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Oasis Petroleum Inc. Announces Quarter and Year Ending December 31, 2012 Earnings

February 25, 2013

HOUSTON, Feb. 25, 2013 /PRNewswire/ — Oasis Petroleum Inc. (NYSE: OAS) (“Oasis” or the “Company”) today announced financial results for the quarter and year ending December 31, 2012.

Financial Highlights in 2012:

  • Increased revenue by 108% to $686.7 million in 2012, up from $330.4 million in the prior year.
  • Grew Adjusted EBITDA by 118% to $512.3 million in 2012, up from $234.5 million in the prior year. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income and net cash provided by operating activities, see “Non-GAAP Financial Measures” below.
  • Increased net income by 93% to $153.4 million in 2012, up from $79.4 million in the prior year.

Financial Update
Total revenue for the fourth quarter of 2012 was $214.3 million compared to $116.9 million for the fourth quarter of 2011, an increase of 83%. Sequential quarter-over-quarter revenue growth was $29.6 million, or 16%. Total revenue for the full year 2012 was $686.7 million compared to $330.4 million in 2011. This year-over-year increase was due to a $340.1 million increase in oil and gas revenues primarily related to higher production in 2012 and a $16.2 million increase in well services revenues related to Oasis Well Services LLC (“OWS”) commencing fracturing activity in 2012.

Lease operating expenses for the fourth quarter of 2012 totaled $16.9 million, or $6.68 per Boe, a 19% decrease per Boe over the fourth quarter of 2011 of $8.22 per Boe. Lease operating expenses for the full year 2012 totaled $54.9 million, or $6.68 per Boe, a 20% decrease per Boe over the full year 2011 of $8.36 per Boe. This year-over-year decrease was primarily due to the increase in production of 110% outpacing the Company’s overall net increase in costs of 68%. Increased costs primarily related to workovers, chemical treatments, equipment rental and fresh water injections, which have improved operational performance and minimized downtime in our wells. These cost increases were partially offset by salt water disposal activity and lower operating costs related to improved weather conditions as compared to the first half of 2011.

Well services operating expenses represent third-party working interests’ share of fracturing service costs incurred by OWS for fracturing jobs completed in 2012. Well services operating expenses totaled $4.7 million for the fourth quarter of 2012 and $11.8 million for the full year 2012. There were no well services operating expenses in 2011 because OWS did not commence fracturing activity until the first quarter of 2012.

Marketing, transportation and gathering expenses for the fourth quarter of 2012 totaled $2.0 million, or $0.78 per Boe, a 90% increase per Boe over the fourth quarter of 2011 of $0.41 per Boe. Marketing, transportation and gathering expenses for the full year 2012 totaled $9.3 million, or $1.13 per Boe, a $0.79 increase per Boe over the full year 2011 of $0.34 per Boe. This year-over-year increase was mainly attributable to increased oil transportation costs related to Oasis Petroleum Marketing LLC (“OPM”), which did not commence operations until late in the third quarter of 2011, combined with a $1.4 million cost for bulk oil purchases made by OPM in the first quarter of 2012, partially offset by a $0.7 million non-cash valuation charge on oil pipeline imbalances. Excluding this pipeline imbalance charge and bulk oil purchase costs, our marketing, transportation and gathering expenses would have been $1.04 per Boe for the full year 2012 and $1.03 for the fourth quarter of 2012. The increase in marketing, transportation and gathering in the fourth quarter 2012 over the fourth quarter of 2011 was primarily due to higher operated volumes flowing through third-party oil gathering pipelines, partially offset by a non-cash oil pipeline imbalance valuation charge. While transporting volumes through third-party oil gathering pipelines increases marketing, transportation and gathering expenses, it improves oil price realizations by eliminating trucking costs, which are reflected in the oil price differential rather than as an expense.

