Business Context and Reporting Period
The filing is Oasis Petroleum Inc.’s unaudited Form 10-Q for the three months ended March 31, 2016, filed May 10, 2016. The provided metadata identifies Chord Energy Corp., but the filing itself identifies the registrant as Oasis Petroleum Inc.; this company-name discrepancy should be verified.
Oasis was an independent exploration and production company focused on unconventional oil and natural gas resources in the North Dakota and Montana regions of the Williston Basin. It also operated well services and midstream services businesses.
Key Financial Metrics
| Metric | Q1 2016 | Q1 2015 | Change |
|---|---|---|---|
| Total revenue | $130.3 million | $180.4 million | Down 28% |
| Oil and gas revenue | $117.3 million | $173.9 million | Down $56.5 million |
| Operating loss | $75.2 million | $33.6 million | Worsened $41.6 million |
| Net loss | $64.5 million | $18.0 million | Worsened $46.4 million |
| Basic and diluted loss per share | $0.40 | $0.17 | Loss increased |
| Adjusted EBITDA | $132.9 million | $208.9 million | Down 36% |
| Net cash from operating activities | $(46.1) million | $88.4 million | Decreased $134.4 million |
| Capital expenditures | $88.0 million | Not clearly provided in the highlighted MD&A table | Q1 2016 spending reduced |
| Cash and cash equivalents | $19.4 million | $10.2 million | Up $9.2 million year over year |
Average daily production was 50,315 Boe, essentially flat with 50,446 Boe in Q1 2015. Oil production declined to 3.87 million barrels from 4.02 million, while natural gas production increased to 4.25 Bcf from 3.11 Bcf. The average oil price before derivative settlements fell to $28.74 per barrel from $40.73, and the average natural gas price fell to $1.44 per Mcf from $3.23.
Lease operating expense improved to $6.78 per Boe from $8.62 per Boe. Total operating expenses declined modestly to $205.5 million from $214.0 million, but revenue declines and high DD&A of $122.4 million drove the larger operating loss.
Balance Sheet, Debt, and Liquidity
- Total assets were $5.56 billion at March 31, 2016, compared with $5.65 billion at December 31, 2015.
- Total liabilities were $3.12 billion, including $2.20 billion of reported long-term debt.
- Senior unsecured notes had $2.17 billion of principal outstanding, with maturities from 2019 through 2023.
- Revolving credit facility borrowings were $65.0 million, with $14.2 million of letters of credit and $1.07 billion of unused borrowing-base committed capacity.
- Total liquidity, including cash, was reported at $1.09 billion. The company was in compliance with its credit-facility covenants; the reported EBITDAX-to-interest ratio was 4.7 versus a 2.5 minimum.
- The borrowing base and elected commitment were reduced from $1.525 billion to $1.150 billion in February 2016.
- Working capital was positive by $43.9 million at March 31, 2016, compared with a $95.7 million deficit at March 31, 2015.
Material Changes Versus the Prior Comparable Period
- Revenue declined primarily because of sharply lower oil and natural gas prices, while production volumes were broadly stable.
- Operating cash flow changed from a $88.4 million inflow to a $46.1 million outflow, reflecting lower realized commodity prices and working-capital effects.
- Capital expenditures fell substantially from the prior-year level; Q1 2016 cash capital expenditures were $103.4 million versus $359.1 million in Q1 2015.
- The company reduced its 2016 drilling and completion activity and operated one fracturing fleet during the quarter.
- Oasis issued 39.1 million common shares in February 2016 and received $183.2 million of net proceeds for general corporate purposes.
- In March 2016, the company repurchased $29.8 million principal amount of senior notes for $22.3 million and recognized a $7.0 million pretax gain.
- Derivative gains declined to $14.4 million from $47.1 million, although cash derivative settlements remained significant at $73.3 million.
- Stockholders’ equity increased to $2.44 billion from $2.32 billion, principally reflecting the equity issuance, partially offset by the quarterly net loss.
Guidance, Outlook, Risks, and Unusual Items
- Management’s 2016 capital expenditure budget was $400 million, including $340 million for E&P and $60 million for non-E&P activities. Spending could be adjusted based on oil prices, financing availability, drilling results, and other conditions.
- Management stated that available cash, operating cash flow, derivative settlements, and revolver capacity were expected to fund the planned 2016 capital budget and near-term obligations.
- Management highlighted sustained low commodity prices, transportation capacity, service costs, qualified personnel, reserve economics, access to capital, counterparty credit, environmental matters, and regulatory developments as key risks.
- The excess of expected undiscounted cash flows over carrying value for Bakken and Three Forks proved properties narrowed to $684.0 million from $1.265 billion at December 31, 2015. Management estimated that a further 7% decline in expected future oil prices could trigger additional proved-property impairment charges potentially exceeding $2.3 billion, assuming a 10% discount rate.
- A $3.6 million impairment was recorded on properties held for sale. Those legacy assets were sold on April 1, 2016 for approximately $12.2 million in cash plus a $4.0 million secured promissory note.
- Contractual cash obligations totaled approximately $3.62 billion, including senior notes, interest, asset retirement obligations, leases, volume commitments, drilling commitments, and purchase agreements.
- In April 2016, the company repurchased an additional $46.8 million principal amount of notes for $34.6 million. New derivative agreements were also entered into in April and May 2016.
- The filing states that no material changes occurred in the risk factors from the 2015 Form 10-K and that disclosure controls were effective as of March 31, 2016.
Most Important Facts to Verify
- Verify whether this filing belongs to Oasis Petroleum Inc. or Chord Energy Corp.; the supplied company metadata and the filing registrant do not match.
- Verify the company’s ability to sustain operations if commodity prices remain below the levels assumed in reserve and impairment models.
- Review the October 1, 2016 borrowing-base redetermination risk following the reduction from $1.525 billion to $1.150 billion.
- Reconcile reported liquidity with the company’s negative Q1 operating cash flow and substantial contractual obligations.
- Assess the economic impact, counterparty exposure, and future cash-flow effects of the company’s oil swaps and collars.
- Review the subsequent April 2016 debt repurchases, asset sale proceeds, and changes to outstanding derivative positions.