If you believe the old stereotype, the U.S. oil business used
to be a hit-and-miss proposition where some lucky rube would hit
a gusher, get filthy rich and spend the rest of his life lighting
cigars with $100 bills.
Regardless of how much stake you put in that, the 21st century
reality is much different. For most U.S. oil producers, it takes
a great deal of technology, science and efficiency to extract
fuel from the ground and turn a profit from it.
That's especially true in shale formations that require
advanced fracturing techniques. One of those formations, the
Williston Basin, runs across parts of the Dakotas, Montana and
Canada as part of the larger Bakken Shale Formation.
Oil and gas producers in the Williston, includingOasis
), use horizontal drilling techniques to get fuel out of the
ground. After breaking through the oil-bearing rock, drillers
fracture it by injecting water mixed with sand and chemicals in a
process known as fracking.
Oasis is an independent exploration and production company
whose primary projects are located in the Montana and North
Dakota regions of the Williston Basin.
As of Dec. 31, 2012, the company had 335,383 net leasehold
acres in the Williston Basin and about 143 million barrels of oil
equivalent of estimated net proved reserves.
Oasis earns high marks from analysts for its operational
prowess and efficiency at getting the most out of its assets.
"They have a really solid management team focused on
developing their assets in the most efficient manner," said
Ronald Mills, analyst at Johnson Rice & Co. "They are not
just interested in near-term value, but long-term value. They are
managing assets as if they are going to develop the Bakken until
the last drop is produced."
That mindset was established when the company was founded six
years ago, he says.
"From day one, they have tested different drilling and
completion techniques and different variables instead of just
one," Mills said. "They try to determine the optimal spacing and
drill their wells in a manner that allows them to develop
The management team learned much of its operating philosophy
at Burlington Resources, an oil and gas driller acquired
) in 2006.
Oasis Chief Executive Tommy Nusz is a former vice president at
Burlington. So is Taylor Reid, Oasis' chief operating officer. In
fact, almost all of Oasis' senior management team worked at
"These are folks who came out of larger companies, so there's
a high level of execution," said Curtis Trimble, analyst at
Global Hunter Securities. "They are very good operators. They
don't put a lot of well detail in their conference call
statements because they don't have to. There are never any
surprises. You don't see them missing estimates."
One result of this attention to detail is that Oasis has seen
its business grow more than five-fold over the past couple of
In 2012, Oasis more than doubled its production for the second
straight year, growing its annual production to 22,469 barrels of
oil equivalent per day.
Revenue for the year also more than doubled, to $687 million.
As recently as 2010, the company had less than $140 million in
During the 2012 fourth quarter, Oasis logged revenue of $214.3
million. That was up 83% from the prior year and above Wall
Street estimates for $210.5 million.
Earnings gained 63% to 49 cents a share, topping views by a
Oasis' average daily production climbed 81% during the
quarter, while its average oil price, excluding derivatives
impacts, rose 1.6%.
For the full year, net income gained 93% to $153.4 million,
while adjusted EBITDA more than doubled to $512.3 million.
Analyst Mills points out that Oasis optimized its drilling
techniques during 2012 and also benefited from falling service
costs. As a result, average well costs fell to $8.8 million by
year-end from an average of $10.5 million during the first half
"As the shift to more developmental pad drilling occurs during
2013, the company expects well costs to continue to drop in to
the low-$8 million range," Mills said.
Analysts polled by Thomson Reuters expect Oasis to grow annual
earnings 59% this year and 39% in 2014.
The company's stock price touched a record high of 39.78 on
March 14 and now trades near 38.
Meanwhile, all operators in the Bakken Shale should benefit
from an expanded rail system that will connect producers to large
oil refineries across the U.S.
According to one estimate, the number of cars filled with
petroleum products has risen more than 40% over the past year.
Much of that traffic begins in North Dakota, where more fuel is
moved by rail than by pipeline.
"The expansion of rail transport capacity will allow
accessibility to just about every refining market in the U.S.,"
Trimble said. "You now have the opportunity to ship Bakken crude
to refineries on the West Coast, East Coast and Gulf Coast.
In addition to Oasis, other leading landholders in the Bakken
Shale includeContinental Resources (
),Whiting Petroleum (
),Marathon Oil (MRO) andStatoil (STO).