Oasis Petroleum Inc. Announces Quarter and Year Ending December 31, 2016 Earnings and Provides an Operational Update and its 2017 Outlook

HOUSTON, Feb. 22, 2017 /PRNewswire/ -- Oasis Petroleum Inc. (NYSE: OAS) ("Oasis" or the "Company") today announced financial and operational results for the quarter and year ended December 31, 2016 and provided its 2017 outlook.

Highlights

• Average daily production was 50,372 barrels of oil equivalent per day ("Boepd") in 2016 and 53,150 for the fourth quarter of 2016, despite challenging weather conditions in December. Production immediately resumed to estimated year-end 2016 exit levels of 62,000 Boepd during the first week of January 2017, as the harsh weather subsided.
• Core inventory increased by 27%, from 607 gross undeveloped locations at December 31, 2015 to 770 gross undeveloped locations at December, 31 2016. Additionally, extended core inventory increased to 844 gross undeveloped locations as of December 31, 2016.
• Due to increased well performance and updated activity plans, the Company is revising its 2017 and 2018 year-end exit rate guidance to 72,000 Boepd and over 83,000 Boepd, respectively. Production growth in 2017 and 2018 is expected to be within cash flow.
• Closed on an accretive acquisition of approximately 55,000 net acres on December 1, 2016 in the Williston Basin for a purchase price of $765.8 million, subject to further customary post-close purchase price adjustments.
• Completed and brought online the Company's natural gas processing plant and other midstream infrastructure in Wild Basin. Oasis Midstream Services ("OMS") continues to play a strategic role in the Company's ability to drive operational efficiencies, lower costs structures, and maintain volumes during periods of challenging weather conditions.
• Increased net proved oil and natural gas reserves at December 31, 2016 by 40% to 305.1 MMBoe, which included an increase of almost 30% in net proved developed reserves and more than 60% in net proved undeveloped reserves year over year.
• Net cash provided by operating activities was $228.0 million for the year ended December 31, 2016 and $104.6 million for the fourth quarter of 2016. Adjusted EBITDA, a non-GAAP financial measure, was $500.3 million for the year ended December 31, 2016 and $130.9 million for the fourth quarter of 2016. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net loss and net cash provided by operating activities, see "Non-GAAP Financial Measures" below.

"Oasis continues to deliver industry leading performance across a top tier acreage position among oil resource plays in North America," said Thomas B. Nusz, Oasis' Chairman and Chief Executive Officer. "Despite the challenging commodity environment for most of 2016, the team drove down well costs and operating expenses while making significant strides on well performance. The net result has brought our capital efficiency to all-time records. With that momentum, we are increasing activity in 2017, as we already have one third-party completion crew working outside of Wild Basin, completing DUCs in the core.  Additionally, we continue to expect to bring on two additional rigs in the middle of the year and another rig early in 2018. Under our current plan, we believe we can be free cash flow positive at current strip pricing in both 2017 and 2018."

Mr. Nusz added, "In the fourth quarter of 2016 we completed three 10 million pound slickwater wells in Wild Basin and now have eight months of data on a 20 million pound slickwater job that we brought online in June. We continue to see encouraging early time results from these latest completion tests and from tests done by our peers. Early data implies EUR increases of 25% or greater above our previous 4 million pound slickwater well designs.  Accordingly, our completion plan for 2017 is migrating towards higher sand loadings and assumes an average frac size of approximately 10 million pounds of sand across approximately 50 stages."

"We have also continued to realize operational efficiencies as we develop our midstream infrastructure," said Taylor Reid, Oasis' President and Chief Operating Officer. "Our Wild Basin project came online in the fourth quarter and has been a major contributor to the success of the company. We plan to continue developing the infrastructure in 2017, including the acceleration of certain projects. We also plan to build additional midstream capacity in our other systems outside of Wild Basin, as we accelerate activity. Accordingly, we plan to spend $110 million on infrastructure capital in 2017. Our investment in OMS is accretive to our shareholders and is expected to increase OMS EBITDA to $155 million annualized by the fourth quarter of 2017."

Inventory and Leasehold Update

Oasis' total inventory increased to 3,073 gross locations, of which 770 locations are considered core, as of December 31, 2016. Core inventory increased by 27%, from 607 gross undeveloped locations at December 31, 2015 to 770 gross undeveloped locations at December, 31 2016. Additionally, extended core inventory increased to 844 gross undeveloped locations as of December 31, 2016. The Company had 83 gross operated wells awaiting completion at December 31, 2016.

