Shares of Oasis Petroleum have returned almost 75 percent since we added the stock to our Focus List, thanks to a favorable confluence elevated oil prices, rising production and declining production costs.
A pure play on North Dakota’s oil-rich Williston Basin, Oasis Petroleum has amassed about 492,000 acres that are prospective for the Bakken Shale and the Three Forks/Sanish formation.
Crude oil accounts for about 82 percent of the company’s reserves and about 91 percent of the firm’s production–a favorable mix with natural gas prices likely to remain depressed and volatile for at least the next two to three years.
Oasis Petroleum posted third-quarter production of 33,100 barrels of oil equivalent per day–a 36.2 percent increase from year-ago levels. Management’s guidance calls for the company to lift between 42,000 and 46,000 barrels of oil equivalent per day in the final three months of the year, with an uptick in drilling and completion activity and contributions from acreage acquired during the third quarter.
Equally important, the exploration and production company achieved its target of reducing production costs to $8 million per well, thanks in part to sinking 75 percent of its wells on pad sites. As we explained in Salute You Drillmasters: Efficiency Gains Lower Production Costs, this approach to drilling enables operators to sink four or more wells from a single location, dramatically lowering costs.
Oasis Petroleum’s drilling plan suggests that the company will deliver additional production and efficiency gains in 2014. Management expects the firm to drill 210 wells next year, compared to the 128 targeted in 2013. Pad drilling will account for 80 percent to 85 percent of these wells. All told, the company expects to lower its costs to $7.5 million per well.
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In October 2012, renowned energy expert Elliott Gue launched the Energy & Income Advisor, a twice-monthly investment advisory that's dedicated to unearthing the most profitable opportunities in the sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships.
Elliott and Roger on Sep. 27, 2022