Henry,

Oasis is one that is very leveraged to oil prices. A year ago Oasis scared me a little because I thought they had been bid up too much and had a lot of downside if oil prices started to fall. Once oil fell to $60, I thought Oasis was a good pick again because the price had been nearly cut in half, and I don’t think these low oil prices can sustain. But the longer oil remains under $50, the more painful for Oasis. So as oil prices continued to fall, Oasis began to scare me again. I almost bought Oasis myself in October, but I have a pretty strong aversion to risk that kept me from pulling the trigger. Any way you slice it, Oasis is an aggressive pick.

What happens with Oasis is going to depend on oil prices. If I believe oil prices would stay at $50 for the next year, I would run from Oasis. If I believed they would rise back to $70, it would be near the top of my list of buys because it is going to surge when oil prices recover (if it survives the period of low prices). But the uncertainty over oil prices means there is still a lot of potential risk for Oasis. If it was me, personally, and I had the time horizon that would allow it, I think I would hang onto it if you have it in an IRA account. I don’t feel like there is much downside left, but I also feel like oil prices will start to recover before Oasis has a crisis. There is also the possibility that if they do have a crisis, someone with stronger financials may just scoop them up.

I agree with Robert, and would only add that the balance sheet is very liquid, with most debt not due before 2019, and the company has an aggressive plan to save money by idling 10 of its 16 rigs by the spring. The remaining six will be drilling high-quality locations that Oasis claims can provide 20% IRRs with WTI at $60, which would require roughly a 25% recovery from current levels. Oasis also has as much as half of next year’s production hedged near $90. There are definitely good reasons to hold on, especially if you believe, as we do, that crude has overshot a price sustainable in the medium term. All that said, when making portfolio decisions I have to consider the possibility, now significantly likelier than even three months ago, that crude will not reclaim $60 soon, leaving much of the company’s acreage uneconomical. It’s not the likeliest outcome in my mind, but in managing the portfolio we have to consider the risk of a total wipeout. And we also need to consider that our portfolio remain representative of what we believe should be owned in a given environment, and that it it not grow so large as to become unmanageable. So there are some valid reasons why we might wish to stop recommending a stock even if it makes sense for a reader to hang on. I tried to make this combination of considerations clear in the story, and did not mean to come off cavalier.