Site icon Energy News Beat

Oasis Petroleum Inc. Announces Strategic Acquisition of Williston Basin Assets, Reports First Quarter 2021 Results, Declares Dividend and Updates 2021 Outlook

Andy Del Prado

HOUSTON, May 3, 2021 /PRNewswire/ — Oasis Petroleum Inc. (NASDAQ: OAS) (“Oasis” or the “Company”) today announced a strategic acquisition of Williston Basin assets, reported financial and operating results for the first quarter of 2021, declared its first quarter 2021 dividend, and updated its 2021 outlook to incorporate the acquisition, including an expected 33% increase to its future quarterly fixed dividend after the acquisition closes.

Williston Basin Acquisition

Oasis announced it has entered into a definitive agreement under which Oasis will acquire select Williston Basin assets from Diamondback Energy in a cash transaction valued at approximately $745MM, subject to customary purchase price adjustments. The consideration is expected to be financed through cash on hand (approximately $106MM as of March 31, 2021), revolver borrowings ($450MM elected commitment on $500MM borrowing base, none drawn as of March 31, 2021), and a $500MM fully committed underwritten bridge loan (expecting high yield financing to replace the bridge loan). The transaction was approved unanimously by the Board of the Directors of each company. The effective date of the acquisition will be April 1, 2021 and the closing is expected to occur in July 2021, subject to customary closing conditions.

Transaction Highlights:

The following tables outline Oasis’s pro forma position in the Williston Basin:

“This exciting acquisition is a great example of how Oasis is addressing the needs of tomorrow, by taking action in our new industry paradigm, today,” said Danny Brown, Oasis’ Chief Executive Officer.  “The strategic fit of focusing capital to consolidate assets in our core area, generating significant free cash flow for the benefit of the company and its shareholders, is highlighted via this acquisition.  Given the significant anticipated increase in free cash flow per share, coupled with our commitment to returning capital to shareholders, we anticipate declaring a 33% increase to our dividend, raising the quarterly dividend to $0.50 per share with our quarterly declaration after the transaction closes later this year.  This acquisition materially enhances scale in our core Bakken asset at an attractive valuation, with the purchase price almost entirely based on PDP and very little value attributed to the development of the top-tier inventory or potential synergies. When combining the inherently attractive acquisition price with the prudent use of our best-in-class balance sheet this acquisition creates significant accretion for shareholders across all metrics, while maintaining pro forma leverage below target, and well below that of our peers.”  Mr. Brown went on to say, “I’m thankful for the hard work of all those involved in this transaction, and look forward to Oasis operating this asset in a manner consistent with our values and focus on ESG: being respectful of and engaging with all of our stakeholders, including the Three Affiliated Tribes on the Fort Berthold Indian Reservation; showing commitment to our communities and the environment; and operating in a safe and sustainable manner.”

Advisors and Financing

J.P. Morgan Securities LLC acted as strategic and financial advisor and McDermott Will & Emery acted as legal advisor on the acquisition. In connection with the acquisition, Oasis entered into a commitment letter dated May 3, 2021 with J.P. Morgan and Wells Fargo to provide a $500MM bridge facility. Wells Fargo is administrative agent on Oasis’s credit facility. Vinson & Elkins LLP and Kirkland & Ellis LLP acted as legal advisors on the financing.

1Q21 Operational and Financial Highlights:

The following table presents select E&P operational and financial data for the first quarter of 2021 compared to guidance for the same period. E&P Metrics are consistent with disclosures in the Company’s investor presentation, which can be found on the Company’s website (www.oasispetroleum.com), and includes further reconciliation to consolidated numbers.

“First quarter results demonstrate outstanding operational and financial performance, strong execution, and progress towards our key strategic initiatives,” said Danny Brown. “Oasis continues to demonstrate a steadfast commitment to our new strategy of strong capital discipline and significant free cash flow generation as well as commitments to our environment, our social responsibilities and the sustainability of our enterprise. The quality of the Oasis team is impressive and their continued hard work has put our company in a great position to succeed going forward.”

“My goal is to build on the accomplishments made by management and the board in a very short amount of time.  In the first quarter alone, Oasis significantly reduced its cost structure, instituted a peer-leading executive compensation program, declared an inaugural dividend, simplified its midstream business, and initiated a share repurchase program. Oasis represents a compelling investment opportunity, and we will continue to be aggressive and pursue strategies to unlock value.”

