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Oasis Petroleum Inc. Announces Quarter Ended September 30, 2017 Earnings

HOUSTON, Nov. 7, 2017 /PRNewswire/ -- Oasis Petroleum Inc. (NYSE: OAS) ("Oasis" or the "Company") today announced financial results for the quarter ended September 30, 2017 and provided an operational update.

Recent Highlights:

  • Completed and placed on production 24 gross (15.1 net) operated wells in the Williston Basin in the third quarter of 2017.
  • Produced 66.1 thousand barrels of oil equivalent per day ("MBoepd") in the third quarter of 2017, representing an increase of 7% over the second quarter of 2017, primarily driven by completion activity. Production during the third quarter of 2017 increased 36% over the third quarter of 2016.
  • Produced over 69 MBoepd in October 2017 and expect to produce between 69 MBoepd and 72 MBoepd in the fourth quarter of 2017. Oasis continues to expect to hit an exit rate of 72 MBoepd, delivering 16% growth above the 2016 exit rate.
  • Oil differentials have improved to $1.82 off of NYMEX West Texas Intermediate crude oil index price ("WTI") in the third quarter of 2017, and Oasis expects differentials in the fourth quarter to range from $1.25 to $2.00 off of WTI.
  • Delivered Adjusted EBITDA of $179.6 million for the third quarter of 2017. For definitions of Adjusted EBITDA and reconciliations of Adjusted EBITDA to net income and net cash provided by operating activities, see "Non-GAAP Financial Measures" below.
  • Commenced operations of its second Oasis Well Services ("OWS") frac crew during the third quarter of 2017.
  • Oasis Midstream Partners LP ("OMP") sold 8,625,000 common units, representing limited partner interests in an initial public offering ("IPO" or the "Offering") for net proceeds of $137.2 million, of which $131.6 million was distributed to Oasis.
  • Announced investment in and assignment of second Wild Basin Gas Plant ("Gas Plant II") with a total capacity of 200 million standard cubic feet per day ("MMscfpd") to service gas production from its highly economic inventory.
  • Expects full year 2017 adjusted CapEx to total $620.0 million, in line with prior guidance. See "Capital Expenditures" below for adjustments.
  • Including net proceeds distributed to Oasis from the OMP IPO and adjustments for the Gas Plant II assignment, Oasis generated positive free cash flow of $39.0 million for the nine months ended September 30, 2017.

"Oasis successfully delivered on production growth during the quarter in line with guidance, completed its IPO of OMP, and launched its second frac crew," said Thomas B. Nusz, Oasis' Chairman and Chief Executive Officer. "The team delivered another great quarter and has positioned Oasis to exit the year with 72 MBoepd of production. Well performance across our core acreage position, including Wild Basin, Indian Hills, and Alger, continues to deliver impressive results, and our wells remain highly economic in the current commodity price environment. The team has also further reduced operating costs while driving improved differentials benefiting from our integrated midstream infrastructure."

Gas Plant II Update

Oil and gas production from Oasis' Wild Basin wells continues to exceed expectations, primarily due to higher frac intensity in the core areas of the Williston Basin. The initial gas to oil ratio ("GOR") is generally higher in the core of the Williston Basin, including parts of McKenzie County, compared to the entire basin. The combined effect of these factors has resulted in record gas production levels in the Williston Basin and particularly in McKenzie County where much of the drilling since 2015 has occurred, which now produces approximately half of the gas production in North Dakota. Due to the increased production of gas in the Williston Basin, there is a need for incremental processing capacity in the basin.

