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Whiting Petroleum Corporation (NYSE:WLL)

Q4 2011 Earnings Call

February 23, 2012 11:00 am ET

Executives

Eric Hagen – Vice President of Investor Relations

James J. Volker – Chief Executive Officer

James T. Brown – President & Chief Operating Officer

Michael J. Stevens – Vice President & Chief Financial Officer

Mark R. Williams – Senior Vice President, Exploration & Development

J. Douglas Lang – Vice President, Reservoir Engineering/Acquisitions

Analysts

Will Green – Stephens Inc

John Freeman – Raymond James

Michael Scialla – Stifel Nicolaus & Company, Inc

Biju Z. Perincheril – Jefferies & Company, Inc.

Joe Stewart – Citigroup

Gil Yang – Bank of America/Merrill Lynch

Pearce Hammond – Simmons & Company

Philip McPherson – Global Hunter Securities, LLC

Michael Scialla – Stifel Nicolaus

Operator

Good day ladies and gentlemen and welcome to the Fourth Quarter 2011 Whiting Petroleum Corporation Earnings Conference Call. My name is Kathy and I’ll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I’d now like to turn the conference over to your host for today’s call to Mr. Eric Hagen, Vice President of Investor Relations. Please proceed.

Eric Hagen

Thanks Kathy. Good morning and welcome to Whiting Petroleum Corporation’s fourth quarter and full year 2011 earnings conference call. On the call for Whiting this morning is the Whiting management team. During this call, we’ll our review our results for the fourth quarter of 2011 and then discuss the outlook for 2012.

This conference call is being recorded and will also be available on our website at www.whiting.com. To access the call and the webcast, please click on the Investor Relations box on the menu and then click on the webcasts link.

Please note the forward-looking statements, non-GAAP measures, and reserve and resource information on slide one. Please take note that our Form 10-K for the 12 months ended December 31, 2011 is expected to be filed later today. Reconciliations of non-GAAP measures we refer to and the applicable GAAP measures can be found in our earnings release and in our webcast slides.

With that, I'll turn the call over to Jim Volker.

James J. Volker

Thanks Eric, and good morning everyone. Thanks for joining our fourth quarter and full year 2011 conference call. To begin in our slides please note slide 2 which summarizes our current key statistics for the company. Slide 3, is a breakdown of our production by region. Note our January 2012 averaged production rate of 76,000 BOE per day increased by over 5000 BOE per day or 8% versus fourth quarter 2011 average daily production.

We have increased our 2012 production guidance to a range of 14% to 20%. Slide number 4, breaks down our proved reserves, which increased 13% year-on-year to $245 million BOEs, we replaced 274% of our 2011 production. And we did this while remaining oil weighted with 86% of our reserves oil and while maintaining a low PUD percentage of only 31%.

Slide number 5, provides a breakdown of our proved reserves by region and the associated PV10 value at SEC 2011 pricing. As you can see, our total proved PV10 value has risen to $7.4 billion. Slide number 6, shows our probable and possible reserves and PV10 values. These are also based on independent engineering. We are one of the few companies that provide this information and have it independently engineered.

Our total probable and possible PV10 value is $3.1 billion. Therefore, we estimate our 3P PV10 value at $10.5 billion. Once again these are third party engineered estimates. Slide number seven provides Whiting’s internal estimate of resource potential beyond the 3P category. This totals 479 million BOEs with the PV10 value of $4.7 billion.

Slide number eight, we breakout our by region the PV, the 3P and resource drilling locations that underpin our reserve and resource estimates focusing on just our Northern Rockies Williston Basin area. We have over 2,500 drilling locations, which represents over 10 years of inventory from that one area at our current pace of approximately 250 wells per year.

Moving to slide nine, you can see our 2012 CapEx budget. The main change between this year and 2011 is a transition from an emphasis on exploratory drilling to an emphasis on development drilling in our recently discovered Williston Basin prospect areas. For example, that our Pronghorn area, we’ve doubled our rig count to six rigs and are initiating pad drilling. We expect pad drilling alone to save us approximately $0.5 million per well.

On slide 10, we provide an overview on our Williston Basin plays. We control over 680,000 net acres in the play. The line of this map ties to the cross section on the next slide. The slide 11, cross section shows the reservoirs we target in each of our Williston Basin plays. At Lewis & Clark/Pronghorn, we target the Pronghorn Sand and upper Three Forks horizon which we can tap with one wellbore.

In Hidden Bench, Tarpon, Missouri Breaks and Starbuck, we have dual targets in the Middle Bakken and Three Forks formations. On slide 12, we show our estimate of the derisked acreage across to our prospect areas in the Williston Basin.

This slide hasn’t changed since our third quarter call. We will update it later this year, when we drilled more wells at our Starbuck Missouri Breaks, Hidden Bench, Tarpon, Cassandra, Lewis & Clark and Pronghorn prospect areas. Slide 13 and 14 give our Sanish Bakken and Three Forks type curves. They have not changed since our last update. On slide 15, our two typical production profiles are non Sanish, Field Bakken or Pronghorn Sand/Three Forks wells.

The production profile EURs range from 600,000 BOEs to 350,000 BOEs, which we believe reflects the range of our Lewis & Clark, Pronghorn, Hidden Bench, Tarpon and Cassandra prospect wells. Average well cost in these areas is estimated at 7 million. As we can see these wells have excellent economics at current oil prices. Slide 16, shows the 24-hour, 30/60 and 90 day average rates at our Sanish, Lewis & Clark, Pronghorn, Hidden Bench, Tarpon prospect areas through December 31, 2011.

