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Edited Transcript of WLL earnings conference call or presentation 22-Feb-17 4:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Whiting Petroleum Corp Earnings Call

Denver Feb 22, 2017 (Thomson StreetEvents) -- Edited Transcript of Whiting Petroleum Corp earnings conference call or presentation Wednesday, February 22, 2017 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Eric Hagen

Whiting Petroleum Corporation - VP of IR

* Jim Volker

Whiting Petroleum Corporation - Chairman, President & CEO

* Mike Stevens

Whiting Petroleum Corporation - CFO

* Mark Williams

Whiting Petroleum Corporation - SVP of Exploration and Development

* Rick Ross

Whiting Petroleum Corporation - SVP of Operations

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Conference Call Participants

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* John Freeman

Raymond James & Associates, Inc. - Analyst

* Brian Corales

Howard Weil - Analyst

* Neal Dingmann

SunTrust Robinson Humphrey - Analyst

* Steve Berman

Canaccord Genuity - Analyst

* Will Green

Stephens Inc. - Analyst

* David Deckelbaum

KeyBanc Capital Markets - Analyst

* Paul W. Grigel

Macquarie Research Equities - Analyst

* Jeanine Wai

Citigroup - Analyst

* Michael Hall

Heikkinen Energy Advisors - Analyst

* Mike Scialla

Stifel Nicolaus - Analyst

* Unidentified Participant

- Analyst

* Jeff Robertson

Barclays Capital - Analyst

* Gail Nicholson

KLR Group - Analyst

* Sean Sneeden

Oppenheimer & Co. - Analyst

* Ray Deacon

Coker Palmer - Analyst

* Jacob Gomolinski

Morgan Stanley - Analyst

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Presentation

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Operator [1]

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Good morning, my name is Keith and I'll be your conference facilitator today. Welcome, everyone, to the Whiting Petroleum Corporation fourth-quarter and full-year 2016 financial and operating results conference call.

(Operator Instructions)

I will now turn the call over to Eric Hagan, the Company's Vice President of Investor Relations.

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Eric Hagen, Whiting Petroleum Corporation - VP of IR [2]

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Thank you, Keith. Good morning, everyone, and welcome to Whiting Petroleum Corporation's fourth-quarter and full-year 2016 earnings conference call. During this call we will review our results for the fourth quarter and full-year 2016 and then discuss the outlook for the first quarter and full-year 2017.

The conference call is being recorded and will also be available on our website at www.whiting.com. To access the presentation slides, please click on the investor relations box on the menu and then click on the presentations and events link. Please note that our remarks and answers to questions include forward-looking statements that are subject to risks that could cause actual results to differ materially from those in the forward-looking statements.

Additional information concerning these risks is set forth on slide number 1 and in our earnings release. Reconciliations of non-GAAP measures we refer to and the GAAP measures can be found in our earnings release and at the end of our webcast slides. Please take note that our form 10-K for the full-year ended December 31, 2016, is expected to be filed later this week. And with that, I'll turn the call over to Jim Volker.

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [3]

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Thank you, Eric, and good morning everyone. Let's get right to slide number 2, which shows it was a great quarter for Whiting. Production exceeded the high-end of our guidance, with capital spending on target. Earnings per share and cash flow per share exceeded consensus estimates.

In the fourth quarter, operating cash flow of $237 million exceeded CapEx by $115 million. This is the third quarter in a row we have generated cash flow above CapEx. Also, CapEx was on target again this quarter. Fourth-quarter production came in above the high-end of guidance and averaged 118,890 BOEs per day, despite severe weather in December.

Adjusted for asset sales, our production increased from the third quarter, driven by our Bakkan and Three Forks Play, which grew 3% quarter-over-quarter. This reflects the quality of our wells where productivity is measured by 90-day rates has increased 84% since 2014 to an average of 1,057 BOEs per day over that 90-day period in 2016.

We continued to see strong results in the fourth quarter with 30-day average rates of 1,754 BOEs per day. On the operating side, we continued to achieve cost savings, with fourth quarter LOE at the low end of guidance at $8.01 per BOE. Subsequent to the quarter-end, we received $375 million from our North Dakota Midstream sale and used $275 million of the proceeds to redeem all of our outstanding 2018 notes. The additional $100 million was used to pay down the revolver. As Mike Stevens will detail later in the presentation, we have reduced debt by $2.4 billion, or 42% since March of 2016.

In 2017, we project a capital budget of $1.1 billion and forecast strong production growth of 23% from Q1 to Q4 of 2017. This also sets us up for strong double-digit growth in 2018 and a 2018 debt to EBITDAX under 3 to 1. Fourth-quarter 2017 production held flat through 2018, alone equates to 13% growth over 2017 and we intend to grow on top of that.

As you can see on slide number 3, with the focus on the Bakkan and the Niobrara, our total net production averaged 118,890 BOEs per day in the fourth quarter. At 108,850 BOEs per day, the Bakkan Three Forks represented 91% of our total production and grew 3% from the third-quarter level.

