Oasis Petroleum Inc. - FORM 10-Q - August 9, 2016

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2016
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                 
Commission file number: 1-34776

Oasis Petroleum Inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
Delaware
 
80-0554627
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
1001 Fannin Street, Suite 1500
Houston, Texas
 
77002
(Address of principal executive offices)
 
(Zip Code)

(281) 404-9500
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ý    No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
ý
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
o  (Do not check if a smaller reporting company)
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨     No   ý
Number of shares of the registrant’s common stock outstanding at August 5, 2016: 180,430,785 shares.
 
 
 
 
 



OASIS PETROLEUM INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2016
TABLE OF CONTENTS
 
 
Page


PART I — FINANCIAL INFORMATION
Item 1. — Financial Statements (Unaudited)
Oasis Petroleum Inc.
Condensed Consolidated Balance Sheet
(Unaudited)
 
June 30, 2016
 
December 31, 2015
 
(In thousands, except share data)
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
6,475

 
$
9,730

Accounts receivable — oil and gas revenues
109,121

 
96,495

Accounts receivable — joint interest and other
81,291

 
100,914

Inventory
9,018

 
11,072

Prepaid expenses
5,838

 
7,328

Derivative instruments
10,330

 
139,697

Other current assets
4,164

 
50

Total current assets
226,237

 
365,286

Property, plant and equipment
 
 
 
Oil and gas properties (successful efforts method)
6,402,648

 
6,284,401

Other property and equipment
536,462

 
443,265

Less: accumulated depreciation, depletion, amortization and impairment
(1,752,376
)
 
(1,509,424
)
Total property, plant and equipment, net
5,186,734

 
5,218,242

Assets held for sale
—

 
26,728

Derivative instruments
64

 
15,776

Other assets
22,504

 
23,343

Total assets
$
5,435,539

 
$
5,649,375

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable
$
10,357

 
$
9,983

Revenues and production taxes payable
138,451

 
132,356

Accrued liabilities
128,284

 
167,669

Accrued interest payable
47,671

 
49,413

Derivative instruments
20,891

 
—

Advances from joint interest partners
5,416

 
4,647

Other current liabilities
15,001

 
6,500

Total current liabilities
366,071

 
370,568

Long-term debt
2,127,361

 
2,302,584

Deferred income taxes
528,028

 
608,155

Asset retirement obligations
36,390

 
35,338

Liabilities held for sale
—

 
10,228

Derivative instruments
14,291

 
—

Other liabilities
3,043

 
3,160

Total liabilities
3,075,184

 
3,330,033

Commitments and contingencies (Note 15)

 

Stockholders’ equity
 
 
 
Common stock, $0.01 par value: 450,000,000 and 300,000,000 shares authorized at June 30, 2016 and December 31, 2015, respectively; 181,200,581 shares issued and 180,399,060 shares outstanding at June 30, 2016 and 139,583,990 shares issued and 139,076,064 shares outstanding at December 31, 2015
1,777

 
1,376

Treasury stock, at cost: 801,521 and 507,926 shares at June 30, 2016 and December 31, 2015, respectively
(15,140
)
 
(13,620
)
Additional paid-in capital
1,693,583

 
1,497,065

Retained earnings
680,135

 
834,521

Total stockholders’ equity
2,360,355

 
2,319,342

Total liabilities and stockholders’ equity
$
5,435,539

 
$
5,649,375

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

Oasis Petroleum Inc.
Condensed Consolidated Statement of Operations
(Unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands, except per share data)
Revenues
 
 
 
 
 
 
 
Oil and gas revenues
$
159,337

 
$
214,110

 
$
276,652

 
$
387,969

Well services and midstream revenues
19,743

 
15,936

 
32,711

 
22,464

Total revenues
179,080

 
230,046

 
309,363

 
410,433

Operating expenses
 
 
 
 
 
 
 
Lease operating expenses
31,523

 
37,761

 
62,587

 
76,886

Well services and midstream operating expenses
8,875

 
7,395

 
13,264

 
9,347

Marketing, transportation and gathering expenses
6,491

 
7,570

 
15,043

 
14,848

Production taxes
14,367

 
20,618

 
25,120

 
37,239

Depreciation, depletion and amortization
122,488

 
119,218

 
244,937

 
237,696

Exploration expenses
340

 
1,082

 
703

 
1,925

Rig termination
—

 
2,815

 
—

 
3,895

Impairment
23

 
19,516

 
3,585

 
24,837

General and administrative expenses
21,876

 
21,508

 
46,242

 
44,832

Total operating expenses
205,983

 
237,483

 
411,481

 
451,505

Loss on sale of properties
(1,311
)
 
—

 
(1,311
)
 
—

Operating loss
(28,214
)
 
(7,437
)
 
(103,429
)
 
(41,072
)
Other income (expense)
 
 
 
 
 
 
 
Net gain (loss) on derivative instruments
(90,846
)
 
(39,424
)
 
(76,471
)
 
7,648

Interest expense, net of capitalized interest
(34,979
)
 
(37,405
)
 
(73,718
)
 
(76,189
)
Gain on extinguishment of debt
11,642

 
—

 
18,658

 
—

Other income (expense)
(32
)
 
191

 
447

 
121

Total other income (expense)
(114,215
)
 
(76,638
)
 
(131,084
)
 
(68,420
)
Loss before income taxes
(142,429
)
 
(84,075
)
 
(234,513
)
 
(109,492
)
Income tax benefit
52,498

 
30,845

 
80,127

 
38,221

Net loss
$
(89,931
)
 
$
(53,230
)
 
$
(154,386
)
 
$
(71,271
)
Loss per share:
 
 
 
 
 
 
 
Basic (Note 13)
$
(0.51
)
 
$
(0.39
)
 
$
(0.91
)
 
$
(0.58
)
Diluted (Note 13)
(0.51
)
 
(0.39
)
 
(0.91
)
 
(0.58
)
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic (Note 13)
176,984

 
136,859

 
169,953

 
123,157

Diluted (Note 13)
176,984

 
136,859

 
169,953

 
123,157

The accompanying notes are an integral part of these condensed consolidated financial statements.


2

Oasis Petroleum Inc.
Condensed Consolidated Statement of Changes in Stockholders’ Equity
(Unaudited)
 
 
Common Stock
 
Treasury Stock
 
Additional
Paid-in Capital
 
Retained Earnings
 
Total
Stockholders’
Equity
Shares
 
Amount
 
Shares
 
Amount
 
 
(In thousands)
Balance at December 31, 2015
139,076

 
$
1,376

 
508

 
$
(13,620
)
 
$
1,497,065

 
$
834,521

 
$
2,319,342

Issuance of common stock
39,100

 
391

 
—

 
—

 
182,562

 
—

 
182,953

Stock-based compensation
2,517

 
—

 
—

 
—

 
13,966

 
—

 
13,966

Vesting of restricted shares
—

 
10

 
—

 
—

 
(10
)
 
—

 
—

Treasury stock – tax withholdings
(294
)
 
—

 
294

 
(1,520
)
 
—

 
—

 
(1,520
)
Net loss
—

 
—

 
—

 
—

 
—

 
(154,386
)
 
(154,386
)
Balance at June 30, 2016
180,399

 
$
1,777

 
802

 
$
(15,140
)
 
$
1,693,583

 
$
680,135

 
$
2,360,355

The accompanying notes are an integral part of these condensed consolidated financial statements.


