USA Today On Oasis -- November 23, 2015
From USA Today:
With oil prices down roughly 50% over the past year, some oil
producers are simply trying to survive. Then there's a second group
that's just trying to tread water by focusing on pushing costs down to
balance cash flow with outflows for capex and dividends. Finally, a
third group has emerged in what's really an elite class of oil companies
that are thriving in the current environment because they're generating
free cash flow while still managing to grow their production. Topping
that list are Suncor Energy, Oasis Petroleum, and ExxonMobil. Here are the secrets to their success.
The Bakken gem
Oasis Petroleum is generating free cash flow during the
current environment even after investing to grow production, and it
expects those trends to continue next year, even a $50 oil price. Its
secret sauce is lower costs, thanks in part to its own vertical
integration and its strong hedge portfolio.
That hedge portfolio
helps insulate some of Oasis' cash flow from weak oil prices, much as
Suncor's refining assets do for its cash flow. However, it's when this
strong cash flow shield is added to Oasis Petroleum's vertical
integration that we see the real key to its success. Oasis has a
midstream services segment and a well services segment, which work
together to improve operational and financial performance by cutting out
key middlemen. This advantage enabled Oasis to reduce its well costs
and operating costs by 30% and 35%, respectively, year over year. So
despite its smaller size, the compelling combination of production
growth and free cash flow generation really puts Oasis in an elite
class.
Disclaimer: this is not an investment site. Do not make any investment or financial decisions based on what you read here or thought you may have read here. This information is posted only to help me better understand the Bakken. If this information is important to you, go to the source.
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