Production taxes for the fourth quarter of 2012 totaled $19.5 million, or 9.4% of oil and gas revenues. For the full year 2012, production taxes totaled $63.0 million, or 9.4% of oil and gas revenues. Production taxes decreased in 2012 compared to the full year 2011, at 10.2% of oil and gas revenues, primarily due to the increased weighting of oil revenues in Montana, which has lower incentivized production tax rates on certain new wells for the first twelve months of production.

Depreciation, depletion and amortization for the fourth quarter of 2012 totaled $66.0 million, or $26.01 per Boe, compared to $27.2 million, or $19.40 per Boe, in the fourth quarter of 2011. Depreciation, depletion and amortization for the full year 2012 totaled $206.7 million, or $25.14 per Boe, compared to $75.0 million, or $19.16 per Boe, for the full year 2011. The $131.8 million increase in DD&A expense for the year ended December 31, 2012 was primarily a result of our production increases from our 2012 well completions. The higher DD&A rate was a result of increased well costs in 2012, which outpaced the increase in associated reserves. The increased well costs were a result of increases in service costs in the Williston Basin during 2011 and the first half of 2012 and the addition of infrastructure assets, primarily our salt water disposal systems.

General and administrative expenses for the fourth quarter of 2012 totaled $17.6 million, or $6.93 per Boe, compared to $9.6 million, or $6.82 per Boe, in the fourth quarter of 2011. General and administrative expenses for the full year 2012 totaled to $57.2 million, or $6.95 per Boe, as compared to $29.4 million, or $7.52 per Boe, for the full year 2011. Of this $27.8 million year-over-year increase, approximately $20.3 million was due to the impact of the Company’s organizational growth on employee compensation and approximately $6.7 million was due to the amortization of restricted stock awards and performance share units. As of December 31, 2012, the Company had 281 full-time employees compared to 146 full-time employees as of December 31, 2011.

As a result of its derivative activities, the Company incurred net cash settlement gains of $3.8 million and $1.0 million in the fourth quarters of 2012 and 2011, respectively. As a result of forward oil price changes, the Company recognized non-cash unrealized mark-to-market derivative losses of $3.2 million and $66.5 million for the fourth quarters of 2012 and 2011, respectively. The Company incurred a net cash settlement gain of $6.5 million for the year ended December 31, 2012 and a net cash settlement loss of $3.8 million for the year ended December 31, 2011. In addition, as a result of forward oil price changes, the Company recognized non-cash unrealized mark-to-market derivative gains of $27.6 million and $5.4 million during the years ended December 31, 2012 and 2011, respectively.

Adjusted EBITDA for the fourth quarter of 2012 was $163.5 million, an increase of $77.6 million, or 90%, over the fourth quarter of 2011 of $85.9 million. Adjusted EBITDA for the full year 2012 was $512.3 million, an increase of $277.8 million, or 118%, over the full year 2011 of $234.5 million.

The Company reported net income of $42.6 million in the fourth quarter of 2012 compared to a net loss of $13.4 million in the fourth quarter of 2011. For the full year 2012, Oasis reported net income of $153.4 million compared to $79.4 million for the full year 2011. Excluding certain non-cash items and their tax effect in the fourth quarters of 2012 and 2011, Adjusted Net Income (non-GAAP) was $45.2 million, or $0.49 per diluted share, and $28.0 million, or $0.30 per diluted share, respectively. Excluding certain non-cash items and their tax effect for the years ending December 31, 2012 and 2011, Adjusted Net Income (non-GAAP) was $138.4 million, or $1.50 per diluted share, and $78.2 million, or $0.85 per diluted share, respectively. For a definition of Adjusted Net Income and a reconciliation of net income to Adjusted Net Income, see “Non-GAAP Financial Measures” below.

Capital Expenditures
Oasis’ capital expenditures (“CapEx”) were $276.3 million for the fourth quarter of 2012 and $1,148.6 million for the year ending December 31, 2012.

