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Oasis Petroleum Does What Few Oil Producers Can


Oasis Petroleum has recently released its quarterly results in which its production was ahead of market’s estimates, thanks to the high intensity completions program.

The shift towards high-intensity has come at the right time, just as the industry is scrambling to cut costs and improve productivity.

Oasis Petroleum has reported second free cash flow quarter positive in a row – and it’s not going to be the last one.

The oil and gas producers have been outspending their cash flows for the last several years. Following the tumble in oil prices, however, a number of energy companies, such as BP Plc (NYSE:BP) and Chevron (NYSE:CVX), are adjusting their spending levels to bring them closer to cash flows. These companies hope to balance their budgets over the next couple of years, but Oasis Petroleum (NYSE:OAS) is one of the rare drillers that are already living within their means.

Oasis Petroleum is a Williston Basin focused shale producer, one of the many that are tapping into the prolific Bakken and Three Forks formation. The company, like all of its peers, had a poor run this year but its stock was punished harder as compared to the broader exploration and production space, due in large part to its debt. Over the last six months, Oasis Petroleum stock has declined by 34%, underperforming the SPDR S&P Oil & Gas Exploration & Production ETF which has declined by 29% in the same period. But the company's performance in the downturn has been nothing short of impressive.

Oasis Petroleum released its third quarter results last week that showed a 10.2% increase in production from the same period last year to 50,546 boe per day, which was 88% oil. The output was better than the top end of the company's guidance of 48,000 to 50,000 boe per day. In a research report emailed to me, Topeka Capital Market's analyst Gabriele Sorbara said that the output was also better than his and market's consensus estimate of 49,300 boe per day and 49,500 boe per day respectively.

I believe the strong production numbers show the positive impact of the high...