Bakken pure-play Oasis enters Delaware shale

By Staff | December 12, 2017

Oasis Petroleum is no longer a pure-play Bakken producer. Through its acquisition of 20,300 net acres in the Delaware Basin, the Oasis team now has operations in the core acreage of the leading U.S. shale oil plays. For $483 million and 46 million shares of common stock, Oasis will purchase Forge Energy LLC.

“It’s an exciting day for Oasis,” said Tommy Nusz, chairman and CEO. “We are now positioned at the core of the two best oilfields in the U.S.”

To date, Forge has drilled roughly 9 horizontal wells in an acreage block that could have at least 600 wells. Oil cut for the wells drilled and completed to date is just under 80 percent. According to Nusz, Oasis will achieve initial rates of return of 75 percent at current oil prices. The company will continue running the single drilling rig on the acreage block, with a possibility to add a second rig in the Delaware in late 2018.

The Oasis team has experience in the Permian Basin with many members of the team having worked in the region previously. The founders of Forge Energy also have a long history with Nusz with at least two of the executives from the Forge team having worked with Nusz.

To pay for the deal, Oasis has issued a public offering of common stock and the company intends to sell roughly $500 million worth of non-core Williston Basin acreage.

Next year, Oasis will drill and complete roughly 120 wells in the Williston Basin while it runs five rigs. At $55 WTI oil, the company will remain cash flow positive. In the Delaware, the company will take its time to ramp up operations. Through a single drilling rig program, Oasis intends to spend roughly $100 million and drill 20 wells to complete 8 wells.

In the Delaware, there is no contracts in place for oil, gas or water gathering or takeaway. Oasis may bring its midstream operations to the basin. The company may create a new frack team to operate as a Delaware Basin well services team, Nusz said.

Below is a summarized version of the company’s question and answer period from its announcement to investors on the move into the Delaware Basin.

Q: Does your Williston plan change?

A: Our Williston plan doesn’t change. This is just an addition to the current plan and activity.

Q: Why run just one rig given the number of core locations (in the Delaware)?

A: This is a move into a new basin and we want to be prudent about that. We don’t think picking up another rig right away is the best idea. Initial integration and having a solid plan in place is more important to us.

Q: Why enter the Delaware Basin now?

A: We viewed this as a consolidation of core positions. We have an opportunity to be resilient to low oil prices.

Q: How many rigs could you run before you run into infrastructure or logistical challenges (in the Delaware)?

We could run five to six rigs. We’ll probably be executing on this asset similar to the Williston where you have multiple rigs on a single drilling unit to bring down cycle times.