Results remain strong. As shown on page 11, of the press release in the fourth quarter of 2011 and to-date in the first quarter of 2012, Whiting completed 10 notable wells in the Pronghorn prospect, which had average IPs of 25,065 BOEs per day.

The slide 17 shows that Whiting continues to lead the pack in terms of cumulative productions during the first six months from all Bakken wells drilled North Dakota. Our average is 6,000 BOEs higher than the second ranked Bakken operator and 30,000 BOEs per day better than the average of the next 25 operators.

Please note on slide 18, the 522,000 barrels per day of planned expansion for the Williston Basin in 2012. This should bring total basin takeaway capacity to over one million barrels per day by year-end 2012. And go a long way toward relieving the high differentials we saw in the first quarter of 2011 and are experiencing in the first quarter of 2012.

In summary, in 2011, we made multiple discoveries in our Western Williston Basin area that set the stage for multiple years of growth. As we move into the development mode in 2012, the value of these discoveries should become even more apparent. To present our exploration results outside of the Bakken and our EOR projects, I’d like to introduce Jim Brown, Whiting’s President and Chief Operating Officer.

James T. Brown

Let’s start on slide 19 with our Big Tex prospect. We currently have two drilling rigs in our operation. One rig is drilling a horizontal test in the Wolfcamp on the northern part of the Big Tex acreage. Our second rig is testing the Wolfbone play where we co-mingle the Bone Spring and Wolfcamp in a vertical well bore. We plan to drill three horizontal Wolfcamp wells and three vertical Wolfbone wells in the first half of this year. In addition to the Wolfcamp and Wolfbone prospects, we have a horizontal Bone Spring development area over a portion of the acreage and we remain very encouraged about Big Tex.

Slide 20, shows our Redtail prospect in Weld County, Colorado, where we target the Niobrara formation. Our first long lateral well, the Horsetail 18-0733H tested at 718 BOE per day from a 7000 foot lateral. The Horsetail well was drilled about 12 miles Northeast of the Wildhorse well. Based on the results of these wells, we planned to begin development with the three well program located near the Wildhorse well.

Now I’d like to turn to our two EOR projects, the Postle and North Ward Estes fields. Combined they represent 39% of Whiting’s total proved reserves and 24% of our current production. Fourth quarter net production from Postle and North Ward Estes totaled 16,845 BOE per day. On slide 22, you can see the production forecast from the proved probable and possible reserves at North Ward Estes. We are very pleased with the recent performance of the field. During the fourth quarter, it averaged 8795 BOE per day or about 4% higher than its third quarter average daily rate of 8,440 BOE per day.

Slide 23, details the development phases for our North Ward Estes field. We still have 116 million BOE of probable and possible reserves, we planned to capture primarily between now and 2020. Slide 24, details the capital forecast associated with capturing these reserves.

Slides 25 and 26 shows that in addition to delivering some of the best cash margins in the business $50 million and $0.65 per BOE in 2011. We also deliver steady double-digit production growth.

Now, I’d like to turn the call over to Mike Stevens, our CFO, to discuss our financial results.

Michael J. Stevens

Our fourth quarter 2011 adjusted net income available to common shareholders was $124.5 million, or $1.05 per diluted share. Our discretionary cash flow in the fourth quarter totaled a record $328 million. This compared to fourth quarter of 2010 adjusted net income available to common shareholders of $99 million or $0.84 per diluted share and discretionary cash flow of $277.2 million.

On slide 34 and number 35, we show reconciliations to these non-GAAP measures. On slide number 28, you can see we continue to maintain a strong balance sheet with total long-term debt of $1.4 billion and total a debt to total capitalization ratio of 31.4%. You’ll also notice that we’ve updated our hedge positions on slide number 32. We are now 51% hedged on our oil production for 2012 with collars that average $67 million floors and $109 million ceilings.

Slide 29 shows that our two senior sub notes are trading above par. It also shows that we are well within all the covenants in our credit agreement and our bond indentures. We were recently upgraded by Moody’s to double BB plus, another sign of our financial strength.

Our guidance for the first quarter and full year 2012 was detailed on slide number 30. The main changes are that we have increased our production guidance to account for a strong start to the year and increased our differential forecast. We’ve now forecast first quarter production of 75,700 to 79,100 BOEs per day. We’ve adjusted our LOE guidance downward accordingly.

I’ll turn the call back over to Jim Volker

James J. Volker

Thanks, Mike. Ladies and gentlemen, in summary, Whiting is a high margin oil company forecast to grow 14% to 20% in 2012, spending close to cash flow with over 10 years of future drilling inventory in the Williston Basin alone. At the current share price, we believe Whiting represents a very attractive investment.

Operator, would you please open up the conference call for questions.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions) Our first question comes from the line of Will Green of Stephens, please proceed.

Will Green – Stephens Inc

Good morning guys.

Mark R. Williams

Good morning, Will.

Will Green – Stephens Inc

Wanted to start on the Montana acreage, I just wanted to ask on, you noted that there's a 13,000 acres you are picking up I just was curious as to how that acreage acquisition came about and given that it’s kind of a smaller working interest than you guys typically purchase. How many operator locations are you getting in and who is the other big operator or big operators in that area?

James T. Brown

It was an acreage position that we picked up from an operator that had been leasing in the area out there. They weren’t able to assemble an acreage position that they considered to be material for them and so they were looking for some place to turn it. I’m believing it increases our interest in about 10 spacing units out there. I may have to get some help from Mark Williams to answer this question, but it concentrated our interest on the eastern part of the Missouri Breaks area, which we think is going to be very prospective.

