Oasis Petroleum Inc. Announces Quarter Ended June 30, 2014 Earnings

HOUSTON, Aug. 5, 2014 /PRNewswire/ -- Oasis Petroleum Inc. (NYSE: OAS) ("Oasis" or the "Company") today announced financial results for the quarter ended June 30, 2014 and provided an operational update.

Highlights include:

  • Increased average daily production to 43,668 barrels of oil equivalent per day ("Boepd"), a 45% increase over the second quarter of 2013 and a 6% sequential quarter increase, excluding production from Sanish.
  • Grew Adjusted EBITDA to $254.7 million in the second quarter of 2014, an increase of $69.2 million over the second quarter of 2013 and a sequential increase of $14.9 million over the first quarter of 2014. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income and net cash provided by operating activities, see "Non-GAAP Financial Measures" below.
  • Invested capital expenditures ("CapEx") of $351.8 million in the second quarter of 2014.
  • Completed and placed on production 41 gross (30.8 net) operated wells in the second quarter of 2014.
  • Started operating Oasis Well Services' ("OWS") second fracturing fleet.

"Oasis continues to execute on its full-year plan to enhance shareholder value through completion technique changes and resource expansion initiatives," said Thomas B. Nusz, Oasis' Chairman and Chief Executive Officer. "Our first slickwater wells in Indian Hills have continued to produce well above our type curve. In addition, early production results from our first Three Forks slickwater well in Red Bank and a slickwater Bakken well in Montana are expanding the completion technique's applicability across more of our inventory. Both of these Oasis wells are producing 35% or more over comparable wells completed with our base completion design."

Mr. Nusz added, "Even as we move to completing 70% of our wells with different technology than our base design, our expectation of investing a total of $1.25 billion for drilling and completions during 2014 remains unchanged. Our base design well cost of $7.3 millionin the first half of 2014, which includes the beneficial impact of OWS, provides us the ability to complete more intense frac jobs while remaining within our budget. While completions were pushed back a bit and we completed six fewer wells than planned, we were able to grow production 6% over the sequential quarter.  We expect production to range between 47,000 and 49,000 Boepd in the third quarter of 2014.  In addition, we have increased both frac spreads and cleanout crews, which will support the additional work we are doing in the second half of the year."

Operational and Financial Update

The Company's average daily production by project area is listed in the following table:

 

Quarter Ended:

 

6/30/2014

 

3/31/2014

 

6/30/2013

Average daily production (Boepd)

         

West Williston

30,381

 

28,227

 

18,257

East Nesson

13,287

 

12,980

 

9,312

Sanish (1)

-

 

1,649

 

2,602

Total

43,668

 

42,856

 

30,171

Percent Oil

89.1%

 

89.4%

 

90.6%

   

(1)

Includes production from certain non-operated properties in the Company's Sanish project area and other non-operated leases adjacent to its Sanish position until March 1, 2014. These properties were sold on March 5, 2014 (the "Sanish Divestiture").

The following table describes the Company's producing wells by project area in the Williston Basin as of June 30, 2014:

 

Bakken/Three Forks Producing Wells

 

West Williston

 

East Nesson

 

Total Williston Basin

 

Gross

 

Net

 

Gross

 

Net

 

Gross

 

Net

Producing on or before 3/31/2014: (1)

                                 

Operated

338

   

260.1

   

158

   

125.0

   

496

   

385.1

 

Non-Operated

162

   

13.3

   

98

   

7.1

   

260

   

20.4

 

Production started in Q2 2014:

                                 

Operated

26

   

20.0

   

15

   

10.8

   

41

   

30.8

 

Non-Operated

14

   

0.9

   

3

   

0.1

   

17

   

1.0

 

Total Producing Wells on 6/30/2014:

                                 

Operated

364

   

280.1

   

173

   

135.8

   

537

   

415.9

 

Non-Operated

176

   

14.2

   

101

   

7.2

   

277

   

21.4

 
   

(1)

Well counts include changes that occurred in the current reporting period for wells producing on or before March 31, 2014.

Additionally, the Company had approximately 16 rigs running during the second quarter of 2014, and as of June 30, 2014, had an inventory of gross operated wells waiting on completion of 35 wells in West Williston and 32 wells in East Nesson.

The Company's average price per barrel of oil, without derivative settlements, was $94.48 in the second quarter of 2014, compared to$91.15 in the second quarter of 2013 and $89.66 in the first quarter of 2014. The Company's average price differential compared to NYMEX West Texas Intermediate ("WTI") crude oil index prices was 8% in the second quarter of 2014, compared to 3% in the second quarter of 2013 and 9% in the first quarter of 2014.

The Company's revenues are detailed in the following table:

 

Quarter Ended:

 

6/30/2014

 

3/31/2014

 

6/30/2013

Revenues ($ in thousands):

               

Oil

$

334,559

   

$

309,231

   

$

226,848

 

Bulk oil sale

-

   

-

   

5,777

 

Natural gas

19,623

   

22,616

   

9,217

 

Well services (OWS)

14,878

   

15,827

   

11,461

 

Midstream (OMS)

3,318

   

1,845

   

1,279

 

Total revenues

$

372,378

   

$

349,519

   

$

254,582

 

The Company's operating expenses are detailed in the following table:

 

Quarter Ended:

 

6/30/2014

 

3/31/2014

 

6/30/2013

Operating expenses ($ in thousands):

               

Lease operating expenses (LOE)

$

40,553

   

$

39,989

   

$

18,266

 

Well services (OWS)

7,200

   

10,359

   

6,420

 

Midstream (OMS)

1,569

   

561

   

224

 

Marketing, transportation and gathering expenses (1)

6,996

   

5,932

   

4,977

 

Bulk oil purchase

-

   

-

   

5,777

 

Non-cash valuation charges

118

   

(746)

   

25

 

Total operating expenses

$

56,436

   

$

56,095

   

$

35,689

 

Operating expenses ($ per Boe):

               

Lease operating expenses (LOE)

$

10.21

   

$

10.37

   

$

6.65

 

Marketing, transportation and gathering expenses (1)

1.76

   

1.53

   

1.82

 
   

(1)

Excludes bulk oil purchase and non-cash valuation charges on pipeline imbalances.

The sequential quarter-over-quarter decrease in lease operating expenses ("LOE") per barrel of oil equivalent ("Boe") was primarily due to higher workover costs in the first quarter of 2014 related to restoring wells that were down due to winter weather conditions.

The increase in marketing, transportation and gathering expenses from the first quarter of 2014 to the second quarter of 2014 is primarily due to higher operated volumes flowing through third-party oil gathering pipelines in the second quarter of 2014. Currently, the Company is flowing approximately 75% of its gross operated oil production through these gathering systems. While transporting volumes through third-party oil gathering pipelines increases marketing, transportation and gathering expenses, it improves oil price realizations by reducing transportation costs included in the Company's oil price differential for sales at the wellhead.

Production taxes as a percentage of oil and gas revenues were 9.7% in the second quarter of 2014, 9.1% in the second quarter of 2013 and 9.6% in the first quarter of 2014. The Company's production tax rate increased in the second quarter of 2014 compared to the second quarter of 2013 due to the increased weighting of production in North Dakota compared to Montana, which has lower production tax rates.

Depreciation, depletion and amortization expenses ("DD&A") totaled $97.3 million in the second quarter of 2014, $66.8 million in the second quarter of 2013 and $91.3 million in the first quarter of 2014. DD&A was $24.48 per Boe in the second quarter of 2014, $24.33per Boe in the second quarter of 2013 and $23.66 per Boe in the first quarter of 2014. During the first two months of 2014, the Company had production from the wells sold in the Sanish Divestiture, but these wells were not depreciated because the assets were held for sale, which lowered DD&A by $0.78 per Boe in the first quarter of 2014.

General and administrative ("G&A") expenses totaled $20.8 million in the second quarter of 2014, $16.7 million in the second quarter of 2013 and $23.5 million in the first quarter of 2014. The sequential quarter-over-quarter decrease in G&A expenses was primarily due to lower consolidated OWS G&A expenses in the second quarter of 2014 compared to the first quarter of 2014. G&A expenses were $5.22per Boe in the second quarter of 2014, $6.07 per Boe in the second quarter of 2013 and $6.10 per Boe in the first quarter of 2014. Amortization of stock-based compensation, which is included in G&A expenses, was $5.2 million, or $1.30 per Boe, in the second quarter of 2014 as compared to $3.1 million, or $1.12 per Boe, in the second quarter of 2013 and $4.5 million, or $1.17 per Boe, in the first quarter of 2014. The sequential increase in amortization of stock-based compensation is primarily due to growth in headcount.

The Company's derivative activities are detailed in the following table: 

 

Quarter Ended:

 

6/30/2014

 

3/31/2014

 

6/30/2013

Derivative activities (1) ($ in thousands)

               

Derivative settlements

$

(11,405)

   

$

(2,239)

   

$

1,246

 

Non-cash change in fair value of derivative instruments

(54,165)

   

(15,364)

   

11,345

 

Net gain (loss) on derivative instruments

$

(65,570)

   

$

(17,603)

   

$

12,591

 
   

(1)

The Company's derivative instruments do not qualify for and were not designated as hedging instruments for accounting purposes.

Interest expense was $39.0 million for the second quarter of 2014 compared to $21.4 million for the second quarter of 2013 and $40.2 million for the first quarter of 2014. The $1.2 million decrease from the first quarter of 2014 was primarily due to lower weighted average borrowings under the Company's revolving credit facility coupled with an increase in capitalized interest in the second quarter of 2014. Capitalized interest totaled $2.3 million for the second quarter of 2014, $1.1 million for the second quarter of 2013 and $1.6 million for the first quarter of 2014.

Income tax expense was $23.3 million for the three months ended June 30, 2014, resulting in an effective tax rate of 37.5%. The Company's income tax expense for the three months ended June 30, 2013 was recorded at 36.0% of pre-tax net income. The Company's effective tax rate is expected to continue to closely approximate the statutory rate applicable to the U.S. and the blended rate for each of the states in which the Company conducts business.

Adjusted EBITDA for the second quarter of 2014 was $254.7 million, a 37% increase over the second quarter of 2013 of $185.5 million, and an increase of 6% from the first quarter of 2014 of $239.8 million. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income and net cash provided by operating activities, see "Non-GAAP Financial Measures" below.

For the second quarter of 2014, the Company reported net income of $38.8 million, or $0.39 per diluted share, as compared to net income of $67.1 million, or $0.72 per diluted share, for the second quarter of 2013. The Company's second quarter 2014 results were impacted by several non-cash items, including a $54.2 million non-cash mark-to-market loss on derivative instruments. Excluding these items and their tax effect, the second quarter 2014 Adjusted Net Income (non-GAAP) was $70.5 million, or $0.70 per diluted share. Excluding similar non-cash items and their tax effect, Adjusted Net Income (non-GAAP) for the second quarter of 2013 was $60.1 million, or $0.65 per diluted share. For a definition of Adjusted Net Income and a reconciliation of net income to Adjusted Net Income, see "Non-GAAP Financial Measures" below.

Capital Expenditures

The following table depicts the Company's exploration and production ("E&P") CapEx by project area and total CapEx by category:

 

1Q 2014

 

2Q 2014

 

YTD 2014

CapEx ($ in thousands):

               

 E&P CapEx by Project Area

               

West Williston

$

189,288

   

$

223,526

   

$

412,814

 

East Nesson

107,843

   

103,370

   

211,213

 

Total E&P CapEx (1)

297,131

   

326,896

   

624,027

 

OWS

6,410

   

18,903

   

25,313

 

Non E&P (2)

3,957

   

6,036

   

9,993

 

               Total Company CapEx (3)

$

307,498

   

$

351,835

   

$

659,333

 
   

(1)

Year-to-date total E&P CapEx includes $12.5 million for Oasis Midstream Services ("OMS"), primarily related to pipelines and salt water disposal systems.

(2)

Non-E&P CapEx includes such items as administrative capital and capitalized interest.

(3)

CapEx reflected in the table above differs from the amounts shown in the statement of cash flows in the Company's condensed consolidated financial statements because amounts reflected in the table above include accrued liabilities for capital expenditures, while the amounts presented in the statement of cash flows are presented on a cash basis.

Liquidity

On June 30, 2014, Oasis had total cash and cash equivalents of $27.0 million. As of June 30, 2014, the Company had $100.0 million of LIBOR loans and $5.2 million of outstanding letters of credit issued under its revolving credit facility, resulting in an unused borrowing base capacity of $1,394.8 million.

Update to Outlook for Operating Metrics

Oasis is updating its full year 2014 guidance range for LOE to $8.50 to $10.00 per Boe and production taxes to 9.7% to 10.2%.

Hedging Activity

As of August 5, 2014, the Company had the following outstanding commodity derivative contracts, all of which are priced off of WTI and settle monthly:

       

Weighted Average Prices ($/Bbl)

           
   

Remaining Term

 

Sub-Floor

 

Floor

 

Ceiling

 

Swaps

 

BOPD

 

Total Barrels

2014

                                       

Full Year

                                       

Swaps

 

Jul - Dec

                   

$

95.90

   

9,500

   

1,738,500

 

Swaps with sub-floors

 

Jul - Dec

 

$

70.00

               

$

92.60

   

6,000

   

1,098,000

 

Two-way collars

 

Jul - Dec

       

$

95.22

   

$

106.39

         

11,500

   

2,104,500

 

Three-way collars

 

Jul - Dec

 

$

70.59

   

$

90.59

   

$

105.25

         

8,500

   

1,555,500

 

Total 2014 hedges (weighted average)

 

$

70.34

   

$

93.25

   

$

105.91

   

$

94.62

   

35,500

   

6,496,500

 
                                         

2015

                                       

Full Year

                                       

Swaps

 

Jan - Dec

                   

$

90.15

   

10,000

   

3,650,000

 

Two-way collars

 

Jan - Dec

       

$

86.00

   

$

103.42

         

5,000

   

1,825,000

 

First Half

                                       

Swaps

 

Jan - June

                   

$

91.26

   

9,000

   

1,629,000

 

Deferred premium puts

 

Jan - June

       

$

90.00

               

6,000

   

1,086,000

 

Two-way collars

 

Jan - June

       

$

90.00

   

$

99.10

         

2,000

   

362,000

 

Total 2015 hedges (weighted average)

       

$

87.77

   

$

102.70

   

$

90.49

   

23,430

   

8,552,000

 

Total 1H15 hedges

             

32,000

       

Total 2H15 hedges

             

15,000

       

Conference Call Information

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

Date:

 

Wednesday, August 6, 2014

Time:

 

9:00 a.m. Central Time

Dial-in:

 

877-621-0256

Intl. Dial in:

 

706-634-0151

Conference ID:

 

74680357

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 untilWednesday, August 13, 2014 by dialing:

Replay dial-in:

 

855-859-2056

Intl. replay:

 

404-537-3406

Conference ID:

 

74680357

The conference call will also be available for replay 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, derivative instruments, 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, but are not limited to, 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 atwww.oasispetroleum.com.

Contact:

Oasis Petroleum Inc.
Matt Ultis, (281) 404-9600
Manager � Finance and Investor Relations

 

Oasis Petroleum Inc.
Condensed Consolidated Balance Sheet
(Unaudited)

 
 

June 30, 2014

 

December 31, 2013

 

(In thousands, except share data)

ASSETS

         

Current assets

         

Cash and cash equivalents

$

26,957

   

$

91,901

 

Accounts receivable - oil and gas revenues

216,764

   

175,653

 

Accounts receivable - joint interest partners

147,056

   

139,459

 

Inventory

17,636

   

20,652

 

Prepaid expenses

8,907

   

10,191

 

Deferred income taxes

25,390

   

6,335

 

Derivative instruments

-

   

2,264

 

Advances to joint interest partners

97

   

760

 

Other current assets

421

   

391

 

Total current assets

443,228

   

447,606

 

Property, plant and equipment

         

Oil and gas properties (successful efforts method)

5,141,582

   

4,528,958

 

Other property and equipment

231,129

   

188,468

 

Less: accumulated depreciation, depletion, amortization and impairment

(823,500)

   

(637,676)

 

Total property, plant and equipment, net

4,549,211

   

4,079,750

 

Assets held for sale

-

   

137,066

 

Derivative instruments

-

   

1,333

 

Deferred costs and other assets

44,540

   

46,169

 

Total assets

$

5,036,979

   

$

4,711,924

 

LIABILITIES AND STOCKHOLDERS' EQUITY

         

Current liabilities

         

Accounts payable

$

32,402

   

$

8,920

 

Revenues and production taxes payable

217,414

   

146,741

 

Accrued liabilities

288,813

   

241,830

 

Accrued interest payable

49,444

   

47,910

 

Derivative instruments

62,415

   

8,188

 

Advances from joint interest partners

6,910

   

12,829

 

Other current liabilities

3,311

   

-

 

Total current liabilities

660,709

   

466,418

 

Long-term debt

2,300,000

   

2,535,570

 

Deferred income taxes

460,897

   

323,147

 

Asset retirement obligations

37,542

   

35,918

 

Derivative instruments

11,844

   

139

 

Other liabilities

1,963

   

2,183

 

Total liabilities

3,472,955

   

3,363,375

 

Commitments and contingencies

         

Stockholders' equity

         

Common stock, $0.01 par value: 300,000,000 shares authorized; 101,396,597 and 100,866,589 shares issued at June 30, 2014 and December 31, 2013, respectively

999

   

996

 

Treasury stock, at cost: 244,729 and 167,155 shares at June 30, 2014 and December 31, 2013, respectively

(8,677)

   

(5,362)

 

Additional paid-in capital

995,024

   

985,023

 

Retained earnings

576,678

   

367,892

 

Total stockholders' equity

1,564,024

   

1,348,549

 

Total liabilities and stockholders' equity

$

5,036,979

   

$

4,711,924

 

 

 

Oasis Petroleum Inc.
Condensed Consolidated Statement of Operations
(Unaudited)

 
   

Three Months Ended June 30,

 

Six Months Ended June 30,

   

2014

   

2013

   

2014

   

2013

 
   

(In thousands, except per share data)

Revenues

                       

Oil and gas revenues

 

$

354,182

   

$

241,842

   

$

686,029

   

$

483,493

 

Well services and midstream revenues

 

18,196

   

12,740

   

35,868

   

19,393

 

Total revenues

 

372,378

   

254,582

   

721,897

   

502,886

 

Expenses

                       

Lease operating expenses

 

40,553

   

18,266

   

80,542

   

37,755

 

Well services and midstream operating expenses

 

8,769

   

6,644

   

19,689

   

9,558

 

Marketing, transportation and gathering expenses

 

7,114

   

10,779

   

12,300

   

14,168

 

Production taxes

 

34,493

   

21,397

   

66,296

   

43,486

 

Depreciation, depletion and amortization

 

97,276

   

66,790

   

188,548

   

133,051

 

Exploration expenses

 

475

   

392

   

855

   

2,249

 

Impairment of oil and gas properties

 

42

   

208

   

804

   

706

 

General and administrative expenses

 

20,751

   

16,656

   

44,271

   

30,510

 

Total expenses

 

209,473

   

141,132

   

413,305

   

271,483

 

Gain on sale of properties

 

3,640

   

-

   

187,033

   

-

 

Operating income

 

166,545

   

113,450

   

495,625

   

231,403

 

Other income (expense)

                       

Net gain (loss) on derivative instruments

 

(65,570)

   

12,591

   

(83,173)

   

(2,021)

 

Interest expense, net of capitalized interest

 

(38,990)

   

(21,392)

   

(79,148)

   

(42,575)

 

Other income (expense)

 

135

   

294

   

288

   

1,074

 

Total other income (expense)

 

(104,425)

   

(8,507)

   

(162,033)

   

(43,522)

 

Income before income taxes

 

62,120

   

104,943

   

333,592

   

187,881

 

Income tax expense

 

23,287

   

37,824

   

124,806

   

68,911

 

Net income

 

$

38,833

   

$

67,119

   

$

208,786

   

$

118,970

 

Earnings per share:

                       

Basic

 

$

0.39

   

$

0.73

   

$

2.10

   

$

1.29

 

Diluted

 

0.39

   

0.72

   

2.08

   

1.28

 

Weighted average shares outstanding:

                       

Basic

 

99,663

   

92,399

   

99,612

   

92,387

 

Diluted

 

100,260

   

92,702

   

100,328

   

92,812

 

 

 

Oasis Petroleum Inc.
Selected Financial and Operational Statistics
(Unaudited)

 
 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2014

   

2013

   

2014

   

2013

 

Operating results ($ in thousands):

                     

Revenues

                     

Oil

$

334,559

   

$

232,625

   

$

643,790

   

$

464,300

 

Natural gas

19,623

   

9,217

   

42,239

   

19,193

 

Well services and midstream

18,196

   

12,740

   

35,868

   

19,393

 

Total revenues

372,378

   

254,582

   

721,897

   

502,886

 

Production data:

                     

Oil (MBbls)

3,541

   

2,489

   

6,990

   

4,971

 

Natural gas (MMcf)

2,596

   

1,540

   

5,045

   

2,929

 

Oil equivalents (MBoe)

3,974

   

2,746

   

7,831

   

5,459

 

Average daily production (Boe/d)

43,668

   

30,171

   

43,264

   

30,162

 

Average sales prices:

                     

Oil, without derivative settlements (per Bbl) (1)

$

94.48

   

$

91.15

   

$

92.10

   

$

92.24

 

Oil, with derivative settlements (per Bbl) (1) (2)

91.26

   

91.65

   

90.15

   

92.83

 

Natural gas (per Mcf) (3)

7.56

   

5.98

   

8.37

   

6.55

 

Costs and expenses (per Boe of production):

                     

Lease operating expenses

$

10.21

   

$

6.65

   

$

10.29

   

$

6.92

 

Marketing, transportation and gathering expenses (4)

1.76

   

1.82

   

1.65

   

1.54

 

Production taxes

8.68

   

7.79

   

8.47

   

7.97

 

Depreciation, depletion and amortization

24.48

   

24.33

   

24.08

   

24.37

 

General and administrative expenses

5.22

   

6.07

   

5.65

   

5.58

 
   

(1)

For the three and six months ended June 30, 2013, average sales prices for oil are calculated using total oil revenues, excluding bulk oil sales of $5.8 million, divided by oil production.

(2)

Realized prices include gains or losses on cash settlements for commodity derivatives, which do not qualify for and were not designated as hedging instruments for accounting purposes.

(3)

Natural gas prices include the value for natural gas and natural gas liquids.

(4)

Excludes bulk oil purchase and non-cash valuation charges on pipeline imbalances.

 

 

Oasis Petroleum Inc.
Condensed Consolidated Statement of Cash Flows
(Unaudited)

 
 

Six Months Ended June 30,

 

2014

   

2013

 
 

(In thousands)

Cash flows from operating activities:

         

Net income

$

208,786

   

$

118,970

 

Adjustments to reconcile net income to net cash provided by operating activities:

         

Depreciation, depletion and amortization

188,548

   

133,051

 

Gain on sale of properties

(187,033)

   

-

 

Impairment of oil and gas properties

804

   

706

 

Deferred income taxes

118,695

   

67,974

 

Derivative instruments

83,173

   

2,021

 

Stock-based compensation expenses

9,678

   

5,371

 

Debt discount amortization and other

3,220

   

1,753

 

Working capital and other changes:

         

Change in accounts receivable

(37,132)

   

(13,768)

 

Change in inventory

3,016

   

(4,200)

 

Change in prepaid expenses

1,284

   

(4,402)

 

Change in other current assets

(30)

   

330

 

Change in other assets

(1,477)

   

-

 

Change in accounts payable and accrued liabilities

91,543

   

48,701

 

Change in other current liabilities

3,311

   

688

 

Change in other liabilities

(132)

   

612

 

Net cash provided by operating activities

486,254

   

357,807

 

Cash flows from investing activities:

         

Capital expenditures

(606,924)

   

(428,630)

 

Acquisition of oil and gas properties

(8,116)

   

-

 

Proceeds from sale of properties

324,888

   

-

 

Costs related to sale of properties

(2,337)

   

-

 

Redemptions of short-term investments

-

   

25,000

 

Derivative settlements

(13,644)

   

2,932

 

Advances from joint interest partners

(5,919)

   

(5,593)

 

Net cash used in investing activities

(312,052)

   

(406,291)

 

Cash flows from financing activities:

         

Proceeds from revolving credit facility

100,000

   

-

 

Principal payments on revolving credit facility

(335,570)

   

-

 

Purchases of treasury stock

(3,315)

   

(364)

 

Debt issuance costs

(85)

   

(2,998)

 

Other

(176)

   

-

 

Net cash used in financing activities

(239,146)

   

(3,362)

 

Decrease in cash and cash equivalents

(64,944)

   

(51,846)

 

Cash and cash equivalents:

         

Beginning of period

91,901

   

213,447

 

End of period

$

26,957

   

$

161,601

 

Supplemental non-cash transactions:

         

Change in accrued capital expenditures

$

51,129

   

$

(6,085)

 

Change in asset retirement obligations

1,624

   

3,441

 

Non-GAAP Financial Measures

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of the Company's consolidated 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. Adjusted EBITDA is not a measure of net income or cash flows as determined by United Statesgenerally accepted accounting principles, or GAAP.

The following table presents reconciliations of the non-GAAP financial measure of Adjusted EBITDA to the GAAP financial measures of net income and net cash provided by operating activities, respectively.

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2014

   

2013

   

2014

   

2013

 
 

(In thousands)

Adjusted EBITDA reconciliation to net income:

                     

Net income

$

38,833

   

$

67,119

   

$

208,786

   

$

118,970

 

Gain on sale of properties

(3,640)

   

-

   

(187,033)

   

-

 

Non-cash change in fair value of derivative instruments

54,165

   

(11,345)

   

69,529

   

4,953

 

Interest expense

38,990

   

21,392

   

79,148

   

42,575

 

Depreciation, depletion and amortization

97,276

   

66,790

   

188,548

   

133,051

 

Impairment of oil and gas properties

42

   

208

   

804

   

706

 

Exploration expenses

475

   

392

   

855

   

2,249

 

Stock-based compensation expenses

5,173

   

3,082

   

9,678

   

5,371

 

Income tax expense

23,287

   

37,824

   

124,806

   

68,911

 