Financial and Operational Update and Outlook

Oasis is updating its February FY21 volume and CapEx guidance to reflect 1Q21 actual performance and the Williston acquisition. For the purposes of guidance, the acquisition is modeled to close June 30, 2021. At $55/bbl WTI and $2.50/mmBtu NYMEX gas, Oasis is now expecting in excess of $200MM of free cash flow in 2021, including the impacts of hedges. The accretive transaction and the Company’s dedication to shareholder returns supports an approximately 33% increase in the dividend post closing to $0.50/share ($2.00 annualized).

Updated highlights based on adjusted E&P metrics include:

The following table presents previously announced full-year 2021 guidance and updated guidance for full-year 2021 and the second quarter of 2021:

Progress on Strategy since Emergence

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

G&A totaled $20.7MM in 1Q21 and $31.2MM in 1Q20. Amortization of equity-based compensation, which is included in G&A, was $2.2MM, or $0.43 per barrel of oil equivalent (“Boe”), in 1Q21. G&A for the Company’s E&P segment, excluding G&A expenses attributable to other services, totaled $15.7MM in 1Q21 and $23.3MM in 1Q20. E&P Cash G&A (non-GAAP), excluding G&A expenses attributable to other services, non-cash equity-based compensation expenses and other non-cash charges, was $2.72 per Boe in 1Q21 and $2.29 per Boe in 1Q20. For a definition of E&P Cash G&A and a reconciliation of G&A to E&P Cash G&A, see “Non-GAAP Financial Measures” below.

Interest expense was $8.7MM in 1Q21 as compared to $95.8MM in 1Q20. Capitalized interest totaled $0.4MM in 1Q21 and $2.3MM in 1Q20. Cash Interest (non-GAAP) totaled $5.6MM in 1Q21 and $93.5MM in 1Q20. For a definition of Cash Interest and a reconciliation of interest expense to Cash Interest, see “Non-GAAP Financial Measures” below.

In 1Q21, the Company recorded an income tax benefit of $3.7MM, resulting in a 9.4% effective tax rate as a percentage of its pre-tax loss for the quarter.

In 1Q21, the Company reported a net loss of $43.6MM, or $2.20 per diluted share, as compared to a net loss of $4,310.9MM, or $13.61 per diluted share, in 1Q20. Excluding certain non-cash items and their tax effect, Adjusted Net Income Attributable to Oasis (non-GAAP) was $86.2MM, or $4.34 per diluted share, in 1Q21, as compared to Adjusted Net Loss Attributable to Oasis of $62.8MM, or $0.20 per diluted share, in 1Q20. Adjusted EBITDA (non-GAAP) in 1Q21 was $169.2MM, as compared to Adjusted EBITDA of $167.0MM in 1Q20, which included $37.4MM for derivatives monetized in 1Q20. For definitions of Adjusted Net Income (Loss) Attributable to Oasis and Adjusted EBITDA and reconciliations to the most directly comparable financial measures under GAAP, see “Non-GAAP Financial Measures” below.

Capital Expenditures and Completions

The following table presents the Company’s total capital expenditures (“CapEx”) by category for the period presented:

Dividend Declaration

Oasis declared a dividend of $0.375 per share ($1.50/share annualized) for the first quarter of 2021 for shareholders of record as of May 17, 2021, payable on May 31, 2021.

Balance Sheet and Liquidity

The following table depicts the Company’s key balance sheet statistics and liquidity. Debt is calculated in accordance with respective credit facility definitions. The debt held at Oasis and OMP is not cross-collateralized and guarantors under the Oasis credit facility are not responsible for OMP debt.

Hedging Activity

The Company’s crude oil contracts settle monthly based on the average NYMEX West Texas Intermediate crude oil index price (“NYMEX WTI”) for fixed price swaps and costless collars. The Company’s natural gas contracts settle monthly based on the average NYMEX Henry Hub natural gas index price (“NYMEX HH”) for fixed price swaps. As of May 3, 2021, the Company had the following outstanding commodity derivative contracts:

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 Wednesday, May 12, 2021 by dialing:

Replay dial-in:

877-344-7529

Intl. replay:

412-317-0088

Replay code:

10156060

The conference call will also be available for replay for approximately 30 days at www.oasispetroleum.com. Please note the conference call originally scheduled for Thursday May 6th is cancelled.

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 the Company’s 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 Williston Basin acquisition, 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 unprecedented nature of the COVID-19 pandemic and the related decline of the oil and gas 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 the future pace and extent of a global economic recovery from the effects of the COVID-19 pandemic, the Company 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.

Exit mobile version