Will Green – Stephens Inc

Okay, great. I appreciate that color. Let me jump over the Permian real quick and, just on the horizontals I believe the best it was about a 3,600 foot lateral at 16 stages. How are you guys thinking about the horizontals as you go forward? Are you happy with this completion technique? Do you think that the laterals evolves into something much longer like you’re seeing closer to the midland basin and, do you think that you’re going to be able to tighten our stages or do you need to at this point?

Mark R. Williams

Yes, this is Mark Williams. I’ll just comment the Bissett is part of what we now consider development program in the second Bone Springs. It’s one of the three projects we’ve got going out there now. And so it’s we think a pretty good design. We have more additional wells. We’re planning to drill right in that same area where we see the second Bone Spring development. This year, they’ll be modeled pretty similarly to the Bissett and so we’ve got two other exploratory areas out there that we’re working with that Jim mentioned as well, but this our first real development project.

Will Green – Stephens Inc

Great thanks guys. I’ll let someone else have a chance.

Mark R. Williams

Thank you.

Operator

Our next question comes from the line of John Freeman of Raymond James. Please proceed.

John Freeman – Raymond James

Hey, guys.

Mark R. Williams

Hi, John.

John Freeman – Raymond James

First thing I just want to make sure I’m looking at on the table that you all have that goes over the latest or the highlight Pronghorn wells, from what I’m looking at it looks like there is about four of those wells that were drilled this year and it looks like average rate was somewhere around like 2,900 barrels a day. And I guess, I’m just trying to get a sense of it seems like more and more each quarter goes by we keep getting these bigger and bigger wells in the area and I’m trying to get a sense of how much of if it is just the rock as you’re drilling more and more of the core of the play, and how much of it is you feeling like you’ve tweaked and fine tuned the operational on the completion side figuring out how to complete these?

James T. Brown

John, this is Jim Brown. It’s both. We’re kind of learning how do to these completion of two things. First of all, we’ve gotten totally away from the hybrid completion that we were, we had a number of hose early in this play where we would pump 22 stages sliding sleeve, 8 stages plug and perk. We’ve gotten completely away from that. We’re pumping all 30 stage sliding sleeve right now. So we’ve simplified our completion out here. So we’re getting the whole wellbore completed at one time, one fell swoop. So we’ve got that working for us. I mean obviously we’re drilling in the better part of the reservoir out here. We got a pretty good the de-risk area that we’ve got on Pronghorn. We feel very comfortable in there and we’re just getting great results. Our guys are continuing to tinker with the completion. I think we’re going to continue to see some good results in here. But I have to say its both better rock, better completions.

John Freeman – Raymond James

That’s helpful. And can you give me just ballpark with the general kind of average cost has been on, I guess, the last handful of wells in Pronghorn, Lewis & Clark area?

James T. Brown

Sure. We’re targeting for somewhere in, we’d like to get them below $6 million of copy. We’re targeting for somewhere in that range. We just completed what with our second pad at Pronghorn. We drilled two wells on that pad at rig release, so this we have drilled two wells. We were at $8.8 million. So we drilled each one of those wells for $4.4 million. And we are estimating our guys are saying we’re about $1.7 million to complete, if I’d be a little generous and say okay we’re going to be $2 million to complete. We’re in the one, we’re in the $6.4 million for those well. So that’s our target and we’re going to continue to work on there, we’re continue to work that cost down. We would like to target somewhere in the $6 million range.

John Freeman – Raymond James

Thanks. And then last question I have and I’ll turn over to somebody else. Just an update on Starbuck in terms of when you might drill another well there?

Mark R. Williams

John, we right now have a rig one of the best rigs in our fleet, up there drilling and they have just completed the third well, you’ll recall, we drilled two wells in Starbuck last year. This rig just completed a third well and is now moving on to the fourth well.

So we are targeting there exclusively, our Three Forks reservoir. We feel like we're probably at Starbuck able to get both the Bakken and Three Forks by targeting the Three Forks and we are starting to see some good results there, but a little too early to get much more color.

John Freeman – Raymond James

Thanks, guys. I appreciate it.

Mark R. Williams

All the best, John.

Operator

Our next question comes from the line of Mike Scialla of Stifel Nicolaus. Please proceed.

Michael Scialla – Stifel Nicolaus & Company, Inc

Hi, good morning guys.

Mark R. Williams

Hi, Mike.

Michael Scialla – Stifel Nicolaus & Company, Inc

The $228 million you budgeted for facility this year, what all is included in that?

Michael J. Stevens

Mike, that extends across you know kind of all of our projects about half of it is in the Northern Rockies and so that some additional facilities that we are spending or additional facilities that we are investing in at both the Robinson Lake plant and also down in the Pronghorn area. We have our Postle and North Ward Estes is in there for about 80 million something in there and then the rest of it is just kind of scattered around various projects.

Michael Scialla – Stifel Nicolaus & Company, Inc

So, in terms of what’s in there for the Rockies it’s strictly the processing plant. There is not any ex-surface equipment or anything that does site specific on the wells.

Michael J. Stevens

No, all of the site specific facilities go into the well AFE. That’s we don’t budget or AFE that’s well site facility separately.

Michael Scialla – Stifel Nicolaus & Company, Inc

Gotcha, okay.

James J. Volker

This is Jim, I just like to expand on that briefly to say that we are netting about on an eight to eight basis, we’re netting about $6 million a month right now from the Robinson Lake Gas Plant and we see that raising by perhaps another 40% or so as we take the plant from just under $60 million a day up close to $90 million a day.

We see this is a very valuable asset that will be loaded with our gas and the gas from surrounding operators for a long period of time. And therefore you see that’s a very highly valuable asset that sometimes, at some point in the future we might monetize.

In addition, I would like to point out that we’re doing the same thing at Pronghorn and have plans to see the same kind of value there. So, we think these investments that we’re making in the plant and equipment are really going to be golden eggs for us. Thank you.