3

Oasis Petroleum Inc.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
 
Six Months Ended June 30,
 
2016
 
2015
 
(In thousands)
Cash flows from operating activities:
 
 
 
Net loss
$
(154,386
)
 
$
(71,271
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation, depletion and amortization
244,937

 
237,696

Gain on extinguishment of debt
(18,658
)
 
—

Loss on sale of properties
1,311

 
—

Impairment
3,585

 
24,837

Deferred income taxes
(80,127
)
 
(38,221
)
Derivative instruments
76,471

 
(7,648
)
Stock-based compensation expenses
12,979

 
13,663

Deferred financing costs amortization and other
6,552

 
5,059

Working capital and other changes:
 
 
 
Change in accounts receivable
4,297

 
75,799

Change in inventory
2,054

 
3,685

Change in prepaid expenses
1,423

 
3,394

Change in other current assets
(114
)
 
5,538

Change in other assets
100

 
—

Change in accounts payable, interest payable and accrued liabilities
(18,034
)
 
(22,624
)
Change in other current liabilities
9,001

 
—

Change in other liabilities
10

 
(21
)
Net cash provided by operating activities
91,401

 
229,886

Cash flows from investing activities:
 
 
 
Capital expenditures
(231,341
)
 
(587,430
)
Proceeds from sale of properties
11,679

 
—

Costs related to sale of properties
(310
)
 
—

Derivative settlements
103,790

 
213,336

Advances from joint interest partners
769

 
(406
)
Net cash used in investing activities
(115,413
)
 
(374,500
)
Cash flows from financing activities:
 
 
 
Proceeds from revolving credit facility
359,000

 
320,000

Principal payments on revolving credit facility
(462,000
)
 
(665,000
)
Repurchase of senior unsecured notes
(56,925
)
 
—

Deferred financing costs
(751
)
 
(3,591
)
Proceeds from sale of common stock
182,953

 
463,010

Purchases of treasury stock
(1,520
)
 
(1,932
)
Net cash provided by financing activities
20,757

 
112,487

Decrease in cash and cash equivalents
(3,255
)
 
(32,127
)
Cash and cash equivalents:
 
 
 
Beginning of period
9,730

 
45,811

End of period
$
6,475

 
$
13,684

Supplemental non-cash transactions:
 
 
 
Change in accrued capital expenditures
$
(17,015
)
 
$
(156,368
)
Change in asset retirement obligations
(8,785
)
 
2,649

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

OASIS PETROLEUM INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Organization and Operations of the Company
Oasis Petroleum Inc. (together with its consolidated subsidiaries, “Oasis” or the “Company”) was originally formed in 2007 and was incorporated pursuant to the laws of the State of Delaware in 2010. The Company is an independent exploration and production company focused on the acquisition and development of unconventional oil and natural gas resources in the North Dakota and Montana regions of the Williston Basin. Oasis Petroleum North America LLC (“OPNA”) conducts the Company’s exploration and production activities and owns its proved and unproved oil and natural gas properties. The Company also operates a well services business through Oasis Well Services LLC (“OWS”) and a midstream services business through Oasis Midstream Services LLC (“OMS”), both of which are separate reportable business segments that are complementary to its primary development and production activities.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements of the Company include the accounts of Oasis and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. The accompanying condensed consolidated financial statements of the Company have not been audited by the Company’s independent registered public accounting firm, except that the Condensed Consolidated Balance Sheet at December 31, 2015 is derived from audited financial statements. Certain reclassifications of prior year balances have been made to conform such amounts to current year classifications. These reclassifications have no impact on net income. In the opinion of management, all adjustments, consisting of normal recurring adjustments necessary for the fair statement, have been included. Management has made certain estimates and assumptions that affect reported amounts in the condensed consolidated financial statements and disclosures of contingencies. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results.
These interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain disclosures have been condensed or omitted from these financial statements. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete consolidated financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 (“2015 Annual Report”).
Risks and Uncertainties
As an oil and natural gas producer, the Company’s revenue, profitability and future growth are substantially dependent upon the prevailing and future prices for oil and natural gas, which are dependent upon numerous factors beyond its control such as economic, political and regulatory developments and competition from other energy sources. The energy markets have historically been very volatile, and there can be no assurance that oil and natural gas prices will not be subject to wide fluctuations in the future. Oil and natural gas prices have declined significantly since mid-2014. As a result of sustained lower commodity prices, the Company decreased its 2016 capital expenditures as compared to 2015 and continues to concentrate its drilling activities in certain areas that are the most economic in the Williston Basin. An extended period of low prices for oil and, to a lesser extent, natural gas could have a material adverse effect on the Company’s financial position, results of operations, cash flows and quantities of oil and natural gas reserves that may be economically produced.
Significant Accounting Policies
There have been no material changes to the Company’s critical accounting policies and estimates from those disclosed in the 2015 Annual Report.
Recent Accounting Pronouncements
Revenue recognition. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). The objective of ASU 2014-09 is greater consistency and comparability across industries by using a five-step model to recognize revenue from customer contracts. ASU 2014-09 also contains some new disclosure requirements under GAAP. In August 2015, the FASB issued Accounting Standards Update No. 2015-14, Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 defers the effective date of the new revenue standard by one year, making it effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. In 2016, the FASB issued additional accounting standards updates to clarify the

5

implementation guidance of ASU 2014-09. The Company is currently evaluating the effect that adopting this guidance will have on its financial position, cash flows and results of operations.
Going concern. In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 codifies in GAAP management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 is effective for the annual reporting period ending after December 15, 2016 and for annual periods and interim periods thereafter. The adoption of this guidance will not impact the Company’s financial position, cash flows or results of operations but could result in additional disclosures.
Inventory. In July 2015, the FASB issued Accounting Standards Update No. 2015-11, Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 changes the inventory measurement principle from lower of cost or market to lower of cost and net realizable value for entities using the first-in, first-out (FIFO) or average cost methods. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016, including interim periods within those years. The Company is currently evaluating the effect that adopting this guidance will have on its financial position, cash flows and results of operations.
Financial instruments. In January 2016, the FASB issued Accounting Standards Update No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which requires that most equity instruments be measured at fair value with subsequent changes in fair value recognized in net income. ASU 2016-01 also impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. ASU 2016-01 does not apply to equity method investments or investments in consolidated subsidiaries. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those years. The Company is currently evaluating the effect that adopting this guidance will have on its financial position, cash flows and results of operations.
Leases. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (“ASU 2016-02”), which requires a lessee to recognize lease payment obligations and a corresponding right-of-use asset to be measured at fair value on the balance sheet. ASU 2016-02 also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. The Company is currently evaluating the effect that adopting this guidance will have on its financial position, cash flows and results of operations.
Embedded derivatives. In March 2016, the FASB issued Accounting Standards Update No. 2016-06, Contingent Put and Call Options in Debt Instruments (“ASU 2016-06”), which clarifies what steps are required when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is one of the criteria for bifurcating an embedded derivative. ASU 2016-06 is effective for fiscal years beginning after December 15, 2016, including interim periods within those years. The Company does not expect the adoption of this guidance to have a material impact on its financial position, cash flows or results of operations.
Stock-based compensation. In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which updates several aspects of the accounting for share-based payment transactions, including recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within those years. The Company is currently evaluating the effect that adopting this guidance will have on its financial position, cash flows and results of operations.
3. Inventory
Crude oil inventory includes oil in tank and linefill. Equipment and materials consist primarily of proppant, chemicals, tubular goods, well equipment to be used in future drilling or repair operations and well fracturing equipment. Inventory is stated at the lower of cost or market value with cost determined on an average cost method. Inventory consists of the following:
 
