Business Context and Reporting Period
The filing is Oasis Petroleum Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2015, filed August 5, 2015. The provided metadata identifies Chord Energy Corp., but the filing text identifies the registrant as Oasis Petroleum Inc. The company is an independent exploration and production business focused on unconventional oil and natural gas resources in the North Dakota and Montana portions of the Williston Basin, with well services and midstream operations.
Key Financial Metrics
| Metric | Three months ended June 30, 2015 | Six months ended June 30, 2015 |
|---|---|---|
| Total revenue | $230.0 million | $410.4 million |
| Operating income (loss) | $(7.4) million | $(41.1) million |
| Net income (loss) | $(53.2) million | $(71.3) million |
| Diluted loss per share | $(0.39) | $(0.58) |
| Net cash provided by operating activities | Not separately provided | $229.9 million |
| Capital expenditures | $170.4 million, per management | $586.7 million cash basis |
| Adjusted EBITDA | $245.4 million | $454.3 million |
Second-quarter operating margin was approximately negative 3.2% and net margin approximately negative 23.1%. Six-month operating margin was approximately negative 10.0% and net margin approximately negative 17.4%.
- Average daily production increased 15% year over year to 50,261 Boe per day in the second quarter and 16% to 50,353 Boe per day for the six-month period.
- Second-quarter oil revenue was $208.6 million and natural gas revenue was $5.5 million. Oil revenue for the six-month period was $372.4 million.
- Oil price excluding derivative settlements fell to $52.04 per barrel in the second quarter from $94.48, while natural gas price fell to $1.63 per Mcf from $7.56.
- Lease operating expense declined to $8.26 per Boe in the second quarter and $8.44 per Boe for the six-month period.
- Cash and cash equivalents were $13.7 million at June 30, 2015, versus $45.8 million at December 31, 2014. Working capital was negative $167.6 million.
- Total debt was $2.355 billion, consisting of $2.2 billion of senior unsecured notes and $155.0 million drawn under the revolving credit facility.
- Liquidity was $1.3785 billion, including cash and $1.3648 billion of unused committed borrowing-base capacity.
- The company held a net derivative asset of $109.8 million and received $213.3 million of derivative settlements during the first six months.
Material Changes Versus the Prior Comparable Period
- Second-quarter revenue declined $142.3 million, or 38%, and six-month revenue declined $311.5 million, or 43%, primarily because of lower commodity prices, partly offset by higher production volumes.
- The company reported a second-quarter net loss of $53.2 million versus net income of $38.8 million in the prior-year quarter. The six-month result was a $71.3 million loss versus $208.8 million of income.
- Operating income declined from $166.5 million to a $7.4 million loss in the second quarter and from $495.6 million to a $41.1 million loss for six months. The prior-year six-month period included a $187.0 million gain on the Sanish property divestiture.
- Operating expenses increased $28.0 million in the second quarter and $38.2 million for six months. DD&A increased to $119.2 million and $237.7 million, respectively, reflecting increased production and a higher DD&A rate.
- The company recorded $19.5 million of second-quarter and $24.8 million of six-month non-cash impairment charges on unproved properties, primarily acreage expected to expire without drilling or extension.
- Rig termination expense was $2.8 million in the quarter and $3.9 million for six months as the company reduced its drilling program.
- Operating cash flow fell from $486.3 million to $229.9 million for the six-month period, while capital expenditures remained substantial.
- On March 9, 2015, the company issued 36.8 million shares for net proceeds of approximately $463.1 million, primarily used to repay revolving debt and for general corporate purposes.
- The April 2015 credit facility amendment reduced the borrowing base from $2.0 billion to $1.7 billion, increased elected commitments to $1.525 billion, and extended maturity to April 2020, subject to retirement or refinancing of the 2019 Notes before maturity.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management reduced its 2015 capital expenditure plan in response to lower oil prices. The approved budget was $705 million, but management expected approximately $670 million of total spending for 2015 as of June 30.
- The company expected third-quarter 2015 Williston Basin price differentials of approximately $5.50 to $6.50 per Boe below WTI.
- Management stated that cash, operating cash flow, derivative settlements, and revolving-credit availability should fund the 2015 capital program, but acknowledged that extended low oil prices could require further deferrals and could adversely affect reserves, cash flows, access to capital, and financial condition.
- At June 30, 2015, the company was in compliance with its revolving-credit financial covenants, including the minimum 2.5-to-1.0 EBITDAX-to-interest ratio and 1.0-to-1.0 current ratio requirements.
- Key risks include oil and natural gas price volatility, transportation capacity and differentials, reserve and production uncertainty, service and personnel availability, interest rates, counterparty credit risk, environmental regulation, and litigation.
- The company had approximately $30.7 million of lease commitments, $185.6 million of volume commitment obligations, $38.9 million of fresh-water purchase commitments, and $4.5 million of electrical-facility cost-sharing commitments. Potential early termination payments for certain drilling contracts were approximately $8.5 million.
- The company was involved in litigation and settlement proceedings relating to the 2013 Lac-Mégantic crude oil train derailment. Management stated that the company’s settlement contributions were fully covered by insurance, subject to required court approvals.
- No material changes to previously disclosed risk factors were reported, and management concluded that disclosure controls and procedures were effective as of June 30, 2015.
Important Facts for Investors to Verify
- Confirm the issuer identity: the supplied filing is for Oasis Petroleum Inc., not Chord Energy Corp.
- Verify commodity-price assumptions, realized prices, derivative volumes, floors, ceilings, and settlement cash flows because derivatives materially affected reported earnings and liquidity.
- Assess whether the reduced 2015 capital program can sustain production growth while oil prices remain depressed.
- Review borrowing-base redeterminations, the 2019 Notes refinancing requirement, covenant compliance, and the concentration of assets pledged to the secured facility.
- Evaluate the effect of unproved acreage expirations and impairment charges on future drilling inventory and reserves.
- Reconcile management’s $170.4 million second-quarter capital expenditure figure and $670 million expected full-year spending with cash-basis and accrued-capital-expenditure presentations in the filing.