Thursday, May 20, 2021

Full Circle -- Back to Black -- May 20, 2021

This may be the biggest Bakken story of the year. After entering the Permian not too long ago, Oasis surprised many by exiting the Permian in early/mid-2021, acquiring more net acres in the Bakken and becoming once again a pure Bakken play. This speaks volumes about the Permian and the Bakken. 

I love it.

Back to Black, Amy Winehouse

Disclaimer: not ready for prime time. I was rushed when I read through the press release and rushed when I posted the note. I may be completely wrong; I may have missed something; I may have seen something that is not there. If this is important to you, go to the source.

For newbies: this is an incredible turn of events. Much can be learned from this. Hopefully, I will find the time to comment on this but my hunch is there will be much written about the press release. 

Sidebar: at the sidebar I have a link to something I call -- WTI beatdown. Bakken or the Permian.


May 21, 2021: one day later -- investors love the announcement that Oasis is pulling out of the Permian. 

Later, 11:53 p.m. CT: social media; from a guy who really knows this stuff.

Original Post

I checked a few publicly traded companies at market close, and it appeared "most" oil companies were relatively flat today, up/down about 0.35%.

But Oasis was up almost 2% at market close. After the market closed, it remained unchanged. At least that's what I thought I saw. 

The press release had a release time of 4:41 p.m. -- after the market closed. But it was early enough in the day to suggest to me that the "news" -- if not all the details -- were well known to analysts who follow Oasis well before the market closed. 

Hold that thought.

A reader sent me this link. Thank you so much. I wouldn't have seen it until tomorrow at the earliest. So, a huge thank you to the reader.

Due to family commitments, I won't be able to post as much as I usually do. 

Full circle. One can follow the story here.

Here's the link, again:

I believe Oasis' Permian acres were in the Delaware Basin. 

From the link, a press release:

Oasis Petroleum Inc. announced today it has entered into a series of definitive agreements to sell its entire Permian Basin position for total gross potential consideration of $481MM.

The total consideration consists of $406 million at closing and up to three $25 million annual contingent payments in 2023, 2024 and 2025 if WTI averages over $60 per barrel in each respective calendar year.

The primary transaction is expected to close around June 30, 2021, subject to customary closing conditions, and two smaller transactions have already closed. Oasis has updated its 2021 outlook to reflect the divestment.

"The decision to exit the Permian Basin while building scale in the Williston Basin is fundamentally based on aligning Company resources with our core competitive strengths and strategic focus of building a sustainable enterprise which generates significant free cash flow for the benefit of the Company and shareholders," said Danny Brown, Oasis' Chief Executive Officer. 
NOTE: when the CEO referenced "building scale in the Williston Basin," he is referencing the FANG-QEP-Oasis deal in the Bakken, on/about May 3, 2021. The link is here. In that deal, Oasis acquired 95,000 net acres for $745 million, or about $8,000 / acre.

"The successful conclusion of our Permian divestiture process allows us to bring substantial value forward from an asset that was difficult to scale, strengthens our balance sheet from already peer-leading levels, and allows us to focus our attention on driving significant value from our world-class Williston acreage position, where we see great upside opportunity and long-term running room.  

The combined Williston and Permian transactions are highly accretive, position Oasis to take advantage of expanded scale, result in very low leverage, and demonstrate our commitment to shareholders. We believe Oasis represents a compelling investment opportunity, and we will continue to be aggressive in pursuing strategies to unlock value."

Transaction Highlights:

  • Positions Oasis exclusively in the Williston Basin, where the Company expects to drive significant value creation through its size, scale and robust inventory life as one of the basin's largest operators;
  • Divests non-strategic Permian position consisting of approximately 24k net acres and 1Q21 production of 7.2 MBoe/d;
  • Purchase price of $481MM values production at $67k/Boepd and 1Q21 annualized Adjusted EBITDA at 4.6x;
  • When combined with the recent Williston acquisition, the transactions result in paying approximately 1.7x for $145MM – $165MM of net EBITDA;
  • OMP retains midstream assets in Panther DevCo and expects to benefit from incremental activity based on plans from the new operator;
  • Lowers full-year G&A by approximately $1MM – Oasis expects cash E&P G&A per boe of $1.30 – $1.40 in 4Q21;
  • Reduces Oasis' pro forma leverage to approximately 0.3x, based on 1Q21 annualized Adjusted EBITDA to Oasis and pro forma for the recently announced Williston acquisition, which remains well below Oasis's 1.0x target and far below peers.

Much more at the link.  

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