OAS Oasis Petroleum Inc

HOUSTON, May 18, 2020 /PRNewswire/ -- Oasis Petroleum Inc. (NASDAQ: OAS) ("Oasis" or the "Company") today announced financial and operating results for the first quarter of 2020 and updated its 2020 outlook.

1Q20 Highlights:

• Delivered net cash provided by operating activities of $107.8 million and Adjusted EBITDA⁽¹⁾ of $167.0 million in 1Q20.
• Produced 80.1 MBoepd in 1Q20, 2% above midpoint guidance, with oil volumes at 54.1 MBopd, 1% above midpoint guidance.
• E&P CapEx⁽²⁾ was $151.3 million for 1Q20, more than 10% below the Company's February 2020 guidance.
• LOE per Boe decreased 6% to $6.83 per Boe in 1Q20 as compared to $7.26 per Boe in 4Q19.
• Crude oil differentials were solid over 1Q20, averaging $3.19 off of NYMEX WTI.
• Reduced the total principal of the Company's senior unsecured notes by $156.8 million during the quarter to $1,825.8 million as of March 31, 2020.
• Total G&A expense and E&P Cash G&A⁽¹⁾ expense decreased by approximately 10% and 12%, respectively, from 1Q19.

Updated 2020 Outlook

• Reducing 2020 E&P CapEx⁽²⁾ by 50% to 60% as compared to February 2020 guidance of $575 million to $595 million, with expected spending from 2Q20 to 4Q20 of $80 million to $140 million.
• Expecting to generate free cash flow at strip NYMEX WTI prices based on the Company's revised 2020 plan, as strong hedge position helps protect cash flow.
• 2Q20 hedged volumes of 50 MBopd and 2H20 hedged volumes of 38 MBopd drive mark to market value of $262 million as of March 31, 2020.
• Ramped down all drilling and completion activity. Completion activities have shut down with the flexibility to resume the appropriate level of activity in the fall.
• Suspending 2020 volume and operating cost guidance given ongoing uncertainty, continued market volatility and the uncertainty around the size and duration of volume curtailments over the coming months.
• Completed 27 gross operated wells in 1Q20. Most flush production from newly completed wells is currently curtailed to preserve value. Compared to 1Q20 production, volumes in the Williston Basin were reduced by approximately 25% in April. May curtailments are currently expected to be higher than those in April. Oasis has significant flexibility to bring volumes back online and can respond quickly to market dynamics.
• Expected Midstream CapEx has been reduced by approximately 65% to 70%, ranging from $35 million to $40 million in 2020, with approximately 35% attributable to Oasis. See the Oasis Midstream Partners LP ("OMP") press release issued on May 18, 2020 for more details.

⁽¹⁾ Non-GAAP measure. See "Non-GAAP Financial Measures" below for definitions of all non-GAAP measures included herein and reconciliations to the most directly comparable measures under United States generally accepted accounting principles ("GAAP").

⁽²⁾ E&P CapEx includes administrative capital and excludes capitalized interest, midstream CapEx and acquisitions for both 1Q20 actual and plan.

Chairman and Chief Executive Officer, Thomas B. Nusz commented, "We are living in unprecedented times and during this challenging macroeconomic environment and pandemic, Oasis is first and foremost focused on the health and safety of our employees, contractors, and communities. Additionally, Oasis is aligning our operations and capital spending plan with the current market reality. Oasis acted immediately to reduce activity following the sharp oil price declines in March. As we have done in the past, the team took aggressive actions with the goal of better protecting our balance sheet. We dramatically lowered our cost structure in 2019, established a robust hedge position that provides protection to our 2020 cash flow, and materially changed our executive compensation and compensation structure as outlined in our definitive proxy statement filed on March 30, 2020. The aggressive actions we are taking are aimed at preserving liquidity while maintaining optionality for a more normalized pricing environment. Oasis is continuously reviewing its plans and has the ability to make necessary additional adjustments as the unprecedented global macroeconomic dislocation continues to unfold."