Gas production in Wild Basin has already surpassed original design expectations for OMP's 80 MMscfpd gas plant, which is held by OMP's wholly-owned development company ("DevCo"), Bighorn DevCo LLC ("Bighorn DevCo"), and recently has averaged gross gas production in Wild Basin of approximately 100 MMscfpd. Oasis initially evaluated options to process the incremental gas that is being produced in and around Wild Basin and subsequently began the front end engineering and design process for a second gas plant and began ordering long lead time items. Oasis recently made the decision to proceed with the construction of Gas Plant II, and on November 6, 2017, Oasis agreed to assign the project to OMP. In exchange for the assignment of Gas Plant II into Bighorn DevCo, OMP agreed to reimburse Oasis for 100% of the capital spent-to-date and will fund 100% of the remaining project capital. OMP funded the reimbursement under its revolving credit facility and will have full rights to all cash flows generated from both gas plants held by Bighorn DevCo. For the nine months ended September 30, 2017, Oasis invested $57.0 million in Gas Plant II, and on November 6,2017, assigned $66.7 million of asset value to OMP, which included capital spent in October 2017. OMP expects to invest approximately $140.0 million for the entire Gas Plant II project and anticipates operations will begin in late 2018.

Operational and Financial Update

Select operational and financial statistics are in the following table:


Quarter Ended:


9/30/2017


6/30/2017


9/30/2016

Production data:






Oil (Bopd)

51,825



47,795



39,439


Natural gas (Mcfpd)

85,800



84,890



54,421


Total production (Boepd)

66,125



61,943



48,509


Percent Oil

78

%


77

%


81

%

Average sales prices:






Oil, without derivative settlements (per Bbl)

$

46.35



$

44.61



$

40.54


Differential to WTI (per Bbl)

1.82



3.68



4.39


Natural gas (per Mcf)(1)

3.50



3.19



1.84


Revenues ($ in millions):






Oil

$

221.0



$

194.0



$

147.1


Natural gas

27.6



24.6



9.2


Bulk oil sales

21.2



8.1



1.9


Midstream revenues

18.8



15.6



8.5


Well services revenues

16.1



11.8



10.6


Total revenues

$

304.7



$

254.1



$

177.3


Midstream and well services operating expenses ($ in millions):






Midstream operating expenses

$

4.3



$

3.3



$

2.6


Well services operating expenses

9.1



8.1



5.5


Select exploration and production (E&P) operating expenses:






LOE ($ per Boe)

$

7.45



$

7.92



$

8.00


MT&G ($ per Boe)(2)

2.50



2.14



1.58


DD&A ($ per Boe)

21.75



22.23



25.08


E&P general and administrative expenses ("G&A") ($ per Boe)

2.93



3.52



4.31


Production taxes (% of oil and gas revenues)(3)

8.5

%


8.7

%


9.4

%

___________________

(1)

Natural gas prices include the value for natural gas and natural gas liquids.

(2)

Excludes non-cash valuation charges on pipeline imbalances.

(3)

Prior to the first quarter of 2017, oil and gas revenues included bulk oil sales related to blending at the Company's crude oil terminal on the Company's Condensed Consolidated Statements of Operations. Prior periods have been adjusted retrospectively to reflect these revenues in bulk oil sales on the Company's Condensed Consolidated Statements of Operations.

G&A totaled $22.5 million in the third quarter of 2017, $22.8 million in the third quarter of 2016 and $23.5 million in the second quarter of 2017. Amortization of equity-based compensation, which is included in G&A, was $6.6 million, or $1.09 per Boe, in the third quarter of 2017 as compared to $5.8 million, or $1.30 per Boe, in the third quarter of 2016 and $7.1 million, or $1.26 per Boe, in the second quarter of 2017. G&A for the Company's E&P segment totaled $17.8 million in the third quarter of 2017, $19.2 million in the third quarter of 2016 and $19.8 million in the second quarter of 2017.

Interest expense was $37.4 million for the third quarter of 2017 compared to $31.7 million for the third quarter of 2016 and $36.8 million for the second quarter of 2017. Capitalized interest totaled $3.1 million for the third quarter of 2017, $4.4 million for the third quarter of 2016 and $2.8 million for the second quarter of 2017. Cash Interest totaled $36.2 million for the third quarter of 2017, $33.7 million for the third quarter of 2016 and $35.5 million for the second quarter of 2017. For a definition of Cash Interest and a reconciliation of interest expense to Cash Interest, see "Non-GAAP Financial Measures" below.