On slide number 4, we provide you an overview of the Williston Basin, where we control 444,000 net acres of which 99% is held by production. On slide number 5, you can see that 90% of our potential drilling locations are located in the core areas of the Williston Basin. Slide number 6, shows that based on publicly available data from the North Dakota industrial commission, Whiting is the top performer in the Bakkan.

Our 90-day average rate for wells completed between December of 2015 and November of 2016 was over 1,200 BOEs per day. On slide number 7, you can see that our 60 and 90-day production rates have increased by over 80% since 2014. Slide number 8 demonstrates Whiting's core competency of adding value through technology innovation. We've increased the average 90-day rates on wells drilled in the Polar Area by 87% since we acquired the property in December 2014. This was driven by enhanced completions that incorporated higher sand volumes, more entry points and diverter technology.

Slide number 9 shows results from fourth-quarter wells that were completed with over 10 million pounds of sand. On average, those wells are tracking a 1.5 million BOE type-curve. On slide number 10, you can see that we have driven spud to rig release times down 36% from 22 days in Q1 of 2014 to 14 days in Q4 of 2016.

Slide number 11 depicts our Redtail Field in Colorado, where we have 105 DUCs that will be completed in 2017. We plan to test enhanced completion designs that incorporate more frack stages and higher sand volumes across a 7,500 foot lateral. We also plan to complete approximately 34 longer lateral, 10,000-foot DUC wells in 2017.

On slide number 12, you will see that we have driven spud to rig release times down by 50% in our Redtail Field to just under six days. Mike Stevens, our CFO, will now discuss our financial results in the fourth quarter of 2016.

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Mike Stevens, Whiting Petroleum Corporation - CFO [4]

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On slide number 13, we show our fourth-quarter 2016 financial results. Our operating cash flow was $237 million, which was significantly above our CapEx of $122 million. On slide number 14, you can see the debt reduction we achieved since March 2016.

Starting from a base of $5.65 billion, which consisted of $4.65 billion of bonds and $1 billion of bank debt, we have reduced our debt to $3.3 billion. This represents a 42% decrease since March 31, 2016. On slide number 15, you can see our liquidity and debt covenants. We had $500 million drawn on our $2.5 billion borrowing base as of February 2, 2017.

We have no debt maturities until 2019 as we redeemed all of the outstanding 2018 notes on February 2 with the proceeds from the North Dakota Midstream sale. We remain well within all of our covenants and strongly positioned from a liquidity and debt maturity perspective.

Our guidance for the first quarter and full-year 2017 is detailed on slide number 16. We project 23% production growth from the first quarter to the fourth quarter of 2017 based on our $1.1 billion budget. We will put on production 70 gross wells in the first half of the year and 163 gross wells in the last half of the year. At current NYMEX strip prices, the additional cash flow from this growth will result in continued improvement in our debt to EBITDAX metric.

Slide number 17 provides a breakdown of our capital budget in 2017. 96% of the budget is allocated to development activities that drive production growth. Slide number 18 shows our crude oil hedge positions as of January 3, 2017. We're 53% hedged at attractive prices. With that I'll turn the call back over to Jim.

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [5]

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Thanks, Mike. Ladies and gentlemen, in 2016, our efforts to position the Company for growth in a $50 oil price environment came to fruition. Through innovative capital markets transactions and asset sales, we reinvigorated our balance sheet. Through innovative technology leadership, we created a step change in Bakkan well productivity and profitability.

We believe these achievements position us for multi-year growth while maintaining a strong balance sheet. We thank our investors for their support as we delivered on our 2016 initiatives. These achievements set the stage for the rewards from strong growth in 2017 and the years ahead. Keith, please open up the conference call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

John Freeman, Raymond James.

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John Freeman, Raymond James & Associates, Inc. - Analyst [2]

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Jim, you mentioned that if you flatline that Q4 2017 production that you get like 13% growth in 2018 and you mentioned you look to grow on top of that. I am wondering, could you give a ballpark estimate on what the maintenance CapEx would look like at the end of 2017?

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Mike Stevens, Whiting Petroleum Corporation - CFO [3]

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We think to hold ourselves flat around 140,000 BOEs per day would take about $900 million in 2018.

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John Freeman, Raymond James & Associates, Inc. - Analyst [4]

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Perfect, thank you. My follow-up, when I'm looking at the completion cadence, it is obviously driving the big second-half 2017 production ramp. Any color we could get on either, just the total completion cadence or even specifically on those 105 Red Tail DUC's would be helpful.

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [5]

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As Mike said we intend to put on, in the first-half of the year, that 70 wells on production and 163 in the second-half of the year.

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John Freeman, Raymond James & Associates, Inc. - Analyst [6]

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And then of that, I'm sorry, on just on the Red Tail DUC's?

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Mark Williams, Whiting Petroleum Corporation - SVP of Exploration and Development [7]

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We are heavily weighted towards the second-half of the year on Red Tail. We have 15 in the first-half but 95 coming on in the second-half. It comes on pretty strong right at the end of the summer there and then continues to stay pretty strong. In total 110 wells that we're putting on production at Red Tail.

