Business Context and Reporting Period
The source document is Oasis Petroleum Inc.’s Form 10-K for the fiscal year ended December 31, 2015, not a Chord Energy Corp. filing or a standalone 2015 Q4 report. Oasis is 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 complementary well-services and midstream businesses.
At year-end, Oasis held 484,745 net leasehold acres, operated or participated in 1,250 producing wells, and had 218.2 MMBoe of estimated proved reserves, 85% oil and 68% proved developed.
Financial and Operating Metrics
| Metric | 2015 | 2014 | Change |
|---|---|---|---|
| Total revenue | $789.7 million | $1,390.2 million | Down 43% |
| Oil and gas revenue | $721.7 million | $1,304.0 million | Down 45% |
| Operating income (loss) | $(114.2) million | $645.7 million | Declined materially |
| Net income (loss) | $(40.2) million | $506.9 million | Turned to loss |
| Adjusted EBITDA | $820.2 million | $952.8 million | Down 14% |
| Operating cash flow | $359.8 million | $872.5 million | Down 59% |
| Capital expenditures | $610.0 million | $1,572.6 million | Down 61% |
| Average daily production | 50,477 Boe/day | 45,656 Boe/day | Up 11% |
| Realized oil price, excluding derivatives | $43.04/Bbl | $82.73/Bbl | Down 48% |
| Realized oil price, including derivative settlements | $66.06/Bbl | $83.19/Bbl | Down 21% |
| Natural gas price | $2.08/Mcf | $6.81/Mcf | Down 69% |
Lease operating expense declined to $7.84 per Boe from $10.18 per Boe, while DD&A increased to $26.34 per Boe from $24.74 per Boe. The company recorded a $210.4 million net gain on derivatives, including $370.4 million of cash settlement receipts, and a $16.1 million income tax benefit.
Cash and cash equivalents were $9.7 million at December 31, 2015, compared with $45.8 million in 2014. Working capital was negative $5.3 million. Long-term debt was $2.303 billion, including $2.2 billion of senior unsecured notes and $138.0 million drawn under the revolving credit facility. Pro forma liquidity, including the February 2016 equity offering and reduced borrowing base, was reported at $1.199 billion.
Material Changes Versus the Prior Comparable Period
- Production increased 11%, but sharp declines in oil and natural gas prices caused revenue to fall 43% and operating cash flow to fall 59%.
- The company moved from $506.9 million of net income in 2014 to a $40.2 million net loss in 2015. The 2014 results included a $187.0 million gain from the Sanish divestiture; no comparable gain occurred in 2015.
- Development activity was reduced in response to lower commodity prices: 80 gross operated wells were completed in 2015 versus 195 in 2014.
- Proved reserves decreased 20% to 218.2 MMBoe from 272.1 MMBoe, primarily because lower price assumptions caused negative revisions and the removal of uneconomic proved undeveloped locations.
- PV-10 declined 63% to $2.023 billion from $5.481 billion, while the after-tax standardized measure declined to $1.914 billion from $3.982 billion.
- The company issued 36.8 million common shares in March 2015 for $462.8 million of net proceeds, primarily to repay revolving debt and fund corporate purposes.
- Oasis reduced revolving-credit borrowings from $500.0 million at year-end 2014 to $138.0 million at year-end 2015.
Guidance, Outlook, Risks and Unusual Items
- For 2016, management budgeted approximately $400 million of capital expenditures, including $200 million for drilling and completion, $140 million for OMS and Wild Basin infrastructure, and approximately $60 million for other spending.
- The 2016 plan contemplated approximately 46 gross, or 28.6 net, operated wells, down substantially from 2015. Management stated that spending and activity could be adjusted based on commodity prices, financing, drilling results and market conditions.
- The company had derivative contracts covering approximately 70% of estimated 2016 oil production at an average WTI price of $51.70 per barrel as of the filing date.
- Subsequent to year-end, the February 2016 borrowing-base redetermination reduced the borrowing base and elected commitment from $1.525 billion to $1.150 billion. A February 2016 equity offering generated $182.9 million of net proceeds.
- Unusual or non-recurring items included $46.1 million of oil and gas property impairment, comprising $9.4 million on proved properties held for sale and $36.6 million on unproved properties; $3.9 million of rig termination expense; and $370.4 million of derivative settlement receipts.
- Management identified commodity-price volatility, reserve revisions, impairment risk, borrowing-base reductions, debt covenants, access to capital, transportation constraints, environmental and hydraulic-fracturing regulation, natural gas flaring requirements, rail transportation risks, and concentration in the Williston Basin as significant risks.
- Total contractual cash obligations were $3.808 billion, including $2.2 billion of senior notes, $910.6 million of related interest payments, $448.4 million of volume commitments and $42.4 million of purchase agreements.
- The Lac-Mégantic crude-by-rail litigation was settled; Oasis’s contributions were fully covered by insurance and the settlement agreements bar future litigation against Oasis arising from that derailment.
Most Important Facts for an Investor to Verify
- Confirm the issuer identity: the provided filing is for Oasis Petroleum Inc., whereas the request identifies Chord Energy Corp.
- Reconcile the requested “2015 Q4” period with the filing’s annual fiscal-year reporting period ended December 31, 2015 and review the separate unaudited fourth-quarter data.
- Assess sensitivity of liquidity, reserve values and impairment charges to lower oil prices; management disclosed that a further 13% decline in expected future oil prices could eliminate the excess undiscounted cash flows supporting Bakken and Three Forks proved properties.
- Review the February 2016 borrowing-base reduction, the 2019 notes maturity, debt covenants and the company’s ability to fund the $400 million 2016 capital program.
- Separate recurring operating cash generation from derivative settlements, non-cash derivative fair-value gains, impairments and other unusual items.
- Verify reserve assumptions, particularly the large negative revisions to proved undeveloped reserves and the dependence on five-year development plans and future access to capital.