June 30, 2016
 
December 31, 2015
 
(In thousands)
Crude oil inventory
$
5,430

 
$
6,152

Equipment and materials
3,588

 
4,920

Total inventory
$
9,018

 
$
11,072


6

4. Fair Value Measurements
In accordance with the FASB’s authoritative guidance on fair value measurements, the Company’s financial assets and liabilities are measured at fair value on a recurring basis. The Company recognizes its non-financial assets and liabilities, such as asset retirement obligations (“ARO”) and proved oil and natural gas properties upon impairment, at fair value on a non-recurring basis.
As defined in the authoritative guidance, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). To estimate fair value, the Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable.
The authoritative guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (“Level 1” measurements) and the lowest priority to unobservable inputs (“Level 3” measurements). The three levels of the fair value hierarchy are as follows:
Level 1 — Unadjusted quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 — Pricing inputs, other than unadjusted quoted prices in active markets included in Level 1, are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument and can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
Level 3 — Pricing inputs are generally less observable from objective sources, requiring internally developed valuation methodologies that result in management’s best estimate of fair value.
Financial Assets and Liabilities
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. The following tables set forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis: 
 
Fair value at June 30, 2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In thousands)
Assets:
 
 
 
 
 
 
 
Money market funds
$
54

 
$
—

 
$
—

 
$
54

Commodity derivative instruments (see Note 5)
—

 
10,394

 
—

 
10,394

Total assets
$
54

 
$
10,394

 
$
—

 
$
10,448

Liabilities:
 
 
 
 
 
 
 
Commodity derivative instruments (see Note 5)
$
—

 
$
35,182

 
$
—

 
$
35,182

Total liabilities
$
—

 
$
35,182

 
$
—

 
$
35,182

 
 
 
 
 
 
 
 
 
Fair value at December 31, 2015
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In thousands)
Assets:
 
 
 
 
 
 
 
Money market funds
$
742

 
$
—

 
$
—

 
$
742

Commodity derivative instruments (see Note 5)
—

 
155,473

 
—

 
155,473

Total assets
$
742

 
$
155,473

 
$
—

 
$
156,215


7

The Level 1 instruments presented in the tables above consist of money market funds included in cash and cash equivalents on the Company’s Condensed Consolidated Balance Sheet at June 30, 2016 and December 31, 2015. The Company’s money market funds represent cash equivalents backed by the assets of high-quality major banks and financial institutions. The Company identifies the money market funds as Level 1 instruments because the money market funds have daily liquidity, quoted prices for the underlying investments can be obtained, and there are active markets for the underlying investments.
The Level 2 instruments presented in the tables above consist of commodity derivative instruments, which include oil collars and swaps. The fair values of the Company’s commodity derivative instruments are based upon a third-party preparer’s calculation using mark-to-market valuation reports provided by the Company’s counterparties for monthly settlement purposes to determine the valuation of its derivative instruments. The Company has the third-party preparer evaluate other readily available market prices for its derivative contracts, as there is an active market for these contracts. The third-party preparer performs its independent valuation using a moment matching method similar to Turnbull-Wakeman for Asian options. The significant inputs used are crude oil prices, volatility, skew, discount rate and the contract terms of the derivative instruments. However, the Company does not have access to the specific proprietary valuation models or inputs used by its counterparties or third-party preparer. The Company compares the third-party preparer’s valuation to counterparty valuation statements, investigating any significant differences, and analyzes monthly valuation changes in relation to movements in crude oil forward price curves. The determination of the fair value for derivative instruments also incorporates a credit adjustment for non-performance risk, as required by GAAP. The Company calculates the credit adjustment for derivatives in a net asset position using current credit default swap values for each counterparty. The credit adjustment for derivatives in a net liability position is based on the Company’s market credit spread. Based on these calculations, the Company recorded an adjustment to reduce the fair value of its net derivative liability by $2.4 million at June 30, 2016 and an adjustment to reduce the fair value of its net derivative asset by $0.3 million at December 31, 2015.
There were no transfers between fair value levels during the six months ended June 30, 2016 and 2015.

Fair Value of Other Financial Instruments
The Company’s financial instruments, including certain cash and cash equivalents, accounts receivable and accounts payable, are carried at cost, which approximates fair value due to the short-term maturity of these instruments. At June 30, 2016, the Company’s cash equivalents were all Level 1 assets.
The carrying amount of the Company’s long-term debt reported in the Condensed Consolidated Balance Sheet at June 30, 2016 was $2,127.4 million, which included $2,123.4 million of senior unsecured notes, $35.0 million of borrowings under the revolving credit facility and a $31.0 million reduction for deferred financing costs on the senior unsecured notes (see Note 8 – Long-Term Debt). The fair value of the Company’s senior unsecured notes, which are publicly traded and therefore categorized as Level 1 liabilities, was $1,965.2 million at June 30, 2016.
Non-Financial Assets and Liabilities
Asset retirement obligations. The carrying amount of ARO in the Company’s Condensed Consolidated Balance Sheet at June 30, 2016 was $37.1 million (see Note 9 – Asset Retirement Obligations). The Company determines its ARO by calculating the present value of estimated cash flows related to the liability. Estimating the future ARO requires management to make estimates and judgments regarding the timing and existence of a liability, as well as what constitutes adequate restoration when considering current regulatory requirements. Inherent in the fair value calculation are numerous assumptions and judgments, including the ultimate costs, inflation factors, credit adjusted discount rates, timing of settlement and changes in the legal, regulatory, environmental and political environments. These assumptions represent Level 3 inputs. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the related asset.
Impairment. The Company reviews its proved oil and natural gas properties for impairment whenever events and circumstances indicate that a decline in the recoverability of their carrying value may have occurred. The Company estimates the expected undiscounted future cash flows of its proved oil and natural gas properties and then compares such undiscounted future cash flows to the carrying amount of the proved oil and natural gas properties to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, the Company will adjust the carrying amount of the proved oil and natural gas properties to the fair value. The factors used to determine fair value are subject to management’s judgment and expertise and include, but are not limited to, recent sales prices of comparable properties, the present value of future cash flows, net of estimated operating and development costs, using estimates of proved reserves, future commodity pricing, future production estimates, anticipated capital expenditures and various discount rates commensurate with the risk and current market conditions associated with realizing the expected cash flows projected. These assumptions represent Level 3 inputs.