Mr. Nusz continued, "Oasis executed well in the first quarter, building off the positive momentum seen in the back half of 2019. Volumes exceeded expectations while spending and operating costs were significantly lower, driven by further efficiency gains. In the Williston Basin, Oasis continued to enhance returns by optimizing the development program and driving costs lower, all while maintaining industry-leading gas capture rates. In the Delaware Basin, capital efficiency exceeded expectations, allowing Oasis to get wells online sooner than expected at lower costs. The macroeconomic environment changed significantly over the first quarter, but the team delivered exceptionally well."

Select Financial Metrics

The following table provides select actual metrics from 1Q20 and the associated guidance for 2020:

The following table presents select operational and financial data for the periods presented:

G&A totaled $31.2 million in 1Q20, $34.5 million in 1Q19 and $25.3 million in 4Q19. Amortization of equity-based compensation, which is included in G&A, was $6.8 million, or $0.93 per barrel of oil equivalent ("Boe"), in 1Q20 as compared to $9.0 million, or $1.09 per Boe, in 1Q19 and $7.2 million, or $0.90 per Boe, in 4Q19. G&A for the Company's E&P segment, excluding G&A expenses attributable to other services, totaled $23.3 million in 1Q20, $27.5 million in 1Q19 and $19.0 million in 4Q19. E&P Cash G&A expenses (non-GAAP), excluding G&A expenses attributable to other services, non-cash equity-based compensation expenses and other non-cash charges, were $2.29 per Boe in 1Q20, $2.30 per Boe in 1Q19 and $1.51 per Boe for 4Q19. For a definition of E&P Cash G&A expenses and a reconciliation of G&A to E&P Cash G&A, see "Non-GAAP Financial Measures" below.

Impairment expense was $4.8 billion in 1Q20 as compared to $0.6 million in 1Q19 and $9.6 million in 4Q19. In 1Q20, the Company recorded impairment charges of $4.4 billion on its proved oil and gas properties in the Williston Basin and the Delaware Basin, $291.3 million on its unproved oil and gas properties, $108.3 million on its midstream assets and $15.8 million on its well services assets. In 1Q19, the Company recorded impairment charges of $0.6 million on its unproved oil and gas properties. No other impairment charges were recorded for the period. In 4Q19, the Company recorded impairment charges of $4.7 million on its unproved oil and gas properties and $4.4 million to adjust the carrying value of equipment held for sale related to exiting the well services business to the estimated fair value less costs to sell.

Interest expense was $95.8 million in 1Q20 as compared to $44.5 million in 1Q19 and $44.7 million in 4Q19. Capitalized interest totaled $2.3 million in 1Q20, $2.8 million in 1Q19 and $2.5 million in 4Q19. Cash Interest (non-GAAP) totaled $93.5 million in 1Q20, $42.6 million in 1Q19 and $40.7 million in 4Q19. For the three months ended March 31, 2020, interest expense and Cash Interest include additional interest charges of $29.3 million per the Fourth Amendment of the Oasis Credit Facility and additional interest charges of $25.9 million for the OMP Credit Facility as discussed under "Liquidity and Balance Sheet" below. For a definition of Cash Interest and a reconciliation of interest expense to Cash Interest, see "Non-GAAP Financial Measures" below.

In 1Q20, the Company recorded an income tax benefit of $254.7 million, resulting in a 5.6% effective tax rate as a percentage of its pre-tax loss for the quarter. In 4Q19, the Company recorded an income tax benefit of $23.9 million, resulting in a 27.1% effective tax rate as a percentage of its pre-tax loss for the quarter.

In 1Q20, the Company reported a net loss of $4,310.9 million, or $13.61 per diluted share, as compared to a net loss of $114.9 million, or $0.37 per diluted share, in 1Q19. Excluding certain non-cash items and their tax effect, Adjusted Net Loss Attributable to Oasis (non-GAAP) was $62.8 million, or $0.20 per diluted share, in 1Q20, as compared to Adjusted Net Income Attributable to Oasis of $19.7 million, or $0.06 per diluted share, in 1Q19. Adjusted EBITDA (non-GAAP) in 1Q20 was $167.0 million, as compared to Adjusted EBITDA of $269.3 million in 1Q19. For definitions of Adjusted Net Income (Loss) Attributable to Oasis and Adjusted EBITDA and reconciliations to the most directly comparable GAAP measures, see "Non-GAAP Financial Measures" below.

