia and Russia) to increase crude oil production, the unprecedented nature of the current economic downturn, the COVID-19 pandemic and the related decline of the crude oil exploration and production industry may make it particularly difficult to identify risks or predict the degree to which identified risks will impact the Company's business and financial condition. Because considerable uncertainty exists with respect to foreign oil production and the future pace and extent of a global economic recovery from the effects of the COVID-19 pandemic, the Company cannot predict whether or when crude oil production and economic activities will return to normalized levels.

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

Cash MT&G Reconciliation

Cash MT&G is defined as the total marketing, transportation and gathering expenses less non-cash valuation charges on pipeline imbalances. Cash MT&G is not a measure of marketing, transportation and gathering expenses as determined by GAAP. Management believes that the presentation of Cash MT&G provides useful additional information to investors and analysts to assess the cash costs incurred to get its commodities to market without regard for the change in value of its pipeline imbalances, which vary monthly based on commodity prices. The following table presents a reconciliation of the GAAP financial measure of marketing, transportation and gathering expenses to the non-GAAP financial measure of Cash MT&G for the periods presented:

E&P Cash G&A Reconciliation

E&P Cash G&A is defined as the general and administrative expenses less non-cash equity-based compensation expenses, other non-cash charges and G&A expenses attributable to other services, including midstream and other services, such as equipment rentals and well services. 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 to the non-GAAP financial measure of E&P Cash G&A for the periods presented:

Cash Interest and E&P Cash Interest Reconciliations

Cash Interest is defined as interest expense plus capitalized interest less amortization and write-offs of deferred financing costs and debt discounts included in interest expense, and E&P Cash Interest is defined as total Cash Interest less Cash Interest attributable to OMP. Cash Interest and E&P Cash Interest are not measures of interest expense as determined by GAAP. Management believes that the presentation of E&P Cash Interest provides useful additional information to investors and analysts for assessing the interest charges incurred on its debt to finance its E&P activities, excluding non-cash amortization, and its ability to maintain compliance with its debt covenants.

The following table presents a reconciliation of the GAAP financial measure of interest expense to the non-GAAP financial measures of Cash Interest and E&P Cash Interest for the periods presented:

Adjusted EBITDA Reconciliation

The Company defines Adjusted EBITDA as earnings (loss) 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 (loss) or cash flows as determined by GAAP. Management believes that the presentation of Adjusted EBITDA provides useful additional information to investors and analysts for assessing the Company's results of operations, financial performance and ability to generate cash from its business operations without regard to its financing methods or capital structure coupled with its ability to maintain compliance with its debt covenants.

The following table presents reconciliations of the GAAP financial measures of net income (loss) including non-controlling interests and net cash provided by operating activities to the non-GAAP financial measure of Adjusted EBITDA for the periods presented:

Segment Adjusted EBITDA and E&P Free Cash Flow Reconciliations

The Company defines E&P Free Cash Flow as Adjusted EBITDA for its exploration and production segment plus distributions to Oasis for its ownership of (i) OMP limited partner units, (ii) a controlling interest in OMP's general partner, OMP GP LLC, and (iii) retained interests in Bobcat DevCo LLC and Beartooth DevCo LLC; less E&P Cash Interest, capital expenditures for E&P and other, excluding capitalized interest, and midstream capital expenditures attributable to its retained interests in Bobcat DevCo LLC and Beartooth DevCo LLC. E&P Free Cash Flow is not a measure of net income (loss) or cash flows as determined by GAAP. Management believes that the presentation of E&P Free Cash Flow provides useful additional information to investors and analysts for assessing the financial performance of its E&P business as compared to its peers and its ability to generate cash from its E&P operations and midstream ownership interests after interest and capital spending. In addition, E&P Free Cash Flow excludes changes in operating assets and liabilities that relate to the timing of cash receipts and disbursements, which the Company may not control, and changes in operating assets and liabilities may not relate to the period in which the operating activities occurred.

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 two reportable business segments and to the non-GAAP financial measure of E&P Free Cash Flow for its exploration and production segment for the periods presented:

Adjusted Net Income (Loss) Attributable to Oasis and Adjusted Diluted Earnings (Loss) Attributable to Oasis Per Share Reconciliations

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 (loss) 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: