Oasis -- 2Q15

Disclaimer applies. Some numbers rounded.

Opening comments

• strong quarter
• came in at high end of our production guidance
• below the low end of our guidance on LOE (similar to EOG, CLR)
• right on top of our internal CAPEX plan for 1H15; ahead of schedule on our plan to lower costs, live within cash flow
• as a reminder, when we put together our 2015 budget, we used a $50 WTI price for the entire year

High-intensity completions

• end of 2014: $10.6 million
• goal: decrease to an average of $9.5 million
• 1Q15: $9 million range; around $7.8 million for slickwater completions in the core
• half the cost reductions: efficiency gains; will likely remain regardless of price of oil going forward

Cash flow

• 1Q15: $100 million overspend
• projected: breakeven
• 2Q15: positive to tune of $36 million
• expect to be neutral or more likely to be positive for 2Q15

DUCs

• elected to delay completion even though we expect to come in under our full-year CAPEX budget by about $35 million

Operations

• experiencing out-performance on our high-intensity wells
• remainder of 2015 will be focused on the core: Indian Hills, Wild Basin, and Alger
• 825 locations; 701 of those in the Middle Bakken or Three Forks B1
• eight to ten years of inventory
• efficiencies through pad drilling; drill highest EUR wells

Rig count

• 1Q15: dropped from 5 rigs to 4 rigs
• 2Q15: dropped to 3 rigs due to higher efficiencies; will stay at 3 for rest of year
• drilling days (spud to rig release): from 24 days last year to 16 days more recently (Indian Hills)

Investor Presentation

• updated out-performance on our type curves: 34 to 54 percent better
• high intensity completions: $8 million
• hybrid-style completion: $7 million
• slickwater: $7 to $7.5 million which produces IRRs above 20% at $60 pricing
• we can achieve 20 to 35% IRRs with our high intensity fracks in the core at $50 pricing
• we believe the IRRs can increase even at $50 pricing
• Montana, also; the Jimbo Federal was a slickwater style completion; save $500,000 -- no plans to move outside the core but just pointing out that opportunities exist for slickwater outside the core
• we plan on completing some all-sand slickwater tests in 2H15 which could save another $500,000

OMS (Oasis Midstream Services) discussions
Finances

• exited 2Q15 with only $155 million drawn on our $1.7 billion borrowing base 

Comments regarding pricing:

Speaking of better differentials, in 2015, we've continued to see some great pricing out of the Williston Basin. We were below our guidance range of $6.50 per barrel to $7.50 per barrel in the second quarter coming in at $5.90 per barrel off of WTI. We expect the third quarter to range between $5.50 per barrel and $6.50 per barrel as we continue to benefit from flattening production and additional takeaway capacity in the basin. Conversely, natural gas price realizations came in a bit light primarily driven by both lower Henry Hub and liquids pricing.

We will likely see a slight step-up in the third quarter in natural gas price realizations. We did see some oil price improvement in the second quarter in WTI, and we were able to layer in some additional hedges for both the second half of 2015 and in 2016. We've increased our position to 28,000 barrels of oil per day at an average floor of $75.61 in the second half of 2015 to 8,000 barrels of oil per day at $63.20 in the first half of 2016, and 3,000 barrels of oil per day at $63.94 in the second half of 2016.

Q&A

• " ... ramp up the percentage of our completions that are high intensity 20% last year. First half, it was 60%; second half, it'll be 65% of our activity. If we continue to see this type of performance that we've seen in these wells, we'll push that up closer to a 100% in 2016."
• non-consent from partners? "We've got a few partners that have been going non-consent. And really as the year has worn on, we've seen a little bit less of that. I think that's probably a reflection of well costs coming down as much as they have. But there is still a portion that we're seeing non-consent, but we've planned for that within our budget numbers and we think we're in good shape"
• will look at modifying completion design after looking at new data by end of 2015 
• two techniques: slickwater, high intensity

Great question:

I'm looking at some of the enhanced completions both slickwater and high proppant volume. It looks like you see a more consistent pickup in productivity when these wells are drilled on tighter spacing? First of all, do you agree with that observation? And if you do, I was wondering what – is there an explanation of why that may be the case? Answer: I don't know that we've necessarily seen a higher pickup at tighter spacing, but those really are the two things we've got to understand. One is, what is the uplift, if we do these high intensity completions, very importantly, what is the uplift when you do it in spacing, so drilling out a full DSU and doing all of those fracs close together, we've got to get that right and that's one of things we'll continue to work on spacing with the high intensity fracs and it's – we think we've got a pretty good answer right now and we'll continue to perfect that as we go and every year you will see us modify that spacing plan a bit.....tighter spacing -- consistent uplift and so it would indicate no interference..

EURs:

• currently: 1-million-bbl range in Indian Hill; 900,000 bbls at Alger; modeling a 25% to 30% uplift

CAPEX:

• drilling vs completion in 2016? we've gone to a 3-rig program

New term: strip pricing

Infrastructure capital coming into the Bakken; mentions Hess; did not mention ONEOK

Gas ratio has moved up a bit; now about 12%

Final comment regarding the conference call: the Oasis folks seemed very forthcoming in all areas addressed until the question about tighter spacing and interference, and not only was it a non-answer, it was very short, as if holding something close to the chest. It was also near the end of the conference call; folks were probably getting tired, ready to go, and time may have been running out.