For the three months ended September 30, 2017, the Company recorded an income tax benefit of $18.8 million, resulting in a 31.5% effective tax rate as a percentage of its pre-tax loss for the quarter. The Company recorded an income tax expense of $2.3 million, resulting in a 12.4% effective tax rate as a percentage of its pre-tax income for the three months ended June 30, 2017.

For the third quarter of 2017, the Company reported net loss of $41.1 million, or $0.18 per diluted share, as compared to a net loss of $33.9 million, or $0.19 per diluted share, for the third quarter of 2016. Excluding certain non-cash items and their tax effect, Adjusted Net Income Attributable to Oasis (non-GAAP) was $0.5 million, or $0.00 per diluted share, in the third quarter of 2017, compared to Adjusted Net Loss Attributable to Oasis of $29.3 million, or $0.17 per diluted share, in the third quarter of 2016. For a definition of Adjusted Net Income (Loss) Attributable to Oasis and a reconciliation of net income (loss) to Adjusted Net Income (Loss) Attributable to Oasis, see "Non-GAAP Financial Measures" below. Adjusted EBITDA for the third quarter of 2017 was $179.6 million, compared to Adjusted EBITDA of $104.4 million for the third quarter of 2016. For a definition of Adjusted EBITDA and a reconciliation of net income (loss) including non-controlling interests and net cash provided by (used in) operating activities to Adjusted EBITDA, see "Non-GAAP Financial Measures" below.

Capital Expenditures

The following table depicts the Company's total CapEx by category:


1Q 2017


2Q 2017


3Q 2017


YTD 2017

CapEx ($ in millions):








E&P

$

90.8



$

100.8



$

149.9



$

341.5


Midstream

13.1



66.1



79.6



158.9


Well services



0.3



5.1



5.4


Other(1)

5.9



5.8



5.7



17.3


Total CapEx(2)

$

109.8



$

173.0



$

240.3



$

523.1


___________________

(1)

Other CapEx includes such items as administrative capital and capitalized interest.

(2)

CapEx reflected in the table above differs from the amounts shown in the statement of cash flows in the Company's condensed consolidated financial statements because amounts reflected in the table above include changes in accrued liabilities from the previous reporting period for capital expenditures, while the amounts presented in the statement of cash flows are presented on a cash basis.

The Company's CapEx totaled $523.1 million for the nine months ended September 30, 2017, of which $57.0 million was reimbursed by OMP with the assignment of Gas Plant II. Additionally, the Company acquired a freshwater intake facility from the Missouri River and a freshwater distribution system that it is expanding to service a portion of the Company's completion activity in Wild Basin (the "Freshwater Project"). The Freshwater Project costs for the nine months ended September 30, 2017, including the acquisition, have totaled approximately $23.0 million. At the time of the OMP IPO, the Freshwater Project was included in Beartooth DevCo LLC, which is 60% owned by Oasis. Excluding the Gas Plant II and the Freshwater Project, CapEx would have totaled $443.0 million for the nine months ended September 30, 2017, which is in line with the Company's CapEx plan for the nine months ended September 30, 2017. Excluding the Gas Plant II and the Freshwater Project for the full year 2017 CapEx, Oasis continues to expect adjusted CapEx to be approximately $620.0 million, which includes $15.0 million for activating the second frac spread for OWS.

Updated Guidance

Oasis is providing an update to its outlook for the full year 2017 in the following table:



Updated FY17


Prior FY17

Metric


Low


High


Low


High

Production (MBoepd)


65.1



65.8



65.1



66.1


Differentials ($ per Bbl)


$

2.80



$

3.00



$

3.00



$

4.00


MT&G ($ per Boe)


$

2.20



$

2.30



$

1.90



$

2.20


LOE ($ per Boe)


$

7.50



$

7.70



$

6.75



$

7.75


G&A ($ in millions)


$

92.5



$

97.5



$

95.0



$

100.0


Production Taxes (% of oil and gas revenue)


8.5

%


8.6

%


8.7

%


9.0

%

Hedging Activity

As of November 7, 2017, the Company had the following outstanding commodity derivative contracts, which settle monthly and are priced off of WTI for crude oil and NYMEX Henry Hub for natural gas:

Crude oil (Volume in Mbopd)


2H17


1H18


2H18


1H19

Swaps









Volume


14.3



37.0



35.0



7.0


Price


$

50.03



$

50.89



$

50.84



$

50.82


Collars









Volume


4.0



3.0



3.0




Floor


$

46.25



$

48.67



$

48.67



$


Ceiling


$

54.37



$

53.07



$

53.07



$


3-way









Volume


3.0








Sub-Floor


$

31.67



$



$



$


Floor


$

45.83



$



$



$


Ceiling


$

59.94



$



$



$


Total Crude Oil Volume


21.3



40.0



38.0



7.0











Natural Gas (Volume in MMBtupd)









Swaps









Volume


11.0



19.0



19.0




Price


$

3.30



$

3.05



$

3.05



$


Total Natural Gas Volume


11.0



19.0



19.0




The September 2017 crude oil derivative contracts settled at a net $0.1 million paid in October 2017 and will be included in the Company's fourth quarter 2017 derivative settlements.

Conference Call Information

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

Date:


Wednesday, November 8, 2017

Time:


10:00 a.m. Central Time

Live Webcast:


https://www.webcaster4.com/Webcast/Page/1052/23152

OR:



Dial-in:


888-317-6003

Intl. Dial in:


412-317-6061

Conference ID:


2353150

Website:


www.oasispetroleum.com

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, November 15, 2017 by dialing:

Replay dial-in:


877-344-7529

Intl. replay:


412-317-0088

Replay code:


10113619

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. 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 oil and natural gas prices, weather and environmental conditions, the timing of planned capital expenditures, availability of acquisitions, 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 SEC.

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 unconventional oil and natural gas resources, primarily operating in the Williston Basin. For more information, please visit the Company's website at www.oasispetroleum.com.

Oasis Petroleum Inc.

Condensed Consolidated Balance Sheets

(Unaudited)



September 30, 2017


December 31, 2016


(In thousands, except share data)

ASSETS




Current assets




Cash and cash equivalents

$

8,488



$

11,226


Accounts receivable, net

285,383



204,335


Inventory

17,169



10,648


Prepaid expenses

10,647



7,623


Derivative instruments

692



362


Other current assets

65



4,355


Total current assets

322,444



238,549


Property, plant and equipment




Oil and gas properties (successful efforts method)

7,640,785



7,296,568


Other property and equipment

783,542



618,790


Less: accumulated depreciation, depletion, amortization and impairment

(2,388,709)



(1,995,791)


Total property, plant and equipment, net

6,035,618



5,919,567


Derivative instruments

703




Long-term inventory

10,885




Other assets

21,562



20,516


Total assets

$

6,391,212



$

6,178,632


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities




Accounts payable

$

16,348



$

4,645


Revenues and production taxes payable

169,361



139,737


Accrued liabilities

194,157



119,173


Accrued interest payable

20,325



39,004


Derivative instruments

16,412



60,469


Advances from joint interest partners

5,095



7,597


Other current liabilities



10,490


Total current liabilities

421,698



381,115


Long-term debt

2,340,613



2,297,214


Deferred income taxes

508,335



513,529


Asset retirement obligations

52,413



48,985


Derivative instruments

3,703



11,714


Other liabilities

5,805



2,918


Total liabilities

3,332,567



3,255,475


Commitments and contingencies




Stockholders' equity




Common stock, $0.01 par value: 450,000,000 shares authorized; 238,639,488 shares issued and 237,312,881 shares outstanding at September 30, 2017 and 237,201,064 shares issued and 236,344,172 shares outstanding at December 31, 2016

2,348



2,331


Treasury stock, at cost: 1,326,607 and 856,892 shares at September 30, 2017 and December 31, 2016, respectively

(22,132)



(15,950)


Additional paid-in capital

2,369,098



2,345,271


Retained earnings

593,368



591,505


Oasis share of stockholders' equity

2,942,682



2,923,157


Non-controlling interests

115,963




Total stockholders' equity

3,058,645



2,923,157


Total liabilities and stockholders' equity

$

6,391,212



$

6,178,632



Oasis Petroleum Inc.