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [8]

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You are right John, 15 in the first-half and 95 in the second-half.

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John Freeman, Raymond James & Associates, Inc. - Analyst [9]

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That's terrific. Thanks.

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Operator [10]

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Brian Corales, Howard Weil.

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Brian Corales, Howard Weil - Analyst [11]

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Great job on the Bakkan. Wells look fantastic. I had one question on those 25 wells you brought on in fourth quarter, were those spread out through your acreage, or was it concentrated in one area? Because the rates were fantastic.

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [12]

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It was really spread out across our acreage. That is the great thing about our acreage position. Mark, you can add to that if you would like.

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Mark Williams, Whiting Petroleum Corporation - SVP of Exploration and Development [13]

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Across the basin we have rigs working both in that Dunn, in McKenzie County and Williams County along the river, are what we call our Polar Area and Tarpon. Some of the better completions there at Tarpon and we've also got a rig working down at Pronghorn. So pretty much across our acreage.

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Brian Corales, Howard Weil - Analyst [14]

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When I look at the Niobrara, you're going to test the bigger completions there, when do think you are going to have some of those results?

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Rick Ross, Whiting Petroleum Corporation - SVP of Operations [15]

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This is Rick Ross. The larger completions will come on right at the end of the second quarter, first part of the third quarter.

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Brian Corales, Howard Weil - Analyst [16]

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Okay. Thank you.

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Operator [17]

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Neal Dingmann, SunTrust.

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Neal Dingmann, SunTrust Robinson Humphrey - Analyst [18]

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Jim, you put out the 580 or the 5 rigs that you are planning for the Bakkan this year, are most of those going to be tackling the larger volume completions that you so pointed out on that slide 9 that are outperforming? How much is going for those enhanced completions?

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [19]

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I will let Mark answer that one and Rick too. They have been waiting to answer that.

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Rick Ross, Whiting Petroleum Corporation - SVP of Operations [20]

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Basically at this point everything we're doing is enhanced completion. Our sand volumes are between 7 million pounds and 10 million pounds as a rule. Some of them get up to about 11 million pounds but as we continue to ramp up sand volumes, the other thing that we are paying a lot of attention to is, as we bring the sand volumes up, adding more entry points so that we are actually distributing that sand better.

We did a lot of ramp up to essentially 7 million pounds, 8 million pounds over the course of the last year. We're now going to up to 10 million pounds and 11 million pounds, but we're -- the second thing that we're doing, I think is really important, is we are customizing the design of each of those completions for the different areas, the geology very subtly across our acreage position. So essentially customized completions [for them].

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Neal Dingmann, SunTrust Robinson Humphrey - Analyst [21]

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One follow-up, Mark, you've mentioned in the past about the re-frac opportunities, do you still see just as many and what type of upside could that produce either this year or next year?

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Mark Williams, Whiting Petroleum Corporation - SVP of Exploration and Development [22]

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We have started on our re-fracs. We are about four wells into that program right now and have had some very good initial results. Essentially what we're doing is we're grinding in all of our re-fracs with our developments. So as we put rigs out into any one of our areas, we have already catalogued now and prioritized all of the re-frac opportunities and we're working those right in with the completion of our new wells so it's [seeing those].

In total, we figure we have somewhere in the neighborhood of 200, pretty good opportunities for re-fracs but you will see those as a regular part of our development program.

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Neal Dingmann, SunTrust Robinson Humphrey - Analyst [23]

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Great, thanks so much. Jim, nice turnaround.

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Operator [24]

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Steve Berman, Canaccord.

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Steve Berman, Canaccord Genuity - Analyst [25]

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Obviously you have done a fantastic job of bringing your debt down over 40% in a relatively short period of time. Are we done with non-core asset sales? I know, never say never but what is your thinking there Jim?

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [26]

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We do not have any non-core assets lined up right now. We do continue to talk to some folks who have approached us about joint ventures and the net result of those joint ventures could be continued balance sheet improvement.

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Steve Berman, Canaccord Genuity - Analyst [27]

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In terms of the sustain on balance sheet, the 2019's not that far away. Any thoughts on refinancing those bonds or the 2019 or even 2020 -- (multiple speakers)?

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Mike Stevens, Whiting Petroleum Corporation - CFO [28]

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Yes. We are looking at ideas for that right now but honestly they are still out there quite a ways, so we have plenty of availability on the borrowing base. It's one way to go. We're looking at ideas right now but no plans in the near-term to do anything with them.

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [29]

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I'm sure you are aware all of our bonds are currently trading above par.

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Steve Berman, Canaccord Genuity - Analyst [30]

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I am. Alright, great thanks.

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Operator [31]

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Will Green, Stephens.

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Will Green, Stephens Inc. - Analyst [32]

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I may have just missed this but I wondered if you could remind me on where you are currently at or where you have been on Red Tail completions on a pounds per foot and where you expect to get to or where you are layering in these higher intensity jobs?

