Will Oasis Petroleum Stock Recover After the Recent Beating?

Oasis Petroleum [stock_market_widget type="inline" template="generic" color="default" assets="OAS" markup="(NYSE: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] stock was doing well on the market until last month, but it has tumbled big time since the end of April. The company’s first-quarter results also turned out to be a mixed bag, as Oasis managed to beat Wall Street’s top-line estimates quite easily, but it swung to a loss as compared to a profit in the prior-year period.

Let’s take a look at what went wrong for Oasis last quarter and if there’s a chance of a turnaround going forward.

A Closer Look at the Latest Performance

Oasis Petroleum’s first-quarter production came in at 91,714 barrels of oil equivalent per day (boepd), 72% of which was crude oil. For comparison, the company had clocked production of 76,819 boepd in the prior-year period. This means that the company’s production increased around 20% year over year.

Oasis’ production increased considerably on a year-over-year basis last quarter. But the company’s results were dented by a drop in the average sales price of oil and gas. More specifically, Oasis’ average sales price of crude oil fell to $53.52 per barrel during the quarter as compared to $61.75 per barrel during the prior-year period.

Similarly, Oasis Petroleum’s natural gas price came in at $3.66 per Mcf as compared to $4.12 per Mcf in the prior year period. So Oasis’ crude oil price fell just over 13%, while the natural gas price fell around 11%. As such, the double-digit fall in the price of oil and gas hurt Oasis Petroleum’s financial performance last quarter.

Lower prices and higher costs dented Oasis Petroleum’s operating cash flow, which came in at $175 million during the quarter as compared to $228 million in the year-ago period.

At the same time, Oasis’ costs increased year over year. Oasis’ lease operating expense per barrel of oil equivalent increased to $7.08 from $6.48 in the prior-year period, an increase of 9%. Moreover, transportation expenses also increased year over year to the tune of 31%.

In all, a combination of lower prices and higher costs was enough to dent Oasis Petroleum’s operating cash flow, which came in at $175 million during the quarter as compared to $228 million in the year-ago period. It reported an adjusted net loss of $0.02 per share during the first quarter of 2019 as compared to a profit of $0.10 per share a year ago.

So, it is not surprising to see Oasis Petroleum stock taking a nosedive in recent weeks.

What Next for Oasis?    

The bad news for Oasis is that crude oil prices have started retreating once again. A month ago, WTI crude oil was trading at $66.30 per barrel, but it had now retreated below $58 per barrel.

As it turns out, the U.S.-China trade tensions have started weighing on oil prices, which slumped 5% this Thursday. As reported by Business Standard:

Oil prices remain under pressure, extending this week’s falls amid surging US crude inventories and weak demand from refineries,” said Oanda analyst Dean Popplewell, noting latest data showed crude oil inventories at a two-year high due to weak refinery demand.

So as oil prices retreat, Oasis Petroleum will find it difficult to make a comeback. This is why investors should watch Oasis stock from the sidelines until and unless there are clear signs of a turnaround.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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