Oasis Petroleum Looks Strong

The Bakken shale play in North Dakota is fueling the creation of numerous start-up companies, some of which have already started showing promise. Houston-based Oasis Petroleum (NYS: OAS) is one such player that is sitting pretty on some of the most coveted reserves in North Dakota.

Impressive growth
After going public in June last year, share prices of Oasis have more than doubled in a span of about 12 months, before falling in the past two weeks. Much of this performance is thanks to fantastic year-over-year production growth of 77% at the end of second quarter. This should catch the attention of any Fool.

Why Oasis looks good
Reserves have grown substantially in the past three years. Estimated proven reserves grew from 2.3 million barrels of oil equivalent at the end of 2008 to 39.8 MMBOE at the end of 2010. Oasis has been steadily acquiring assets since its inception. Currently, it has 303,201 net leasehold acres in the Williston Basin.

Not surprisingly, cash flows from operations have grown substantially over the past five quarters as well -- and this translates into a staggering 334% growth year over year. Capital expenditures, meanwhile, have grown by 226% to $424 million. The company raised $400 million from a senior offering last February to help fund its growth initiatives.

Historically, smaller exploration and production companies with solid business models and astute management have done extremely well. Kodiak Oil & Gas (NYS: KOG) and Brigham Exploration (NAS: BEXP) are already counting the gains from operating in the Williston Basin.

Promising future
Despite acquiring property, Oasis has managed to stay amply liquid with a current ratio at 6.6 times. With 57% of its proven reserves yet to be developed, further growth plans are imminent and things should look even more promising in future.

The stock is priced fairly richly, at 3.6 times value. But I believe the market has priced it rationally, given the immense potential this company has.

Foolish bottom line
While the company has yet to post a net profit, I believe it will only be a matter of time before it does. Fools should note that core earnings -- in other words, EBITDA -- have grown for the last five consecutive quarters. In all, this stock looks really promising in terms of growth. What do you think of this company's future growth? Shoot your comments below.

At the time thisarticle was published Fool contributor Isac Simon does not own shares of any of the companies mentioned in this article.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.

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