Oasis buys SM Energy’s Williston Basin assets for $785 million

By Luke Geiver | October 19, 2016

Bakken pure-play operator Oasis Petroleum Inc. has spent $785 million to acquire roughly 55,000 net acres in the Williston Basin from SM Energy Co. Included in the purchase by Oasis is 226 gross operated drilling locations with properties that have an estimated 50.2 MMboe of proved reserves. Based on the proved reserves of the properties, Oasis will operate 75 percent of the recently purchased properties.

“This acquisition is a great opportunity to add acreage and inventory that is a natural fit with our existing core and extended core positions,” said Thomas Nusz, Oasis chairman. The new acres will increase the operators core by roughly 25 percent. The assets are already held by production and when seen on an asset map, are laid over next to the company’s current assets. Most well pads purchased by Oasis have one well already operating. When Oasis works to fully develop the well sites, the company intends to drill new Bakken and Three Forks wells.

SM Energy, which only recently announced plans to divest of its non-Divide County, North Dakota-assets, said it will use the proceeds of the acreage and assets sale to fund its recent purchase of 35,700 net acres in Permian Basin’s Howard and Martin counties of West Texas. SM Energy will use all of the proceeds from the asset sale to Oasis in combination with drawn credit from its revolving credit facility to pay for its $1.1 billion asset purchase.

To help pay for part of its purchase of SM Energy’s assets, Oasis has issued a public offering of 40 million shares of common stock. As of October 17, shares in Oasis were trading for roughly $11/share. The remaining portion of the purchase amount will be paid through the company’s credit facility. And, if the acquisition of SM Energy’s assets does not proceed, the shares will be used for general corporate purposes, including the funding of the company’s 2017 capital budget.

Oasis has reported improved well production results this year as a result of its enhanced completion designs. Oasis is increasing its well type curves and expected production results for its Bakken and Three Forks wells in the Wild Basin to 1,550 mboe (from 1,200 mboe) and 1,200 mboe (from 1,000 mboe), respectively. “Our confident is growing that increasing proppant loading and stage counts will continue to improve well performance,” Nusz said, adding that Oasis is seeing production uplift in its own tests as well as other test results from other operators in the area of Wild Basin.

Oasis has shifted its production expectations in regards to oil prices. Previously the company thought it could not economically grow production when oil traded in the $40’s, but, the company now believes that at $45/b, the company can grow production. The company also believes it will increase activity next year and start growing if prices remain at the current levels.