Oasis Petroleum Inc. OAS recently agreed to buy Delaware Basin assets spanning 20,300 net acres from Forge Energy, LLC in a cash and stock deal. Oasis Petroleum has agreed to pay around $946 million for the assets.
Following the news of the strategic acquisition, the company's stock declined 17.2% as the investors were not pleased with the company’s decision to overlook cash flow and opt for new acquisitions. Strengthening the balance sheet is currently more important to them. The stock is down 19.3% in the last 30 days.
The transaction will include around $483 million cash and 46 million shares of Oasis Petroleum worth $463 million. The deal is expected to be completed by February 2018.
Per the company, it will fund the deal through a combination of stocks issued to Forge Energy and from its own revolving credit facility. The deal is expected to open the gateway for Oasis Petroleum in the Delaware Basin, which is a part of Permian Basin. It is the most lucrative area for oil explorers now due to its low production cost.
The acquisition includes 601 gross operated locations. The acquired acreage is expected to complement the company's existing assets in the region, which will enable long lateral development of around 8,000 feet median lateral length.
The company plans to drill 16-20 wells in the acquired acreage, of which six to eight will be completed in 2018. The company intends to spend $100 million on these wells. Production from the acquired acreage in November was around 3,500 barrels of oil equivalent per day (Boe/d).
In another development, the company also disclosed its intention to sell its non-core Williston Basin property for $500 million in the next year to ensure better return from assets. The company also updated its production forecast for 2017. Oasis Petroleum expects its production to be in the range of 71,000-73,000 Boe/d compared with the previous estimation of 69,000-72,000 Boe/d.
About the Company
Oasis Petroleum is an independent exploration and production company focused on the acquisition and development of oil and natural gas resources. The company is currently focused on exploiting resource potential from the Williston Basin. As of Dec 31, 2016, Oasis Petroleum owned 517,801 net leasehold acres in the basin along with around 305.1 million barrels of oil equivalent of estimated net proved reserves. The company is based in Houston, TX.
The company’s sales for 2017 are expected to climb 57.5% year over year. It pulled off an average earnings beat of 44.6% in the last four quarters.
Oasis Petroleum has lost 47.1% of its value year to date compared with 22.8% fall of its industry.
Zacks Rank and Stocks to Consider
Oasis Petroleum has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the oil and energy sector are Northern Oil and Gas, Inc. NOG, Holly Energy Partners, L.P. HEP and ConocoPhillips COP. Northern Oil and Gas and Holly Energy sport a Zacks Rank #1 (Strong Buy) while ConocoPhillips has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Minnetonka, MN-based Northern Oil and Gas is an independent energy company. The company’s sales for the fourth quarter of 2017 are expected to grow 51.9% year over year. The company pulled off an average beat of 175% in the last four quarters.
Dallas, TX-based Holly Energy is a production pipeline company. The company’s sales for 2017 are expected to climb 10.4% year over year. The company came up with a positive earnings surprise of 57.1% in the third quarter of 2017.
Houston, TX-based ConocoPhillips is a major global exploration and production company. The company’s sales for 2017 are expected to increase 24.4% year over year. The company delivered an average positive earnings surprise of 152.3% in the last four quarters.
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