Capital Expenditures and Completions

The following table depicts the Company's total capital expenditures ("CapEx") by category:

Oasis completed 27 gross (20.7 net) operated wells and 0.6 net non-operated wells during 1Q20. Completions included 18 gross (11.7 net) operated wells in the Williston Basin and 9 gross (9.0 net) operated wells in the Delaware Basin.

Liquidity and Balance Sheet

As of March 31, 2020, Oasis had cash and cash equivalents of $134.0 million, total elected commitments under its revolving credit facility (the "Oasis Credit Facility") of $1,100.0 million and total elected commitments under the revolving credit facility among OMP, as parent, OMP Operating LLC, a subsidiary of OMP, as borrower, Wells Fargo Bank, N.A., as administrative agent and the lenders party thereto (the "OMP Credit Facility") of $575.0 million. In addition, Oasis had $522.0 million of borrowings and $18.9 million of outstanding letters of credit issued under the Oasis Credit Facility and $487.5 million of borrowings and a $1.7 million outstanding letter of credit issued under the OMP Credit Facility.

On April 24, 2020, Oasis completed its spring redetermination of its borrowing base under the Oasis Credit Facility and entered into that certain Limited Waiver and Fourth Amendment (the "Fourth Amendment") to the Oasis Credit Facility. As a result, Oasis's borrowing base decreased from $1,300.0 million to $625.0 million and aggregate elected commitments were set at the level of the borrowing base. The next redetermination under the Oasis Credit Facility is scheduled for October 1, 2020. The following additional reductions under the Oasis Credit Facility will be effective on June 1, 2020 (the "June Reduction") and July 1, 2020 (the "July Reduction"), respectively: (1) the June Reduction consists of borrowing base and aggregate elected commitment amount reductions from $625.0 million to $612.5 million, and (2) the July Reduction consists of additional borrowing base and aggregate elected commitment amount reductions from $612.5 million to $600.0 million. In addition, the Fourth Amendment amended the financial covenants under the Oasis Credit Facility to provide that the Company's Current Ratio (as defined in the Oasis Credit Facility) has been waived for the fiscal quarter ending June 30, 2020 and the Company's Ratio of Total Debt to EBITDAX (as defined in the Oasis Credit Facility) shall not, for the four quarter period ended on the last day of each fiscal quarter, be greater than 4.00 to 1.00.

As a result of ongoing internal oversight processes, OMP Operating LLC identified that a Control Agreement (as defined in the OMP Credit Facility) had not been executed for a certain bank account (the "JPM Account") held at JPMorgan Chase Bank, N.A. ("JPMorgan"), who is a lender under the OMP Credit Facility. The Control Agreement serves to establish a lien in favor of the lenders under the OMP Credit Facility with respect to the JPM Account. On May 11, 2020, OMP Operating LLC executed a Control Agreement with both the administrative agent and JPMorgan, thereby completing the documentation required under the OMP Credit Facility. Despite the Control Agreement's execution, the failure to have had it in place before the JPM Account was initially funded with cash represents a past Event of Default (as defined in the OMP Credit Facility). On May 15, 2020, OMP Operating LLC entered into a limited waiver (the "Limited Waiver") of this past Event of Default, which provides forbearance of additional interest owed arising from this past Event of Default until the earlier to occur of (i) November 10, 2020 and (ii) an Event of Default. Pursuant to the Limited Waiver, OMP Operating LLC recorded an additional interest charge of approximately $25.9 million in the unaudited condensed consolidated financial statements as of March 31, 2020.

Hedging Activity

The Company's crude oil contracts will settle monthly based on the average NYMEX West Texas Intermediate crude oil index price ("NYMEX WTI") for fixed price swaps and two-way and three-way costless collars. As of May 18, 2020, the Company had the following outstanding commodity derivative contracts:

The March 2020 crude oil derivative contracts settled at a net $32.4 million received in April 2020 and will be included in the Company's 2Q20 derivative settlements.

