Oasis Reports 3Q17 Earnings; Update On The Largest Natural Gas Processing Plant Complex In North Dakota -- November 7, 2017

Oasis website.

Slides for the company's earning's call (a pdf will download). 

After earnings reported, after hours trading, OAS up 50 cents, or 5%.

From the company's press release:

• 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 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 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 sold 8,625,000 common units, representing limited partner interests in an initial public 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 to service gas production from its highly economic inventory
• xxpects 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

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.

For my purposes, I will call this the Oasis "Wild Basin Gas Plant Complex" which apparently will have "Gas Plant I" (80) and "Gas Plant II" (185).

Note this post back on July 10, 2017: Oasis wants to be the biggest in the state -- natural gas processing plant. At that post:

From The Bismarck Tribune via The Charlotte Observer:

A company has proposed an expansion for a natural gas processing plant in the most prolific part of the Bakken oil patch in northwestern North Dakota.

The Bismarck Tribune (http://bit.ly/2tFJeuB ) reports that Oasis Midstream wants to expand the Wild Basin Gas Plant in McKenzie County to make it the largest natural gas processing complex in the state.

The plant currently processes about 80 million cubic feet of natural gas per day. The expansion would add a new complex next to the existing plant, which would allow the plant to process an additional 265 million cubic feet per day.

According to documents filed with the North Dakota Public Service Commission, construction is expected to cost around $140 million.