Michael Scialla – Stifel Nicolaus & Company, Inc

Great, thanks Jim, I appreciate that. In terms of Missouri Breaks, you said one rig, what are your plans going forward there, is it going to be a one rig area for a while or do you expect to ramp up overtime?

James T. Brown

So, Missouri Breaks is up there in the same area where Starbuck is in Montana right, and you’re correct we do have one rig there right now we have just completed our second Bakken well drilling and we’re now starting our third well which is a Three Forks well. We do plan to bring in another rig here shortly at Missouri Breaks and so good after A little too early to give much additional information. Both those projects are still very exploratory for us.

Michael Scialla – Stifel Nicolaus & Company, Inc

Got you, okay. And then the residual oil zone that you talked about in the press release at North Ward Estes, I don’t remember you guys talking about that before maybe I just missed it, but it looks like some very large potential area what was the genesis of that

James T. Brown

This is Jim and I'll turn it over to Doug. But this has been an area of discussion in the Permian Basin for probably the last three years. There have been a couple of industry conferences on it. We've been to them and contributed, and in general there is a band of residual oil zone that extends right through North Ward Estes essentially north and south of North Ward Estes, but North Ward Estes is in the heart of it. Some other people, who I won’t name but at any rate, other large operators are already we understand successfully exploiting it, and basically these are zones that were passed over when the areas this general area was drilled typically between 1930’s and the 1960’s because the wells didn’t produce a lot based on the typical vertical well completion. So what they really are is wells with or areas with good porosity or zones with good porosity that generally have a lot of oil in place, in that zone.

And unfortunately they also had water in place, so they’re sort of like a water flood project that never experienced primary production. So basically the concept here is to introduce CO2 and run an EOR project in these residual oil zones. And at any rate we felt that the appropriate thing to do here would be to institute a pilot which we are going to do and we expect to have the results of that by the time we get sort of well into the third quarter and the fourth quarter of this year. And If we're successful as we believe some other people are being then we’re going to be able to, I think over a period of time, book the kind of reserves that we’ve had independently engineered here. Doug would like to add to that?

J. Douglas Lang

Yeah. This is Doug Lang, the one thing I guess I would add is the, what kind of happened, we’ve known about this zone for few years obviously and been looking at it. What happened during this calendar year 2011 was we were able to go out and test in single wells where we had deep enough wells to test. We actually did some testing on what the residual oil saturation, what kind of oil in place we might have to target and then we actually even did a test in a single well where we injected CO2 to see to prove indeed that, that oil was moveable and that we could move it with the CO2 and that was successful.

So those are the two things that really was the impetus test to get the pilot started because we needed to know how to operate on the real life more full field development and that’s what the pilot should tell us. So it was a work in progress, we’ll know more at the end of the year like Jim said, but what happened this last year was we did some single well testing and convinced ourselves that the resources there and that we can contact with CO2 and move it so then that we moved on to the pilot. So we’ll hopefully have more information toward the end of this year.

James T. Brown

And of course, the great thing about the area is, A, we already own it, B, we have all the resources there capable of capitalizing on this asset and we got a great net revenue interest. So we certainly think it’s a great opportunity because as you can tell it size wise here as we scope it most of the independent engineers have looked at it that’s equal to 40% or more of our current proved reserves.

Michael Scialla – Stifel Nicolaus & Company, Inc

If the pilot is successful, how does that change your plans in the development of North Ward Estes in terms of been trying to increase the recovery factor there over what's been booked and given that you've got a limited supply at least right now of CO2. Would you have to slow down development of the original CO2 play to redirect toward the residual oil zone here or how would those work together?

James J. Volker

Well, great question and I’ll try to be quick and specific about it. No slowdown at all with respect to North Ward Estes. Second, we’ve done a good job with contracts that we’ve executed recently with the Texas Clean Energy Project and other as you know that’s a manmade sources of CO2 and we’ve executed couple of additional contracts to make available additional supplies of naturally occurring CO2. So we feel very good about the CO2 supply there that we have available to execute on our plants at North Ward Estes for the next five to seven years, so no slowdown at North Ward Estes.

Second, those seem to be as indicated by the Texas Clean Energy Project that so called summit project. The ability of the number of plants to be built in the area to supply manmade CO2 at rates that are very competitive and in fact less expensive than the naturally occurring CO2 that currently supplies most of the market. So we are optimistic about that supply coming available on the market and we are staying up with all those projects. In fact, a number of them have been in contact with us and are very interested in supplying CO2, to our North Ward Estes project and that additional supply of CO2, would easily be available for the rods.

Michael Scialla – Stifel Nicolaus & Company, Inc

Very good, I will get back in the queue. Thanks Jim.

James T. Brown

Thanks.

Operator

Our next question comes from the line of Biju Perincheril of Jefferies. Please proceed.

Biju Z. Perincheril – Jefferies & Company, Inc.

Good morning.

James T. Brown

Hi, Biju.

Biju Z. Perincheril – Jefferies & Company, Inc.

Couple of questions, can you give us an update on the Sanish fieldm the wells that were offline? Are they all now back on or what’s the latest there?

James T. Brown

Biju, this is Jim Brown. They [aren’t all] back online, yeah we are still in the mid 20s as number of wells that we have off, and our kind of base line out there is probably going to be in the range of 20 something like that. So we are close, but I can’t tell you we got them all back on. But we are well along where we think we need to be or where we had planned to be.

Biju Z. Perincheril – Jefferies & Company, Inc.