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Rick Ross, Whiting Petroleum Corporation - SVP of Operations [33]

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This is Rick Ross. Our current completion, I will say on a 960 would amount to about 700 pounds per foot in a 30 states job. What we're ramping up to in a test mode would be 50 stages and about 1,100 pounds per foot.

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Mike Stevens, Whiting Petroleum Corporation - CFO [34]

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I will add to that, Will, you may have seen that one of our peers that operates the East Pony Field, which is basically contiguous with the Red Tail Field, has tested some even larger completions with excellent results. Near 600,000 BOE wells on a 7,500 foot lateral. We're very optimistic about the potential at Red Tail for enhanced completions.

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Will Green, Stephens Inc. - Analyst [35]

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But you are taking a more gradual approach to that and seeing how they respond and ultimately that is still potential to go a lot further with those?

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [36]

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We're ramping up to a similar amount to our peers and we will see how that comes in.

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Rick Ross, Whiting Petroleum Corporation - SVP of Operations [37]

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Just mention one thing about Red Tail there, we have a tremendous amount of oil in place and we feel like there is the opportunity to get better production given the high oil in place there; is there we don't really have a ceiling. As we test the larger sand volumes that we're talking about here, we think that our recovery efficiencies are going to start to get in line with the Bakkan, so plenty of headroom I would say on those completions.

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [38]

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That's right. All Red Tail needs is some more wells.

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Will Green, Stephens Inc. - Analyst [39]

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That's great to hear, and then on 2017 I know you noted you are targeting a 900,000 to 1.5 million barrel EUR for all the wells you drill in the Williston this year. I wanted to ask because you have really cored up and high graded your acreage up there over the years, so I realize that all of the acreage is pretty high quality now.

Do you think that, that range is now reflective of all of the wells you have going forward or are you just drilling some of your best areas this year? How do I think about that long-term EUR -- (multiple speakers)?

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [40]

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I think you stated it very well. I think it is reflective of all of our acreage going forward. Certainly everything we will be drilling over the next three or four years and feel very good about that.

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Will Green, Stephens Inc. - Analyst [41]

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Great, thanks.

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Operator [42]

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David Deckelbaum, KeyBanc.

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David Deckelbaum, KeyBanc Capital Markets - Analyst [43]

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I was thinking you provided helpful maintenance CapEx on the fourth quarter 2017 exit into 2018. To square that with your comments earlier about growing on a healthy balance sheet, there is some outspend into 2017, as you reinitiate the DUC program in Red Tail, et cetera, do you view more of a free cash neutral profile beyond 2017 while still being able to grow there?

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [44]

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I would say our growth in 2017 will improve our debt to EBITDAX metrics, very significantly, over the course of the year. Plus, we protected a large portion of the cash flow from this growth through a robust hedging program. Also, in our own minds we earmarked $100 million from our North Dakota asset sale to reinvest for growth, which we don't consider to be outspend.

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David Deckelbaum, KeyBanc Capital Markets - Analyst [45]

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That's helpful. On the geography of the Red Tail DUC's, can you give us a sense of, maybe percentage-wise, how many of them are in that Razor Area versus Horse Tail and some of the other areas there?

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Mark Williams, Whiting Petroleum Corporation - SVP of Exploration and Development [46]

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I would say that everything we have lined up for 2017, the DUC's as well as the new drills, are in the core part of Razor, which is Razor and the West part of Horse Tail. It's all one contiguous accumulation through there and that is our entire program for 2017.

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Rick Ross, Whiting Petroleum Corporation - SVP of Operations [47]

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It's very high quality, David. It's where we released a lot of well results in 2015 that were showing wells approaching 500,000 barrels.

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David Deckelbaum, KeyBanc Capital Markets - Analyst [48]

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Appreciate that. One last one if I may. Jim you discussed the potential for looking at JV opportunities. Is that being considered across the entire asset base or in more specific areas and I think in the past you have framed JVs versus going into loan based on commodity prices, is that still the framework? Or feel like with the balance sheet right sized, there might just be some opportunities out there maybe in some less capitalized areas to pull some of that value forward?

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [49]

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My comments currently are directed only at Red Tail.

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David Deckelbaum, KeyBanc Capital Markets - Analyst [50]

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Okay.

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Mike Stevens, Whiting Petroleum Corporation - CFO [51]

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Yes, and that would be outside of that area that Mark and I just talked about, David.

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David Deckelbaum, KeyBanc Capital Markets - Analyst [52]

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That's helpful. Thank you.

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Operator [53]

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Paul W. Grigel, Macquarie Capital.

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Paul W. Grigel, Macquarie Research Equities - Analyst [54]

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I wanted to touch on the Williston Basin and your potential desire to increase completion sizes larger than even the 10 million or 12 million, some of the peers are well into the teens and pushing 20 million. Could you walk through the strategy of going on a more measured pace versus jumping out and testing something toward the outer edge?

