Will a Lighter Loss at Whiting Rekindle Buyout Hopes

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Whiting Petroleum Corp. (NYSE: WLL) reported its first-quarter financial results Wednesday after the markets closed. The company had a net loss of $0.23 per share on $529.2 million in revenue compared to Thomson Reuters consensus estimates for a net loss per share of $0.32 on $563.48 million in revenue. The first quarter from the previous year had $1.05 in earnings per share (EPS) on $740.25 million in revenue.

The company gave its outlook for the second quarter as well as the 2015 full year. Whiting expects production to be 14.8 to 15.2 million barrels of oil equivalent in the second quarter and 58.8 to 59.4 million barrels of oil equivalent for the full year. The full year capital budget is $2.0 billion. There are consensus estimates for a net loss of $0.21 per share on $596.69 million in revenue for the second quarter, and a net loss of $0.62 per share on $2.53 billion in revenue for the full year.

In terms of production, for the first quarter Whiting had a total of 15.0 million barrels of oil equivalent, 88% of which was crude oil/natural gas liquids (NGLs). First quarter 2015 production averaged 166,930 barrels of oil equivalent per day.

Under their current price deck, lenders reaffirmed a $4.5 billion borrowing base and Whiting has elected to request $3.5 billion of commitments. There were no changes to the interest rates, fees or repayment terms of the credit line, which matures in December 2019.

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James J. Volker, Whiting’s chairman, president and CEO, commented:

While we are reducing rig count and well cost, production was strong in Q1 2015. We had solid results in the Bakken/Three Forks and Niobrara. Our operations in the first quarter generated record production of 166,930 [barrels of oil equivalent per day]. As a result of stronger production growth in the first quarter, our production guidance is 59.1 [million barrels of oil equivalent] for 6% year-over-year production growth despite the $108 million asset sale. Our budget remains at $2 billion. Our capital expenditures decline sharply in the second half of 2015. Our total rig count will average 11 rigs in the second half of 2015. Nine of these rigs will operate in the Bakken/Three Forks and two rigs will drill in the Niobrara. This compares to 25 rigs working for us in the second half of 2014.

On the balance sheet, Whiting had cash and cash equivalents of $105.9 million at the end of the first quarter of 2015. The first quarter from last year only had $78.1 million in cash and cash equivalents.

There was a hope this quarter that Whiting would be the first serious buyout in the space. With Whiting conducting a deeply discounted capital raise, that hope now appears to be as dead as $100 oil.

Many reports had indicated Whiting was looking for a buyer. Then the hopes diminished after further reports signaled that Whiting would pursue asset sales. What should investors think when the company is raising $1.75 billion from the capital markets at a deep discount? This quarter as part of its raise in capital, Whiting sold $108 million in its properties.

In an investor presentation on March 2, Whiting discussed its assets and plans for its North Dakota and Colorado operations, but it had little to say about its Permian Basin assets.

A few analysts weighed in on Whiting prior to its earnings:

  • Global Hunter Securities had a price target of $43.
  • SunTrust upgraded the company to a Buy rating from Neutral and moved its price target up to $44 from $34.
  • Nomura Initiated coverage with a Neutral rating and a price target of $39.

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Shares of Whiting closed Wednesday up 2.9% at $36.76. Following the release of the first quarter financial results, shares were down 0.7% at $36.51. The stock has a consensus analyst price target of $42.08 and a 52-week trading range of $24.13 to $92.92.