CapEx primarily consists of:

  • $1,008 million of drilling and completion CapEx for operated and non-operated wells, including expected savings from services provided by OWS;
  • $64 million for constructing infrastructure to support production in Oasis’ core project areas, primarily related to salt water disposal systems;
  • $37 million for maintaining and expanding the Company’s leasehold position;
  • $3 million for geology (micro-seismic);
  • $16 million for OWS; and
  • $21 million for other (facilities, district tools and administrative capital, including capitalized interest of $3 million).

The following table depicts the Company’s CapEx for exploration and production (“E&P”), by project area, and non-E&P:

                                     2012
                                     ----
    ($ in millions) 1Q         2Q         3Q         4Q         FY
    --------------  ---        ---        ---        ---        ---
    E&P CapEx by
     Project Area
    West Williston      $204.0     $187.9     $189.2     $144.7       $725.8
    East Nesson           50.1       56.6      106.0      110.3        323.0
    Sanish                12.9       18.7       16.2       15.1         62.9
    Total E&P CapEx     $267.0     $263.2     $311.4     $270.1     $1,111.7
    Other Non E&P
     (1)                  21.3        4.1        5.3        6.2         36.9
                          ----        ---        ---
    Total Company
     CapEx (2)          $288.3     $267.3     $316.7     $276.3     $1,148.6
                        ======     ======     ======     ======     ========

    (1)            Non-E&P capital expenditures
                   include such items as capital
                   expenditures related to OWS,
                   district tools, administrative
                   capital and capitalized interest.
    (2)            Capital expenditures reflected in
                   the table above differ from the
                   amounts shown in the statement of
                   cash flows in the Company's
                   consolidated financial statements
                   because amounts reflected in the
                   table above include accrued
                   liabilities for capital
                   expenditures, while the amounts
                   presented in the statement of
                   cash flows are presented on a
                   cash basis.

Conference Call Information
Investors, analysts and other interested parties are invited to listen to the conference call:

    Date:          Tuesday, February 26, 2013
    Time:          10:00 a.m. Central Time
    Dial-in:       855-384-2828
    Intl. Dial in: 706-634-0151
    Conference ID:                            98545808
    Website:       www.oasispetroleum.com

A recording of the conference call will be available beginning at 1:00 p.m. Central Time on the day of the call and will be available until Tuesday, March 5, 2013 by dialing:

    Replay dial-in:                 855-859-2056
    Intl. replay:                   404-537-3406
    Conference ID:                                    98545808

The conference call will also be available for replay for approximately 30 days at www.oasispetroleum.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including the Company’s drilling program, production, derivatives activities, capital expenditure levels and other guidance included in this press release. These statements are based on certain assumptions made by the Company based on management’s experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include changes in oil and natural gas prices, the timing of planned capital expenditures, availability of acquisitions, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as the Company’s ability to access them, the proximity to and capacity of transportation facilities, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting the Company’s business and other important factors that could cause actual results to differ materially from those projected as described in the Company’s reports filed with the SEC.

Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

About Oasis Petroleum Inc.
Oasis is an independent exploration and production company focused on the acquisition and development of unconventional oil and natural gas resources, primarily operating in the Williston Basin. For more information, please visit the Company’s website at www.oasispetroleum.com.