Okay. Perfect. And then…

James J. Volker

Biju, this is Jim, let me just give you a little color on that essentially once we’ve caught up here, and now that we have larger fleet of work over rigs available to is essentially service units. And what we are able to do now is when we shut a well in for fracking as we just leave those, rigs that we’ve used those work over rigs to take wells off production to just stay right there and put them back on production after the frac is done.

Biju Z. Perincheril – Jefferies & Company, Inc.

Are you moving to pad drilling there too and does that change sort of how many wells you have to take offline when you are fracking a well?

James T. Brown

Yes, exactly currently we have seven rigs running in Sanish, four of them are drilling on pads. So that’s the other thing we are doing to reduce or minimize the number of wells we have to take off production.

Biju Z. Perincheril – Jefferies & Company, Inc.

Okay. And then in the Lewis & Clark area, I think you said you are running two rigs, which areas are you focusing on? And can you give us an update on what you’re seeing in there and results so far in some of the varying areas?

James T. Brown

Yeah, we’ve been drilling in the area. We had some wells out there called Teddy. We drilled some additional wells in that area. And then in the area, I can’t remember if it's Beaver Creek or it's right on the border up there, up by the federal 32 bore well, the well that the very first well that we drilled in there that was pretty attractive. We’ve been concentrating on those areas.

James J. Volker

And just to clarify the rig count for you there as we combine those, there’s nine rigs in Lewis & Clark/Pronghorn, six at Pronghorn and three at Lewis & Clark.

Biju Z. Perincheril – Jefferies & Company, Inc.

Okay. And then if this year’s plan sort of look at these two areas around the Teddy and Federal wells? Is that more in a development or are you drilling exploratory wells this year?

Mark R. Williams

This is Mark Williams here. I'll just say that the areas that Jim Brown just mentioned are the ones that we’re focusing on. Within Lewis & Clark/Pronghorn is the area that we’re really focusing most our attention on. So those two other areas are the ones that we’re continuing to drill on and Lewis & Clark and those are the ones that will work for us. So we’ve got three rigs that will remain active in the area outside of Pronghorn through the end of the year.

Biju Z. Perincheril – Jefferies & Company, Inc.

Got it. And then one last question. In the North Ward Estes field, the new zone that you’re talking about is the pilot is successful, when can you start a full scale program there?

J. Douglas Lang

This is Doug Lang. I think it probably be at 2015 before we’d really get launched of on the full field development. And again that would be a sort of a phased development like we have had done in the North Ward Estes formation.

Biju Z. Perincheril – Jefferies & Company, Inc.

I missed so much of comments on CO2 supply. Can you get CO2 from your existing provider or you have to look for new sources?

James J. Volker

Okay, well as I said essentially for executing North Ward Estes, we’re in good shape for the next six to seven years with the existing supplies and some amendments to existing contracts that we’ve made to increase the supply including contracts with we have executed or a contract that we have executed with the Texas Clean Energy Project. So we’re really in great shape for executing at North Ward Estes. And then with respect to the rods, there are a number of additional plans that could be brought to bear in the area to supply more manmade CO2. And in general, one of these projects requires somewhere in the range of around $100 million a day and the plants typically produce a couple hundred million a day. So there is a real game changer, these plants essentially that combust coal and produce electricity or some other product plus CO2, a real game changer in terms of increasing the current supply of CO2 which has historically been in the range of about 1.5 Bcf a day. So, that’s the fact and it’s a pretty optimistic view going forward. I think, as a result of the fact that the government is very interested in seeing as many of these plants built as possible that captures CO2. So they’re providing both loans and brands and I think we’re going to see quite a bit more of that as we move forward over about the next five years, which is just a great schedule for providing CO2 for the rods.

Biju Z. Perincheril – Jefferies & Company, Inc.

Great, thank you.

James J. Volker

You bet.

Operator

Our next question comes from line of Joe Stewart of Citi. Please proceed.

Joe Stewart – Citigroup

Hi, good morning everybody.

James J. Volker

Hi, Joe.

Joe Stewart – Citigroup

Hey, one of your peers just mentioned that he sees a lot of consolidation coming in the Bakken. Is Whiting a consolidator beyond the $136 million land budget for the year?

James J. Volker

Well I’ll try to be succinct here. We’re always interested in making good acquisitions. We have found that it’s been more economic for us to do that with the leasing dollar than it has with the acquisition dollar primarily because I think the market is to be frank misvaluing Whiting’s stock in comparison to some of the smaller companies which happen to trade at a higher multiple. We’re doing our best to I’m going to say increase our growth rate even though we have a greater amount of production than they do so that our growth rates are comparable to some of the smaller companies and therefore hopefully that will be reflected in our multiple.

Having said that, I would say that that’s why we haven’t been a consolidator to date is that it’s been a better deal for us to pickup the growth opportunities with the leasing dollar and the drilling dollar than it has been to go out and do an acquisition. Although I might say, if you would like to beat down the stock of these smaller companies, we’ll be happy to rush in there and take advantage.

Joe Stewart – Citigroup

Got it.

James J. Volker

I just make one other comment there, one of the big assets that I think we have up in the Williston right now is the amount of nonoff acreage where we have less of the controlling interest. And so we’re seeing lot of opportunity between us and other operators up there to consolidate our acreage position by trading out of the stuff that we have say 10% or 15% working interest and then adding two units where we have, we already have controlling interest. So we’re doing quite a bit of that up there as well and I think ultimately that’s going to add significantly to our inventory.

Joe Stewart – Citigroup

Okay, okay, thanks. That’s helpful. Then also for Q1 ‘12, the guidance bump, how much of that was due to those 11 wells coming back online?

Eric Hagen

Joe, this is Eric Hagen. We have said previously that those wells will add about 100 barrels per day net to our production. So 11 wells would add about 1,100 barrels per day and we increased our guidance I think like about 5,000 barrels a day.

