Filing Overview
The submitted Form 10-Q is for Oasis Petroleum Inc., not Chord Energy Corp. It covers the quarter and six months ended June 30, 2016, with unaudited interim financial statements. 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, with well services and midstream segments.
Key Financial Metrics
| Metric | Three months ended June 30, 2016 | Three months ended June 30, 2015 | Six months ended June 30, 2016 | Six months ended June 30, 2015 |
|---|---|---|---|---|
| Total revenue | $179.1 million | $230.0 million | $309.4 million | $410.4 million |
| Operating loss | $(28.2) million | $(7.4) million | $(103.4) million | $(41.1) million |
| Net loss | $(89.9) million | $(53.2) million | $(154.4) million | $(71.3) million |
| Diluted loss per share | $(0.51) | $(0.39) | $(0.91) | $(0.58) |
| Net cash from operating activities | Not separately provided for the quarter in the cash-flow statement | Not separately provided | $91.4 million | $229.9 million |
| Adjusted EBITDA | $132.2 million | $245.4 million | $265.0 million | $454.3 million |
| Free cash flow | $(32.1) million | $40.0 million | $(22.0) million | $(59.4) million |
Operating margin was approximately (15.8%) in the second quarter and (33.4%) for the first six months. Net margin was approximately (50.2%) and (49.9%), respectively. These calculations are derived from reported GAAP amounts.
- Average daily production was 49,507 Boe in the second quarter and 49,911 Boe for the first six months, down 1% year over year for the six-month period.
- Second-quarter oil revenue was $152.9 million; natural gas revenue was $6.4 million; well services revenue was $12.8 million; and midstream revenue was $6.9 million.
- Second-quarter oil price excluding derivative settlements averaged $40.81 per barrel, compared with $52.04 in the prior-year quarter. The six-month average was $34.67 versus $46.37.
- Cash and cash equivalents were $6.5 million at June 30, 2016, compared with $9.7 million at December 31, 2015.
- Total long-term debt was $2.127 billion, including $2.123 billion of senior unsecured notes and $35.0 million drawn under the revolving facility, net of deferred financing costs.
- Total liquidity was $1.107 billion, consisting of cash and $1.101 billion of unused borrowing-base capacity.
- Total assets were $5.436 billion and stockholders’ equity was $2.360 billion at June 30, 2016.
Material Changes Versus the Prior Comparable Period
- Second-quarter revenue declined $51.0 million, or 22%; six-month revenue declined $101.1 million, or 25%, primarily because of lower oil and natural gas prices.
- Six-month operating cash flow fell $138.5 million, or approximately 60%, to $91.4 million.
- Operating losses widened by $20.8 million in the quarter and $62.4 million for the six-month period.
- Net losses increased by $36.7 million in the quarter and $83.1 million for the six-month period.
- Derivative results changed from a $7.6 million gain in the first six months of 2015 to a $76.5 million loss in 2016. The 2016 period nevertheless included $103.8 million of derivative settlement receipts.
- Capital expenditures fell to $231.3 million on a cash basis for the first six months, compared with $587.4 million in the prior-year period. Management reported a $400 million full-year 2016 capital expenditure budget.
- Lease operating expenses declined 19% for the six-month period, while depreciation, depletion and amortization increased 3% to $244.9 million.
- The company issued 39.1 million common shares in February 2016 for net proceeds of $183.0 million.
- The company repurchased $76.6 million principal amount of senior notes for $56.9 million, recognizing an $18.7 million pretax gain on extinguishment of debt.
- On April 1, 2016, the company sold certain legacy conventional properties for approximately $12.2 million in cash plus a $4.0 million secured promissory note and recorded a $3.6 million impairment charge for the six-month period.
Guidance, Outlook, Risks and Unusual Items
- Management reduced 2016 capital spending because of sustained low commodity prices and concentrated drilling in the most economic areas of the Williston Basin. It stated that cash, operating cash flow, derivative settlements and revolver availability should fund the $400 million budget, subject to market conditions and operating results.
- Management reported no expected debt-covenant violation in the next twelve months. At June 30, the EBITDAX-to-interest ratio was 4.0 versus a 2.5 minimum, and the covenant current ratio was 3.8 versus a 1.0 minimum.
- The revolving facility’s borrowing base and elected commitment were reduced from $1.525 billion to $1.150 billion. The next scheduled redetermination was October 1, 2016.
- Commodity prices remain the principal risk. Management stated that a roughly 20% decline in expected future oil prices, holding other factors constant, could eliminate the excess of estimated undiscounted cash flows over the carrying value of Bakken and Three Forks proved properties and could result in additional proved impairment charges exceeding $2.3 billion under the stated assumptions.
- The company had a net derivative liability of $24.8 million at June 30, 2016. A 10% increase in crude oil prices would reduce the derivative position’s fair value by approximately $58.9 million, while a 10% decrease would increase it by approximately $58.0 million.
- Contractual obligations totaled approximately $3.502 billion, including senior notes, interest, asset retirement obligations, leases, volume commitments and purchase agreements.
- Subsequent events included new 2017–2018 three-way collars and an August 8, 2016 credit-facility amendment that provided additional flexibility for capital raising and refinancing without changing the $1.150 billion borrowing base commitment.
- Management identified risks related to oil and gas prices, transportation capacity, service costs, qualified personnel, reserve estimates, environmental and regulatory matters, customer and counterparty credit, and access to capital.
Important Facts for Investors to Verify
- Registrant identity: Confirm whether the requested issuer should be Oasis Petroleum Inc. or Chord Energy Corp.; the supplied filing is for Oasis.
- Reconcile the substantial decline in revenue and operating cash flow with realized commodity prices, production trends and derivative settlements.
- Review the October 2016 borrowing-base redetermination and the company’s ability to refinance or retire the $399.0 million of 2019 notes.
- Assess sensitivity to oil prices, including potential proved-property impairment and the fair-value impact of outstanding derivatives.
- Evaluate whether the $400 million capital budget and stated liquidity remain adequate under lower prices or weaker production.
- Consider the $3.502 billion of contractual obligations, including approximately $442.0 million of estimable volume commitments.
- Distinguish GAAP net loss and operating cash flow from management’s non-GAAP Adjusted EBITDA and Free Cash Flow measures.