Contact:
Oasis Petroleum Inc.
Richard Robuck, (281) 404-9600

                                      Oasis Petroleum Inc. Financial Statements

                                                 OASIS PETROLEUM INC.
                                              CONSOLIDATED BALANCE SHEET

                                                December 31,                    December 31,
                                                                    2012                           2011
                                                                    ----                           ----
                                     (In thousands, except share data)
                       ASSETS
    Current assets
    Cash and cash equivalents                                   $213,447                       $470,872
    Short-term investments                                        25,891                         19,994
    Accounts receivable -oil
     and gas revenues                                            110,341                         52,164
    Accounts receivable -joint
     interest partners                                            99,194                         67,268
    Inventory                                                     20,707                          3,543
    Prepaid expenses                                               1,770                          2,140
    Advances to joint interest
     partners                                                      1,985                          3,935
    Derivative instruments                                        19,016                              -
    Deferred income taxes                                              -                          3,233
    Other current assets                                             335                            491
                                                                     ---                            ---
    Total current assets                                         492,686                        623,640
                                                                 -------                        -------
    Property, plant and
     equipment
    Oil and gas properties
     (successful efforts method)                               2,348,128                      1,235,357
    Other property and equipment                                  49,732                         20,859
    Less: accumulated
     depreciation, depletion,
     amortization and impairment                                (391,260)                      (176,261)
                                                                --------                       --------
    Total property, plant and
     equipment, net                                            2,006,600                      1,079,955
                                                               ---------                      ---------
    Derivative instruments                                         4,981                          4,362
    Deferred costs and other
     assets                                                       24,527                         19,425
                                                                  ------                         ------
    Total assets                                              $2,528,794                     $1,727,382
                                                              ==========                     ==========

                  LIABILITIES AND
                STOCKHOLDERS' EQUITY
    Current liabilities
    Accounts payable                                             $12,491                        $12,207
    Advances from joint interest
     partners                                                     21,176                          9,064
    Revenues and production
     taxes payable                                                71,553                         19,468
    Accrued liabilities                                          189,863                        119,692
    Accrued interest payable                                      30,096                         15,774
    Derivative instruments                                         1,048                          5,907
    Deferred income taxes                                          4,558                              -
    Other current liabilities                                          -                            472
                                                                     ---                            ---
    Total current liabilities                                    330,785                        182,584
                                                                 -------                        -------
    Long-term debt                                             1,200,000                        800,000
    Asset retirement obligations                                  22,956                         13,075
    Derivative instruments                                           380                          3,505
    Deferred income taxes                                        177,671                         92,983
    Other liabilities                                              1,997                            997
                                                                   -----                            ---
    Total liabilities                                          1,733,789                      1,093,144
                                                               ---------                      ---------
    Commitments and
     contingencies
    Stockholders' equity
    Common stock, $0.01 par
     value; 300,000,000 shares
     authorized; 93,432,712
     issued and 93,303,298
     outstanding at December 31,
     2012 and 92,483,393 issued
     and 92,460,914 outstanding
     at December 31, 2011                                            925                            921
    Treasury stock, at cost;
     129,414 and 22,479 shares
     at December 31, 2012 and
     2011, respectively                                           (3,796)                          (602)
    Additional paid-in-capital                                   657,943                        647,374
    Retained earnings (deficit)                                  139,933                        (13,455)
                                                                 -------                        -------
    Total stockholders' equity                                   795,005                        634,238
                                                                 -------                        -------
    Total liabilities and
     stockholders' equity                                     $2,528,794                     $1,727,382
                                                              ==========                     ==========

                                      OASIS PETROLEUM INC.
                              CONSOLIDATED STATEMENT OF OPERATIONS

                         Three Months Ended December 31,                    Year Ended December 31,
                         -------------------------------                    -----------------------
                                   2012                           2011                     2012         2011
                                   ----                           ----                     ----         ----
                                           (In thousands, except per share data)
    Revenues
    Oil and gas revenues       $208,634                       $116,876                 $670,491     $330,422
    Well services
     revenues                     5,693                              -                   16,177            -
    Total revenues              214,327                        116,876                  686,668      330,422