8

On April 1, 2016, the Company sold certain proved oil and natural gas properties and other midstream properties (see Note 7 – Divestiture). For the six months ended June 30, 2016, the Company recorded an impairment charge of $3.6 million, of which $2.4 million was included in its midstream services segment and $1.2 million was included in its exploration and production segment, to adjust the current carrying value of these assets, net of the associated ARO liabilities, to their estimated fair value. For the year ended December 31, 2015, the Company recorded an impairment charge of $9.4 million to adjust its net assets held for sale to their estimated fair value in its exploration and production segment. The fair value was determined based on the expected sales price, less costs to sell. No other impairment charges on proved oil and natural gas properties were recorded for the six months ended June 30, 2016. No impairment charges on proved oil and natural gas properties were recorded for the three months ended June 30, 2016 and the three and six months ended June 30, 2015.
In addition, as a result of expiring leases, the Company recorded non-cash impairment charges on its unproved oil and natural gas properties of $23,000 and $25,000 for the three and six months ended June 30, 2016, respectively, and $0.4 million and $4.5 million for the three and six months ended June 30, 2015, respectively. As a result of periodic assessments of unproved properties, the Company recorded non-cash impairment charges on its unproved oil and natural gas properties of $19.1 million and $20.3 million for the three and six months ended June 30, 2015, respectively, related to acreage expiring in future periods because there were no current plans to drill or extend the leases prior to their expiration. For the three and six months ended June 30, 2016, the Company did not record similar impairment charges.
5. Derivative Instruments
The Company utilizes derivative financial instruments to manage risks related to changes in oil prices. At June 30, 2016, the Company utilized two-way and three-way costless collar options and swaps to reduce the volatility of oil prices on a significant portion of its future expected oil production. A two-way collar is a combination of options: a sold call and a purchased put. The purchased put establishes a minimum price (floor) and the sold call establishes a maximum price (ceiling) the Company will receive for the volumes under contract. A three-way collar is a combination of options: a sold call, a purchased put and a sold put. The purchased put establishes a minimum price (floor), unless the market price falls below the sold put (sub-floor), at which point the minimum price would be the NYMEX West Texas Intermediate crude oil index price (“WTI”) plus the difference between the purchased put and the sold put strike price. The sold call establishes a maximum price (ceiling) the Company will receive for the volumes under contract. A swap is a sold call and a purchased put established at the same price (both ceiling and floor).
All derivative instruments are recorded on the Company’s Condensed Consolidated Balance Sheet as either assets or liabilities measured at fair value (see Note 4 – Fair Value Measurements). The Company has not designated any derivative instruments as hedges for accounting purposes and does not enter into such instruments for speculative trading purposes. If a derivative does not qualify as a hedge or is not designated as a hedge, the changes in fair value are recognized in the other income (expense) section of the Company’s Condensed Consolidated Statement of Operations as a net gain or loss on derivative instruments. The Company’s cash flow is only impacted when the actual settlements under the derivative contracts result in making a payment to or receiving a payment from the counterparty. These cash settlements represent the cumulative gains and losses on the Company’s derivative instruments and do not include a recovery of costs that were paid to acquire or modify the derivative instruments that were settled. Cash settlements are reflected as investing activities in the Company’s Condensed Consolidated Statement of Cash Flows.
At June 30, 2016, the Company had the following outstanding commodity derivative instruments, all of which settle monthly based on the average WTI:
Settlement
Period
 
Derivative
Instrument
 
Total Notional
Amount of Oil
 
Weighted Average Prices
 
Fair Value
Asset (Liability)
 
 
 
Swap
 
Sub-Floor
 
Floor
 
Ceiling
 
 
 
 
 
(Barrels)
 
($/Barrel)
 
(In thousands)
2016
 
Swaps
 
5,886,000

 
$
49.64

 
 
 
 
 
 
 
$
1,157

2017
 
Swaps
 
4,694,000

 
$
47.79

 
 
 
 
 
 
 
(18,429
)
2017
 
Two-way collars
 
668,000

 
 
 
 
 
$
40.00

 
$
47.58

 
(4,427
)
2017
 
Three-way collars
 
1,336,000

 

 
$
30.00

 
$
45.00

 
$
59.39

 
(923
)
2018
 
Swaps
 
310,000

 
$
47.68

 
 
 

 

 
(1,519
)
2018
 
Two-way collars
 
62,000

 
 
 
 
 
$
40.00

 
$
47.58

 
(453
)
2018
 
Three-way collars
 
124,000

 
 
 
$
30.00

 
$
45.00

 
$
59.39

 
(194
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
(24,788
)

9

The following table summarizes the location and fair value of all outstanding commodity derivative instruments recorded in the Company’s Condensed Consolidated Balance Sheet: 
 
 
 
 
Fair Value Asset (Liability)
Commodity
 
Balance Sheet Location
 
June 30, 2016
 
December 31, 2015
 
 
 
 
(In thousands)
Crude oil
 
Derivative instruments — current assets
 
$
10,330

 
$
139,697

Crude oil
 
Derivative instruments — non-current assets
 
64

 
15,776

Crude oil
 
Derivative instruments — current liabilities
 
(20,891
)
 
—

Crude oil
 
Derivative instruments — non-current liabilities
 
(14,291
)
 
—

Total derivative instruments
 
$
(24,788
)
 
$
155,473

The following table summarizes the location and amounts of gains and losses from the Company’s commodity derivative instruments recorded in the Company’s Condensed Consolidated Statement of Operations for the periods presented:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Statement of Operations Location
 
2016
 
2015
 
2016
 
2015
 
 
(In thousands)
Net gain (loss) on derivative instruments
 
$
(90,846
)
 
$
(39,424
)
 
$
(76,471
)
 
$
7,648

In accordance with the FASB’s authoritative guidance on disclosures about offsetting assets and liabilities, the Company is required to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting agreement. The Company’s derivative instruments are presented as assets and liabilities on a net basis by counterparty, as all counterparty contracts provide for net settlement. No margin or collateral balances are deposited with counterparties, and as such, gross amounts are offset to determine the net amounts presented in the Company’s Condensed Consolidated Balance Sheet.
The following tables summarize gross and net information about the Company’s commodity derivative instruments:
Offsetting of Derivative Assets
 
Gross Amounts of Recognized Assets
 
Gross Amounts Offset
in the Balance Sheet
 
Net Amounts of Assets Presented
in the Balance Sheet
 
 
(In thousands)
At June 30, 2016
 
$
24,900

 
$
(14,506
)
 
$
10,394

At December 31, 2015
 
155,473

 
—

 
155,473

Offsetting of Derivative Liabilities
 
Gross Amounts of Recognized Liabilities
 
Gross Amounts Offset
in the Balance Sheet
 
Net Amounts of Liabilities Presented
in the Balance Sheet
 
 
(In thousands)
At June 30, 2016
 
$
49,688

 
$
(14,506
)
 
$
35,182

At December 31, 2015
 
—

 
—

 
—



10

6. Property, Plant and Equipment
The following table sets forth the Company’s property, plant and equipment:
 
June 30, 2016
 
December 31, 2015
 
(In thousands)
Proved oil and gas properties(1)
$
5,774,121

 
$
5,655,759

Less: accumulated depreciation, depletion, amortization and impairment
(1,657,641
)
 
(1,428,427
)
Proved oil and gas properties, net
4,116,480

 
4,227,332

Unproved oil and gas properties
628,527

 
628,642

Other property and equipment
536,462

 
443,265

Less: accumulated depreciation
(94,735
)
 
(80,997
)
Other property and equipment, net
441,727

 
362,268

Total property, plant and equipment, net
$
5,186,734

 
$
5,218,242

 __________________
(1)
Included in the Company’s proved oil and gas properties are estimates of future asset retirement costs of $31.3 million and $30.7 million at June 30, 2016 and December 31, 2015, respectively.
7. Divestiture
On April 1, 2016, the Company completed the sale of certain legacy wells that have been producing from conventional reservoirs such as the Madison, Red River and other formations in the Williston Basin other than the Bakken or Three Forks formations for cash proceeds of approximately $12.2 million, which includes, and is subject to further, customary post close adjustments, and a $4.0 million 10% secured promissory note due within one year. These sold assets primarily consisted of oil and gas properties in the Company’s exploration and production segment and included certain other property and equipment in the Company’s midstream segment.
For the six months ended June 30, 2016 and the year ended December 31, 2015, the Company recorded impairment charges of $3.6 million and $9.4 million, respectively, which were included in impairment on the Company’s Condensed Consolidated Statement of Operations, to adjust the carrying value of these assets to their estimated fair value, determined based on the expected sales price, less costs to sell. There were no similar charges recorded during the three months ended June 30, 2016 and three and six months ended June 30, 2015. For the three and six months ended June 30, 2016, customary post close adjustments were included in the loss on sale of properties on the Company’s Condensed Consolidated Statement of Operations.

