Business Context and Reporting Period
This Form 10-Q was filed by Oasis Petroleum Inc. for the quarter ended March 31, 2021. The provided filing text does not identify the registrant as Chord Energy Corp.; investors should verify the entity relationship. Oasis was an independent U.S. exploration and production company operating in the Williston and Permian Basins, with a consolidated midstream business through Oasis Midstream Partners LP (OMP).
The company emerged from Chapter 11 bankruptcy on November 19, 2020 and adopted fresh-start accounting. Accordingly, first-quarter 2021 Successor results are not directly comparable with first-quarter 2020 Predecessor results.
Financial Metrics
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Total revenue | $355.5 million | $387.8 million |
| Operating income (loss) | $150.8 million | $(4.86) billion |
| Net loss attributable to Oasis | $(43.6) million | $(4.31) billion |
| Loss per diluted share | $(2.18) | $(13.61) |
| Net cash provided by operations | $190.4 million | $107.8 million |
| Capital expenditures, cash basis | $22.0 million | $147.6 million |
| Adjusted EBITDA attributable to Oasis | $126.0 million | $133.8 million |
| E&P free cash flow | $93.5 million | $(83.4) million |
Production averaged 57,205 Boepd, consisting of approximately 64% oil. Average crude oil sales price was $56.09 per barrel, or $49.11 after derivative settlements. Average natural gas and NGL sales price was $5.41 per Mcf, or $5.46 after derivative settlements. E&P lease operating expense was $9.92 per Boe, and crude oil differentials averaged a $1.58 per barrel discount to NYMEX WTI.
At March 31, 2021, cash and cash equivalents were $113.1 million. Total assets were $2.30 billion, total liabilities were $1.34 billion, and stockholders’ equity was $962.0 million. Working capital was negative $86.1 million.
Total long-term debt was $674.2 million, consisting of $234.0 million outstanding under the OMP Credit Facility and $450.0 million of OMP senior notes, net of deferred financing costs. Oasis had no borrowings under its revolving facility and $448.7 million of unused capacity; OMP had $210.5 million of unused capacity. Management reported compliance with applicable financial covenants.
The company recorded a $181.5 million net loss on commodity derivatives, including $22.6 million of cash settlement payments. The net derivative liability was $253.0 million at quarter-end.
Material Changes Versus Prior Comparable Period
- Revenue declined $32.3 million, primarily because production fell to 57,205 Boepd from 80,066 Boepd, partly offset by materially higher commodity prices.
- Operating results improved substantially because Q1 2020 included approximately $4.8 billion of impairment charges. Q1 2021 included no material asset impairment.
- Net loss narrowed to $43.6 million from $4.31 billion, although the 2021 result included a $181.5 million derivative loss versus a $285.3 million derivative gain in Q1 2020.
- Operating cash flow increased $82.6 million, supported by lower interest, lease operating, gathering, transportation and general and administrative costs.
- Capital expenditures decreased substantially as the company reduced drilling and development activity.
- General and administrative expense decreased to $20.7 million from $31.2 million. Headcount declined 15% from December 31, 2020 to March 31, 2021.
- On March 30, 2021, Oasis completed a midstream simplification. It contributed its remaining interests in Bobcat DevCo and Beartooth DevCo to OMP for approximately $512.5 million of total consideration, including $231.5 million in cash and OMP common units. Oasis owned approximately 77% of OMP following the transaction.
- OMP issued $450.0 million of 8.00% senior notes due April 1, 2029. Proceeds funded the midstream simplification, repaid approximately $204.0 million of OMP revolver borrowings and paid fees.
- The company declared a $0.375 per share dividend and authorized a $100.0 million share-repurchase program; no shares were repurchased during the quarter.
Guidance, Outlook, Risks and Unusual Items
No formal production, capital spending or earnings guidance is clearly provided in the filing text. Management stated that market conditions and energy demand had improved as COVID-19 restrictions eased, but continued to emphasize uncertainty from new variants, potential renewed restrictions, global supply decisions and commodity-price volatility.
On May 3, 2021, after quarter-end, Oasis agreed to acquire approximately 95,000 net Williston Basin acres from QEP Energy Company for approximately $745.0 million, subject to adjustments. Closing was expected in July 2021. The acquisition was expected to be financed with cash, Oasis revolver borrowings and a $500.0 million committed senior secured second-lien bridge facility, with anticipated replacement by high-yield debt. The transaction would add estimated production of approximately 27,000 Boepd based on company estimates.
Other notable matters include the appointment of Daniel E. Brown as CEO on April 14, 2021, a $22.8 million accrued balance related to the Mirada settlement, and uncertainty regarding the future operation of the Dakota Access Pipeline. The company also reported $6.8 million of letters of credit and $7.2 million of net surety bond exposure.
Principal risks include crude oil, natural gas and NGL price volatility; substantial derivative liabilities and potential cash settlements; acquisition financing and integration risk; leverage and covenant compliance; counterparty and customer credit risk; environmental and regulatory matters; litigation; production declines; infrastructure constraints; and COVID-19-related demand uncertainty.
Most Important Facts to Verify
- Confirm whether this Oasis Petroleum filing is the intended filing for Chord Energy Corp. and understand any successor-company, merger or name-change implications.
- Reconcile Successor versus Predecessor accounting before drawing period-over-period conclusions.
- Assess the $253.0 million net derivative liability, hedge volumes and the potential effect of commodity-price changes on cash settlements.
- Evaluate liquidity after the proposed $745.0 million Williston acquisition, including expected bridge or high-yield financing and resulting leverage.
- Review OMP’s 8.00% senior notes, revolving debt, covenant thresholds and restrictions on distributions.
- Verify the assumptions and independent review status of the proposed acquisition’s acreage, production and other operating estimates.
- Monitor the Dakota Access Pipeline environmental review and any resulting transportation or operational impact.
- Review dividend sustainability and the $100.0 million repurchase authorization in light of negative working capital, derivative obligations and acquisition funding needs.