SEC Form 10-Q Summary
Filing identity: The provided filing is for Oasis Petroleum Inc., not Chord Energy Corp. It covers the quarter and nine months ended September 30, 2013, and was filed November 7, 2013. The financial statements are unaudited.
Business Context and Reporting Period
Oasis was an independent exploration and production company focused on unconventional oil and natural gas resources in the Williston Basin, primarily in North Dakota and Montana. Its complementary businesses included well services, marketing and midstream services. The company completed 38 gross, or 27.7 net, operated wells during the third quarter and reported 37 gross operated wells awaiting completion and nine gross wells being drilled at September 30, 2013.
Average production was 33,064 Boe per day in the third quarter and 31,140 Boe per day for the nine-month period.
Financial Performance and Key Metrics
| Metric | Q3 2013 | Q3 2012 | 9M 2013 | 9M 2012 |
|---|---|---|---|---|
| Total revenue | $305.5 million | $184.7 million | $808.4 million | $472.3 million |
| Operating income | $150.9 million | $72.0 million | $382.3 million | $190.4 million |
| Net income | $54.5 million | $18.3 million | $173.5 million | $110.8 million |
| Diluted EPS | $0.59 | $0.20 | $1.87 | $1.20 |
| Operating margin | 49.4% | 39.0% | 47.3% | 40.3% |
| Net margin | 17.8% | 9.9% | 21.5% | 23.5% |
| Cash flow from operations | Not separately provided | Not separately provided | $536.7 million | $282.1 million |
Oil and gas revenue was $287.0 million in the third quarter and $770.4 million for the nine months. Q3 oil revenue was $273.7 million, natural gas revenue was $13.3 million, and well services and midstream revenue was $18.5 million. Average oil prices before derivative settlements were $100.75 per barrel in Q3 and $95.24 per barrel for the nine months.
Total expenses increased to $154.6 million in Q3 and $426.1 million for the nine months. DD&A was $72.7 million in Q3 and $205.8 million for the nine months. The effective tax rate was 38.2% in Q3 and 37.2% for the nine months.
Cash Flow, Debt and Liquidity
- Cash and cash equivalents were $125.4 million at September 30, 2013, compared with $213.4 million at December 31, 2012.
- Restricted cash was $986.2 million, representing proceeds from the 2022 senior notes held in escrow for the West Williston acquisition.
- Net cash used in investing activities was $1.762 billion, including $654.2 million of capital expenditures, $133.1 million of oil and gas acquisitions and the $986.2 million escrow deposit.
- Net cash provided by financing activities was $1.137 billion, including $1.0 billion of senior notes proceeds and $160.0 million of revolving-credit borrowings.
- Total long-term debt was $2.360 billion, consisting of $2.2 billion of senior unsecured notes and $160.0 million drawn under the revolving credit facility.
- The revolving facility borrowing base and elected commitments were increased to $1.5 billion. At September 30, $1.3348 billion of capacity remained available after borrowings and letters of credit.
- The company was in compliance with its credit-facility covenants, including a minimum 2.5-to-1 EBITDAX-to-interest ratio and a minimum 1.0-to-1 current ratio.
Material Changes Versus Prior Comparable Period
- Q3 revenue increased 65% and nine-month revenue increased 71%, driven by higher production volumes, higher oil prices and increased well services activity.
- Average daily production increased 36% in Q3 and 50% for the nine months.
- Q3 operating income more than doubled, while nine-month operating income increased approximately 101%.
- Q3 net income increased approximately 198%; nine-month net income increased approximately 57%.
- Derivative results deteriorated materially: the company recorded a $39.8 million Q3 derivative loss and a $41.8 million nine-month loss, compared with losses of $22.4 million and a gain of $33.6 million in the respective 2012 periods.
- Interest expense increased to $22.9 million in Q3 and $65.4 million for the nine months, primarily due to additional notes and revolving-credit borrowings.
- Property, plant and equipment increased to $2.613 billion from $2.007 billion at year-end 2012, reflecting development spending, acquisitions and midstream assets.
Guidance, Outlook, Risks and Unusual Items
Management budgeted $1.020 billion of 2013 capital expenditures, excluding the East Nesson and West Williston acquisitions. The budget included $897 million for drilling and completion, $43 million for infrastructure, $25 million for leasehold expansion, $14 million for well services and $10 million for other non-E&P capital. Management stated that cash on hand, operating cash flow, senior-note proceeds and revolver availability were expected to fund the budget, but noted that developing the full identified drilling inventory would require substantially more capital.
On October 1, 2013, after the balance-sheet date, Oasis completed the $1.479 billion West Williston acquisition of approximately 136,000 net acres. It also borrowed an additional $440.0 million under the revolver. The company had acquired approximately 25,000 net acres in East Nesson for $54.8 million on September 26, 2013 and committed an additional $7.2 million for drilling and completion activities.
- Key exposures included oil and natural gas price volatility, Williston Basin transportation capacity and price differentials, service and equipment availability, labor availability, operating execution and reserve estimates.
- Derivative contracts reduced downside price exposure but limited participation in higher oil prices. Net derivative liabilities were $14.1 million at September 30, 2013.
- Material commitments included $24.9 million of potential early-termination payments on drilling contracts, $55.5 million of volume commitments, $11.5 million of lease obligations and $7.2 million of remaining East Nesson investment commitments.
- The company identified acquisition risks involving reserve estimates, well performance, integration, title, environmental liabilities, litigation and unknown obligations.
- No material proved-property impairment was recorded; unproved-property impairment was $0.8 million for the nine months.
Investor Verification Checklist
- Verify the issuer: the supplied filing is Oasis Petroleum Inc., despite the request identifying Chord Energy Corp.
- Reconcile the post-quarter West Williston acquisition, additional revolver borrowings and resulting leverage in subsequent filings.
- Assess debt-service capacity after the acquisition, including $2.2 billion of senior notes and increased variable-rate revolver borrowings.
- Review derivative volumes, floors, ceilings and sub-floors and their effect on realized oil prices and future cash flow.
- Evaluate whether production growth and operating cash flow support the stated capital budget and longer-term drilling inventory.
- Review acquisition accounting, reserve estimates, integration progress and potential environmental, title and other contingent liabilities.