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Why Oasis Petroleum (OAS) Tumbled on Tuesday

NEW YORK (TheStreet) -- Oasis Petroleum (OAS - Get Report) was sinking on Tuesday afternoon after the company released preliminary 2013 results and plans to increase spending over 2014 to finance an escalation of production.

Over fiscal 2013, the Houston-based miner increased average daily production 51% year-over-year to 33,904 barrels of oil equivalent (boe) per day from 22,469 boe in 2012. Inventory increased 78% to 3,590 drilling locations, up from 2,020 drilling locations at year-end 2012.

To the year ahead, management said it plans to spend $1.43 billion, up 40% year-over-year, to increase average daily production to between 46,000 and 50,000 boe per day. An approximate 90% of capital expenditure will be allocated to drilling and completion, as well as the addition of 2 rigs over the latter half of the year, bringing the total to 16 operational rigs.

Additionally, the company has entered into a purchase-and-sale agreement to unload non-operated properties in its Sanish operating area. The transaction is expected to generate around $333 million in cash.

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By late afternoon, shares had fallen 4.8% to $39.27.

TheStreet Ratings team rates OASIS PETROLEUM INC as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate OASIS PETROLEUM INC (OAS) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, reasonable valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • OAS's very impressive revenue growth greatly exceeded the industry average of 1.4%. Since the same quarter one year prior, revenues leaped by 65.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • OASIS PETROLEUM INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, OASIS PETROLEUM INC increased its bottom line by earning $1.66 versus $0.86 in the prior year. This year, the market expects an improvement in earnings ($2.93 versus $1.66).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 197.6% when compared to the same quarter one year prior, rising from $18.31 million to $54.50 million.
  • The gross profit margin for OASIS PETROLEUM INC is currently very high, coming in at 78.83%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.83% significantly outperformed against the industry average.

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