8. Long-Term Debt
The Company’s long-term debt consists of the following:
 
June 30, 2016
 
December 31, 2015
 
(In thousands)
Senior secured revolving line of credit
$
35,000

 
$
138,000

Senior unsecured notes
 
 
 
7.25% senior unsecured notes due February 1, 2019
399,000

 
400,000

6.5% senior unsecured notes due November 1, 2021
397,697

 
400,000

6.875% senior unsecured notes due March 15, 2022
940,500

 
1,000,000

6.875% senior unsecured notes due January 15, 2023
386,200

 
400,000

Less: deferred financing costs related to senior unsecured notes
(31,036
)
 
(35,416
)
Total long-term debt
$
2,127,361

 
$
2,302,584

Senior secured revolving line of credit. The Company has a senior secured revolving line of credit (the “Credit Facility”) of $2,500.0 million as of June 30, 2016, which has a maturity date of April 13, 2020. The Credit Facility is restricted to a borrowing base, which is reserve-based and subject to semi-annual redeterminations on April 1 and October 1 of each year. On February 23, 2016, the lenders under the Credit Facility completed their regular semi-annual redetermination of the borrowing base scheduled for April 1, 2016, resulting in a decrease in the borrowing base and aggregate elected commitment from $1,525.0 million to $1,150.0 million.

11

As of June 30, 2016, the Company had $35.0 million of LIBOR loans and $14.2 million of outstanding letters of credit issued under the Credit Facility, resulting in an unused borrowing base committed capacity of $1,100.8 million. The weighted average interest rate on borrowings outstanding under the Credit Facility was 2.0% and 1.9% as of June 30, 2016 and December 31, 2015, respectively. On a quarterly basis, the Company also pays a 0.375% (as of June 30, 2016) annualized commitment fee on the average amount of borrowing base capacity not utilized during the quarter and fees calculated on the average amount of letter of credit balances outstanding during the quarter.
The Company was in compliance with the financial covenants of the Credit Facility as of June 30, 2016.
Senior unsecured notes. At June 30, 2016, the Company had $2,123.4 million principal amount of senior unsecured notes outstanding with maturities ranging from February 2019 to January 2023 and coupons ranging from 6.5% to 7.25% (the “Notes”). Interest on the Notes is payable semi-annually in arrears. The Notes are guaranteed on a senior unsecured basis by the Company, along with its material subsidiaries (the “Guarantors”), which are 100% owned by the Company. These guarantees are full and unconditional and joint and several among the Guarantors, subject to certain customary release provisions. The indentures governing the Notes contain customary events of default as well as covenants that place restrictions on the Company and certain of its subsidiaries.
Prior to certain dates, the Company has certain options to redeem up to 35% of the Notes at a certain redemption price based on a percentage of the principal amount, plus accrued and unpaid interest to the redemption date, with the proceeds of certain equity offerings so long as the redemption occurs within 180 days of completing such equity offering and at least 65% of the aggregate principal amount of the Notes remains outstanding after such redemption. Prior to certain dates, the Company has the option to redeem some or all of the Notes for cash at certain redemption prices equal to a certain percentage of their principal amount plus an applicable make-whole premium and accrued and unpaid interest to the redemption date. The Company estimates that the fair value of these redemption options is immaterial at June 30, 2016 and December 31, 2015.
During the six months ended June 30, 2016, the Company repurchased an aggregate principal amount of $76.6 million of its outstanding Notes, consisting of $1.0 million principal amount of its 7.25% senior unsecured notes due February 2019, $2.3 million principal amount of its 6.5% senior unsecured notes due November 2021, $59.5 million principal amount of its 6.875% senior unsecured notes due March 2022 and $13.8 million principal amount of its 6.875% senior unsecured notes due January 2023, for an aggregate cost of $56.9 million, including accrued interest and fees. For the three and six months ended June 30, 2016, the Company recognized pre-tax gains of $11.6 million and $18.7 million, respectively, related to these repurchases, which were net of unamortized deferred financing costs write-offs of $0.5 million and $1.0 million, respectively, and are reflected in gain on extinguishment of debt in the Company’s Condensed Consolidated Statement of Operations.
Deferred financing costs. At June 30, 2016, the Company had $36.7 million of deferred financing costs related to the Notes and the Credit Facility. Deferred financing costs of $31.0 million related to the Notes are included in long-term debt on the Company’s Condensed Consolidated Balance Sheet at June 30, 2016, and are being amortized over the respective terms of the Notes. Deferred financing costs of $5.7 million related to the Credit Facility are included in other assets on the Company’s Condensed Consolidated Balance Sheet at June 30, 2016, and are being amortized over the term of the Credit Facility. Amortization of deferred financing costs recorded was $2.0 million and $4.1 million for the three and six months ended June 30, 2016, respectively, and $1.9 million and $3.5 million for the three and six months ended June 30, 2015, respectively. These costs are included in interest expense on the Company’s Condensed Consolidated Statement of Operations. For the six months ended June 30, 2016 and 2015, the Company’s interest expense also included $1.8 million and $0.5 million charges for unamortized deferred financing costs related to the Credit Facility, which were written off in proportion to the decreases in the borrowing base. No deferred financing costs related to the Credit Facility were written off during the three months ended June 30, 2016. Aforementioned, the gain on extinguishment of debt in the Company’s Condensed Consolidated Statement of Operations included unamortized deferred financing costs write-offs of $0.5 million and $1.0 million related to the repurchased Notes for the three and six months ended June 30, 2016, respectively. No deferred financing costs related to the Notes were written off during the three and six months ended June 30, 2015.

12

9. Asset Retirement Obligations
The following table reflects the changes in the Company’s ARO during the six months ended June 30, 2016:
 
(In thousands)
Balance at December 31, 2015
$
35,812

Liabilities incurred during period
248

Liabilities settled during period(1)
(443
)
Accretion expense during period(2)
940

Revisions to estimates
571

Balance at June 30, 2016
$
37,128

___________________
(1)
Liabilities settled during the six months ended June 30, 2016 included ARO related to the sold properties (see Note 7 – Divestiture).
(2)
Included in depreciation, depletion and amortization on the Company’s Condensed Consolidated Statement of Operations.
At June 30, 2016, the current portion of the total ARO balance was approximately $0.7 million and was included in accrued liabilities on the Company’s Condensed Consolidated Balance Sheet.
10. Income Taxes
The Company’s effective tax rate for the three and six months ended June 30, 2016 was 36.9% and 34.2%, respectively. The Company’s effective tax rate for the three and six months ended June 30, 2015 was 36.7% and 34.9%, respectively. The effective tax rates for both the six months ended June 30, 2016 and 2015 were lower than the combined federal statutory rate and the statutory rates for the states in which the Company conducts business due to the impact of permanent differences on pre-tax loss for each period. The permanent differences were primarily between amounts expensed for book purposes versus the amounts deductible for income tax purposes related to stock-based compensation vesting during the six months ended June 30, 2016 and 2015 at stock prices lower than the grant date values.
While the Company is in an overall deferred tax liability position, the Company had deferred tax assets for its federal and state tax net operating losses and other tax carryforwards recorded in deferred income taxes at June 30, 2016. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. During the six months ended June 30, 2016, the Company recorded a valuation allowance of $0.9 million and $0.6 million for Montana net operating losses and for federal charitable contribution carryovers, respectively, based on management’s assessment that it is more likely than not that these net deferred tax assets will not be realized prior to their expiration due to their short carryover periods, current economic conditions and expectations for the future. Management determined that a valuation allowance was not required for its U.S. federal tax net operating loss carryforwards as they are expected to be fully utilized before their expiration. However, the amount of deferred tax assets considered realizable could be reduced in the future if subjective positive evidence, such as projections of future growth, become limited by objective negative evidence, such as projected cumulative losses incurred over a three-year period. Management’s estimates of future taxable income are significantly affected by changes in commodity prices, the timing and amount of future production and future operating and capital costs.
At June 30, 2016, the Company did not have any uncertain tax positions requiring adjustments to its tax liability.
11. Common Stock
On February 2, 2016, the Company completed a public offering of 39,100,000 shares of its common stock (including 5,100,000 shares issued pursuant to the underwriters’ option to purchase additional common stock) at an offering price of $4.685 per share. Net proceeds from the offering were $183.0 million, after deducting underwriting discounts and commissions and offering expenses, of which $0.4 million is included in common stock and $182.6 million is included in additional paid-in capital on the Company’s Condensed Consolidated Balance Sheet at June 30, 2016. The Company used the net proceeds for general corporate purposes. The offering was made pursuant to an effective shelf registration statement on Form S-3 filed with the SEC on July 15, 2014.
12. Stock-Based Compensation
Restricted stock awards. The Company has granted restricted stock awards to employees and directors under its Amended and Restated 2010 Long Term Incentive Plan, the majority of which vest over a three-year period. The fair value of restricted