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Mike Stevens, Whiting Petroleum Corporation - CFO [55]

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I will say our plan for 2017 is to look at the 10 million pound to 15 million pound jobs. We're going to look at probably 10% to 15% of our completion inventory going that way and we're trying to ensure that we're getting a good return on our incremental investment. I think we are seeing some good results that we are showing you that, so that's our plan.

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Paul W. Grigel, Macquarie Research Equities - Analyst [56]

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And within that plan, as a follow-up there, for the assumptions on the guidance that you have given, is it based off of 900,000 for each of the wells or is it more targeted specific that some are 900,000, some are 1 million, and some are (multiple speakers) --

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Rick Ross, Whiting Petroleum Corporation - SVP of Operations [57]

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Paul, it is more complicated than that. It varies. We model it by area. I would say some of the recent results are partially reflected in there.

Same as we have said in the past. It's conservatively modeled. We look back at results in those various areas over the past six months to a year and that is what gets factored into our production forecast. So I would say, you can say some of the recent results are partially factored in there.

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Paul W. Grigel, Macquarie Research Equities - Analyst [58]

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Okay, that's helpful.

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Rick Ross, Whiting Petroleum Corporation - SVP of Operations [59]

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I wanted to clarify one thing about the capital efficiency and spend too. Just in case it was not clear, what Mike had said earlier that our maintenance CapEx was $900 million. And I wanted to ensure that everyone understood that was to keep 140,000 barrels a day flat. That is not referring to our 2016 average. That is $900 million for 140,000 barrels a day.

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Paul W. Grigel, Macquarie Research Equities - Analyst [60]

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One last one on service cost, you are obviously baking in some, what is the thought on, potentially in the Bakkan or in the DJ relative to other basins in the US should it be higher, lower, in-line? Curious to get your thoughts there.

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Rick Ross, Whiting Petroleum Corporation - SVP of Operations [61]

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I'll just say that we built in about 20% increase in pressure pumping services for our activity in 2017. But for full disclosure -- well, and I will say that amounts to about 4% of the total well cost when you really work it out in that way. For full disclosure we did build in some significant efficiencies that we have gotten in other areas as well.

We're pushing down our drilling cost so 20% on the service company pressure pumping volume.

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Paul W. Grigel, Macquarie Research Equities - Analyst [62]

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Are those service costs or service efficiencies that you have already realized today or they assuming going forward there?

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Rick Ross, Whiting Petroleum Corporation - SVP of Operations [63]

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These are efficiencies that we've been able to achieve over the last quarter.

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Paul W. Grigel, Macquarie Research Equities - Analyst [64]

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Thank you.

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Operator [65]

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Jeanine Wai, Citigroup.

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Jeanine Wai, Citigroup - Analyst [66]

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Going back to the 2017 plan, can you talk a little bit about the capital allocation process between the Williston and the Red Tail? Specifically in terms of adding incremental activity to the Red Tail, just want to understand. Understanding that it's DUC, you also still have the rig running but was that solely rate of return driven or were there other considerations like -- sounds like there is more optimism in new completion designs in Red Tail, et cetera.

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [67]

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Well of course, we are looking at all the data and we use that to determine where we are going to drill. You can say therefore, that it is rate of return driven. That is for sure.

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Eric Hagen, Whiting Petroleum Corporation - VP of IR [68]

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I will add to that Jeanine, it is Eric. It's underpinned. Everything is underpinned by rate of return and MPV. And when you look at a Red Tail DUC, you are spending about $3 million to get a well around 500,000 barrels. That is about a $6.00 finding cost. You look at a million barrel well in the Bakkan for $7.3 million that is about a $7.00 finding cost.

The Bakkan wells do have a little but more production upfront but the Red Tail DUC's have a shorter cycle time, they are already drilled. We think the returns are pretty competitive. That is why we have had a balance in the program this year. As we go into 2018 probably you will see more activity shift into the Bakkan as we drill through the DUC's there.

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Jeanine Wai, Citigroup - Analyst [69]

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Okay, great. That is really helpful. Thanks. My follow-up is, is there anything logistically speaking that would prevent you from adding more 10 million pound fracs to the plan? I know you said they are all that level but maybe adding higher sand volumes to that or more wells, should we see commodity prices increase or if you were completing things ahead of schedule. Is there anything logistically that prevents you from adding more of those bigger fracs to the schedule?

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Eric Hagen, Whiting Petroleum Corporation - VP of IR [70]

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We do not see that now.

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Jeanine Wai, Citigroup - Analyst [71]

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Okay, great. Thanks for taking my questions.

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Operator [72]

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Michael Hall, Heikkinen Energy Advisors.

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Michael Hall, Heikkinen Energy Advisors - Analyst [73]

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Sorry if it has been hit and I missed it but just to be clear, what exactly are the EURs assuming in the 2017 guide? What EUR is being assumed within the 2017 guide? (multiple speakers)

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Mark Williams, Whiting Petroleum Corporation - SVP of Exploration and Development [74]

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100,000 to 1 million barrels.