James J. Volker

No, about 4,000

Eric Hagen

4000, so that’s kind of the rough break down I think Joe, the rough break down of…

Joe Stewart – Citigroup

Sure.

Eric Hagen

Wells versus well performance.

Joe Stewart – Citigroup

Okay, great. Thanks a lot guys. I appreciate it.

James J. Volker

You’re welcome.

Operator

Our next question is from the line of Gil Yang of Bank of America/Merrill Lynch. Please proceed.

Gil Yang – Bank of America/Merrill Lynch

Good, good morning.

James J. Volker

Welcome, Gil.

Gil Yang – Bank of America/Merrill Lynch

Are you seeing any productivity difference when, may be just answered the question but are you seeing any productivity difference when those Middle Bakken wells come back online from what they were doing beforehand?

James J. Volker

No we haven’t seen anything. I mean occasionally, we’ll see a Middle Bakken well that will actually come on higher than it was before which has puzzled the reservoir engineers a little bit but no I mean if anything we’re seeing them come right back on where they where or come on slightly higher than they were, but nothing that’s our experience.

Gil Yang – Bank of America/Merrill Lynch

When they come on stronger is that because they’ve had a chance to repressurize a little bit maybe or...

James J. Volker

We don’t know, we spend a lot of time trying to analyze this with our microseismic and with our reservoir engineering modeling what we’ve done. What we think is happening is when we come in and frac the offset well, like I say as frac and offset Three Forks well. We’re actually breaking up rocks that we did not break up with our first frac job. And you have to remember that early on in this program, the predominant stimulation we pumped out here with a ten stage sliding sleeve frac. Most of the ones we’re pumping now are in the 30 stage range. We think we’re doing just a better job breaking up the rock now than we did, you know, when we first got into this play.

Gil Yang – Bank of America/Merrill Lynch

Is then that some of the reason for the higher increased guidance versus just that 11,000 barrels per day increase from bringing those wells back online?

James J. Volker

No, Gil, that’s pretty much the way I broke it down for Joe.

Gil Yang – Bank of America/Merrill Lynch

All right. Regarding, how much interference are you now seeing between the Three Forks, in Sanish between Three Forks and Middle Bakken. I know you had some wells that were doing had some interference. Are you seeing any more of that or is it really been nicely to one particular area?

James J. Volker

Occasionally we’ll see some interference between the Three Forks and Bakken well, as we’ve moved over to the West side of the field that’s become much less. So…

James T. Brown

Yeah, Gil no the Eastern side of the field where it’s more heavily fractured we have a little bit lower pressure regime. And so you will see over there, as we drill over there, we will tend to have sometimes lower IP’s but a pretty flat production profile. So it’s similar to EURs. As you go to the West and we’re drilling more in the west. Now you will see those IP’s will be a bit higher. That might be a way to characterize the incremental results there.

James J. Volker

You might remember Gil that cross section where we basically showed Middle Bakken thinning as you moved to East. So basically once you get away from the wells that are sort of close to the partial field, immediately East to Sanish, we really don’t see that type of interference.

Gil Yang – Bank of America/Merrill Lynch

So in terms of risking the region does it knock any percentage of the wells out of the inventory?

James J. Volker

No in fact, I think did we add some PUDs there this year in Sanish…

James T. Brown

We did not increase the total number of wells, but yeah we got upgrades with our reserve category…

James J. Volker

We actually had a positive revisions there, Gil, not.

Gil Yang – Bank of America/Merrill Lynch

Okay. And then last question as you look at your growth going forward, how are you guys thinking about setting up new transportation agreements, are you just thinking about additional pipeline capacity or you giving the basis flow out recently? Are you thinking about brining rail into your portfolio of transportation options?

James J. Volker

Gil, we already have some percentage of our production going out on rail. We still think long-term the solution out here is pipeline. We now have our pipeline down in the Pronghorn area that’s connected into the Bridger four bears pipe and we think, yeah there is going to be historically first quarter. So we had some differential blowouts, but we think long-term the best place to be is on pipe, but I will say, we do have some of our production going out on rail right now.

Gil Yang – Bank of America/Merrill Lynch

How much is that, Jim?

James J. Volker

Oh, man…

James T. Brown

4 to 6

James J. Volker

4 to 6 barrels a day.

Gil Yang – Bank of America/Merrill Lynch

Okay, great thanks.

James J. Volker

The differentials for the pipeline is still better than the differential on the rail, so it just paid us to a) our own gathering systems so we’re not paying somebody else for gathering and b) lay the connecting line into a large either interstate or intrastate line but then gets us to a major city market.

Gil Yang – Bank of America/Merrill Lynch

Thank you.

James J. Volker

You’re welcome.

Operator

Our next question comes from the line of Pearce Hammond of Simmons and Company. Please proceed.

Pearce Hammond – Simmons & Company

Good morning.

James J. Volker

Good morning, Pearce

Pearce Hammond – Simmons & Company

Hi, I apologize if I miss this but have you talked about the second bench of the Three Forks in your thoughts on that and how Whiting might be able to capture that opportunity?

James J. Volker

Mark Williams has been warning somebody to ask that question, so we’re going to let him answer that.

Mark R. Williams

Mark Williams here. There is a upper bench, well particularly Hidden Bench, there is an upper part and lower part of the Three Forks formation and we take a core in there and we have already drilled a couple of wells in the upper part of that and we’re very comfortable with the results of those. We’ve also seen this lower bench of the Three Forks has developed and the core that we’ve taken and so we have our first well targeting that zone, it’s going to be drilled here at the end of May. We also see a couple other areas where we think it’s going to be perspective. And so we’re trying to work that into our program. We core about every fifth or sixth well out here in the Bakken especially in these new areas are emerging. So our coring program had lately has focused on this lower bench of the Three Forks and we’ve got two other areas where we think it’s going to work but little too early in those areas.

