Whiting Petroleum: a Closer Look

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Whiting Petroleum just raised $2.75 Billion!

Since that is a lot of money, I thought I should fire up the Drillinginfo Analytics package (DI Analytics), take a closer look at their operations and see what they’re likely to spend their new money on.

Show Me the Money

A few weeks ago The Wall Street Journal reported Whiting had put themselves up for sale, and there were certainly a number of rumors flying around about potential buyers. No-one came forward, so now Whiting has reached out directly to the market for some much needed capital, and the market has responded rather easily to the request. Despite the drop in stock price and the dilution of outstanding stockholder value brought on by the move, some analysts remain optimistic about Whiting’s potential.

About Whiting Petroleum

Denver-based Whiting Petroleum is often regarded as a pure play operator in the Bakken, although they maintain a few rigs on prime acreage in the Niobrara, and have additional assets elsewhere. The additional $2 Billion of debt incurred in their late 2014 acquisition of Kodiak Oil & Gas combined with the 50% downturn in oil price since last summer have left the operator in a cash crunch – in fact, $1.4 Billion of the raised money is going to pay down their existing credit agreement (likely related to the Kodiak deal) – leaving a healthy $1.4 Billion available for continued operations. The company’s CEO plans on drilling 265 more wells in 2015, and maintaining profitability even at $50 oil.

According to our DI Analytics Operator Differential (which compares operators’ production vs. other operators in similar grade geology), Whiting maintains better than median performance vs. similarly sized operators in terms of productivity performance on both peak rate and 24 month cumulative oil.

Whiting Petroleum: a Closer Look

However a quick look at their oil type curves in the play demonstrates middling performance in 2014 – a lower peak and a less encouraging decline.

Whiting Petroleum: a Closer Look

Acreage

So, Whiting knows how to operate in the play and their performance is good vs. their peers. Now let’s take a look at the acreage they are looking to produce. Our DI Analytics package has an expiring acreage function that looks at individual leases that are set to expire and determines if that lease has either current production or a permit filed within the last 12 months. If we look at Whiting’s leases in the Bakken we see that roughly a third of their potentially expiring acreage has no production or permit filed in the 1st quarter of this year.

Whiting Petroleum: a Closer Look

We can also quickly check to see if operators have current lease extensions filed and see that Whiting hasn’t filed a current extension on the bulk of their non-active potentially expiring acreage acreage. In some cases lease extensions don’t get reported as quickly as other filings, so for illustration we have the expiration position of a similar operator in the play and can see they are much less exposed this quarter.

Whiting Petroleum: a Closer Look

So I hope they use a portion of their new warchest to file some extensions!

Conclusion

Although everyone in the Oil & Gas game is looking for the wave of M&A activity typically predicated by lower prices, Whiting Petroleum’s ability to recapitalize on the open market indicates continued optimism towards a recovery in oil prices, efficiency gains within the oilfield, and fair-market value for strong proven acreage.

Your Turn

What do you think? Leave a comment below.

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Eric Roach

Eric Roach is the editor of Drillinginfo's blog, which was selected as the Top Oil & Gas Industry Blog based on visibility, engagement and relevance. He also prepares a weekly newsletter of top industry news for blog subscribers, and would be grateful if you would subscribe and tell your friends. (There's a box on the upper right of the page where you can subscribe).