Oasis Petroleum Inc. (OAS)’s Shares Rally Post Strong Second Quarter Results

The shares of Oasis Petroleum Inc. (NYSE:OAS) are trading 6.41% higher after somehow stronger financial results for the second quarter of 2015. The oil company beat the market’s earnings estimate of $0.27 per share, posting EPS of $0.38, although its quarterly revenues declined by 38.2% year-over-year to $230.0 million. Upon including one-time items and their tax impacts, Oasis Petroleum Inc. (NYSE:OAS) reported net loss of $53.2 million or $0.39 per diluted share against previous year earnings per share of $0.39. On the positive front, the petroleum company was able to improve its average daily production by 15% in comparison with the same quarter of 2014,

Thomas B. Nusz, Chief Executive Officer and Chairman of Oasis Petroleum Inc. (NYSE:OAS), said,

“Our team has exceeded all of our expectations during the first half of 2015, with production averaging over 50,000 Boepd and LOE trending below $8.50 per Boe year to date.”

While discussing the operational growth in the first quarter, he added,

“Oasis Midstream Services (“OMS”) increased pipeline connections resulting in the amount of produced water flowing through our system to our disposal wells increasing significantly from 48% to 65% during the second quarter of 2015. Additionally, well costs continue to decrease as we optimize pad operations, improve drilling efficiency, and reduce the cost of source water with OMS infrastructure. Wells completed with slickwater in Indian Hills are now approximately $7.8 million, which is 13% lower than where they were in May 2015. “

Newpark Resources Inc (NR), NYSE:NR,

The analysts’ are bullish on Oasis Petroleum’s stock, which sports an average price target of $23.00 and has a consensus ‘Buy’ rating. However, sharing a similar sentiment with other oil production and exploration companies, Oasis Petroleum Inc. (NYSE:OAS)’s stock lost 43.1% year-to-date.

However, hedge funds have been bullish on the stock, as our data show. We analyze 13F filings each quarter, and use them to determine 15 most popular small-cap stocks. We gather and share this information based on 16 years of research, which showed that 15 most popular small-cap picks have a great potential to outperform the market, beating the S&P 500 Total Return Index by nearly one percentage point per month in backtests. Moreover, since the beginning of forward testing in August 2012, the strategy worked brilliantly, outperforming the market every year and returning 123%, which is more than 65 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).

Nevertheless, investors seemed to be bullish on the stock at the end of the first quarter, with 32 hedge funds having positions worth $776.59 million, up from $520.78 million a quarter earlier. Meanwhile, the stock fell by 14.03% during the first quarter, which shows an inflow of capital into the company. John Scully’s SPO Advisory Corp was the largest shareholder of the petroleum company at the end of the first quarter, holding 20.37 million shares, followed by John Paulson’s Paulson & Co, which owned 8.80 million shares.  David E. Shaw’s D E Shaw, David Cost Haley’s HBK Investments, and Dmitry Balyasny’s Balyasny Asset Management were among the other shareholders of the company at the end of March.

Considering a positive hedge fund sentiment coupled with strong second-quarter results, we recommend a buy for the shares of the company.

Disclosure: None