Summary of Significant Accounting Policies

Basis of Presentation

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, 2018 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 of the Company’s financial position, 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, 2018 (“2018 Annual Report”).

Consolidation. The accompanying condensed consolidated financial statements of the Company include the accounts of Oasis, the accounts of wholly-owned subsidiaries and the accounts of OMP. The Company has determined that the partners with equity at risk in OMP lack the authority, through voting rights or similar rights, to direct the activities that most significantly impact OMP’s economic performance. Therefore, as the limited partners of OMP do not have substantive kick-out or substantive participating rights over OMP GP LLC (“OMP GP”), the general partner to OMP, OMP is a variable interest entity (“VIE”). Through the Company’s ownership interest in OMP GP, the Company has the authority to direct the activities that most significantly affect economic performance and the right to receive benefits that could be potentially significant to OMP. Therefore, the Company is considered the primary beneficiary and consolidates OMP and records a non-controlling interest for the interest owned by the public as of March 31, 2019. All intercompany balances and transactions have been eliminated upon consolidation.

Revision of Prior Period Financial Statements. In connection with the preparation of the Company’s 2018 Annual Report, the Company identified errors in its previously issued 2017 annual consolidated financial statements and in each of the interim periods within 2018 and 2017. These prior period errors related to the manner in which it accounted for certain crude oil purchase and sale arrangements. Specifically, although the Company previously reported the transactions on a net basis, the Company was required to account for these purchase and sale arrangements on a gross basis, in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”) in 2018, as these transactions were not subject to Accounting Standards Codification 845, Nonmonetary Transactions (“ASC 845”). The correction of these errors had no effect on the reported consolidated net income (loss) attributable to Oasis or earnings (loss) attributable to Oasis per share data.

In accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, the Company evaluated the errors and, based on an analysis of quantitative and qualitative factors, determined that the related impact was not material to the Company’s consolidated financial statements for any prior period. Therefore, amendments of previously filed reports are not required. In accordance with Accounting Standards Codification 250, Accounting Changes and Error Corrections, the Company has corrected the errors for the three months ended March 31, 2018 by revising the unaudited condensed consolidated financial statements appearing herein. Periods not presented herein will be revised, as applicable, in future filings.

For the three months ended March 31, 2018, the revision did not impact the Company’s financial position or cash flows from operations, and the impacts to the Company’s Condensed Consolidated Statement of Operations were as follows:



	Three Months Ended March 31, 2018
	As Reported		Revision		As Revised
	(In thousands, except per share data)
Oil and gas revenues	$	363,671	$	2,924	$	366,595
Purchased oil and gas sales	18,037		49,672		67,709
Total revenues	421,216		52,596		473,812
Purchased oil and gas expenses	17,998		52,596		70,594
Total operating expenses	308,231		52,596		360,827
Net income attributable to Oasis	590		—		590
Earnings attributable to Oasis per share:
Basic	$	0.00	$	—	$	0.00
Diluted	$	0.00	$	—	$	0.00

The accompanying notes to the condensed consolidated financial statements reflect the impact of this revision.

Dividends

The Company has not paid any cash dividends since its inception. Covenants contained in its revolving credit facilities and the indentures governing the Company’s senior notes restrict the payment of cash dividends on its common stock. The Company currently intends to retain all earnings for the development of its business and for repayment of outstanding debt, and the Company does not anticipate declaring or paying any cash dividends to holders of its common stock.

Risks and Uncertainties

As a crude oil and natural gas producer, the Company’s revenue, profitability and future growth are substantially dependent upon the prevailing and future prices for crude 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 crude oil and natural gas prices will not be subject to wide fluctuations in the future. A substantial or extended decline in prices for crude 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 crude 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 2018 Annual Report, other than as noted below.

Leases. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires lessees to recognize a right-of-use (“ROU”) asset and related liability on the balance sheet for leases with durations greater than twelve months and also requires certain quantitative and qualitative disclosures about leasing arrangements. Accounting Standards Codification 842, Leases (“ASC 842”), was subsequently amended by various Accounting Standards Updates, which provided additional implementation guidance.

The Company adopted the new standard as of January 1, 2019 using the required modified retrospective approach and elected the option to recognize a cumulative effect adjustment of initially applying the guidance to the opening balance of retained earnings in the period of adoption. Prior period amounts were not adjusted.

The Company elected the package of practical expedients under the transition guidance within the new standard, including the practical expedient to not reassess under the new standard any prior conclusions about lease identification, lease classification and initial direct costs; the use-of hindsight practical expedient; the practical expedient to not reassess the prior accounting treatment for existing or expired land easements; and the practical expedient pertaining to combining lease and non-lease components for all asset classes. In addition, the Company elected not to apply the recognition requirements of ASC 842 to short-term leases, or leases with terms of one year or less, and as such, recognition of lease payments for short-term leases are recognized in net income on a straight line basis. See Note 17 — Leases for the adoption impact and disclosures required by ASC 842.

Recent Accounting Pronouncements

Financial Instruments. In August 2018, the FASB issued Accounting Standards Update No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which improves the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those years. An entity is permitted to early adopt the removed or modified disclosures upon the issuance of ASU 2018-13 and may delay adoption of the additional disclosures until their effective date. The Company does not expect the adoption of this guidance to have an impact on its financial position, cash flows or results of operations, but it may result in changes to disclosures.