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Michael Hall, Heikkinen Energy Advisors - Analyst [75]

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And how much of the capital program will be directed towards, call it, 10 million pound plus-type completions?

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Rick Ross, Whiting Petroleum Corporation - SVP of Operations [76]

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10% to 15% of our completions in the Bakkan.

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Mark Williams, Whiting Petroleum Corporation - SVP of Exploration and Development [77]

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That is just in the range of 12 million pounds to 15 million pound jobs, Michael.

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Michael Hall, Heikkinen Energy Advisors - Analyst [78]

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Okay, great. I appreciate you clearing that up for me. On the productivity front, the step up from 2014 to 2015 to 2016, how much of that would you say is completions driven versus high grading and/or location driven?

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Rick Ross, Whiting Petroleum Corporation - SVP of Operations [79]

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I would say if you look across the completions we've actually done here as reported by the NDAC, you can see where all of our wells have been completed. Where we drill and where we complete wells, you will see it's across our acreage spread. So what we were talking about earlier is, it is a pretty broad representation of Whiting's acreage, especially in the Williston. So that increase in production is driven primarily by increases in our completion technology, which again is sand volumes, plus more entry points, plus customized completions, designing the completions specific to the geology of each of those seven areas.

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Michael Hall, Heikkinen Energy Advisors - Analyst [80]

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Okay great. It sounded like then, with the larger program in 2017 you wouldn't expect much of a headwind from that. It would be really a tailwind from the higher completion loading year on year?

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Mark Williams, Whiting Petroleum Corporation - SVP of Exploration and Development [81]

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I think we have gotten much better at what we do and I think those gains, once you realize that technology, those are locked in.

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Michael Hall, Heikkinen Energy Advisors - Analyst [82]

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Appreciate it. Thanks for questions.

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Operator [83]

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Mike Scialla, Stifel.

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Mike Scialla, Stifel Nicolaus - Analyst [84]

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Most of my questions have been answered but just one on Red Tail, wondering where you are in terms of HBP acreage. Does one rig fill all of the need there and same thing for any minimum volume commitments that you may have there? Does the completion schedule, where does that put you relative to any MVCs you may have?

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [85]

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We are in good shape on acreage. We have scattered our drilling around enough out there previously that we are in good shape in terms of HBPing our acreage. As we have commented before, the bulk of the budget is going into the Bakkan, 60% roughly and 40% at Red Tail.

The wells are cheaper at Red Tail so we can basically drill a few more and of course really, the reason that as much as 40% of the budget is in Red Tail currently, is because as Eric just explained, the good bang for your buck you get by completing these 100 plus DUC's that we have there. Red Tail is good. I would say, if you want me to rate something for you, I would say I would rate our Red Tail as an A and I would rate our Bakkan as an A plus.

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Mike Scialla, Stifel Nicolaus - Analyst [86]

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Fair enough. Just to clarify Eric, you put up those numbers on well costs I think to $3 million and Jim you just mentioned that, I assume that is the larger frac size and same thing with the Bakkan, the $7.3 million is that for your -- I guess what size completion is the $7.3 million referred to?

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Eric Hagen, Whiting Petroleum Corporation - VP of IR [87]

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In the Bakkan a 10 million pound job is [$7.6 million] if you are down around 7, 8 [million pounds] it will be around just over $7 million and in Red Tail DUC it will be 3 million [pounds]to probably 3.5 million [pounds] with the larger completion, somewhere that range.

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Mike Scialla, Stifel Nicolaus - Analyst [88]

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Got it. Thank you.

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Operator [89]

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Tarek Hamid, JPMorgan.

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Unidentified Participant, - Analyst [90]

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This is Kevin calling in for Tarek. Just real quick on the 2017 spend and I know you mentioned free cash a little bit earlier and this is more to lay the groundwork for 2018 growth but wanted to see what near-term free cash flow looks like or lack thereof and also what you might expect for the spring redetermination?

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Mike Stevens, Whiting Petroleum Corporation - CFO [91]

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I will handle the redetermination part. We have a $2.5 billion of commitments and borrowing base right now. We will have our bank meeting coming up here in March, later in March and we expect it, from all signs so far, to stay right at $2.5 billion. Could you repeat your other question?

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Unidentified Participant, - Analyst [92]

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Looking at your near-term free cash flow outlook looks like, I know it's going to be a little tougher to spend with the higher spend and to keep it within cash flow in 2017 but wanted to see what your near-term outlook is, what your revolver draw might look like?

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [93]

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Like we said, we really believe that in 2017 there is a limited amount of outspend because we basically earmarked about $100 million of that sale for growth in 2017. As I have mentioned, there are other balance sheet improvements that we can do simply by perhaps JVing a few more wells in Red Tail. What that means is, production growth there which helps your debt to EBITDAX ratio, without spending much if any additional capital.

That would be the reason for doing some of those is twofold, more production, and improvement in the balance sheet as a result of that ratio.