Condensed Consolidated Statements of Operations

(Unaudited)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2017


2016


2017


2016


(In thousands, except per share data)

Revenues








Oil and gas revenues

$

248,648



$

156,316



$

704,533



$

432,968


Bulk oil sales

21,195



1,867



56,917



1,867


Midstream revenues

18,767



8,487



48,939



22,380


Well services revenues

16,138



10,641



33,566



29,459


Total revenues

304,748



177,311



843,955



486,674


Operating expenses








Lease operating expenses

45,334



35,696



133,871



98,283


Midstream operating expenses

4,301



2,617



10,891



6,095


Well services operating expenses

9,125



5,548



21,115



15,334


Marketing, transportation and gathering expenses

15,028



7,003



38,018



22,046


Bulk oil purchases

21,701



1,853



57,683



1,853


Production taxes

21,052



14,638



60,322



39,758


Depreciation, depletion and amortization

132,289



111,948



384,246



356,885


Exploration expenses

854



489



4,010



1,192


Impairment

139



382



6,021



3,967


General and administrative expenses

22,531



22,845



69,913



69,087


Total operating expenses

272,354



203,019



786,090



614,500


Gain (loss) on sale of properties



6





(1,305)


Operating income (loss)

32,394



(25,702)



57,865



(129,131)


Other income (expense)








Net gain (loss) on derivative instruments

(54,310)



20,847



52,297



(55,624)


Interest expense, net of capitalized interest

(37,389)



(31,726)



(110,548)



(105,444)


Gain (loss) on extinguishment of debt



(13,793)





4,865


Other income (expense)

(605)



(259)



(755)



188


Total other expense

(92,304)



(24,931)



(59,006)



(156,015)


Loss before income taxes

(59,910)



(50,633)



(1,141)



(285,146)


Income tax benefit

18,846



16,691



470



96,818


Net loss including non-controlling interests

(41,064)



(33,942)




(671)



(188,328)


Less: Net income attributable to non-controlling interests

150





150




Net loss attributable to Oasis

$

(41,214)



$

(33,942)



$

(821)



$

(188,328)


Earnings (loss) attributable to Oasis per share:








Basic

$

(0.18)



$

(0.19)



$

0.00



$

(1.09)


Diluted

(0.18)



(0.19)



0.00



(1.09)


Weighted average shares outstanding:








Basic

233,389



177,120



233,248



172,360


Diluted

233,389



177,120



233,248



172,360




Oasis Petroleum Inc.

Selected Financial and Operational Statistics

(Unaudited)



Three Months Ended September 30,


Nine Months Ended September 30,


2017


2016


2017


2016

Operating results (in thousands):








Revenues








Oil

$

221,004



$

147,095



$

623,603



$

411,201


Natural gas

27,644



9,221



80,930



21,767


Bulk oil sales

21,195



1,867



56,917



1,867


Midstream

18,767



8,487



48,939



22,380


Well services

16,138



10,641



33,566



29,459


Total revenues

$

304,748



$

177,311



$

843,955



$

486,674


Production data:








Oil (MBbls)

4,768



3,628



13,552



11,245


Natural gas (MMcf)

7,894



5,007



23,131



13,809


Oil equivalents (MBoe)

6,083



4,463



17,408



13,547


Average daily production (Boe per day)

66,125



48,509



63,764



49,440


Average sales prices:








Oil, without derivative settlements (per Bbl)

$

46.35



$

40.54



$

46.02



$

36.57


Oil, with derivative settlements (per Bbl)(1)

43.50



43.79



41.70



46.85


Natural gas (per Mcf)(2)

3.50



1.84



3.50



1.58


Costs and expenses (per Boe of production):








Lease operating expenses

$

7.45



$

8.00



$

7.69



$

7.26


Marketing, transportation and gathering expenses(3)

2.50



1.58



2.16



1.58


Production taxes

3.46



3.28



3.47



2.93


Depreciation, depletion and amortization

21.75



25.08



22.07



26.35


General and administrative expenses ("G&A")

3.70



5.12



4.02



5.10


Exploration and production G&A

2.93



4.31



3.32



4.28


___________________

(1)

Realized prices include gains or losses on cash settlements for commodity derivatives, which do not qualify for or were not designated as hedging instruments for accounting purposes. Cash settlements represent the cumulative gains and losses on the Company's derivative instruments for the periods presented and do not include a recovery of costs that were paid to acquire or modify the derivative instruments that were settled.