Pearce Hammond – Simmons & Company

But overall are you excited about the potential?

Mark R. Williams

Absolutely, I think it looks like here in the central part of the basin and Hidden Bench is right in the middle of the basin. And so as you go to the north and the west especially and maybe even to the east, we think that that lower bench of the Three Forks is going to work. All of this is end up being charged by the Bakken, so the oil is got to make its way from the Bakken Shale down into the Three Forks zones but there's something about that lower bench that gives us some pretty good porosity and so we think it’s going to be present under a significant amount of our acreage.

James T. Brown

We’d reference you to the cross-section on page 11 where when you see, I am going to say both zones, the Middle Bakken and the Three Forks being targeted there, you can pretty much feel that most of that is going to have in our opinion where we are. As well as we know today it’s going to have a second bench potential.

Pearce Hammond – Simmons & Company

Great, thank you. And then Jim, Whiting’s got a very good relationships with service companies. How do you see the service company environment right now up in the Bakken, is the pricing easing, is availability improving?

James T. Brown

We couldn’t be happier with our service company providers up there. Certainly they’ve all been great to us, I think that’s because we tried to establish great relationships with them, not just two years ago or five years ago, but in fact 30 years ago. Those relationships have really come home to roost and we've had great service from all of the major fracking companies and companies. So they've brought all of the capability that we need to bear and are making impact more crews available.

So we feel very good about that same thing is true with respect to the different drilling contractors that we use up there, we have, I think, if not the best, certainly one of the best fleets of drilling rigs working for us. And we intend to continue the work with those very same contractors. The best indication of that I can give to you is that our drilling cost is $7 million per copy across the entire Williston Basin and going down. So our average across the basin it’s about $7 million and we’re driving it down. And we couldn’t do that, if we didn’t have great service providers both on the drilling side and then on the completion side. Jim do you want to add anything?

James J. Volker

No, I will add one more thing because it's been a question we get frequently asked. Sand availability is no longer an issue. We seem to be able to have all the sand we need for our frac jobs up there.

Pearce Hammond – Simmons & Company

Thank you very much.

James T. Brown

You are welcome.

Operator

Our next question is from the line of Phil Mcpherson of Global Hunter Security. Please proceed.

Philip McPherson – Global Hunter Securities, LLC

Hey, good morning gentlemen nice job on the quarter.

James T. Brown

Hi Philip. Thank you.

Philip McPherson – Global Hunter Securities, LLC

Lot of my questions have answered and I don't want to beat the dead horse, but on this ROZ is that the actual name of the reservoir or is there something else it's called

James T. Brown

But we want to keep mum exactly about exactly, which zone we’re after there. So it varies and there is more than one, as you move acrossed our acreage we’re targeting one zone with our initial pilot and we'll disclose that after we get the results of the pilot.

Philip McPherson – Global Hunter Securities, LLC

Sure, and how much

James J. Volker

ROZ stands for residual oil zone industry standard term for those Jim explained, how they work but essentially that’s what ROZ means is just a residual oil zone.

Philip McPherson – Global Hunter Securities, LLC

Okay, great. And what are you expect to spend on the pilot program?

James T. Brown

Only about $10 million to $12 million

Philip McPherson – Global Hunter Securities, LLC

Right. And just switching gears in the press release you kind of use of term, kind of Lewis & Clark area, you have de-risked a substantial portion or something of that nature, can you quantify that from a percentage standpoint.

James T. Brown

Yeah, we would refer that slide that gives you exact percentages within Lewis & Clark and Pronghorn. So what’s been…

Michael J. Stevens

Slide number 12, and the numbers are 46% of Lewis & Clark, which is 64,193 acres and 60% of Pronghorn, which is 68,649 net acres and put in perspective. We control 66,000 net acres at Sanish. So that’s pretty bit de-risked areas.

James T. Brown

Keep in mind that in both the Pronghorn area, and Lewis & Clark our net acreage position is essentially little more than twice what we have already de-risked. So we have big potential in front of us. And we intend to capture that over the next few years. As we essentially drill out the de-risked area, while at the same time, we'll be proving up, the area that has yet not been de-risked.

Philip McPherson – Global Hunter Securities, LLC

And Jim as far as the amount of rigs running there, how are they spilt between that, between development and de-risking?

James J. Volker

There is three at Lewis & Clark and six in Pronghorn. And they are all currently I am going to say drilling with in the de-risk areas, but as we go through the year, you will see that we move out toward the, we will drill a few wells towards the edge of the de-risk areas. And that’s a consequence that will help us expand the de-risked area.

Philip McPherson – Global Hunter Securities, LLC

Okay, great. I appreciate the color. Thanks guys.

James T. Brown

To give you a little more color on that probably be about 75, 25 that’s 75% within the de-risked area, 25% near the edge of the de-risked areas.

Philip McPherson – Global Hunter Securities, LLC

Great.

Operator

Our next question comes from the line of [Kevin Bennett of World Securities]. Please proceed.

Unidentified Analyst

Hi, this is (Kevin Bennett) from Wells Fargo just wanted to ask about the four from new horizontals, that you’ve completed just wanted to see if you might be able to give any color or any results there?

James J. Volker

Yeah before we talked about we’ve not completed any of them yet, if you are talking about the Wolfcamp horizontals, we are just getting our first one drilled right now we got one drilled uncompleted. We’re just drilling our second one right now.

