Whiting Petroleum: Buy for the Long Run

Whiting Petroleum (WLL) announced second quarter ended June 30, 2016 total revenue of $339.6 million, down 42 percent year-over-year from $590.0 million during the same period last year.

Whiting Petroleum declared second quarter of 2016 adjusted net loss of $158.7 million or $0.07 of loss per diluted share compared to adjusted net income of $9.2 million or $0.04 per diluted share in second quarter of 2015.

The independent oil and gas company reported continued year-over-year decline in both its top and bottom lines primarily driven by the ongoing weaker global commodity demand and pricing environment, negatively impacting the company’s key margins.

Disciplined and efficient  

Whiting Petroleum is believed to have impressive capital allocation discipline and year-over-year efficiency gains with a record 70 percent sequential improvement in second quarter of 2016 capital expenditure of $79.4 million.
Further, flexible cash flows of about $151.6 million surpassed the capital spending by approximately $72.2 million. In addition, Whiting strategically exchanged about $1.6 billion worth of convertible notes for fresh convertible notes in 2016.
Whiting Petroleum: Buy for the Long Run
Image by drpepperscott230 / Pixabay
Whiting also concluded the strategic sales of North Ward Estes assets on 27 July for about $300 million all in cash coupled with an estimated $100 million of likely payment. Importantly, Whiting uniquely reduced debt by nearly $1.15 billion year-till-date, since August 12, 2016 through well-planned exchange of stock for $849 million along with the retirement of $300 million of net debt through the sale of North Ward Estes.

The global independent energy company has strategically optimized its financial position by minimizing debt while maximizing its total cash position through the reduction of consolidated senior secured debt-to-EBITDAX ratio to 0.97:1 on 30th June 2016 from 3.0:1 earlier, increasing the total EBITDAX-to-net interest ratio to 4.87:1 on 30th June 2016 from 2.25:1 earlier, attractive current ratio of 4.17:1 on 30th June 2016 from 1:1 previously, nil bond maturities till 2018 and nil major maturities till 2019 coupled with a superior bond finance covenant ratio of 3.50:1 on 30th June 2016 from over 2.0:1 earlier.

Whiting seems keen on optimizing its overall financial position by minimizing its debt while improving the total cash position for sustaining its daily growth operations profitably amid weaker global commodity demand and pricing environment.

Impressive infrastructure development  

The Williston Basin has recently achieved improved completions by delivering 900 Mboe type curl and further adding 16 other Williston Basin key completions during the second half of fiscal year 2016. In addition, Whiting is believed to be the supreme performer in the Bakken region with an early 90-day average rate (in BOEPD) for all wells concluded during the period from June 2015 till May 2016.

During the second quarter of 2016, Whiting Petroleum delivered notable production from its key operating areas including, Williston Basin comprising of Bakken or three forks, Redtail that include Niobrara A, B, C & Codell/Ft Hays and North Ward Estes each producing 114,435 BOE/d, 10,150 BOE/d and 8,595 BOE/d respectively. Whiting primarily searches for, advances, captures and yields natural gas liquids, natural gas and crude oil mainly in the Rocky Mountain area of the US. The company’s major projects thrive in the Redtail Niobrara play located in northeast Colorado, three key Forks plays and the Bakken occurring in North Dakota.

The industry-leading position of Whiting Petroleum in terms of complete control over key high-producing areas in the basin is believed to continue to deliver sustainable long-term company growth after the ongoing global meltdown concludes but, the near-term growth outlook for the company appears weak.

However, Whiting Petroleum is expected to deliver extremely poor shareholder returns compared to the industry’s average which should drive off investments from several stakeholders.


Overall, the investors are advised to “Sell” any equity held in Whiting Petroleum Corp. considering the company’s poor near-term and longer term growth prospects with extremely weak financial position illustrated by significant total debt of $4.96 billion against smaller total cash position of just $15.34 million only, restricting the company to continue with its daily operations profitably. The profit margin of -172.30% is disappointing as well and indicate no profit but loss. The PEG ratio of 0.11 signifies only marginal company growth.
Published on Sep 7, 2016
By Subhen Mittra

Copyrighted 2020. Content published with author's permission.

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