(2)

Natural gas prices include the value for natural gas and natural gas liquids.

(3)

Excludes non-cash valuation charges on pipeline imbalances.


Oasis Petroleum Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



Nine Months Ended September 30,


2017


2016


(In thousands)

Cash flows from operating activities:




Net loss including non-controlling interests

$

(671)



$

(188,328)


Adjustments to reconcile net loss to net cash provided by operating activities:




Depreciation, depletion and amortization

384,246



356,885


Gain on extinguishment of debt



(4,865)


Loss on sale of properties



1,305


Impairment

6,021



3,967


Deferred income taxes

(470)



(96,818)


Derivative instruments

(52,297)



55,624


Equity-based compensation expenses

20,451



18,761


Deferred financing costs amortization and other

12,666



10,174


Working capital and other changes:




Change in accounts receivable

(81,022)



11,349


Change in inventory

(235)



2,559


Change in prepaid expenses

823



1,168


Change in other current assets

276



(240)


Change in long-term inventory and other assets

(12,843)



(148)


Change in accounts payable, interest payable and accrued liabilities

32,282



(41,991)


Change in other current liabilities

(10,490)



(6,000)


Change in other liabilities



17


Net cash provided by operating activities

298,737



123,419


Cash flows from investing activities:




Capital expenditures

(443,649)



(340,314)


Proceeds from sale of properties

4,000



12,333


Costs related to sale of properties



(310)


Derivative settlements

(804)



115,576


Advances from joint interest partners

(2,502)



544


Net cash used in investing activities

(442,955)



(212,171)


Cash flows from financing activities:




Proceeds from revolving credit facility

764,000



835,000


Principal payments on revolving credit facility

(732,000)



(778,000)


Repurchase of senior unsecured notes



(435,907)


Proceeds from issuance of senior unsecured convertible notes



300,000


Deferred financing costs

(96)



(8,811)


Proceeds from sale of common stock



182,791


Proceeds from sale of OMP common units, net of offering costs

115,813




Purchases of treasury stock

(6,182)



(2,275)


Other

(55)




Net cash provided by financing activities

141,480



92,798


Increase (decrease) in cash and cash equivalents

(2,738)



4,046


Cash and cash equivalents:




Beginning of period

11,226



9,730


End of period

$

8,488



$

13,776


Supplemental non-cash transactions:




Change in accrued capital expenditures

$

63,499



$

(49,177)


Change in asset retirement obligations

3,112



(8,083)


Notes payable from acquisition

4,875




Non-GAAP Financial Measures

Cash Interest is a supplemental non-GAAP financial measure that is used by management and external users of the Company's financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Cash Interest as interest expense plus capitalized interest less amortization and write-offs of deferred financing costs and debt discounts included in interest expense. Cash Interest is not a measure of interest expense as determined by United States generally accepted accounting principles, or GAAP.

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


Three Months Ended September 30,


Nine Months Ended September 30,


2017


2016


2017


2016


(In thousands)

Interest expense

$

37,389



$

31,726



$

110,548



$

105,444


Capitalized interest

3,137



4,380



8,773



13,683


Amortization of deferred financing costs

(1,729)



(2,095)



(5,128)



(8,042)


Amortization of debt discount

(2,591)



(300)



(7,426)



(300)


Cash Interest

$

36,206



$

33,711



$

106,767



$

110,785


Adjusted EBITDA and Free Cash Flow 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 EBITDA as earnings before interest expense, income taxes, depreciation, depletion, amortization, exploration expenses and other similar non-cash charges. The Company defines Free Cash Flow as Adjusted EBITDA less Cash Interest and CapEx, excluding capitalized interest. Adjusted EBITDA and Free Cash Flow are not measures of net income (loss) or cash flows as determined by GAAP.

