Oasis Petroleum Inc. Hit By Fresh Bearish Oil Data

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Crude oil seemed to have been finding some support recently, as drilling rig count was beginning to decrease and a couple weeks of decreasing supply in US oil. However, oil received another jolt lower after US crude oil inventories rose 7.3 million barrels of oil, after expecting a drop of -2.3 million barrels, the highest level in December ever, according to the Energy Information Administration (EIA). US WTI crude oil is down -2.75% as of this writing to $55.55 a barrel.

Phil Flynn, an analyst for Price Futures Group, saw the data as very bearish and had this to say about black gold’s excess supply: “It’s a Christmas flood of oil at a time when refiners and producers usually are letting inventories get lower for end-of-year tax reasons, but with this flood of supply there’s no place to put it” (Yahoo Finance).  Flynn says oil has a chance to test the $53 low before 2014 is over.

Oasis Petroleum down -5.70%

One of many independent oil and gas companies taking a big hit today is Oasis Petroleum, which is down -5.70%. Oasis Petroleum is an explorer, producer, acquisition and development company of oil and natural gas sites across the US, particularly Williston Basin. Despite having sales, quarter over quarter, rise 20.70% and earnings per share soar 105.10% during the same period, shares are still down -62.30% year to date. Profit margins still remain high at 27%, but I suspect that figure will take a major hit after oil continues to fall. Earnings are forecast to fall       -28.46% next year and could face some trouble paying its long term debt to equity of 1.51. Oasis Petroleum only has cash per share of .66.

US oil producers surprisingly snapped a few weeks of supply cuts and certainly will be interesting to see whether or not oil and gas companies restarted rigs. Furthermore, will US oil producers continue to churn out supply, despite the lack of storage availability? OPEC’s Saudi Arabia continues to take heat from fellow OPEC and non-OPEC members to cut production and help stabilize oil prices. Despite calls to cut production, Saudi Arabia has said they will stay the course and allow the markets to sort out the supply/demand aspects. Continued fall in oil is expected to continue having devastating effects on countries in the Middle East and Russia, who appears to be on the verge of a full blown financial crisis.

I suspect that oil prices will continue to stay low through 2015, which will help boost economic activity, but could ultimately be costly once supply is eventually cut and demand revives, which will shoot prices upward. I suspect oil could return to a $80-95 range by 2016, before continuing higher into the early $100s the years following. For now, I want to stay away from companies such as Oasis Petroleum, which will continue to struggle along with oil.

Disclosure: None

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