Unidentified Analyst

Perfect.

James J. Volker

We don’t have any results yet

Unidentified Analyst

Okay. Thanks, Jim

James J. Volker

I’ll go ahead and add a little color on that, we do have one vertical well, that we’re testing currently just in Wolfcamp and we’re very pleased with that, initial rates that it was flowing, were essentially at rate of 250 barrels a day out of the Wolfcamp alone. And so that’s in the area where as we continue to drill in the area. We’ll attempt some completions in the both the Wolfcamp and the Bone Springs. So the thing’s flowing 10 barrels an hour for several days, before we shut it down. And we’re very pleased with that right out of the Wolfcamp alone.

Operator

(Operator Instructions). Our next question comes from the line of Mike Scialla with Stifel Nicolaus. Please proceed.

Michael Scialla – Stifel Nicolaus

Yeah, you’ve probably already answered this, but the six rigs you have at Lewis & Clark right now, how does that change over the year?

James J. Volker

We have a three at Lewis & Clark. Actually we have nine altogether in the greater Lewis & Clark area, three of, which are in Lewis & Clark proper then six are down in the Pronghorn area, we’ll see

Michael Scialla – Stifel Nicolaus

I’m sorry I missed it in the Pronghorn sorry Mark and its six in the Pronghorn and does that number change or?

Mark R. Williams

No, it pretty stays the same Mike through the rest of the year, and as Jim mentioned most of those will be drilling development wells in core Pronghorn. We’ve had some very nice new results extending our de-risked area overall on the East side and Pronghorn now and so a combination of those two areas will keep at least four or five of those rigs working development wells in those two parts of Pronghorn.

Michael Scialla – Stifel Nicolaus

You think you found the eastern extent of the at this point or?

Mark R. Williams

No, I can’t say that I think we have the opportunity to push out yet a little bit further to the east, we definitely found a nice area there kind of east to Dickinson that looks like its going to work pretty well for us and that we just don’t know as we press each other

Michael Scialla – Stifel Nicolaus

And in terms of the if the trust goes successfully we planned to do with the proceeds there, is that just going to be pay down debt or do you look at ramping up in new areas?

James J. Volker

Yeah, we’re going to pay down over 300 million bucks worth of debt and as you know that basically just like reloading the gun, so it will give us an opportunity if we wish for I’m going to say that the drilling that we’ve indicated whether it be an extension of Pronghorn they’re moving out in the some of the de-risked areas same thing through at Lewis & Clark more wells at Hidden Bench, more wells at Missouri Break, more wells at Starbuck, my point you here would be that we’re really just scratching the surface at these prospects like Starbuck, Missouri Breaks, Hidden Bench and we also have lot of running room left, beyond the de-risked areas at Lewis & Clark and Pronghorn. So that would give us an opportunity of having paid down on our debt to ramp up drilling in those all those prospect areas, where we have good success.

James J. Volker

If you add to that Mike, in addition you saw we had good well in the Niobrara, I mean we feel like we’ve done a pretty good job of defining the productive area there. And also as Jim just mentioned, still very early days, but we had a good initial results in that vertical Wolfcamp well. So those are both areas to that with continued success we could, accelerate potentially in the future.

Michael Scialla – Stifel Nicolaus

On the Niobrara, apart of those the Wildhorse and Horsetail wells.

James J. Volker

They are I think about nine miles apart from each other, so we have we think that suite spot of that reservoir, extends yet further to the East.

James T. Brown

It was about 12 miles.

James J. Volker

Actually about 12 yeah.

James T. Brown

12 miles.

James J. Volker

Yeah, so they we define a nice suite spot in there between the Horsetail and the Wildhorse wells, that we think extends yet further to the North East. And so we are kind of switching there from what has been an exploratory program to a development program, which will be starting in May, we are going to start doing pad drilling, we got pretty good idea based on microseismic, what kind of areas we can drain. So we’re going to be doing in our first development pilot in that project and probably late May, early June.

James T. Brown

I just like to remind you that we have now over 100,000 net acres at Big Tex. So I really would like you to approximately 100,000 net acres at Big Tex. So let’s not – that when sort specially with I am going to say all of the great results that not only Whiting has had but other people are having there in the Wolfcamp, which we believe extends over a large portion of our nearly 100,000 acres net acres there. So, in my opinion we're just scratching the surface of the potential of these new discovery areas that we found on the last year 2011, and really provides a lot of drilling opportunity for us if you look at our slide about our 3P and resource areas you can see that there is over 600,000 drilling locations there. So, I think we’re being under appreciated to an extent when you talk about the potential future of Whiting Petroleum Corporation.

Michael Scialla – Stifel Nicolaus

That’s all I had. Thank you, very much guys. Thank you

James T. Brown

Thank you.

James J. Volker

Thanks Mike.

Operator

There are no further questions in the queue at this time. I would now turn the call over to Mr. Jim Volker for closing remarks. Please proceed.

James J. Volker

Thank you, Kathy. I would like to thank all the Whiting employees for a job well done in 2011, and for the exciting plans we have in place covering our 2012 CapEx. I also express my thanks to our directors for their continued contribution to Whiting success Eric?

Eric Hagen

We will be participating in the JPMorgan High Yield Conference in Miami, Beach February 27 to 29. Raymond James Institutional Investors Conference in Orlando the week of March 5. We're also presenting at OGIS New York the week of April 16. Look forward to seeing you at these events. Jim?

James J. Volker

In closing, we thank you all of you on this call for your new or continuing interest in Whiting Petroleum Corporation. We look forward to meeting with you very soon.

Operator

Ladies and gentlemen, that concludes today’s conference. Thank you for your participation. Now disconnect and have a great day.

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