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


Three Months Ended September 30,


Nine Months Ended September 30,


2017


2016


2017


2016


(In thousands)

Net loss including non-controlling interests

$

(41,064)



$

(33,942)



$

(671)



$

(188,328)


(Gain) loss on sale of properties



(6)





1,305


(Gain) loss on extinguishment of debt



13,793





(4,865)


Net (gain) loss on derivative instruments

54,310



(20,847)



(52,297)



55,624


Derivative settlements(1)

8,095



11,786



(804)



115,576


Interest expense, net of capitalized interest

37,389



31,726



110,548



105,444


Depreciation, depletion and amortization

132,289



111,948



384,246



356,885


Impairment

139



382



6,021



3,967


Exploration expenses

854



489



4,010



1,192


Equity-based compensation expenses

6,628



5,782



20,451



18,761


Income tax benefit

(18,846)



(16,691)



(470)



(96,818)


Other non-cash adjustments

(208)



(26)



491



697


Adjusted EBITDA

179,586



104,394



471,525



369,440


Adjusted EBITDA attributable to non-controlling interests

190





190




Adjusted EBITDA attributable to Oasis

179,396



104,394



471,335



369,440


Cash Interest

(36,206)



(33,711)



(106,767)



(110,785)


Capital expenditures(2)

(240,373)



(78,453)



(523,143)



(297,696)


Capitalized interest

3,137



4,380



8,773



13,683


Free Cash Flow

$

(94,046)



$

(3,390)



$

(149,802)



$

(25,358)










Net cash provided by operating activities

$

88,876



$

32,018



$

298,737



$

123,419


Derivative settlements(1)

8,095



11,786



(804)



115,576


Interest expense, net of capitalized interest

37,389



31,726



110,548



105,444


Exploration expenses

854



489



4,010



1,192


Deferred financing costs amortization and other

(3,795)



(3,622)



(12,666)



(10,174)


Changes in working capital

48,375



32,023



71,209



33,286


Other non-cash adjustments

(208)



(26)



491



697


Adjusted EBITDA

179,586



104,394



471,525



369,440


Adjusted EBITDA attributable to non-controlling interests

190





190




Adjusted EBITDA attributable to Oasis

179,396



104,394



471,335



369,440


Cash Interest

(36,206)



(33,711)



(106,767)



(110,785)


Capital expenditures(2)

(240,373)



(78,453)



(523,143)



(297,696)


Capitalized interest

3,137



4,380



8,773



13,683


Free Cash Flow

$

(94,046)



$

(3,390)



$

(149,802)



$

(25,358)


___________________

(1)

Cash settlements represent the cumulative gains and losses on the Company's derivative instruments for the periods presented and do not include a recovery of costs that were paid to acquire or modify the derivative instruments that were settled.

(2)

CapEx reflected in the table above differs from the amounts shown in the statement of cash flows in the Company's condensed consolidated financial statements because amounts reflected in the table above include changes in accrued liabilities from the previous reporting period for capital expenditures, while the amounts presented in the statement of cash flows are presented on a cash basis.

The following tables present reconciliations of the GAAP financial measure of income (loss) before income taxes to the non-GAAP financial measure of Adjusted EBITDA for the Company's three reportable business segments on a gross basis for the periods presented:

Exploration and Production


Three Months Ended September 30,


Nine Months Ended September 30,


2017


2016


2017


2016


(In thousands)

Loss before income taxes including non-controlling interests

$

(88,835)



$

(66,333)



$

(71,999)



$

(331,075)


(Gain) loss on sale of properties



(6)





1,663


(Gain) loss on extinguishment of debt



13,793





(4,865)


Net (gain) loss on derivative instruments

54,310



(20,847)



(52,297)



55,624


Derivative settlements(1)

8,095



11,786



(804)



