Business Context and Reporting Period
The provided filing is Oasis Petroleum Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2017, not a Chord Energy Corp. filing. Oasis was an independent exploration and production company focused on unconventional oil and natural gas resources in the Williston Basin, with midstream and well services segments.
Key Financial Metrics
| Metric | Q3 2017 | Q3 2016 | 9M 2017 | 9M 2016 |
|---|---|---|---|---|
| Total revenue | $304.7 million | $177.3 million | $844.0 million | $486.7 million |
| Operating income (loss) | $32.4 million | $(25.7) million | $57.9 million | $(129.1) million |
| Net loss attributable to Oasis | $(41.2) million | $(33.9) million | $(0.8) million | $(188.3) million |
| Loss per diluted share | $(0.18) | $(0.19) | $0.00 | $(1.09) |
| Net cash from operations | $88.9 million | $32.0 million | $298.7 million | $123.4 million |
| Free cash flow, non-GAAP | $(94.0) million | $(3.4) million | $(149.8) million | $(25.4) million |
Q3 operating margin was approximately 10.6%, compared with negative 14.5% in the prior-year quarter. Net margin was approximately negative 13.5%, compared with negative 19.1%. For the nine-month period, operating margin was approximately 6.9%, compared with negative 26.5% in 2016; net margin was approximately negative 0.1%, compared with negative 38.7%.
- Average production increased to 66,125 Boepd in Q3 2017 from 48,509 Boepd, and to 63,764 Boepd for the nine-month period from 49,440 Boepd.
- Q3 oil and gas revenue rose 59% to $248.6 million; total revenue rose 72%. Nine-month total revenue rose 73%.
- Q3 adjusted EBITDA was $179.6 million; nine-month adjusted EBITDA was $471.5 million.
- Cash and cash equivalents were $8.5 million at September 30, 2017, versus $11.2 million at December 31, 2016. Working capital was negative $99.3 million.
- Total assets were $6.39 billion and total stockholders’ equity was $3.06 billion at September 30, 2017.
- Long-term debt was $2.34 billion, including $395.0 million drawn under the senior secured revolving facility and $2.05 billion principal amount of senior unsecured notes, including convertible notes.
- The company reported $953.5 million of total liquidity, consisting of cash and $945.0 million of unused committed capacity under its revolving facilities.
Material Changes Versus the Prior Comparable Period
- Production growth was driven primarily by the December 2016 acquisition of approximately 55,000 net Williston Basin acres and additional well completions.
- Q3 2017 included 24 gross, or 15.1 net, operated well completions, while 82 gross operated wells remained waiting on completion at quarter-end.
- Oil revenue benefited from higher volumes and prices. Average oil price before derivative settlements increased to $46.35 per barrel from $40.54; natural gas price increased to $3.50 per Mcf from $1.84.
- Midstream revenue increased to $18.8 million from $8.5 million, primarily due to increased gathering, processing and transportation activity. Well services revenue increased to $16.1 million from $10.6 million.
- Operating income improved materially, but Q3 net loss worsened because the company recorded a $54.3 million derivative loss, compared with a $20.8 million derivative gain in Q3 2016.
- Interest expense increased to $37.4 million from $31.7 million, primarily due to the convertible notes and higher revolving-facility borrowings.
- Capital expenditures increased to $443.6 million on a cash-flow basis for the nine months, versus $340.3 million in 2016. Reported capital expenditures under management’s measure were $523.1 million, including accrued expenditures.
Guidance, Outlook, Risks and Unusual Items
- Management maintained expected 2017 adjusted capital expenditures of approximately $620.0 million, including $410.0 million for drilling and completion, $110.0 million for midstream infrastructure and $100.0 million for other expenditures.
- Management stated that available cash, operating cash flow and revolving-facility capacity were expected to fund the 2017 capital budget and near-term obligations, while noting that future development of the broader drilling inventory would require substantially more capital.
- Oasis Midstream Partners LP completed an IPO in September 2017. Including the underwriters’ option exercised in October, OMP raised approximately $137.2 million net, of which approximately $131.6 million was distributed to Oasis. The IPO created a public non-controlling interest.
- Oasis and OMP entered into 15-year fee-based midstream and services arrangements. OMP also had a new $200.0 million revolving facility with no borrowings outstanding at quarter-end.
- The company used swaps and collars covering significant portions of expected oil and natural gas production. The net derivative liability was approximately $18.7 million at September 30, 2017; a 10% increase in crude oil prices was estimated to reduce derivative fair value by approximately $103.8 million.
- Key risks include volatile oil and natural gas prices, transportation capacity, service costs, drilling and completion execution, access to capital, reserve and production uncertainty, environmental and regulatory matters, counterparty credit risk and debt covenant compliance.
- Mirada Energy and related entities filed litigation seeking more than $100 million in damages and other relief concerning Wild Basin operating and midstream rights. The company considers the claims without merit, but stated that an adverse result could materially affect operations, assets and future revenues.
- At September 30, 2017, the company was in compliance with its credit-facility covenants. Management reported a consolidated EBITDAX-to-interest ratio of 4.3 versus a 2.5 minimum and a covenant current ratio of 2.6 versus a 1.0 minimum.
Most Important Facts to Verify
- Verify the issuer identity: the supplied text identifies Oasis Petroleum Inc., whereas the request metadata identifies Chord Energy Corp.
- Verify whether the $620.0 million capital expenditure guidance and expected liquidity remained achievable after the reporting date.
- Review debt maturities, especially the $54.3 million of 2019 notes and the requirement to retire or refinance them before the revolving facility’s April 2020 maturity.
- Assess the effect of oil-price changes on derivative settlements, realized prices, cash flow and covenant headroom.
- Monitor the Mirada litigation and any impact on Wild Basin operations or midstream economics.
- Evaluate the economic effect of the OMP IPO, including public ownership, distributions to Oasis and the long-term related-party service contracts.