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Unidentified Participant, - Analyst [94]

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My follow-up is on, any color on the M&A environment in the Bakkan and Red Tail given more recent transactions focused on the Permian and in Mid-Con?

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [95]

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We are vigilant. That is all that I can say. We're vigilant, but we don't have -- if we had an acquisition there, we would have announced it. Haven't seen anything that I would say with knock my socks off right now.

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Unidentified Participant, - Analyst [96]

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Fair enough. Thanks so much.

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Operator [97]

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Jeff Robertson, Barclays.

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Jeff Robertson, Barclays Capital - Analyst [98]

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Couple of follow-up questions on Red Tail. The larger stimulations that you plan are those applicable in all four of the prospective zones you have or are they more suitable to one bench than the others?

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Mark Williams, Whiting Petroleum Corporation - SVP of Exploration and Development [99]

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They're going to be applicable to all four of the zones. We have not seen a tremendous need to change the design between zones. The exception to that might be the C; which is a little bit thicker than the A and the B or the Codell. But pretty applicable with all four zones.

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Jeff Robertson, Barclays Capital - Analyst [100]

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Those zones won't communicate with each other at Red Tail?

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [101]

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If they do, not for long.

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Rick Ross, Whiting Petroleum Corporation - SVP of Operations [102]

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Exactly. There is quite a bit of what we call that Bentonite or clay in between those zones, so during the frac sometimes there is some pressure communication but those are pretty good frackers so during your production phase there is little or no communication.

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Jeff Robertson, Barclays Capital - Analyst [103]

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Jim, can you remind me are there any marketing issues or processing issues in the Red Tail area that will be addressed that allow you to go a little bit faster towards the second half of the year?

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [104]

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No, there's no limit there. We've got great takeaway capacity and frankly, adding more production there reduces the differential.

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Jeff Robertson, Barclays Capital - Analyst [105]

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Okay. Thank you.

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Operator [106]

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Gail Nicholson, KLR Group.

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Gail Nicholson, KLR Group - Analyst [107]

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In regards to the $900 million CapEx to keep the 140,000 flat, how should we of that allocated like 70% toward Williston, 30% towards the Niobrara?

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [108]

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Yes. That would be good.

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Gail Nicholson, KLR Group - Analyst [109]

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Looking at the 105 Red Tail completions, how many of those, at this point in time, are doing the enhanced completion?

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Mark Williams, Whiting Petroleum Corporation - SVP of Exploration and Development [110]

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I would say that -- what we're going to be doing is we're testing out some different completion designs here that during the first quarter that will drive a lot of the completion designs for the second half of the year but in general we are ramping up sand volumes as well as stage. We are getting up to 50 stages, so our real focus there is to distribute that sand better.

It's not just sand volumes but it is distributing the sand along the well board better. So we're doing a lot of experimentation on how to best to achieve that right now. But I think in general you will see us up in the 7 million pound range, is where I think we are going to end up settling for the year for the Niobrara, maybe a little bit more.

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Gail Nicholson, KLR Group - Analyst [111]

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And then based on performance, it's plausible that they could be more productive than the average recovery that you are assuming currently in guidance, correct?

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Mark Williams, Whiting Petroleum Corporation - SVP of Exploration and Development [112]

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Absolutely.

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Gail Nicholson, KLR Group - Analyst [113]

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Great thank you.

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Operator [114]

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Sean Sneeden, Oppenheimer.

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Sean Sneeden, Oppenheimer & Co. - Analyst [115]

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On the reserve side, have you run what year-end would look like on a Strip basis or 55 flat environment versus the SEC deck? I am just trying to think about or wondering how that might factor into your redetermination with the banks.

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Mike Stevens, Whiting Petroleum Corporation - CFO [116]

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The banks are going to use their own bank case pricing, which is lower than the current Strip. We know what those prices are. That is why think that the redetermination will stick at $2.5 billion.

In terms of the reserves, I guess a higher SEC price, they were higher at 12/31/15. They were in the low 50's then. Cutting back to the low 40's, we'd [have] $140 million of reserves this year, so we will probably get most of those back when we go back into the low 50's.

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Rick Ross, Whiting Petroleum Corporation - SVP of Operations [117]

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We gave a case in the press release which said that, at a $50.00 and $2.58 gas price reserves would have been $850 million and adding back divestures, it would have been $851 million versus the actual prices were $42.00 and $2.40, $2.49. We gave that case in the press release to show that adjusted reserves actually grew year over year.

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Sean Sneeden, Oppenheimer & Co. - Analyst [118]

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That's helpful. I might have missed that. Lastly, on the balance sheet, Jim, did you say under your current plans that 2018 leverage would be under 3 times or was that the 2017 number?

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [119]

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Yes, I said that.

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Sean Sneeden, Oppenheimer & Co. - Analyst [120]

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So 2018?

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [121]

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Yes.

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Sean Sneeden, Oppenheimer & Co. - Analyst [122]

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Perfect. Thank you very much.

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Operator [123]

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Tyler Gorge, Coker Palmer.

