A prudent investment decision involves buying well-performing stocks at the right time while selling those that are at risk. A rise in share price and strong fundamentals signal a stock’s bull run.
Oasis Petroleum Inc. (OAS - Free Report) has performed considerably well in the past three months and has the potential to sustain the momentum in the near term as well. Consequently, if you haven’t taken advantage of its share price appreciation yet, it’s time you add the stock to your portfolio.
Notably, shares of the company have rallied more than 56% over the past three months, while the stocks in this industry have collectively gained just 12.8%.
Let’s delve deeper into the factors that are fueling this Texas-based upstream player’s performance.
Stellar Bakken Show
Oasis Petroleum is one of the leading operators in the Bakken Shale oil play of the Williston Basin. While Bakken and Three Forks shales in North Dakota have significant accumulations of profitable oil reserves, production in the area fell sharply during the oil slump. However, with rebounding crude prices, Bakken has been regaining strength, with output gradually approaching the peak levels that was achieved in 2014. As such, Oasis Petroleum has been benefiting from its huge exposure in the shale play with more than 502,660 net acres. Notably, the company witnessed a year-over-year production increase of 22% in the last reported quarter.
Driven by robust results, the company upgraded its guidance, further boosting analysts’ optimism surrounding the stock. It raised its 2018 production guidance from 80-83 MBoe/d to 81-84 Mboe/d, indicating approximately 24.7% year-over-year growth. Further, Oasis Petroleum reduced its lease operating costs guidance to reflect increased efficiencies. The company now expects lease operating expenses of $6.5-$7.5 per barrel of oil equivalent (Boe) versus the prior guided range of $7-$7.5 per Boe.
Diversification Into Delaware a Booster
In an attempt to diversify its holdings away from North Dakota, Oasis Petroleum acquired around 22,000 acres in the prolific Delaware Basin. The deal, which closed early this year, has opened the gateway for Oasis Petroleum in the Delaware Basin, which is the most profitable area for oil explorers of late due to its low production cost. The purchased acreage, with high oil concentration of 79%, contains multiple stacked oil plays with around 507 core drilling locations. The company plans to drill 16-20 wells in the acquired acreage, of which six to eight will be completed in 2018.
Robust Cash Flow and Financials
Oasis Petroleum fares well in the cash flow parameter, which is a key metric to gauge the financial health of a company. Notably, it has been generating enough cash to pay off debt along with funding capex since the past three years. In the last reported quarter, the company’s cash flow was $228.4 million while capex totaled $176.9 million. The trend is likely to continue in the subsequent quarters as well. Oasis Petroleum has less exposure to debt compared to its broader industry. The company’s debt-to-capitalization ratio stands at 40.96%, lower than the industry’s figure of 46.23%. Importantly, the upstream firm also displays sound coverage ratio of around 3, emphasizing its ability to fulfil its debt obligations effectively.
Investors should note that the company displays an impressive earnings history, having surpassed estimates in each of the trailing eight quarters. The stock has also been witnessing upward estimate revisions. The Zacks Consensus Estimate for 2018 and 2019 earnings per share has been revised upward by 5.4% and 18.5% respectively, over the past 30 days. In addition to a Zacks Rank #1 (Strong Buy), the stock also has a Growth Score and VGM Score of A.
Other Stocks to Consider
Other top-ranked stocks within the same industry include Geopark Limited , Bonanza Creek Energy, Inc. (BCEI - Free Report) and Eclipse Resources Corporation (ECR - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Geopark’s 2018 earnings are anticipated to increase 745.16% year over year.
Bonanza Creek delivered positive earnings surprise in each of the trailing four quarters, with an average beat of 215.36%.
Eclipse Resources delivered an average positive earnings surprise of 133.33% in the trailing four quarters.
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