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Summary of Significant Accounting Policies | 3 Months Ended
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Mar. 31, 2020
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited 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, 2019 is derived from audited financial statements. Certain reclassifications of prior year balances have been made to conform 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 unaudited 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, 2019 (“2019 Annual Report”). Consolidation. The accompanying unaudited condensed consolidated financial statements of the Company include the accounts of Oasis, the accounts of wholly-owned subsidiaries and the accounts of OMP and its general partner, OMP GP LLC (“OMP GP”). 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, OMP is a variable interest entity. 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. All intercompany balances and transactions have been eliminated upon consolidation. 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. If prices for crude oil, natural gas and natural gas liquids (“NGLs”) continue to decline or for an extended period of time remain at depressed levels, such commodity price environment could have a material adverse effect on the Company’s financial position, results of operations, cash flows, the quantities of crude oil and natural gas reserves that may be economically produced and the Company’s access to capital. The Company considered the impact of the novel coronavirus 2019 (“COVID-19”) pandemic on the assumptions and estimates used by management in the unaudited condensed consolidated financial statements for the reporting periods presented. As a result of the significant decline in current and expected future commodity prices, the Company recognized material asset impairment charges as of March 31, 2020 (see Note 8 — Property, Plant and Equipment). Management’s estimates and assumptions were based on historical data and consideration of future market conditions. Given the uncertainty inherent in any projection, which is heightened by the possibility of unforeseen additional impacts from the COVID-19 pandemic, actual results may differ from the estimates and assumptions used, and conditions may change, which could affect amounts reported in the unaudited condensed consolidated financial statements in the near term. Going Concern Based on the current commodity price environment, the Company currently expects it will be unable to comply with the leverage ratio covenant under its revolving credit facility (the “Oasis Credit Facility”), as amended in April 2020, beginning with the fourth quarter of 2020, which raises substantial doubt about the Company’s ability to continue as a going concern within one year after the financial statements are issued. Failure to comply with this covenant, if not waived, would result in an event of default under the Oasis Credit Facility, the potential acceleration of outstanding debt thereunder and the potential liquidation of the collateral securing such debt. An acceleration under the Oasis Credit Facility could result in an event of default and an acceleration under the indentures for the Company’s senior unsecured notes and senior unsecured convertible notes (collectively, the “Notes”). The Company is actively pursuing, with support from its Board of Directors, a variety of transactions and cost-cutting measures, including but not limited to, reduction in corporate discretionary expenditures, refinancing transactions, capital exchange transactions, asset divestitures, reduction in capital expenditures in 2020 by approximately 50% to 60% from the initial total 2020 capital expenditure plan announced in February 2020 and operational efficiencies. Management believes these measures, as the Company continues to implement them, may enable it to comply with its leverage ratio covenant. However, the Company cannot predict the extent to which any of these measures will be successful, if at all. The Company’s unaudited condensed consolidated financial statements have been prepared on a going concern basis and do not reflect any adjustments that might result if the Company is unable to continue as a going concern. As a result of the foregoing liquidity concerns and the Company’s reduction in planned capital expenditures in 2020 in response to the depressed commodity price environment, the Company’s estimated quantity of proved reserves has decreased significantly from the previous estimate disclosed in its 2019 Annual Report. This decrease is primarily due to the removal of proved undeveloped reserves in contemplation of the ongoing market downturn and uncertainty regarding the Company’s ability to finance the development of such reserves within five years. Dividends The Company has not paid any cash dividends since its inception. Covenants contained in the Oasis Credit Facility 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. Significant Accounting Policies There have been no material changes to the Company’s critical accounting policies and estimates from those disclosed in the 2019 Annual Report, other than as noted below. Fair value measurement. In the first quarter of 2020, the Company adopted 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 adoption of ASU 2018-13 did not result in a material impact to the Company’s financial position, cash flows or results of operations. See Note 6 — Fair Value Measurements for disclosures in accordance with ASU 2018-03. Accounts receivable — credit losses. In the first quarter of 2020, the Company adopted Accounting Standards Update No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasts, to develop credit loss estimates. The Company’s exposure to credit losses is primarily related to its accounts receivable from crude oil and natural gas purchasers and joint interest owners on properties it operates. In accordance with ASU 2016-13, the Company estimates expected credit losses on its accounts receivable at each reporting date, which may result in earlier recognition of credit losses than under previous GAAP. These estimates are based on historical data, current and future economic and market conditions to determine expected collectability. Historically, the Company’s credit losses on joint interest and crude oil and natural gas sales receivables have been immaterial. The Company continually monitors the creditworthiness of its counterparties by reviewing credit ratings, financial statements and payment history. The adoption of ASU 2016-13 was applied using a modified retrospective approach by recognizing a cumulative-effect adjustment to retained earnings, and prior periods were not retrospectively adjusted. The adoption of ASU 2016-13 did not result in a material impact to the Company’s financial position, cash flows or results of operations (see Note 5 — Accounts Receivable). Recent Accounting Pronouncements Income taxes. In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as separate entity financial statements and interim recognition of enactment of tax laws or rate changes. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim reporting periods within those years. The Company is currently evaluating the effect of ASU 2019-12, but does not expect the adoption of this guidance to have a material impact on its financial position, cash flows or result of operations. Reference rate reform. In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference the London Interbank Offered Rate or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is currently evaluating its contracts and the optional expedients provided by ASU 2020-04 and the impact the new standard will have on its condensed consolidated financial statements and related disclosures.

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