    Expenses
    Lease operating
     expenses (1)                16,945                         11,529                   54,924       32,707
    Well services
     operating expense            4,670                              -                   11,774            -
    Marketing,
     transportation and
     gathering expenses           1,974                            568                    9,257        1,365
    Production taxes             19,546                         11,824                   62,965       33,865
    Depreciation,
     depletion and
     amortization                65,951                         27,210                  206,734       74,981
    Exploration expenses             79                          1,340                    3,250        1,685
    Impairment of oil
     and gas properties             974                            297                    3,581        3,610
    Loss on sale of
     properties                       -                            207                        -          207
    General and
     administrative
     expenses                    17,568                          9,565                   57,190       29,435
                                 ------                          -----                   ------       ------
    Total expenses              127,707                         62,540                  409,675      177,855
                                -------                         ------                  -------      -------
    Operating income             86,620                         54,336                  276,993      152,567
                                 ------                         ------                  -------      -------
    Other income
     (expense)
    Net gain (loss) on
     derivative
     instruments                    596                        (65,510)                  34,164        1,595
    Interest expense            (21,191)                       (10,873)                 (70,143)     (29,618)
    Other income
     (expense)                    2,339                            420                    4,860        1,635
                                  -----                            ---                    -----        -----
    Total other income
     (expense)                  (18,256)                       (75,963)                 (31,119)     (26,388)
                                -------                        -------                  -------      -------
    Income (loss) before
     income taxes                68,364                        (21,627)                 245,874      126,179
    Income tax benefit
     (expense)                  (25,774)                         8,226                  (92,486)     (46,789)
                                -------                          -----                  -------      -------

    Net income (loss)           $42,590                       $(13,401)                $153,388      $79,390
                                =======                       ========                 ========      =======

    Earnings (loss) per
     share:
    Basic and diluted             $0.46                         $(0.15)                   $1.66        $0.86

    Weighted average
     shares outstanding:
    Basic                        92,226                         92,070                   92,180       92,056
    Diluted                      92,509                         92,070                   92,513       92,241

    (1)            For both the three months and year
                   ended December 31, 2011, lease
                   operating expenses exclude
                   marketing, transportation and
                   gathering expenses to conform such
                   amounts to current year
                   classifications.

                                    OASIS PETROLEUM INC.
                          SELECTED FINANCIAL AND OPERATIONAL STATS

                        Three Months Ended December 31,               Year Ended December 31,
                        -------------------------------               -----------------------
                                   2012                          2011              2012           2011
                                   ----                          ----              ----           ----
    Operating results
     ($ in thousands):
    Revenues
       Oil                     $199,761                      $113,226          $643,446       $321,668
       Natural gas                8,873                         3,650            27,045          8,754
       Well services              5,693                             -            16,177              -
        Total revenues          214,327                       116,876           686,668        330,422

    Production data:
    Oil (MBbls)                   2,301                         1,325             7,533          3,732
    Natural gas (MMcf)            1,406                           464             4,146          1,092
    Oil equivalents
     (MBoe)                       2,535                         1,402             8,224          3,914
    Average daily
     production (Boe/
     d)                          27,556                        15,243            22,469         10,724

    Average sales
     prices:
    Oil, without
     realized
     derivatives (per
     Bbl) (1)                    $86.82                        $85.46            $85.22         $86.18
    Oil, with realized
     derivatives (per
     Bbl) (1) (2)                 88.45                         86.20             86.09          85.15
    Natural gas (per
     Mcf) (3)                      6.31                          7.86              6.52           8.02

    Costs and expenses
     (per Boe of
     production):
    Lease operating
     expenses (4)                 $6.68                         $8.22             $6.68          $8.36
    Marketing,
     transportation and
     gathering expenses            0.78                          0.41              1.13           0.34
    Production taxes               7.71                          8.43              7.66           8.65
    Depreciation,
     depletion and
     amortization                 26.01                         19.40             25.14          19.16
    General and
     administrative
     expenses                      6.93                          6.82              6.95           7.52

    (1)            For the year ended December 31,
                   2012, average sales prices for oil
                   are calculated using total oil
                   revenues, excluding bulk purchase
                   sales of $1.5 million, divided by
                   oil production.

    (2)            Realized prices include realized
                   gains or losses on cash settlements
                   for commodity derivatives, which do
                   not qualify for and were not
                   designated as hedging instruments
                   for accounting purposes.

    (3)            Natural gas prices include the value
                   for natural gas and natural gas
                   liquids.

    (4)            For both the three months and year
                   ended December 31, 2011, lease
                   operating expenses exclude
                   marketing, transportation and
                   gathering expenses to conform such
                   amounts to current year
                   classifications.

