Business context and reporting period
The supplied filing is Oasis Petroleum Inc.’s Form 10-K for the fiscal year ended December 31, 2020, not a Chord Energy Corp. filing. Oasis was an independent U.S. exploration and production company operating primarily in the Williston and Permian Basins, with a consolidated midstream business through Oasis Midstream Partners LP. The filing covers the Predecessor period from January 1 through November 19, 2020 and the Successor period from November 20 through December 31, 2020, following emergence from Chapter 11 bankruptcy. Fresh start accounting makes Successor results generally not comparable with Predecessor results.
Key financial metrics
| Metric | 2020 | 2019 comparable |
|---|---|---|
| Total revenue | $2.083 billion combined Predecessor and Successor periods | $2.072 billion |
| Net loss attributable to Oasis | $3.690 billion combined | $128.2 million loss |
| Adjusted EBITDA attributable to Oasis | $600.3 million combined | $988.0 million |
| Net cash provided by operating activities | $298.2 million combined | $892.9 million |
| Total capital expenditures | $843.4 million, including $18.1 million in the Successor period and $225.3 million in the Predecessor period on the disclosed capital-expenditure basis | $843.4 million |
| Average production | 64,717 Boepd, 66.8% oil | 88,061 Boepd |
Reported operating loss was $4.873 billion for the combined 2020 periods, principally reflecting $4.4 billion of impairment charges on proved oil and gas properties, $401.1 million of impairment on unproved properties, and $109.9 million of midstream and other impairment charges. Net loss also included $786.8 million of reorganization items, a $233.6 million Predecessor-period derivative gain, and an $83.9 million gain from debt extinguishment.
Average 2020 crude oil sales price was $38.92 per barrel before derivative settlements, compared with $55.27 in 2019. The average natural gas and NGL sales price was $2.08 per Mcf, compared with $2.64 in 2019. Average lease operating expense declined to $5.57 per Boe from $6.95 per Boe, while total lease operating expense per Boe, including the Successor period, was reported at $6.08 per Boe for the year.
Balance sheet, debt and liquidity
- December 31, 2020 cash and cash equivalents were $15.9 million; cash, cash equivalents and restricted cash totaled $20.2 million.
- Total assets were $2.159 billion and total stockholders’ equity was $1.013 billion.
- Long-term debt was $710.0 million, consisting of $260.0 million under the Oasis Credit Facility and $450.0 million under the OMP Credit Facility. All Predecessor senior unsecured notes were cancelled upon emergence.
- Available liquidity was $449.0 million, comprising cash and aggregate unused borrowing capacity of $433.2 million. The Oasis Credit Facility had $308.2 million of unused capacity, and the OMP facility had $125.0 million.
- The Oasis Credit Facility had a $575.0 million borrowing base and matures May 19, 2024. The OMP Credit Facility matures September 25, 2022.
- The company reported a $69.6 million working-capital deficit at year-end, compared with a $165.5 million deficit at December 31, 2019.
- Net derivative liability was $94.1 million at year-end. Contracts covered approximately 22.7 million barrels of crude oil production from 2021 through 2024.
Material changes versus the prior comparable period
- Revenue was broadly flat in reported dollars because lower E&P and midstream prices and volumes were partly offset by the timing and classification of the Successor period; underlying crude oil and natural gas revenue declined 51% from 2019.
- Production fell 26.5% to 64,717 Boepd, primarily because of well shut-ins, curtailed completion activity and reduced capital spending.
- Capital expenditures declined 71% from 2019 levels on the disclosed capital-expenditure basis, following suspension of drilling and completion operations in April 2020 and a reduction from four operated rigs to one operated Williston Basin rig by year-end.
- Proved reserves declined 36% to 182.5 MMBoe from 286.4 MMBoe. Net negative revisions totaled 86.3 MMBoe, driven by alignment with the five-year development plan and lower prices, while production reduced reserves by 23.7 MMBoe.
- Standardized Measure declined 67% to $948.9 million and PV-10 declined 62% to $1.115 billion, reflecting lower price assumptions and lower reserves.
- Oasis filed for Chapter 11 on September 30, 2020 and emerged on November 19, 2020. The restructuring reduced total indebtedness by approximately $1.8 billion through issuance of Successor equity to former noteholders.
- The Predecessor common stock was cancelled, 20.0 million Successor shares were issued to noteholders, and 1.62 million warrants were issued to former common stockholders at an initial exercise price of $94.57 per share.
Guidance, outlook, commentary and risks
- Management’s strategy emphasizes capital discipline, development within cash flow, free-cash-flow generation, balance-sheet flexibility and potential shareholder returns.
- Planned 2021 capital expenditures were $288 million to $303 million in total, including $231 million to $243 million attributable to Oasis after midstream capital funded by OMP.
- The 2021 plan contemplated 23 to 25 gross operated wells in the Williston Basin and 6 to 8 gross operated wells in the Permian Basin. Management stated that the plan could be adjusted materially for commodity prices, liquidity, drilling results and market conditions.
- A $0.375 per-share dividend was declared for payment in March 2021, but future dividends remain subject to earnings, liquidity, debt covenants and board approval.
- The COVID-19 pandemic, the 2020 oil-price collapse, global oversupply, storage constraints and reduced downstream demand caused production curtailments, workforce reductions and suspension of drilling activities.
- Potential disruption to the Dakota Access Pipeline remained a material transportation and pricing risk. Management arranged alternative outlets but warned that a shutdown could materially weaken Williston Basin crude oil prices.
- The company had minimum-volume commitments with estimated future commitments of approximately $525.0 million and could owe deficiency payments if volumes are not delivered or transported.
- The Permian continuous development agreement could result in early termination and non-performance fees of up to approximately $100 million. Management was seeking an amendment for reduced 2021 drilling obligations and could not estimate any potential loss.
- Other significant risks include commodity-price volatility, reserve and impairment assumptions, borrowing-base redeterminations, debt covenants, environmental and climate regulation, hydraulic-fracturing restrictions, water disposal, pipeline safety, customer and counterparty credit risk, cyber incidents and lease expirations.
Most important facts an investor should verify
- Verify the issuer identity: the supplied filing is for Oasis Petroleum Inc., whereas the request identifies Chord Energy Corp.
- Use caution comparing 2020 Successor results with Predecessor or 2019 results because of bankruptcy emergence and fresh start accounting.
- Reconcile the combined 2020 revenue, loss and cash-flow figures from the separate Successor and Predecessor periods to the audited statements.
- Review the $4.9 billion of 2020 impairment charges and the assumptions supporting reserves, commodity prices, production, development costs and discount rates.
- Confirm borrowing-base availability, covenant compliance and the next Oasis Credit Facility redetermination, scheduled around April 1, 2021.
- Assess the sustainability of the $449.0 million liquidity figure after considering restricted cash, derivative settlements, minimum-volume commitments, capital spending and debt maturities.
- Evaluate the 2021 drilling plan against the Permian continuous development agreement and the potential $100 million non-performance exposure.
- Review derivative volumes, fixed prices and the $94.1 million net liability to understand protection against lower prices and limitations on upside.