Wednesday, October 2, 2013

Oasis Petroleum: An Efficiency Focused Williston Basin Play With 25% Upside

The following is a "small cainsight" column by Sarfaraz A. Khan about a company with a market cap of less than $5 billion.

Oasis Petroleum (OAS) is 6.5 years old independent exploration and production company that is focused on developing unconventional oil from Williston Basin. The region in already known for its rich deposits of natural resources, particularly the shale reserves at Bakken and Three Forks. Oasis Petroleum has highly concentrated 335,383 net acres in the region. Over the years, the company has acquired and developed assets at the heart of the play. This has then powered the company's stellar growth over a brief period.

Stellar Growth

Oasis Petroleum is primarily an unconventional oil producer and gets more than 90% of its revenues from oil. The company's acreage is spread across West Williston (in Montana and North Dakota), East Nesson and Sanish (in North Dakota). Oasis Petroleum only operates the West Williston and the East Nesson acreage.

(Figure a)

The company is a growth story in the making. Since Q2-2011, the company's revenues have grown by 278.8%, gross profits are up 221.7% and earnings per share have doubled. As a result, Oasis Petroleum has seen a fivefold increase in its return on equity from 4.76% in Q2-2011 to 22.24% in Q2-2013.

(Figure b)

All of this has come on the back of more than 4x increase in production. In its humble beginnings, Oasis Petroleum's average daily production in FY-2010 was 5,206 boepd. This has now grown to an impressive 30,171 boepd, and the business is on track to produce 33,000 boepd in the current quarter.

(Figure c)

Oasis Petroleum's average daily production is +34% as compared to … Read full article with figures