Well, This Can't Be Good -- Oasis -- February 26, 2019

Well, this can't be good:

As a result of the errors noted [below], the Company has identified a material weakness in its internal control over financial reporting.

Accordingly, management will disclose in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 that its internal control over financial reporting and its disclosure controls and procedures are not effective as of December 31, 2018 and will receive an adverse opinion on internal control over financial reporting as of December 31, 2018 from PricewaterhouseCoopers LLP.

In response to the material weakness identified, management has developed a plan to remediate the material weakness, and has begun working on that remediation plan.

In addition, management performed additional analyses and procedures in order to conclude that the Company's consolidated financial statements for the year ended December 31, 2018 are fairly presented, in all material respects, in accordance with generally accepted accounting principles.

The errors:

For the quarter ended December 31, 2017, the Company revised the Consolidated Statements of Operations by increasing purchased oil and gas sales and purchased oil and gas expenses by $30.5 million and $30.4 million, respectively, and decreasing oil and gas revenues by $0.1 million.

For the year ended December 31, 2017, the Company revised the Consolidated Statements of Operations by increasing purchased oil and gas sales and purchased oil and gas expenses by $45.6 million and $45.3 million, respectively, and decreasing oil and gas revenues by $0.3 million.

For the quarter ended September 30, 2018, the Company revised the Consolidated Statements of Operations by increasing oil and gas revenues, purchased oil and gas sales and purchased oil and gas expenses by $1.6 million, $126.6 million and $128.2 million, respectively. 

As of December 31, 2017, the Company revised the Consolidated Balance Sheets by increasing both accounts receivable and accrued liabilities by $7.8 million. The amounts presented herein reflect the impact of this revision. 

That was buried deep in the press release. No one is going to see it unless they read every line.

But the good news:

Based on an analysis of quantitative and qualitative factors, the Company determined the related impact was not material to its consolidated financial statements, and therefore, amendments of previously filed reports are not required.

Oasis closed at $5.90/share at 4:02 p.m., February 26, 2019, down 3.12% for the day, and remained flat, at $5.90 after hours, at 5:37 p.m.

Oasis earnings statement released February 26, 2019, for 4Q18 and full year 2018.

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Unrelated but of note: this press release from earlier this month:

Former Attorney General of Louisiana, Charles C. Foti, Jr., Esq., a partner at the law firm of Kahn Swick & Foti, LLC, announces that KSF has commenced an investigation into Oasis Petroleum Inc.

On January 2, 2019, The Wall Street Journal reported in an article titled “Fracking’s Secret Problem—Oil Wells Aren’t Producing as Much as Forecast” that, according to a review of available public data on production, many of the Company’s shale wells, specifically those involved in the fracking process, were producing oil and gas at a much lower rate than the Company had forecasted to investors. Further, the report noted that “findings suggest current production levels may be hard to sustain without greater spending because operators will have to drill more wells to meet growth targets.”

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OAS

4Q18 and Full Year

Website here.

Press release.

It's not good news when you have to wade through mountains of data to get to top line and bottom line results but here they are.

New income:

• 4Q18: $222.0 million
• FY18: a net loss of $35.3 million
• adjusted net loss, non-GAAP: $7.3 million or 2 cents/share loss
• the consensus was for a 4 cent gain, but I don't know if that was GAAP or non-GAAP
• FY19, non-GAAP income: $79.6 million or 26 cents/share

Someone smarter than I will have to sort this out.