The year 2016 was a boon for investors of Oasis Petroleum, a Bakken Shale oriented producer. Oasis dominated the oil rush for a major part of the year until it finally went low in late fall.What followed this steep rebound was a series of events that ended with the company growing at an extremely rapid rate in the time to come despite low oil prices. Fast forward to today, Oasis is expected to deliver robust production and increased cash flow in 2017 if the oil prices remain suitable.
Oasis Petroleum started slowly in 2016. Compared to what they spent in the year 2017, the company’s 200 million $ drilling budget for 2016 was 57% lower, making it difficult to maintain a level between its income and the 35$ oil. This led to the company facing a shortage of drilling wells, therefore, causing major difficulties in keeping its production stable. It was expected that the company’s output for 2016 would fall from its average of 50,477 barrels of oil equivalent per day in 2015 to somewhere between 46,000 to 49,000 BOE/D in 2016, I.e., a 6% downfall. Although, it was a minor decline when compared to those of major Bakken Shale companies like Continental Resources and Whiting Petroleum, with 10% and 14% decline respectively.
Given the good pace, Oasis was on in 2016, it is expected that this year Oasis Petroleum will increase it’s drilling budget and production this year. Sources reveal that Oasis may double the number of rigs in Bakken in 2017, given that Oil stays above $50 per barrel. This means that Oasis will have four rigs in 2017, while it also plans to get a fifth rig in the year 2018. The bloom in rigs will act as a catalyst to the company’s annual production growth rate. The company’s annual production growth rate is estimated to reach a whopping 65% come winter 2018 when factoring in the SM Energy transaction.
For a domain like Bakken where drilling returns are comparatively lesser than rival shales, this growth rate will be a boost. It means that oasis’s production may beat it’s rival Continental Resources, whose production rate will increase 26% from its 2016 exit rate to its 2017 exit rate.
Oasis has gained a staggering growth for a Bakken producer, which has set its growth on a steady momentum and has made it a boon for the investors. Oasis’s stock currently sits 75% off its all-time high. However, the company could make up more lost ground by pushing its costs down and well productivity up, so its drilling returns can rival those of the Permian Basin or STACK and SCOOP plays. That would enable the company to grow even faster, which would certainly catch the eyes of investors.
Oasis Petroleum enjoyed quite a run last year, as the company’s ability to cut costs and improve well productivity put it in the position where it could restart its growth engine at lower oil prices. Given the materialization of that growth in 2017, Oasis should provide the stock with the fuel needed to continue its recovery. And if it can get a better combination of even higher oil prices and better drilling returns, it would have enough of lighter fluid to make big bucks again in 2017. Which means that the Bakken Shale is a safe venture to invest in, given the fact that it receives creation of 1000’s of new jobs every year.