                                                                       OASIS PETROLEUM INC.
                                                               CONSOLIDATED STATEMENT OF CASH FLOWS

                                                                                                                                      Year Ended December 31,
                                                                                                                                      -----------------------
                                                                                                                                             2012                    2011
                                                                                                                                             ----                    ----
                                                                                                                                           (In thousands)
    Cash flows from operating activities:
    Net income                                                                                                                           $153,388                 $79,390
    Adjustments to reconcile net income to net cash provided by
    operating activities:

    Depreciation, depletion and amortization                                                                                              206,734                  74,981
    Impairment of oil and gas properties                                                                                                    3,581                   3,610
    Loss on sale of properties                                                                                                                  -                     207
    Deferred income taxes                                                                                                                  92,479                  46,789
    Derivative instruments                                                                                                                (34,164)                 (1,595)
    Stock-based compensation expenses                                                                                                      10,333                   3,656
    Debt discount amortization and other                                                                                                    2,810                   1,561
    Working capital and other changes:
    Change in accounts receivable                                                                                                         (90,103)                (64,900)
    Change in inventory                                                                                                                   (29,313)                 (2,550)
    Change in prepaid expenses                                                                                                                346                  (1,600)
    Change in other current assets                                                                                                            156                    (491)
    Change in other assets                                                                                                                    (95)                   (139)
    Change in accounts payable and accrued liabilities                                                                                     76,706                  36,316
    Change in other current liabilities                                                                                                      (472)                    472
    Change in other liabilities                                                                                                                 -                     317
    Net cash provided by operating activities                                                                                             392,386                 176,024
                                                                                                                                          -------                 -------
    Cash flows from investing activities:
    Capital expenditures                                                                                                               (1,053,315)               (613,223)
    Derivative settlements                                                                                                                  6,545                  (3,841)
    Purchases of short-term investments                                                                                                  (126,213)               (184,907)
    Redemptions of short-term investments                                                                                                 120,316                 164,913
    Advances to joint interest partners                                                                                                     1,950                    (497)
    Advances from joint interest partners                                                                                                  12,112                   5,963
    Proceeds from equipment and property sales                                                                                                  -                   2,202
    Net cash used in investing activities                                                                                              (1,038,605)               (629,390)
                                                                                                                                       ----------                --------
    Cash flows from financing activities:
    Proceeds from issuance of senior notes                                                                                                400,000                 800,000
    Purchases of treasury stock                                                                                                            (3,194)                   (602)
    Debt issuance costs                                                                                                                    (8,012)                (18,680)
    Net cash provided by financing activities                                                                                             388,794                 780,718
                                                                                                                                          -------                 -------
    Increase (decrease) in cash and cash equivalents                                                                                     (257,425)                327,352
    Cash and cash equivalents:
    Beginning of period                                                                                                                   470,872                 143,520
    End of period                                                                                                                        $213,447                $470,872
                                                                                                                                         ========                ========

    Supplemental cash flow information:
    Cash interest paid, net of capitalized interest                                                                                       $53,488                 $13,748
    Cash paid for taxes                                                                                                                       107                       -

    Supplemental non-cash transactions:
    Change in accrued capital expenditures                                                                                                $59,878                 $58,205
    Change in asset retirement obligations                                                                                                 10,230                   5,434

Non-GAAP Financial Measures

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDA as earnings before interest expense, income taxes, depreciation, depletion, amortization, exploration expenses and other similar non-cash charges. Adjusted EBITDA is not a measure of net income or cash flows as determined by United States generally accepted accounting principles, or GAAP.

The following tables present a reconciliation of the non-GAAP financial measure of Adjusted EBITDA to the GAAP financial measures of net income (loss) and net cash provided by operating activities, respectively.