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Ray Deacon, Coker Palmer - Analyst [124]

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It's Ray Deacon. Thanks for letting me in. Congrats on the results in the Bakkan. It sounds great. I was wondering, it seems like as you go through the DUC's in 2017 and you get to 2018 people might assume you have become less efficient. And I was wondering, do you think the potential with the XRL laterals that you've talked about some, could offset some of that as you go into 2018?

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [125]

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Every year we become more efficient, so I would agree with you that, as we move into 2018 we will be more efficient than we were in 2017 and the things that both Mark and Rick have said here about the testing of these, I will go beyond testing and say the implementation of our plan to spread more sand across more entry points is exactly what will drive that growth in 2018.

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Rick Ross, Whiting Petroleum Corporation - SVP of Operations [126]

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And I will point out Ray, when you think about capital efficiency between 2017 and 2018, as I enumerated, a Red Tail DUC in terms of returns and whatnot is similar to a Bakkan drill and complete, so as we shift from Red Tail DUCs to more Bakkan drill and completes in 2018, you shouldn't see any change in the capital efficiency. (multiple speakers)

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Ray Deacon, Coker Palmer - Analyst [127]

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Could you talk a little bit about your thoughts on differentials from here given some of the projects moving forward? In the Bakkan, I mean.

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [128]

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In the Bakkan, thank you for asking. We do think we will see a buck or two as a result of dapple and I might say, an increased takeaway capability as it now looks like there is chances for a number of parties, us included, to market perhaps not only in what I would call the upper Midwest, down the Enbridge line but in the key driving portion market of the Midwest, where dapple will end up in Illinois; and then also the ability to take more crude to some of the markets in Wyoming which have been pretty strong of late.

In general, I see a declining differential and the longer the period you are talking about, in other words if you are asking me where I think we would be 36 months from now as opposed to 12 months from now, I would say it would be even lower 36 months from now.

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Ray Deacon, Coker Palmer - Analyst [129]

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Great, thanks very much.

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Operator [130]

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Jacob Gomolinski, Morgan Stanley.

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Jacob Gomolinski, Morgan Stanley - Analyst [131]

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A quick follow-up to Sean's question. Did you have available, I know that you provided the number of reserves but a value of those reserves, assuming the 2015 price deck for the current reserve book and adjusted for the new cost structure?

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [132]

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That will all be in the K.

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Jacob Gomolinski, Morgan Stanley - Analyst [133]

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Including on, I'm assuming the K will be on SEC 2016 pricing, but did you have one on either Strip or $50.00, $2.50 gas?

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Eric Hagen, Whiting Petroleum Corporation - VP of IR [134]

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No. We do not have the right here.

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Jacob Gomolinski, Morgan Stanley - Analyst [135]

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On hedging, I know you (multiple speakers) --

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [136]

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The only thing we said regarding that is we thought we would add back over 100 million barrels as a result of having what looks like Strip pricing, the current Strip pricing for year-end 2017. Mike gave you an estimate of about --

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Mike Stevens, Whiting Petroleum Corporation - CFO [137]

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120 million barrels.

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [138]

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Right at 120 million barrels.

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Jacob Gomolinski, Morgan Stanley - Analyst [139]

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Okay and then wanted to get your thoughts on hedging. Is 50% for current year the right way to think about your philosophy on hedging going forward in terms of the right amount to have hedged, call it, beginning 2018 also looking at 50% or is it something else? Just trying to get your thoughts on how you think about hedging.

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Mike Stevens, Whiting Petroleum Corporation - CFO [140]

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Generally we want to be 50% to 60% hedged, probably like to be closer to 60%. Right now we're 53% hedged based on December's production. As we go through the year, we will become less as a percent hedge because of the growth we are going to have in our oil volumes.

Odds are we'll layer on more hedges here for 2017 as we move through 2017 in the last half of the year and then on 2018 as well, 50% to 60% with a leaning towards a 60% range.

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Jacob Gomolinski, Morgan Stanley - Analyst [141]

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Okay, great. That's it for me. Thanks very much.

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Operator [142]

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And as that was the last question today, I would like to turn the call back over to Jim Volker for any closing comments.

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [143]

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Thank you Keith. I would like to thank all of the Whiting employees and Directors for they're contributions to a very solid third-quarter at Whiting. Eric?

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Eric Hagen, Whiting Petroleum Corporation - VP of IR [144]

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Pete Hagist will be presenting at the Inter-Con Dallas conference on Wednesday, March 1, at 10:55 AM, Central Standard Time. Jim Volker will be presenting at the Raymond James Institutional Investors Conference in Orlando on Tuesday, March 7, at 8:05 AM Eastern Time, and Pete Hagist will also be presenting at the Howard Weil Energy Conference in New Orleans on Wednesday, March 29 at 9:40 AM, Central Daylight Time.

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Jim Volker, Whiting Petroleum Corporation - Chairman, President & CEO [145]

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In closing everyone, we thank all of you for your interest in Whiting Petroleum Corporation and we look forward to speaking with you soon.

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Operator [146]

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Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.