This Oil Shale Stock is Opportunistic, Despite Huge CEO Sells

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After being upgraded by analysts, this oil and natural gas independent exploration and production company has seen its CEO sell a great deal of his own stock in the market. That oil/gas company is Oasis Petroleum (NYSE: OAS). In the middle of Nov. 14, it was upgraded from neutral rating to buy with a $40 target price by SunTrust. In three days from Nov. 26-28, Thomas Nusz, the company’s chairman and CEO, sold total 130,000 shares at the price range of $29.59 - $31.16 per share, for the total value of nearly $4 million.  Should investors follow the company’s CEO? Or should we stick to Suntrust’s upgrade?

Oasis Petroleum has focused its operation in Montana and North Dakota regions of the Williston Basin, with more than 300,000 leasehold acres. The company estimated to have around 78.7 MMBOE in proved reserves as of December 2011, with an average daily production of more than 10,700 BOE per day.  Out of 78.7 MMBOE in proved reserves, there were 69.1 MMbbls of oil and 57.9 bcf of natural gas. Interestingly, Oasis is operating in Bakken, Williston Basin, which is a big unconventional oil shale area. The company thought in the Bakken formation, its area is one the largest concentrated leasehold positions. In 2011, 90% of the daily production was generated from Bakken and Three Forks formations in the Williston Basin.

The large oil/gas corporations have been actively pursuing operations in this region via acquisitions. In September Denbury Resources (NYSE: DNR) agreed to sell to Exxon Mobil (NYSE: XOM) its Bakken Shale assets for $1.6 billion in cash and interest in two large oil fields in the Gulf Coast of Texas and Wyoming. With the total area of 196,000 net acres, the proved reserves were estimated to be around 96 MMBOE and the daily production to be 15,000 BOE per day. In July, Voyager Oil & Gas acquired Emerald Oil (NYSEMKT: EOX) for 11.6 million newly issued Voyager shares to expand the operations of both companies in the Williston Basin for oil shale. The combined company would have around 43,500 net acres in the region, with the operating area of around 6,900 net acres.

In March, Continental Resources (NYSE: CLR) said that it would buy Wheatland Oil’s assets for $340 million in total consideration. The deal gave Continental Resources 37,900 net acres in Bakken area and interests in more than 1,000 gross wells, with the total proved reserves of 17 million bbls of oil and 2,500 BOE daily productions. In addition, it has expanded its Bakken shale play as it recently announced to purchase 120,000 net acre properties with the production of 6,500 BOE per day in Bakken area for around $650 million. With the potential 1.1 million net acres, the company is considered to be the largest shareholder in the Bakken area.

Oasis seems to employ quite a lot of debt to finance its operations. As of September 2012, the total stockholders’ equity was $750 million, with $407 million in cash, and the long-term debt was $1.2 billion. Trailing twelve months, it delivered a 6.5% return on invested capital and nearly 14% return on equity, along with the generation of $318 million in operating cash flow. Analysts expected that the company would post around $1.45 EPS for the current year. Currently, Oasis is trading at $30.22 per share, with the total market capitalization of $2.82 billion. Its forward P/E is 15.9x, with PEG of only 0.2x.

My Foolish Take

Although this is the third time that its CEO sells his stocks in the market at the similar average price, I would not be bearish on Oasis. Instead, with the good assets in the Bakken area and cheaply valued in terms of PEG ratio, Oasis seems to be a good opportunistic play for investors on oil shale in the US. Being a mid-cap stock, Oasis could be bought out by other big oil/gas players for its Williston Basin assets.

hoangquocanh has no positions in the stocks mentioned above. The Motley Fool owns shares of Denbury Resources and ExxonMobil. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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