13

stock grants is based on the closing sales price of the Company’s common stock on the date of grant. Compensation expense is recognized ratably over the requisite service period. For the six months ended June 30, 2016, the Company assumed annual forfeiture rates by employee group ranging from 0% to 20.0% based on the Company’s forfeiture history for this type of award.
During the six months ended June 30, 2016, employees and non-employee directors of the Company were granted restricted stock awards equal to 2,573,950 shares of common stock with a $4.34 weighted average grant date per share value. Stock-based compensation expense recorded for restricted stock awards for the three and six months ended June 30, 2016 was $4.9 million and $10.7 million, respectively, and $5.1 million and $11.8 million for the three and six months ended June 30, 2015, respectively. Stock-based compensation expense is included in general and administrative expenses on the Company’s Condensed Consolidated Statement of Operations.
Performance share units. The Company has granted performance share units (“PSUs”) to officers of the Company under its Amended and Restated 2010 Long Term Incentive Plan. The PSUs are awards of restricted stock units, and each PSU that is earned represents the right to receive one share of the Company’s common stock. For the six months ended June 30, 2016, the Company assumed annual forfeiture rates by employee group ranging from 3.3% to 4.6% based on the Company’s forfeiture history for the officer employee groups receiving PSUs.
During the six months ended June 30, 2016, officers of the Company were granted 910,000 PSUs with a $3.00 weighted average grant date per share value. Stock-based compensation expense recorded for PSUs for the three and six months ended June 30, 2016 was $1.3 million and $2.2 million, respectively, and $1.0 million and $1.9 million for the three and six months ended June 30, 2015, respectively. Stock-based compensation expense is included in general and administrative expenses on the Company’s Condensed Consolidated Statement of Operations.
The Company accounted for these PSUs as equity awards pursuant to the FASB’s authoritative guidance for share-based payments. The number of PSUs to be earned is subject to a market condition, which is based on a comparison of the total shareholder return (“TSR”) achieved with respect to shares of the Company’s common stock against the TSR achieved by a defined peer group at the end of the performance periods. Depending on the Company’s TSR performance relative to the defined peer group, award recipients will earn between 0% and 200% of the initial PSUs granted. The grant date fair value for each grant of PSUs is recognized on a straight-line basis over a four-year total performance period. All compensation expense related to the PSUs will be recognized if the requisite performance period is fulfilled, even if the market condition is not achieved.
The aggregate grant date fair value of the market-based awards was determined using a Monte Carlo simulation model, which results in an expected percentage of PSUs earned. The Monte Carlo simulation model uses assumptions regarding random projections and must be repeated numerous times to achieve a probabilistic assessment. The key valuation assumptions for the Monte Carlo model are the forecast period, initial value, risk-free interest rate, volatility and correlation coefficients. The risk-free interest rate is the U.S. Treasury bond rate on the date of grant that corresponds to the total performance period. The initial value is the average of the volume weighted average prices for the 30 trading days prior to the start of the performance cycle for the Company and each of its peers. Volatility is the standard deviation of the average percentage change in stock price over a historical period for the Company and each of its peers. The correlation coefficients are measures of the strength of the linear relationship between and amongst the Company and its peers estimated based on historical stock price data.
The following assumptions were used for the Monte Carlo model to determine the grant date fair value and associated stock-based compensation expense of the PSUs granted during the six months ended June 30, 2016:
Forecast period (years)
4.00

Risk-free interest rate
1.25
%
Oasis stock price volatility
59.38
%
For the PSUs granted during the six months ended June 30, 2016, the Monte Carlo simulation model resulted in approximately 69% of PSUs expected to be earned.

14

13. Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing the earnings (loss) attributable to common stockholders by the weighted average number of shares outstanding for the periods presented. The calculation of diluted earnings (loss) per share includes the impact of potentially dilutive non-vested restricted shares and PSUs outstanding during the periods presented, unless their effect is anti-dilutive. There are no adjustments made to the earnings (loss) attributable to common stockholders in the calculation of diluted earnings (loss) per share.
The following is a calculation of the basic and diluted weighted average shares outstanding for the three and six months ended June 30, 2016 and 2015: 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Basic weighted average common shares outstanding
176,984

 
136,859

 
169,953

 
123,157

Dilution effect of stock awards at end of period(1)
—

 
—

 
—

 
—

Diluted weighted average common shares outstanding
176,984

 
136,859

 
169,953

 
123,157

Anti-dilutive stock-based compensation awards
4,920

 
2,993

 
4,794

 
3,012

___________________
(1)
No unvested stock awards were included in computing loss per share for the three and six months ended June 30, 2016 and 2015 because the effect was anti-dilutive.

14. Business Segment Information
The Company’s exploration and production segment is engaged in the acquisition and development of oil and natural gas properties. Revenues for the exploration and production segment are derived from the sale of oil and natural gas production. The Company’s well services business segment (OWS) performs services for the Company’s oil and natural gas wells operated by OPNA. Revenues for the well services segment are derived from providing well services, product sales and equipment rentals. The Company’s midstream services business segment (OMS) performs salt water gathering and disposal and other midstream services for the Company’s oil and natural gas wells operated by OPNA. Revenues for the midstream segment are primarily derived from salt water pipeline transport, salt water disposal and fresh water sales. The revenues and expenses related to work performed by OWS and OMS for OPNA’s working interests are eliminated in consolidation, and only the revenues and expenses related to non-affiliated working interest owners are included in the Company’s Condensed Consolidated Statement of Operations. These segments represent the Company’s three operating units, each offering different products and services. The Company’s corporate activities have been allocated to the supported business segments accordingly.