Oasis ended the year with a leasehold position of 517,801 total net acres in the Williston Basin, primarily targeting the Bakken and Three Forks formations. In addition, the Company increased its acreage that is held by production to 484,321 net acres as of December 31, 2016.

2017 Plan

Highlights for 2017 include:

• $605 million total CapEx budget
• Completing 76 gross (51.7 net) operated wells in 2017
• Increasing rig count from two rigs in Wild Basin to four rigs running across the core
• Investing $110 million in OMS capital, focused on Wild Basin gathering systems, and connecting wells that come online outside of Wild Basin

Due to increased well performance and updated activity plans, the Company is revising its 2017 and 2018 year-end exit rate guidance to 72,000 Boepd and over 83,000 Boepd, respectively.  Production growth in 2017 and 2018 is expected to be within cash flow.

Operational and Financial Update

Select operational and financial statistics are included in the following table for the periods presented:

G&A expenses for the fourth quarter of 2016 totaled $23.9 million, and for the year ended December 31, 2016, G&A totaled $93.0 million. G&A expenses for the Company's E&P segment totaled $21.0 million in the fourth quarter of 2016 and $79.0 million in the full year of 2016. E&P G&A expenses were $4.29 per Boe in the fourth quarter of 2016 and $4.28 per Boe in the full year of 2016. Amortization of stock-based compensation, which is included in G&A expenses, was $5.3 million, or $1.09 per Boe, in the fourth quarter of 2016 and $24.1 million, or $1.31 per Boe, in the full year of 2016.

Interest expense was $34.9 million for the fourth quarter of 2016 and $140.3 million for the full year of 2016. Interest expense in the fourth quarter and full year of 2016 includes amortization of the debt discount related to the Company's senior unsecured convertible notes issued in September 2016 of $2.4 million and $2.7 million, respectively. Capitalized interest totaled $3.2 million for the fourth quarter of 2016 and $16.8 million for the full year of 2016. Cash interest totaled $33.9 million for the fourth quarter of 2016 and $144.7 million for the full year of 2016. For a definition of Cash Interest and a reconciliation of interest expense to Cash Interest, see "Non-GAAP Financial Measures" below.

For the three months ended December 31, 2016, the Company recorded an income tax benefit of $31.7 million, resulting in an effective tax rate of 36.7% as a percentage of its pre-tax loss for the quarter. The Company's income tax benefit for the year ended December 31, 2016 was recorded at $128.5 million, or 34.6% of its pre-tax loss.

The Company reported net loss of $54.7 million in the fourth quarter of 2016. For the full year of 2016, Oasis reported a net loss of $243.0 million. Excluding certain non-cash items and their tax effect in the fourth quarter of 2016 and full year of 2016, Adjusted Net Loss (non-GAAP) was $16.4 million, or $0.08 per diluted share, and $91.7 million, or $0.50 per diluted share, respectively. For a definition of Adjusted Net Loss and a reconciliation of net loss to Adjusted Net Loss, see "Non-GAAP Financial Measures" below.

The Company completed and placed on production 57 gross (37.6 net) operated wells during 2016 and 12 gross (9.3 net) during the fourth quarter of 2016.

Capital Expenditures

Excluding acquisitions, capital expenditures ("CapEx") were $400.0 million for the year ended December 31, 2016, directly in-line with the Company's guidance throughout the year.

The following table depicts the Company's CapEx for the year ended December 31, 2016:

Estimated Net Proved Reserves

The Company's estimated net proved reserves and related PV-10 at December 31, 2016 are based on reports prepared by DeGolyer and MacNaughton, independent reserve engineers. In preparing its reports, DeGolyer and MacNaughton evaluated properties representing all of the Company's PV-10 at December 31, 2016 in accordance with rules and regulations of the Securities and Exchange Commission ("SEC") applicable to companies involved in oil and natural gas producing activities (the "2016 Report"). The following reserve information does not give any effect to or reflect Oasis' commodity hedges and utilizes an average WTI oil price of $42.60 per barrel and an average natural gas price of $2.47 per MMBtu. These prices were adjusted by lease for quality, transportation fees, geographical differentials, marketing bonuses or deductions and other factors affecting the price received at the wellhead. All of the Company's estimated proved undeveloped reserves at December 31, 2016 are expected to be developed within the next five years. Oasis' estimated net proved oil and natural gas reserves at December 31, 2016 were 305.1 MMBoe and consisted of 236.6 million barrels ("MMBbls") of oil and 411.1 billion cubic feet ("Bcf") of natural gas. The table below summarizes the Company's estimated net proved reserves and related PV-10 at December 31, 2016:

Liquidity and Balance Sheet

As of December 31, 2016, Oasis had cash and cash equivalents of $11.2 million. In addition, Oasis had $363.0 million of borrowings and $12.3 million of outstanding letters of credit issued under its revolving credit facility, resulting in an unused borrowing base capacity of $774.7 million as of December 31, 2016.

In 2016, Oasis completed a $300.0 million public offering of senior unsecured convertible notes due 2023 and repurchased an aggregate principal amount of $447.0 million of the Company's outstanding senior unsecured notes, reducing annual cash interest by more than $20 million.

Hedging Activity

As of February 22, 2017, the Company had the following outstanding commodity derivate contracts, all of which are priced relative to WTI crude oil index prices and settle monthly:

Additionally, the Company has swaps priced off of NYMEX Natural Gas of 15,000 mmbtu/d at a weighted average price of $3.32 in 2017 and 2,000 mmbtu/d at a weighted average price of $2.99 in 2018. The December 2016 crude oil derivative contracts settled at $3.0 million and will be included in the Company's first quarter of 2017 derivative settlements.

Conference Call Information
Investors, analysts and other interested parties are invited to listen to the conference call:

Date: Thursday, February 23, 2017
Time: 10:00 a.m. Central Time
Dial-in: 888-317-6003
Intl. Dial in: 412-317-6061
Conference ID: 8389933
Website: www.oasispetroleum.com

A recording of the conference call will be available beginning at 12:00 p.m. Central Time on the day of the call and will be available until Thursday, March 2, 2017 by dialing:

Replay dial-in: 877-344-7529
Intl. replay: 412-317-0088
Replay code: 10100250

The conference call will also be available for replay for approximately 30 days at www.oasispetroleum.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including the Company's drilling program, production, derivatives activities, capital expenditure levels and other guidance included in this press release. These statements are based on certain assumptions made by the Company based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include changes in oil and natural gas prices, weather and environmental conditions, the timing of planned capital expenditures, availability of acquisitions, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as the Company's ability to access them, the proximity to and capacity of transportation facilities, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting the Company's business and other important factors that could cause actual results to differ materially from those projected as described in the Company's reports filed with the SEC.

Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

About Oasis Petroleum Inc.

Oasis is an independent exploration and production company focused on the acquisition and development of unconventional oil and natural gas resources, primarily operating in the Williston Basin. For more information, please visit the Company's website at www.oasispetroleum.com.

Non-GAAP Financial Measures

Cash Interest

Cash Interest is a supplemental non-GAAP financial measure that is used by management and external users of the Company's financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Cash Interest as interest expense plus capitalized interest less amortization and write-offs of deferred financing costs included in interest expense. Cash Interest is not a measure of interest expense as determined by United States generally accepted accounting principles, or GAAP.

The following table presents a reconciliation of the GAAP financial measure of interest expense to the non-GAAP financial measure of Cash Interest for the periods presented:

Adjusted EBITDA Reconciliations

Adjusted EBITDA and Free Cash Flow are supplemental non-GAAP financial measures that are used by management and external users of the Company's financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDA as earnings before interest expense, income taxes, depreciation, depletion, amortization, exploration expenses and other similar non-cash or non-recurring charges. The Company defines Free Cash Flow as Adjusted EBITDA less Cash Interest and CapEx, excluding capitalized interest. Adjusted EBITDA and Free Cash Flow are not measures of net income (loss) or cash flows as determined by United States generally accepted accounting principles, or GAAP.

The following table presents reconciliations of the GAAP financial measures of net income (loss) and net cash provided by (used in) operating activities to the non-GAAP financial measures of Adjusted EBITDA and Free Cash Flow for the periods presented:

Segment Adjusted EBITDA Reconciliations

The following tables present reconciliations of the GAAP financial measure of income (loss) before income taxes to the non-GAAP financial measure of Adjusted EBITDA for the Company's three reportable business segments on a gross basis for the periods presented: