Oasis Petroleum Inc. (NYSE: OAS) (“Oasis” or the “Company”) today announced it has entered into a definitive purchase and sale agreement with Forge Energy, LLC (the “Seller”) to acquire 20,300 net acres in the Delaware Basin (the “Permian Assets”) for approximately $946 million, consisting of approximately $483 million in cash and 46 million shares of the Company’s common stock (the “OAS Shares”) valued at approximately $463 million as of the close of trading on December 8, 2017 (the “Acquisition”). The Acquisition will be funded through a combination of the OAS Shares issued to the Seller, a draw on the Company’s revolving credit facility, and/or capital markets transactions, depending on market conditions. Additionally, Oasis expects to divest non-core Williston Basin acreage up to $500 million in 2018.
The Acquisition has an effective date of December 1, 2017 and is expected to close in February 2018, at which time the owners of the Seller will receive full consideration less a deposit paid. The transaction is subject to customary closing adjustments and conditions.
Tommy Nusz, Oasis’s Chairman and Chief Executive Officer, commented “This accretive transaction more than doubles Oasis’s core net inventory and represents a unique opportunity to acquire a highly complementary asset to Oasis’s premier Williston Basin acreage that positions the Company to further capitalize on its operational strengths. Our leading track record of efficient full field development in the Williston Basin positions Oasis to succeed as we expand operations into the Delaware Basin. Our new Permian Assets deliver a consolidated position in the deepest and highest pressured part of the Delaware in the heart of the oil window. The Seller and offset operators have materially de-risked this position with recent well performance across the Wolfcamp and Bone Spring formations, giving us additional confidence in asset quality and well performance. This transaction further improves the capital efficiency of our development program, while providing an opportunity to divest and realize value for quality assets that fall deeper in our development program. We are excited for this new chapter, and also remain committed to our current capital-disciplined and returns-focused execution plan in the Williston Basin. As we execute our combined program in 2018, we expect to be free cash flow positive on our E&P business running a $55 WTI oil price.”
- Approximately 20,300 net acres acquired in the Delaware Basin across Loving, Ward, Winkler and Reeves Counties, Texas;
- Approximately 3,500 barrels of oil equivalent (“Boe”) per day produced in November 2017 ($170 million PDP value at November 30, 2017 strip pricing);
- 601 gross operated locations (76% working interest) and 507 net core locations targeting the Wolfcamp A, B, and C and the Bone Spring formations, with extensive additional upside from other intervals in the column;
- Largely contiguous acreage blocks that allow for longer lateral development (expected median lateral length of approximately 8,000 feet);
- Ability to transfer technical, operational and managerial knowledge from full-field development of the Williston Basin to the Delaware Basin, in addition to future efficiencies from the vertical integration of Oasis Midstream Services LLC and Oasis Well Services LLC;
- Accretive to per-share NAV, long term cash flow, balance sheet, core inventory and overall inventory;
- Trading attractive non-core acreage in the Williston Basin for core Delaware Basin acreage;
- Expect to drill 16 to 20 gross wells and complete 6 to 8 gross wells with a capital program of approximately $100 million in 2018; and
- Initially running one rig with the potential to add a second rig in the second half of 2018
Recent Results and Updated Guidance
Oasis production for October was approximately 70,000 Boe per day, and November operational production exceeded 72,000 Boe per day, already surpassing the planned 2017 exit rate. In light of the increased production, guidance for the fourth quarter of 2017 is increased from 69,000 – 72,000 Boe per day, to 71,000 – 73,000 Boe per dayOasis expects to continue to run five rigs in the Williston Basin, and will assume one rig currently run by the Seller in the Delaware Basin. Additionally, Oasis expects lease operating expenses in the fourth quarter of 2017 to range between $7.00 and $7.50 per Boe and differentials to range between $0.50 and $1.00 per Boe. Oasis continues to expect production in the Williston Basin to exceed 83,000 Boe per day exiting 2018, not accounting for volumes to be divested through planned asset sales, and expects production to grow to over 5,000 Boe per day in the Delaware Basin exiting 2018. As of November 30, 2017, Oasis had $333.0 million drawn and $10.5 millionin letters of credit outstanding under its $1.6 billion borrowing base and $2.1 million in cash.