Other non-cash adjustments

118

   

25

   

(628)

   

74

 

Adjusted EBITDA

$

254,719

   

$

185,487

   

$

494,493

   

$

376,860

 
                       

Adjusted EBITDA reconciliation to net cash provided by operating activities:

           

Net cash provided by operating activities

$

277,987

   

$

187,260

   

$

486,254

   

$

357,807

 

Derivative settlements

(11,405)

   

1,246

   

(13,644)

   

2,932

 

Interest expense

38,990

   

21,392

   

79,148

   

42,575

 

Exploration expenses

475

   

392

   

855

   

2,249

 

Debt discount amortization and other

(1,733)

   

(1,007)

   

(3,220)

   

(1,753)

 

Current tax expense

3,345

   

837

   

6,111

   

937

 

Changes in working capital

(53,058)

   

(24,658)

   

(60,383)

   

(27,961)

 

Other non-cash adjustments

118

   

25

   

(628)

   

74

 

Adjusted EBITDA

$

254,719

   

$

185,487

   

$

494,493

   

$

376,860

 

Adjusted Net Income and Adjusted Diluted Earnings Per Share are supplemental non-GAAP financial measures that are used by management and external users of the Company's consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted Net Income as net income after adjusting first for (1) the impact of certain non-cash and non-recurring items, including non-cash changes in the fair value of derivative instruments, impairment of oil and gas properties, and other similar non-cash and non-recurring charges, and then (2) the non-cash and non-recurring items' impact on taxes based on the Company's effective tax rate in the same period. Adjusted Net Income is not a measure of net income as determined by GAAP. The Company defines Adjusted Diluted Earnings Per Share as Adjusted Net Income divided by diluted weighted average shares outstanding.

The following table provides reconciliations of net income (GAAP) to Adjusted Net Income (non-GAAP) and diluted earnings per share (GAAP) to Adjusted Diluted Earnings Per Share (non-GAAP):

   

Three Months Ended June 30,

 

Six Months Ended June 30,

   

2014

   

2013

   

2014

   

2013

 
   

(In thousands, except per share data)

Net income

 

$

38,833

   

$

67,119

   

$

208,786

   

$

118,970

 

Non-cash change in fair value of derivative instruments

 

54,165

   

(11,345)

   

69,529

   

4,953

 

Gain on sale of properties

 

(3,640)

   

-

   

(187,033)

   

-

 

Impairment of oil and gas properties

 

42

   

208

   

804

   

706

 

Other non-cash adjustments

 

118

   

25

   

(628)

   

74

 

     Tax impact (1)

 

(19,000)

   

4,045

   

43,896

   

(2,145)

 

Adjusted Net Income

 

$

70,518

   

$

60,052

   

$

135,354

   

$

122,558

 
                         

Diluted earnings per share

 

$

0.39

   

$

0.72

   

$

2.08

   

$

1.28

 

Non-cash change in fair value of derivative instruments

 

0.54

   

(0.12)

   

0.69

   

0.05

 

Gain on sale of properties

 

(0.04)

   

-

   

(1.86)

   

-

 

Impairment of oil and gas properties

 

-

   

-

   

0.01

   

0.01

 

Other non-cash adjustments

 

-

   

-

   

(0.01)

   

-

 

     Tax impact (1)

 

(0.19)

   

0.05

   

0.44

   

(0.02)

 

Adjusted Diluted Earnings Per Share

 

$

0.70

   

$

0.65

   

$

1.35

   

$

1.32

 
                         

Diluted weighted average shares outstanding

 

100,260

   

92,702

   

100,328

   

92,812

 
                         

Effective tax rate

 

37.5

%

 

36.0

%

 

37.4

%

 

36.7

%

   

(1)

The tax impact is computed utilizing the Company's effective tax rate on the adjustments for certain non-cash and non-recurring items.

 

SOURCE Oasis Petroleum Inc.