Wednesday, March 3, 2021

OAS stock: Biggest come back - over 84,900% return

 March 3, 2021

Article written on May 14, 2020, here is the link. 


The noose is tightening

Matt DiLallo (Oasis Petroleum): Cratering crude prices have walloped North Dakota's Bakken shale region. One of the region's largest producers, Whiting Petroleum, has declared bankruptcy, while another leader, Continental Resources, had to shut in nearly all its wells because they were losing money. The region's struggles don't bode well for smaller producers like Oasis Petroleum, especially considering its tightening credit profile.

Because lower oil prices have affected the value of its reserves, Oasis' banks recently slashed the amount of credit they're willing to extend the company from $1.3 billion to $625 million. It already borrowed $487 million on that facility, leaving it with little margin for error.  

On top of that, Oasis has more than $1.8 billion of senior notes outstanding, roughly $800 million of which mature in 2022. Given its tight credit profile and junk-rated credit, the company likely won't be able to refinance that debt.

On a positive note, Oasis does have $110 million in cash and a strong oil hedging program, enabling it to produce free cash flow at current oil pricing. It intends to use all that money to repay debt in hopes of staying afloat. However, if oil prices remain weak, and the company doesn't make enough progress on its debt reduction goal, its banks might cut its borrowing base again this fall. That would likely force it to declare bankruptcy so it can restructure its debt.

Follow up 

March 3, 2021


 

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