John Freeman, a Raymond James analyst, reported that Oasis Petroleum Inc. (OAS:NYSE) "delivered an in line Q3/18 despite temporary issues hampering gas production" and the company's "2019 game plan remains on track."
Freeman reviewed production, capex and differentials, looking forward. Despite an anticipated Q4/18 production miss, the longer-term outlook for Oasis remains unchanged, he indicated. The company still expects its exit rate production to increase by about 25% in 2018 and 15% in 2019.
Due to rescheduled well completions, Oasis now expects Q4/18 production of 87.5–90 thousand barrels of oil equivalent per day (87.5–90 Mboe/d) versus its prior guidance of 91–94 Mboe/d, which the company maintains. The revised rate is below Raymond James' forecast of 91.7–92.2 Mboe/d.
Also noteworthy, Freeman wrote, is it looks like Oasis will exceed expected completions in 2018 and 2019. With a fifth rig added at year-end 2018 in the Bakken and a third rig added in mid-2019 in the Delaware, the company should achieve 15–20 completions in 2018 versus the expected eight and surpass the 110 planned for 2019.
To achieve all of these, the required capital spend would be more than roughly $1 billion ($1B), Freeman pointed out. Additionally, pipeline infrastructure in the Delaware should need about $150–200 million ($150–200M). Offsetting these costs would be capex on the Williston midstream, which is expected to be about 40% lower year over year, at roughly $180M. "All in, we estimate 2019 capex at about $1.4B, which includes projected midstream spending and anticipated Delaware buildout," Freeman noted.
As for differentials, guidance on them remains the same despite some expected changes at Williston. As a result of higher refinery maintenance costs, differentials will likely rise in December from October's $3 per barrel rate. As for 2019 though, Freeman indicated, "rail expansion and normalized refinery demand should help keep differentials in check."
About the company's overall efforts, Freeman concluded, "Oasis continues to make good progress proving out its acreage, and we look forward to future tests that could help to further expand the core Bakken position and help delineate the Delaware acreage further in 2019."
He reiterated Raymond James' Strong Buy rating and $22 per share target price on Oasis, whose stock is currently trading at around $9.36 per share.