Conference Call Information

Investors, analysts and other interested parties are invited to listen to the webcast and conference call:

Or:

A recording of the conference call will be available beginning at 12:00 p.m. Central Time on the day of the call and will be available until Monday, May 25, 2020 by dialing:

The conference call will also be available for replay for approximately 30 days at www.oasispetroleum.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including the Company's drilling program, production, derivative instruments, capital expenditure levels and other guidance included in this press release, as well as the impact of the novel coronavirus 2019 ("COVID-19") pandemic on our operations. These statements are based on certain assumptions made by the Company based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include, but are not limited to, changes in crude oil and natural gas prices, developments in the global economy, particularly the public health crisis related to the COVID-19 pandemic and the adverse impact thereof on demand for crude oil and natural gas, the outcome of government policies and actions, including actions taken to address the COVID-19 pandemic and to maintain the functioning of national and global economies and markets, the impact of Company actions to protect the health and safety of employees, vendors, customers, and communities, weather and environmental conditions, the timing of planned capital expenditures, availability of acquisitions, the ability to realize the anticipated benefits from the previously announced assignment by Oasis of Delaware Basin midstream assets to OMP, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as the Company's ability to access them, the proximity to and capacity of transportation facilities, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting the Company's business and other important factors that could cause actual results to differ materially from those projected as described in the Company's reports filed with the U.S. Securities and Exchange Commission. Additionally, the actions of foreign oil producers (most notably Saudi Arabia and Russia) to increase crude oil production, the unprecedented nature of the current economic downturn, the COVID-19 pandemic and the related decline of the crude oil exploration and production industry may make it particularly difficult to identify risks or predict the degree to which identified risks will impact the Company's business and financial condition. Because considerable uncertainty exists with respect to foreign oil production and the future pace and extent of a global economic recovery from the effects of the COVID-19 pandemic, we cannot predict whether or when crude oil production and economic activities will return to normalized levels.

Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

About Oasis Petroleum Inc.

Oasis is an independent exploration and production company focused on the acquisition and development of onshore, unconventional crude oil and natural gas resources in the United States. For more information, please visit the Company's website at www.oasispetroleum.com.

Non-GAAP Financial Measures

Cash MT&G Reconciliation

Cash MT&G is defined as the total marketing, transportation and gathering expenses less non-cash valuation charges on pipeline imbalances. Cash MT&G is not a measure of marketing, transportation and gathering expenses as determined by GAAP. Management believes that the presentation of Cash MT&G provides useful additional information to investors and analysts to assess the cash costs incurred to get its commodities to market without regard for the change in value of its pipeline imbalances, which vary monthly based on commodity prices. The following table presents a reconciliation of the GAAP financial measure of marketing, transportation and gathering expenses to the non-GAAP financial measure of Cash MT&G for the periods presented:

E&P Cash G&A Reconciliation

E&P Cash G&A is defined as the general and administrative expenses less non-cash equity-based compensation expenses, other non-cash charges and G&A expenses attributable to other services, including midstream and other services, such as equipment rentals and well services. E&P Cash G&A is not a measure of general and administrative expenses as determined by GAAP. Management believes that the presentation of E&P Cash G&A provides useful additional information to investors and analysts to assess the Company's operating costs in comparison to peers without regard to equity-based compensation programs, which can vary substantially from company to company.

The following table presents a reconciliation of the GAAP financial measure of general and administrative expenses to the non-GAAP financial measure of E&P Cash G&A for the periods presented:

Cash Interest and E&P Cash Interest Reconciliations

Cash Interest is defined as interest expense plus capitalized interest less amortization and write-offs of deferred financing costs and debt discounts included in interest expense, and E&P Cash Interest as total Cash Interest less Cash Interest attributable to OMP. E&P Cash Interest is not a measure of interest expense as determined by GAAP. Management believes that the presentation of E&P Cash Interest provides useful additional information to investors and analysts for assessing the interest charges incurred on its debt to finance its E&P activities, excluding non-cash amortization, and its ability to maintain compliance with its debt covenants.