115,576


Interest expense, net of capitalized interest

37,369



31,726



110,528



105,444


Depreciation, depletion and amortization

129,626



109,668



376,818



346,240


Impairment

139



382



6,021



1,536


Exploration expenses

854



489



4,010



1,192


Equity-based compensation expenses

6,344



5,570



19,741



17,495


Other non-cash adjustments

(208)



(26)



491



697


Adjusted EBITDA

$

147,694



$

86,202



$

392,509



$

309,527


___________________

(1)

Cash settlements represent the cumulative gains and losses on the Company's derivative instruments for the periods presented and do not include a recovery of costs that were paid to acquire or modify the derivative instruments that were settled.

Midstream Services


Three Months Ended September 30,


Nine Months Ended September 30,


2017


2016


2017


2016


(In thousands)

Income before income taxes including non-controlling interests

$

25,179



$

16,065



$

69,046



$

49,262


Gain on sale of properties







(358)


Interest expense, net of capitalized interest

20





20




Depreciation, depletion and amortization

4,163



1,909



11,375



5,325


Impairment







2,431


Equity-based compensation expenses

392



218



1,104



661


Adjusted EBITDA

$

29,754



$

18,192



$

81,545



$

57,321


Well Services


Three Months Ended September 30,


Nine Months Ended September 30,


2017


2016


2017


2016


(In thousands)

Income before income taxes including non-controlling interests

$

10,832



$

1,577



$

9,195



$

3,462


Depreciation, depletion and amortization

3,196



3,478



9,417



11,605


Equity-based compensation expenses

281



354



1,015



1,253


Adjusted EBITDA

$

14,309



$

5,409



$

19,627



$

16,320



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 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:


Three Months Ended September 30,


Nine Months Ended September 30,


2017


2016


2017


2016


(In thousands, except per share data)

Net loss attributable to Oasis

$

(41,214)



$

(33,942)



$

(821)



$

(188,328)


(Gain) loss on sale of properties



(6)





1,305


(Gain) loss on extinguishment of debt



13,793





(4,865)


Net (gain) loss on derivative instruments

54,310



(20,847)



(52,297)



55,624


Derivative settlements(1)

8,095



11,786



(804)



115,576


Impairment

139



382



6,021



3,967


Amortization of deferred financing costs

1,728



2,095



5,127



8,042


Amortization of debt discount

2,591



300



7,426



300


Other non-cash adjustments

(208)



(26)



491



697


Tax impact(2)

(24,941)



(2,798)



12,735



(67,598)


Adjusted Net Income (Loss) Attributable to Oasis

$

500



$

(29,263)



$

(22,122)



$

(75,280)










Diluted loss attributable to Oasis per share

$

(0.18)



$

(0.19)



$



$

(1.09)


Loss on sale of properties







0.01


(Gain) loss on extinguishment of debt



0.08





(0.03)


Net (gain) loss on derivative instruments

0.23



(0.12)



(0.22)



0.32


Derivative settlements(1)

0.03



0.07





0.67


Impairment





0.03



0.02


Amortization of deferred financing costs

0.01



0.01



0.02



0.05


Amortization of debt discount

0.01





0.03




Tax impact(2)

(0.10)



(0.02)



0.05



(0.39)


Non-GAAP Diluted Loss Attributable to Oasis Per Share

$



$

(0.17)



$

(0.09)



$

(0.44)










Diluted weighted average shares outstanding

233,389



177,120



233,248



172,360










Effective tax rate applicable to adjustment items

37.4

%


37.4

%


37.4

%


37.4

%

___________________

(1)

Cash settlements represent the cumulative gains and losses on the Company's derivative instruments for the periods presented and do not include a recovery of costs that were paid to acquire or modify the derivative instruments that were settled.

(2)

The tax impact is computed utilizing the Company's effective tax rate applicable to the adjustments for certain non-cash and non-recurring items.

View original content:http://www.prnewswire.com/news-releases/oasis-petroleum-inc-announces-quarter-ended-september-30-2017-earnings-300551474.html

SOURCE Oasis Petroleum Inc.

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