                                                                  Adjusted EBITDA Reconciliations

                                                                                  Three Months Ended December 31,                Year Ended December 31,
                                                                                  -------------------------------                -----------------------
                                                                                             2012                          2011                  2012        2011
                                                                                             ----                          ----                  ----        ----
                                                                                                               (In thousands)
    Adjusted EBITDA reconciliation to Net Income (Loss):
    Net income (loss)                                                                     $42,590                      $(13,401)             $153,388     $79,390
    Change in unrealized
     (gain) loss on
     derivative
     instruments                                                                            3,165                        66,500               (27,619)     (5,436)
    Interest expense                                                                       21,191                        10,873                70,143      29,618
    Depreciation,
     depletion and
     amortization                                                                          65,951                        27,210               206,734      74,981
    Impairment of oil
     and gas properties                                                                       974                           297                 3,581       3,610
    Exploration expenses                                                                       79                         1,340                 3,250       1,685
    Loss on sale of
     properties                                                                                 -                           207                     -         207
    Stock-based
     compensation
     expenses                                                                               3,706                         1,064                10,333       3,656
    Income tax (benefit)
     expense                                                                               25,774                        (8,226)               92,486      46,789
    Other non-cash
     adjustments                                                                               54                             -                    (2)          -
    Adjusted EBITDA                                                                      $163,484                       $85,864              $512,294    $234,500
                                                                                         ========                       =======              ========    ========

    Adjusted EBITDA reconciliation to Net Cash Provided by Operating Activities:
    Net cash provided by
     operating
     activities                                                                          $110,258                       $36,342              $392,386    $176,024
    Realized gain (loss)
     on derivative
     instruments                                                                            3,761                           990                 6,545      (3,841)
    Interest expense                                                                       21,191                        10,873                70,143      29,618
    Exploration expenses                                                                       79                         1,340                 3,250       1,685
    Debt discount
     amortization and
     other                                                                                   (772)                         (520)               (2,810)     (1,561)
    Income taxes                                                                              (57)                            -                     7           -
    Changes in working
     capital                                                                               28,970                        36,839                42,775      32,575
    Other non-cash
     adjustments                                                                               54                             -                    (2)          -
    Adjusted EBITDA                                                                      $163,484                       $85,864              $512,294    $234,500
                                                                                         ========                       =======              ========    ========

Adjusted Net Income is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted Net Income as net income after adjusting first for (1) the impact of non-cash items, including changes in unrealized gains and losses on derivative instruments, impairment of oil and gas properties and other similar non-cash charges, and then (2) the non-cash items’ impact on taxes based on the Company’s effective tax rates in the same period. Adjusted Net Income is not a measure of net income as determined by GAAP.

The following table provides a reconciliation of the GAAP financial measure of net income (loss) to the non-GAAP financial measure of Adjusted Net Income for the periods presented.

                                                 Adjusted Net Income Reconciliation

                                         Three Months Ended December 31,                      Year Ended December 31,
                                         -------------------------------                      -----------------------
                                                   2012                            2011                        2012      2011
                                                   ----                            ----                        ----      ----
                                                           (In thousands, except per share amounts)

    Net income (loss)                           $42,590                        $(13,401)                   $153,388   $79,390
    Change in unrealized
     (gain) loss on
     derivative
     instruments                                  3,165                          66,500                     (27,619)   (5,436)
    Impairment of oil
     and gas properties                             974                             297                       3,581     3,610
    Other non-cash
     adjustments                                     54                               -                          (2)        -
    Tax impact (1)                               (1,581)                        (25,407)                      9,043       677

    Adjusted Net Income                         $45,202                         $27,989                    $138,391   $78,241
                                                =======                         =======                    ========   =======

    Adjusted earnings per share:
    Basic and diluted                             $0.49                           $0.30                       $1.50     $0.85

    Weighted average shares outstanding:
    Basic                                        92,226                          92,070                      92,180    92,056
    Diluted                                      92,509                          92,070                      92,513    92,241

    Effective Tax Rate                             37.7%                           38.0%                       37.6%     37.1%

    (1)            The tax impact is computed
                   utilizing the Company's
                   effective tax rate on the
                   adjustments for certain non-
                   cash items.

SOURCE Oasis Petroleum Inc.


Source: PR Newswire