15

Management evaluates the performance of the Company’s business segments based on operating income, which is defined as segment operating revenues less operating expenses, including depreciation, depletion and amortization. The following table summarizes financial information for the Company’s three business segments for the periods presented: 
 
Exploration and
Production
 
Well Services
 
Midstream Services
 
Eliminations
 
Consolidated
 
(In thousands)
Three months ended June 30, 2016:
 
Revenues from non-affiliates
$
159,337

 
$
12,834

 
$
6,909

 
$
—

 
$
179,080

Inter-segment revenues
—

 
8,301

 
22,026

 
(30,327
)
 
—

Total revenues
159,337

 
21,135

 
28,935

 
(30,327
)
 
179,080

Operating income (loss)
(44,748
)
 
(2,173
)
 
18,056

 
651

 
(28,214
)
Other income (expense)
(114,230
)
 
31

 
(16
)
 
—

 
(114,215
)
Income (loss) before income taxes
$
(158,978
)
 
$
(2,142
)
 
$
18,040

 
$
651

 
$
(142,429
)
 
 
Three months ended June 30, 2015:
 
 
 
 
 
 
 
 
 
Revenues from non-affiliates
$
214,110

 
$
9,219

 
$
6,717

 
$
—

 
$
230,046

Inter-segment revenues
—

 
49,469

 
21,944

 
(71,413
)
 
—

Total revenues
214,110

 
58,688

 
28,661

 
(71,413
)
 
230,046

Operating income (loss)
(22,529
)
 
9,008

 
15,947

 
(9,863
)
 
(7,437
)
Other income (expense)
(76,635
)
 
22

 
(25
)
 
—

 
(76,638
)
Income (loss) before income taxes
$
(99,164
)
 
$
9,030

 
$
15,922

 
$
(9,863
)
 
$
(84,075
)
 
 
 
 
 
 
 
 
 
 
Six months ended June 30, 2016:
 
 
 
 
 
 
 
 
 
Revenues from non-affiliates
$
276,652

 
$
18,818

 
$
13,893

 
$
—

 
$
309,363

Inter-segment revenues
—

 
33,205

 
44,860

 
(78,065
)
 
—

Total revenues
276,652

 
52,023

 
58,753

 
(78,065
)
 
309,363

Operating income (loss)
(133,625
)
 
1,848

 
33,200

 
(4,852
)
 
(103,429
)
Other income (expense)
(131,119
)
 
37

 
(2
)
 
—

 
(131,084
)
Income (loss) before income taxes
$
(264,744
)
 
$
1,885

 
$
33,198

 
$
(4,852
)
 
$
(234,513
)
 
 
Six months ended June 30, 2015:
 
 
 
 
 
 
 
 
 
Revenues from non-affiliates
$
387,969

 
$
11,927

 
$
10,537

 
$
—

 
$
410,433

Inter-segment revenues
—

 
97,666

 
35,766

 
(133,432
)
 
—

Total revenues
387,969

 
109,593

 
46,303

 
(133,432
)
 
410,433

Operating income (loss)
(64,776
)
 
18,618

 
25,255

 
(20,169
)
 
(41,072
)
Other income (expense)
(68,396
)
 
20

 
(44
)
 
—

 
(68,420
)
Income (loss) before income taxes
$
(133,172
)
 
$
18,638

 
$
25,211

 
$
(20,169
)
 
$
(109,492
)
 
 
At June 30, 2016:
 
Property, plant and equipment, net
$
4,951,972

 
$
53,926

 
$
351,116

 
$
(170,280
)
 
$
5,186,734

Total assets(1)
5,191,725

 
57,482

 
356,612

 
(170,280
)
 
5,435,539

At December 31, 2015:
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net
$
5,057,311

 
$
61,402

 
$
264,956

 
$
(165,427
)
 
$
5,218,242

Total assets(1)(2)
5,478,439

 
66,952

 
269,411

 
(165,427
)
 
5,649,375

___________________
(1)
Intercompany receivables (payables) for all segments were reclassified to capital contributions from (distributions to) parent and not included in total assets.
(2)
At December 31, 2015, total assets included assets held for sale of $26.7 million in the exploration and production segment related to the assets sold as of April 1, 2016 (see Note 7 – Divestiture).

16

15. Commitments and Contingencies
Included below is a discussion of the Company’s various future commitments as of June 30, 2016. The commitments under these arrangements are not recorded in the accompanying Condensed Consolidated Balance Sheet. The amounts disclosed represent undiscounted cash flows on a gross basis, and no inflation elements have been applied.
Lease obligations. The Company’s total rental commitments under leases for office space and other property and equipment as of June 30, 2016 were $22.6 million.
Volume commitment agreements. As of June 30, 2016, the Company had certain agreements with an aggregate requirement to deliver or transport a minimum quantity of approximately 30.5 MMBbl of crude oil, 23.0 MMBbl of natural gas liquids and 220.6 Bcf of natural gas, prior to any applicable volume credits, within specified timeframes, all of which are ten years or less. The future commitments under certain agreements cannot be estimated as they are based on fixed differentials relative to WTI under the agreements as compared to the differential relative to WTI for the Williston Basin for the production month. The estimable future commitments under these agreements were approximately $442.0 million as of June 30, 2016.
Purchase agreements. As of June 30, 2016, the Company had certain agreements for the purchase of fresh water with an aggregate future commitment of approximately $38.8 million.
Litigation. The Company is party to various legal and/or regulatory proceedings from time to time arising in the ordinary course of business. While the ultimate outcome and impact to the Company cannot be predicted with certainty, the Company believes that all such matters are without merit and involve amounts which, if resolved unfavorably, either individually or in the aggregate, will not have a material adverse effect on its financial condition, results of operations or cash flows. When the Company determines that a loss is probable of occurring and is reasonably estimable, the Company accrues an undiscounted liability for such contingencies based on its best estimate using information available at the time. The Company discloses contingencies where an adverse outcome may be material, or in the judgment of management, the matter should otherwise be disclosed.

16. Condensed Consolidating Financial Information
The Notes (see Note 8 – Long-Term Debt) are guaranteed on a senior unsecured basis by the Guarantors, which are 100% owned by the Company. These guarantees are full and unconditional and joint and several among the Guarantors. Certain of the Company’s immaterial wholly-owned subsidiaries do not guarantee the Notes (“Non-Guarantor Subsidiaries”).
The following financial information reflects consolidating financial information of the parent company, Oasis Petroleum Inc. (“Issuer”), and its Guarantors on a combined basis, prepared on the equity basis of accounting. The Non-Guarantor Subsidiaries are immaterial and, therefore, not presented separately. The information is presented in accordance with the requirements of Rule 3-10 under the SEC’s Regulation S-X. The financial information may not necessarily be indicative of results of operations, cash flows or financial position had the Guarantors operated as independent entities. The Company has not presented separate financial and narrative information for each of the Guarantors because it believes such financial and narrative information would not provide any additional information that would be material in evaluating the sufficiency of the Guarantors.