The following table presents a reconciliation of the GAAP financial measure of interest expense to the non-GAAP financial measures of Cash Interest and E&P Cash Interest for the periods presented:

Adjusted EBITDA Reconciliation

The Company defines Adjusted EBITDA as earnings (loss) before interest expense, income taxes, depreciation, depletion, amortization, exploration expenses and other similar non-cash or non-recurring charges. Adjusted EBITDA is not a measure of net income (loss) or cash flows as determined by GAAP. Management believes that the presentation of Adjusted EBITDA provides useful additional information to investors and analysts for assessing the Company's results of operations, financial performance and ability to generate cash from its business operations without regard to its financing methods or capital structure coupled with its ability to maintain compliance with its debt covenants.

The following table presents reconciliations of the GAAP financial measures of net income (loss) including non-controlling interests and net cash provided by operating activities to the non-GAAP financial measure of Adjusted EBITDA for the periods presented:

Segment Adjusted EBITDA and E&P Free Cash Flow Reconciliations

The Company defines E&P Free Cash Flow as Adjusted EBITDA for its exploration and production segment plus distributions to Oasis for its ownership of (i) OMP limited partner units, (ii) a controlling interest in OMP's general partner, OMP GP LLC, and (iii) retained interests in Bobcat DevCo LLC and Beartooth DevCo LLC; less E&P Cash Interest, capital expenditures for E&P and other, excluding capitalized interest, and midstream capital expenditures attributable to its retained interests in Bobcat DevCo LLC and Beartooth DevCo LLC. E&P Free Cash Flow is not a measure of net income (loss) or cash flows as determined by GAAP. Management believes that the presentation of E&P Free Cash Flow provides useful additional information to investors and analysts for assessing the financial performance of its E&P business as compared to its peers and its ability to generate cash from its E&P operations and midstream ownership interests after interest and capital spending. In addition, E&P Free Cash Flow excludes changes in operating assets and liabilities that relate to the timing of cash receipts and disbursements, which the Company may not control, and changes in operating assets and liabilities may not relate to the period in which the operating activities occurred.

The following tables present reconciliations of the GAAP financial measure of income (loss) before income taxes including non-controlling interests to the non-GAAP financial measure of Adjusted EBITDA for the Company's two reportable business segments and to the non-GAAP financial measure of E&P Free Cash Flow for its exploration and production segment for the periods presented:

Adjusted Net Income (Loss) Attributable to Oasis and Adjusted Diluted Earnings (Loss) Attributable to Oasis Per Share Reconciliations

Adjusted Net Income (Loss) Attributable to Oasis and Adjusted Diluted Earnings (Loss) Attributable to Oasis Per Share are supplemental non-GAAP financial measures that are used by management and external users of the Company's financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted Net Income (Loss) Attributable to Oasis as net income (loss) after adjusting first for (1) the impact of certain non-cash items, including non-cash changes in the fair value of derivative instruments, impairment, and other similar non-cash charges, or non-recurring items, (2) the impact of net income (loss) attributable to non-controlling interests and (3) the non-cash and non-recurring items' impact on taxes based on the Company's effective tax rate applicable to those adjusting items in the same period. Adjusted Net Income (Loss) Attributable to Oasis is not a measure of net income (loss) as determined by GAAP. The Company defines Adjusted Diluted Earnings (Loss) Attributable to Oasis Per Share as Adjusted Net Income (Loss) Attributable to Oasis divided by diluted weighted average shares outstanding.

The following table presents reconciliations of the GAAP financial measure of net income (loss) attributable to Oasis to the non-GAAP financial measure of Adjusted Net Income (Loss) Attributable to Oasis and the GAAP financial measure of diluted earnings (loss) attributable to Oasis per share to the non-GAAP financial measure of Adjusted Diluted Earnings (Loss) Attributable to Oasis Per Share for the periods presented:

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SOURCE Oasis Petroleum Inc.