Chord Energy Corp quarterly report, Q2 FY2021

Business Context and Reporting Period

The filing is Oasis Petroleum Inc.’s unaudited Form 10-Q for the quarter ended June 30, 2021, although the request metadata identifies Chord Energy Corp. The filing describes an independent U.S. exploration and production company focused on the Williston Basin, with a midstream business operated through Oasis Midstream Partners LP (OMP), in which Oasis owned approximately 70% at June 30, 2021. The company emerged from bankruptcy on November 19, 2020 and applied fresh-start accounting; therefore, Successor results are not directly comparable with Predecessor results.

Financial Results and Key Metrics

Metric	Three months ended June 30, 2021	Six months ended June 30, 2021
Total revenue	$393.1 million	$748.5 million
Operating income	$375.6 million	$526.4 million
Net income attributable to Oasis	$73.4 million	$29.8 million
Diluted earnings per share	$3.52	$1.46
Net cash provided by operating activities	$160.0 million	$350.4 million
Adjusted EBITDA attributable to Oasis	$107.0 million	$233.1 million
E&P free cash flow	$54.8 million	$148.3 million

Second-quarter average production was 54,271 barrels of oil equivalent per day, 64% oil. Average crude oil sales price before derivative settlements was $65.52 per barrel, while the realized price after derivative settlements was $47.77 per barrel. Average natural gas and NGL pricing was $4.53 per Mcf. E&P lease operating expense was $10.21 per Boe; consolidated lease operating expense was $6.95 per Boe.

Second-quarter operating results included a $223.0 million gain on property sales, primarily from the Permian Basin divestiture, and a $267.0 million net loss on derivatives, including $56.0 million of realized cash settlement losses. The six-month derivative loss was $448.6 million, including $78.6 million of cash settlement payments.

At June 30, 2021, cash and cash equivalents were $388.9 million and restricted cash was $400.0 million. Total current assets were $732.3 million versus current liabilities of $691.4 million. Total debt, net of deferred financing costs, was $1.044 billion, comprising $391.1 million of Oasis debt and $653.4 million of OMP debt. Total stockholders’ equity was $1.022 billion.

Available liquidity was reported at approximately $1.419 billion, including cash and aggregate unused borrowing capacity. The Oasis Credit Facility had no borrowings and $398.7 million of unused capacity; the OMP Credit Facility had $213.0 million outstanding and $231.5 million of unused capacity. The company reported compliance with applicable financial covenants.

Material Changes Versus Comparable Periods

Six-month revenue increased to $748.5 million from $554.2 million in the 2020 Predecessor period, primarily due to higher commodity prices, partially offset by lower production.
Six-month operating results improved from a $4.874 billion operating loss in 2020 to $526.4 million of operating income in 2021. The prior-year loss included approximately $4.826 billion of impairment charges; 2021 impairment was immaterial.
Six-month net income attributable to Oasis was $29.8 million versus a $4.404 billion loss in the prior-year Predecessor period. Comparability is limited by bankruptcy emergence and fresh-start accounting.
Six-month operating cash flow increased to $350.4 million from $59.9 million, supported by higher commodity revenues and lower interest and operating costs.
Average production declined to 55,730 Boe per day for the six months from 67,088 Boe per day, primarily because fewer new wells were completed.
General and administrative expense declined to $40.9 million from $68.6 million, partly due to lower employee compensation and the absence of prior-year restructuring-related expenses.
The company issued $400.0 million of 6.375% Oasis Senior Notes due 2026 and OMP issued $450.0 million of 8.00% Senior Notes due 2029. Aggregate debt increased from $710.0 million at December 31, 2020 to $1.044 billion at June 30, 2021.
The company paid or declared regular dividends of $0.375 per share, declared a $4.00 per-share special dividend payable July 21, 2021, and repurchased 190,783 shares for $14.6 million.

Guidance, Outlook, Risks, Contingencies and Unusual Items

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 late in the third quarter of 2021, with an effective date of April 1, 2021.
The company held $400.0 million of restricted cash from the Oasis Senior Notes to fund part of the acquisition. The notes contain a special mandatory redemption provision if the acquisition is not completed by the applicable outside date.
Oasis sold its remaining Permian Basin upstream assets for $347.3 million of cash at closing, plus potential earn-outs of up to $25.0 million annually in 2023–2025 if average WTI exceeds $60 per barrel. The earn-out asset was valued at $32.9 million at closing.
Commodity risk remains material. The net derivative liability was $381.6 million at June 30, 2021; management estimated that a 10% increase in crude oil prices would reduce derivative fair value by approximately $169.4 million.
Outstanding commodity hedges included fixed-price swaps and collars extending through 2024. In May 2021, the company paid $82.4 million to modify certain hedge contracts and increase selected swap prices to $50.00 per barrel.
Future results remain sensitive to crude oil, natural gas and NGL prices, production volumes, COVID-19 developments, OPEC and other producer actions, transportation capacity, environmental regulation, operational hazards, counterparty credit, litigation and access to capital.
A $2.4 million minimum-volume-commitment deficiency fee was accrued. Subsequent transportation escalations created an estimated $149.6 million future commitment with an approximately seven-year remaining term.
The Dakota Access Pipeline remained operational while the U.S. Army Corps of Engineers conducted an environmental review expected to be completed by March 2022.
The company expects no cash taxes for 2021 based on its intended use of the Section 382(l)(5) tax attribute exception, but realization depends on future taxable income and avoiding a subsequent ownership change. A Tax Benefits Preservation Plan was adopted after quarter-end.

Investor Verification Priorities

Confirm that the filing pertains to Oasis Petroleum Inc., not Chord Energy Corp., and reconcile the company identity before relying on the figures.
Verify completion, purchase price adjustments, funding and integration of the Williston Basin Acquisition.
Assess the sustainability of cash flow excluding the $223.0 million property-sale gain and the effects of derivative settlements and fair-value changes.
Review hedge volumes, fixed prices, collateral or liquidity requirements and potential derivative losses if commodity prices rise.
Monitor debt maturities, fixed coupon obligations, OMP leverage and covenant headroom following the new note issuances.
Evaluate the ability to fund the special dividend, ongoing dividends, share repurchases, acquisition spending and required capital expenditures from recurring cash flow.
Confirm the availability and limitations of federal NOLs and other tax attributes, including risks from a Section 382 ownership change.
Review transportation commitments, the Dakota Access Pipeline environmental review and any post-closing obligations from the Permian divestiture.