17

Condensed Consolidating Balance Sheet
 
June 30, 2016
 
Parent/
Issuer
 
Combined
Guarantor
Subsidiaries
 
Intercompany
Eliminations
 
Consolidated
 
(In thousands)
ASSETS
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
85

 
$
6,390

 
$
—

 
$
6,475

Accounts receivable – oil and gas revenues
—

 
109,121

 
—

 
109,121

Accounts receivable – joint interest and other
—

 
81,291

 
—

 
81,291

Accounts receivable – affiliates
1,348

 
198,702

 
(200,050
)
 
—

Inventory
—

 
9,018

 
—

 
9,018

Prepaid expenses
—

 
5,838

 
—

 
5,838

Derivative instruments
—

 
10,330

 
—

 
10,330

Other current assets
—

 
4,164

 
—

 
4,164

Total current assets
1,433

 
424,854

 
(200,050
)
 
226,237

Property, plant and equipment
 
 
 
 
 
 
 
Oil and gas properties (successful efforts method)
—

 
6,402,648

 
—

 
6,402,648

Other property and equipment
—

 
536,462

 
—

 
536,462

Less: accumulated depreciation, depletion, amortization and impairment
—

 
(1,752,376
)
 
—

 
(1,752,376
)
Total property, plant and equipment, net
—

 
5,186,734

 
—

 
5,186,734

Investments in and advances to subsidiaries
4,474,390

 
—

 
(4,474,390
)
 
—

Derivative instruments
—

 
64

 
—

 
64

Deferred income taxes
223,269

 
—

 
(223,269
)
 
—

Other assets
—

 
22,504

 
—

 
22,504

Total assets
$
4,699,092

 
$
5,634,156

 
$
(4,897,709
)
 
$
5,435,539

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
Accounts payable
$
—

 
$
10,357

 
$
—

 
$
10,357

Accounts payable – affiliates
198,702

 
1,348

 
(200,050
)
 
—

Revenues and production taxes payable
—

 
138,451

 
—

 
138,451

Accrued liabilities
31

 
128,253

 
—

 
128,284

Accrued interest payable
47,643

 
28

 
—

 
47,671

Derivative instruments
—

 
20,891

 
—

 
20,891

Advances from joint interest partners
—

 
5,416

 
—

 
5,416

Other current liabilities
—

 
15,001

 
—

 
15,001

Total current liabilities
246,376

 
319,745

 
(200,050
)
 
366,071

Long-term debt
2,092,361

 
35,000

 
—

 
2,127,361

Deferred income taxes
—

 
751,297

 
(223,269
)
 
528,028

Asset retirement obligations
—

 
36,390

 
—

 
36,390

Derivative instruments
—

 
14,291

 
—

 
14,291

Other liabilities
—

 
3,043

 
—

 
3,043

Total liabilities
2,338,737

 
1,159,766

 
(423,319
)
 
3,075,184

Stockholders’ equity
 
 
 
 
 
 
 
Capital contributions from affiliates
—

 
3,380,427

 
(3,380,427
)
 
—

Common stock, $0.01 par value: 450,000,000 shares authorized; 181,200,581 shares issued and 180,399,060 shares outstanding
1,777

 
—

 
—

 
1,777

Treasury stock, at cost: 801,521 shares
(15,140
)
 
—

 
—

 
(15,140
)
Additional paid-in-capital
1,693,583

 
8,743

 
(8,743
)
 
1,693,583

Retained earnings
680,135

 
1,085,220

 
(1,085,220
)
 
680,135

Total stockholders’ equity
2,360,355

 
4,474,390

 
(4,474,390
)
 
2,360,355

Total liabilities and stockholders’ equity
$
4,699,092

 
$
5,634,156

 
$
(4,897,709
)
 
$
5,435,539


18

Condensed Consolidating Balance Sheet
 
December 31, 2015
 
Parent/
Issuer
 
Combined
Guarantor
Subsidiaries
 
Intercompany
Eliminations
 
Consolidated
 
(In thousands)
ASSETS
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
777

 
$
8,953

 
$
—

 
$
9,730

Accounts receivable – oil and gas revenues
—

 
96,495

 
—

 
96,495

Accounts receivable – joint interest and other
15

 
100,899

 
—

 
100,914

Accounts receivable – affiliates
1,248

 
247,488

 
(248,736
)
 
—

Inventory
—

 
11,072

 
—

 
11,072

Prepaid expenses
278

 
7,050

 
—

 
7,328

Derivative instruments
—

 
139,697

 
—

 
139,697

Other current assets
—

 
50

 
—

 
50

Total current assets
2,318

 
611,704

 
(248,736
)
 
365,286

Property, plant and equipment
 
 
 
 
 
 
 
Oil and gas properties (successful efforts method)
—

 
6,284,401

 
—

 
6,284,401

Other property and equipment
—

 
443,265

 
—

 
443,265

Less: accumulated depreciation, depletion, amortization and impairment
—

 
(1,509,424
)
 
—

 
(1,509,424
)
Total property, plant and equipment, net
—

 
5,218,242

 
—

 
5,218,242

Assets held for sale
—

 
26,728

 
—

 
26,728

Investments in and advances to subsidiaries
4,573,172

 
—

 
(4,573,172
)
 
—

Derivative instruments
—

 
15,776

 
—

 
15,776

Deferred income taxes
205,174

 
—

 
(205,174
)
 
—

Other assets
100

 
23,243

 
—

 
23,343

Total assets
$
4,780,764

 
$
5,895,693

 
$
(5,027,082
)
 
$
5,649,375

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
Accounts payable
$
—

 
$
9,983

 
$
—

 
$
9,983

Accounts payable – affiliates
247,488

 
1,248

 
(248,736
)
 
—

Revenue and production taxes payable
—

 
132,356

 
—

 
132,356

Accrued liabilities
10

 
167,659

 
—

 
167,669

Accrued interest payable
49,340

 
73

 
—

 
49,413

Advances from joint interest partners
—

 
4,647

 
—

 
4,647

Other current liabilities
—

 
6,500

 
—

 
6,500

Total current liabilities
296,838

 
322,466

 
(248,736
)
 
370,568

Long-term debt
2,164,584

 
138,000

 
—

 
2,302,584

Deferred income taxes
—

 
813,329

 
(205,174
)
 
608,155

Asset retirement obligations
—

 
35,338

 
—

 
35,338

Liabilities held for sale
—

 
10,228

 
—

 
10,228

Other liabilities
—

 
3,160

 
—

 
3,160

Total liabilities
2,461,422

 
1,322,521

 
(453,910
)
 
3,330,033

Stockholders’ equity
 
 
 
 
 
 
 
Capital contributions from affiliates
—

 
3,369,895

 
(3,369,895
)
 
—

Common stock, $0.01 par value: 300,000,000 shares authorized; 139,583,990 shares issued and 139,076,064 shares outstanding
1,376

 
—

 
—

 
1,376

Treasury stock, at cost: 507,926 shares
(13,620
)
 
—

 
—

 
(13,620
)
Additional paid-in-capital
1,497,065

 
8,743

 
(8,743
)
 
1,497,065

Retained earnings
834,521

 
1,194,534

 
(1,194,534
)
 
834,521

Total stockholders’ equity
2,319,342

 
4,573,172

 
(4,573,172
)
 
2,319,342

Total liabilities and stockholders’ equity
$
4,780,764

 
$
5,895,693

 
$
(5,027,082
)
 
$
5,649,375


19


Condensed Consolidating Statement of Operations
 
Three Months Ended June 30, 2016
 
Parent/
Issuer
 
Combined
Guarantor
Subsidiaries
 
Intercompany
Eliminations
 
Consolidated
 
(In thousands)
Revenues
 
 
 
 
 
 
 
Oil and gas revenues
$
—

 
$
159,337

 
$
—

 
$
159,337

Well services and midstream revenues
—

 
19,743

 
—

 
19,743

Total revenues
—

 
179,080

 
—

 
179,080

Operating expenses
 
 
 
 
 
 
 
Lease operating expenses
—

 
31,523

 
—

 
31,523

Well services and midstream operating expenses
—

 
8,875

 
—

 
8,875

Marketing, transportation and gathering expenses
—

 
6,491

 
—

 
6,491

Production taxes
—

 
14,367

 
—

 
14,367

Depreciation, depletion and amortization
—

 
122,488

 
—

 
122,488

Exploration expenses
—

 
340

 
—

 
340

Impairment
—

 
23

 
—

 
23

General and administrative expenses
6,395

 
15,481

 
—

 
21,876

Total operating expenses
6,395

 
199,588

 
—