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Morningstar | Oasis Focuses on the Bakken Shale in North Dakota

Oasis Petroleum is a shale producer with assets in North Dakota and Texas. The company has been active in the Williston Basin since its inception in 2007, and this area is still its primary focus. Initial production rates are very impressive in the "core" portion of its acreage, which breaks even at about $35 per barrel WTI and contains enough potential drilling locations to support at least 10 years of further drilling. The remainder offers more-pedestrian economics but is more likely to be sold than drilled. Management expects to raise $500 million in 2018 from noncore asset sales, and is well on the way to reaching that goal ($360 million has been raised thus far).Concurrently, the company is ramping up its operations in the Delaware Basin, where it holds 23,000 net acres (we wouldn't rule out bolt-on deals to expand this footprint). The area contains multiple stacked reservoir targets, and could contain as many as 56 locations per square mile in the best-case scenario. For now, management is planning for 34 locations per square mile, giving it about 600 potential locations to work through. The firm's track record in the basin is limited so far, but its first batch of Wolfcamp A and B wells are tracking ahead of a 1.2 mmboe type curve (which is consistent with a WTI break-even of around $35/bbl).Vertical integration is one of the factors separating Oasis from its peers. The company holds a controlling stake in Oasis Midstream Partners (which holds water handling and gas gathering and processing assets) and it also has a well service segment (which supplies equipment and services for completions, such as frac spreads). Ownership of these complementary businesses ensures service availability for the E&P division and generates additional revenue from third-party sales. The services business also insulates the company from rising service costs, since independent contractors are likely to seek higher margins in a stronger oil price environment.