Oasis Petroleum Inc. (OAS-N)

A name in transition. Used to be viewed as a leveraged way to play oil because they had financial leverage and were in the US Bakken play, which is still exceptional economics in a lot of their acreage. In the fall, they did a massively diluted share offering to purchase acreage in the Permian, paying fairly aggressive prices. The investor base which own the story for the Bakken exposure, suddenly got a company with no technical competency in the Permian, which raises the question about a possible inventory issue. With all those question marks, people hit the jettison button and the stock fell 20%. It's going to take several quarters for them to drill wells, prove their competency, test up their acreage, etc. Why not have money in another stock that is not experiencing that transition.

Typically, a higher beta US name. In the US, if you want beta without going to crazy, you typically buy this one. Tends to be higher volatility than others. They’re spinning out some of their midstream assets to pay down some of the debt. Using more sand and getting very strong incremental economics on their wells. It should be a benefactor of some money coming out of some of the Permian. If the stock traded off, he would consider owning some.

Energy can’t seem to break through that US $50 figure. With the shutdown and some of the refining capacity in the Gulf, there is less demand for the raw feed stock, which has also depressed prices. Energy has been the worst performer this year, being down about 17%. You buy companies like this for the reserves they control or have in the ground. If you are patient, you are going to see higher prices.

A fine company, but not one of his favourite US producers. It has a little more debt than the average company on consensus for next year, which would be higher than strip oil prices. Debt would be about 2.6X, while the average in the Permian is 1.2X. Well results have been improving steadily over the past couple of years, as they have been using more frac sand with better results. He has been warming up to the name.

He likes them because they are early on in applying advancements in technology to increase recoveries in wells. They are using more sand, an important theme. They did a pretty good job of navigating the downturn. They should soon get a re-rate. They have improved their balance sheet. Sentiment is as bad a Jan/Feb of last year when oil was about $29, vs. $48 now.