Canaccord Reiterates Buy Rating On Oasis Petroleum, Raises PT to $64.00
In a research report published today, Canaccord analyst Stephen Berman maintained a Buy rating on Oasis Petroleum Inc. (OAS) and raised his price target to $64.00 (from $55.00).
Berman comments: “With over 500K net highly contiguous acres, OAS is one of the largest players in the Williston Basin (WB). Most of the acreage is operated and held by production, the company is executing with the drillbit, and it has been an industry leader in bringing down costs”.
The analyst continued, “Our new $64 price target represents a 15% discount to a ~$75 NAV. Our prior $55 target reflected the same discount to a ~$65 NAV. We value proved reserves using long-term prices of $90/Bbl for oil and $4.75/Mcf for natural gas. The increase in our NAV is driven by assigning more value for downspacing and for locations from lower benches of the Three Forks. Currently, OAS assumes it can drill an average of 10 wells per 1,280-acre drilling spacing unit (DSU) across its entire WB leasehold. The industry is moving towards 160-acre spacing or 8 wells per bench, with some WB operators, including CLR, testing 32 wells per DSU (8 in the Middle Bakken and 8 in each of the 3 Three Forks benches). Through downspacing and adding lower TF locations in Indian Hills, South Cottonwood, North Cottonwood and Red Bank, we believe OAS could add ~1,400 net unrisked locations to its current drilling inventory of ~2,450 net operated locations. Even when risking these additional upside locations heavily (30%), this still adds ~$10/share to our NAV. The company’s liquidity remains strong. At the end of Q1, OAS had total cash and cash equivalents of $56M and revolver availability of $1,435M”.
According to TipRanks, which measures analysts and bloggers success rate based on how their calls perform, analyst Stephen Berman currently has a one-year average return of 21.2% and a 74% success rate. Berman has a 35.3% average return when recommending OAS, and is ranked #259 out of 3154 analysts.