Why Is Oasis (OAS) Up 18.1% Since Last Earnings Report?

A month has gone by since the last earnings report for Oasis Petroleum (OAS). Shares have added about 18.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Oasis due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Oasis Petroleum Posts Weaker Y/Y Results in Q2

Oasis Petroleum reported second-quarter earnings per share of 3 cents, a penny higher than the Zacks Consensus Estimate. The earnings beat can be attributed to lower-than-expected costs incurred in the quarter under review. However, the bottom line deteriorated from the year-ago income of 9 cents a share amid weaker y/y commodity price realizations.

The company’s total operating revenues in the second quarter amounted to $529.4 million, outpacing the Zacks Consensus Estimate of $504 million. However, the top line declined from the year-ago figure of $573.7 million.

Production & Realized Prices

Production of oil and natural gas was up6.3% from a year ago to 84.4 thousand oil-equivalent barrels per day (MBOE/d), comprising 72.5% oil. Oasis Petroleum’s production of oil and natural gas was 61.2 thousand barrels per day and 139,380 thousand cubic feet per day, respectively.

The average realized crude oil price during the second quarter was $58.87 per barrel, representing a decrease of 10.5% from the year-ago realization of $65.82. Moreover, the average realized natural gas price during the quarter under review was $2.29 per thousand cubic feet, down 32.2% from the year-ago period.

Total Expenses

Total operating expenses in the quarter declined 44% y/y to $457.5 million, primarily amid lower impairment charges. Notably, impairment charges were $24,000 compared with $384.1 million in the corresponding quarter of the last year. Meanwhile, depreciation costs totaled $177.4 million versus $153.6 million in the year-ago period.

The company’s lease operating expenses increased 19.8% y/y to $7.32 per barrel of oil equivalent (Boe). The company anticipates lease operating expenses per Boe in the band of $7-$7.75 for the remainder of the year.

Financial Position

Capital spending (before acquisitions) totaled $294.8 million in the quarter. Oasis Petroleum generated $388.9 million in net cash flow from operations, lower than the year-ago period’s $532 million.

The company posted a negative free cash flow of 102.8 million on a year-to-date basis.

As of Jun 30, the Bakken-focused operator — with a market capitalization of almost $2 billion — had $20.3 million in cash and cash equivalents. The company had a long-term debt of $2.9 billion, representing a debt-to-capitalization ratio of 43%.

Guidance Tweaked

Dampening investors’ confidence, Oasis Petroleum lowered its full-year output guidance and increased capex budget. The firm now expects 2019 output in the range of 86.8-88.5 MBOE/d versus prior forecast within 86-91 MBOE/d.

The company expects capital spending from the upstream segment within $620-$640 million, higher than the previous guided range of $540-$560 million. Midstream spending is expected within $219-$230 compared with the earlier forecast of $195-$219 million.

Third-quarter output is anticipated in the band of 87-90 MBOE/d (71.5% oil).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -85.29% due to these changes.

VGM Scores

Currently, Oasis has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Oasis has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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