Must-know: An overview of Whiting Petroleum

Market Realist

Overview: A guide to the Whiting-Kodiak transaction (Part 4 of 9)

(Continued from Part 3)

Whiting Petroleum

Whiting Petroleum (WLL) is an independent oil and gas company. Its largest projects are based in the Bakken and Three Forks play in North Dakota. WLL holds 683,804 net acres in the Williston Basin, in which the Bakken and Three Forks plays are located.

Outside the Bakken, WLL also holds 123,000 net acres in the DJ Basin—Redtail—in Colorado. However, the Bakken and Three Forks production makes up 80% of WLL’s total production.

Financial summary

WLL has a market cap of $10.4 billion and an enterprise value of ~$13 billion as of July 28. In the last 12 months, the earnings before interest, taxes, depreciation, and amortization (or EBITDA) is $1.86 billion and revenue is $2.78 billion. 1Q14 net income available to shareholders was $109.1 million or $0.90 per share. At the end of the quarter, discretionary cash flow—management can decide what to do with it—was $482 million. Total revenues amounted to $740.2 million for the quarter.

Operational summary

WLL’s first quarter production in 2014 totaled nine million barrels of oil equivalent (MMBoe), or 100,065 barrels of oil equivalent per day (boe/d), of which 88% was crude oil and natural gas liquids (NGLs).

Production from the Williston Basin—Bakken and Three Forks—averaged 73,325 boe/d, in 1Q14, representing 73% of the total production. Production from Redtail field—DJ Basin—averaged 4,550 boe/d.

WLL’s Bakken focus

Over 2013, Whiting sold off significant amounts of its assets that aren’t in the Bakken, including its Postle Field enhanced oil recovery assets for $817 million and its acreage in the Delaware Basin for $150 million. WLL has been using this cash from asset sales to redeploy into the Bakken.

The acquisition of Kodiak (KOG) is a perfect example of this redeployment.

By acquiring KOG, WLL is adding over 170,000 net acres to its inventory. The deal recognizes the fact that the Bakken is going to remain an important source of oil production. Large companies like WLL will seek to add value to their existing portfolio by increasing their scale of operations.

Key stocks and exchange-traded funds (or ETFs)

Both WLL and KOG are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the Energy Select Sector SPDR ETF (XLE), and the iShares U.S. Energy ETF (IYE).

The next section provides a brief overview of KOG and how it fits into WLL’s growth plans.

Continue to Part 5

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