Oasis Petroleum (OAS) Tops Q1 EPS by $1.78, Announces Strategic Acquisition of Williston Basin Assets
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Oasis Petroleum (NASDAQ: OAS) reported Q1 EPS of $4.34, $1.78 better than the analyst estimate of $2.56. Revenue for the quarter came in at $355.5 million versus the consensus estimate of $225 million.
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.
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:
- Oasis's original 2021 drilling and completion plan disclosed in February remains intact. Acquired volumes are expected to decline from current levels throughout 2021 as Oasis integrates the new assets and prioritizes free cash generation;
- 2021 CapEx increased $5MM – $10MM to reflect incremental workover associated with acquired assets;
- Updating oil and gas differential guidance to reflect strong 1Q21 performance and updated outlook;
- Lowering GPT and production tax guidance reflecting strong 1Q21 performance and updated outlook;
- E&P Cash G&A guidance of $43MM – $46MM, which includes the impact of $3.3MM of 1Q21 severance expense. Oasis now plans to exit 2021 at $1.25 – $1.35 per Boe, below original expectations of $1.60 per Boe;
- 2Q21 volumes are expected to be 52–55 MBoe/d (65% oil), in line with prior expectations;
- 2Q21 E&P CapEx is expected to be $75MM – $90MM reflecting deferred 1Q21 spending. Following the Midstream Simplification, Oasis no longer has CapEx for its ownership interest in OMP;
- Oasis is currently evaluating various development scenarios for 2022 and beyond with the objective of optimizing operational efficiency, returns on capital, and sustainable free cash generation.
For earnings history and earnings-related data on Oasis Petroleum (OAS) click here.
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