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Whiting Petroleum: Bakken Performance Offsets Redtail Mediocrity


  • Q3 2017 results were solid, with production growth driven by the large amount of capital expenditures during the quarter.
  • New Bakken wells are performing well, helping offset the mediocre performance of new Redtail wells.
  • Whiting may be able to pay down its debt by over $200 million at $55 oil in 2018.
  • Bakken assets may be worth around $5.2 billion compared to debt of around $3 billion based on recent transactions.
  • Longer-term oil prices remaining largely unchanged despite the rise in near-term oil prices.  Oil futures drop below $50 by mid-to-late 2020.

Whiting Petroleum's (WLL) Q3 2017 results ended up being solid in terms of production, as a surge in capital expenditures ($321 million or 34% of its $950 million full year budget) led to a noticeable increase in production during the latter part of the quarter. Strong Bakken results are putting Whiting into position to reach its year end production target, although I believe that its Redtail results are still pretty mediocre.

The rise in near-term oil prices may allow Whiting to grow production by mid-to-high single digits without increasing debt, but longer-term prices haven't improved as much and are still fairly close to Whiting's breakeven point.

Q3 2017 Results

Whiting's Q3 2017 production ended up being on the low end of its previous guidance at 114,350 BOEPD, although that was partially due to its Fort Berthold sale (which closed at the beginning of September and reduced quarterly production by 2,543 BOEPD) and third-party gas processing plant issues that knocked out another 2,717 BOEPD. Whiting mentioned that production would have been near the high end of its guidance after adjusting for those items.

Whiting appears to be on track to meet its year-end production targets, largely due to good performance from its Bakken wells offsetting the mediocre performance of its Redtail wells. Whiting had previously expected to average 133,500 BOEPD in Q4 2017 and now expects 126,000 BOEPD, but that 7,500 BOEPD decrease is due to the effects of the Fort Berthold divestiture.

Whiting's oil differentials to WTI have also improved, largely attributable to the Dakota Access Pipeline. Whiting mentioned that it is getting its oil to the Gulf Coast markets now, where oil trades at a price close to Brent.

Redtail Remains A Fringe Play

Whiting's Q3 2017 Redtail production was somewhat stronger than I expected as a large number

This article was written by

Elephant Analytics profile picture
Elephant Analytics has 15 years of analytical experience and unique skills in numerical analysis and practical mathematics. He is currently ranked in the top 2% of analysts by TipRanks.
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Comments (56)

Lambeau's Dad profile picture
Slide 17 for WLL's recent 19 slide presentation done to the big show on 11-17-17 shows what I'd call very large discounts from NYMEX pricing for WLL's oil and natural gas for 4th quarter (and the full 2017 year average was even larger).

$6.50 to $7.50 discount for each barrel in shale oil ??? Why would that size of discount be correct. Natural gas has a $1.20 to $1.60 discount ?? for Natural Gas that is a nearly 50% deduction of the NYMEX natural gas prices. Why even drill for natural gas at 50% off. And think how that will effect our BOE totals as an average.

Why are the qualities of those two commodities we are pumping declined so badly over the last few years?

And whatever happened to the idea that Whiting was supposed to move up in share price nicely when:

1. A big well known presentation group saw WLL's "true value" last Friday ?

2. When the market for U.S. Oil prices had climbed to $50 or more (currently $55.99 on oil and $3.06 on n. gas). We "were told" it would be a great situation for WLL - and it appears to be the exact opposite.

3. The reverse split would allow all these "new buyers" to be participants.

Well after the reverse split - its been nothing but share price decline (currently I hate to say it but share price has fallen all the way down to $21.88 a share as I write this at 11:30 C.T.).

All those analysts and brokerages at that presentation - and none are jumping in ??? Or are they selling more than buying after the presentation.

And all WLL's effort to increase the authorized stock available to sell in a potential secondary. At these prices - it would really dilute the existing shareholders. And meanwhile - a huge short positions are getting even more free of any potential squeeze issues.

Elephant Analytics - your article says the 3rd qtr. looks better - I'm not seeing it. Redtails says they had this big production increase - but that was purely from all the wells they drilled that previously had not been connected and pumping. If Redtails produces an ever expanding quantity of natural gas - with the whooping kind of discount WLL is getting for NYMEX - what is the point of all those 100s of millions in Capex spent on Redtails?

Managements slide deck indicates a planned expansion of production in 2018 - but I didn't see what the CAPEX will require to do that - and what the net earnings result will be from the Redtails 78% production increase or with all the discounts on oil and n.gas.

I think its pretty safe to say - WLL seems at $55 nymex oil and $3+ gas (then minus the discounts on each) - like its still not even a break even operation in 2018.
Little, Einstein profile picture
What do you think about this fusion?
SGY and
Talos energy
Whiting down another $2.33 or 9% today. Right now it’s also trading down over 1% AH. Anyone still having doubts about whether you should sell or not? What a gift this is turning into for short traders!
Lambeau's Dad profile picture
745, I think WLL's decline the laast couple days is more of a concern than just immediate.

I've been posting the last couple of weeks that far too many writers and analysts and general stock holders are projecting oil prices going to $65 and beyond. They were all "head up" that oil prices were going to be influenced by declining supply and I disagreed with them because the U.S. was actually doing more exporting and that supply was not diminishing and demand increasing.

Well today the report analysis comes out from yesterday's actual report - and it shows that officially now they don't project some big oil price movement based on the recent report and last report combined. So now instead of $57+ dollar oil of just a couple days ago - its back to $55+ and already WLL has declined from $7 stock price (pre-reverse) to under $6 stock price (pre-reverse). The point is - WLL did the reverse - but didn't get any new stock sales to the public from the non-outstanding category - they were depending on for debt relief.

Meanwhile the company that is run by KOG's former CEO bought a major property, Issued 35 million shares - and ended up selling a total of 40+ million shares all between the time of WLL doing the Reverse split and now. So that other company was prepared to take advantage of the oil price rise, issue the stock, sell the stock, lock in pricing while it was higher desire - and they are done with it just as the report comes out saying the "big oil price rises predicted" may not actually happen.

Meanwhile WLL missed the big opportunity but implemented the reverse split at a time that was not good.

Good managements don't just have good ideas - they have good ideas and great execution of those good ideas when opportunity is there.

Now if oil prices stay in the $52 to $55 range - how will WLL stock prices go the next couple of weeks ? If WLL does float out new issue stock - its likely going to be for smaller numbers and still greater dilution for existing shareholders. And the reverse split activity - is likely to tantalize and encourage shorts to hit even harder on their opportunity.

I'm saddened that people I know who still own WLL are once again left holding the bag that was not of their own creation.
Lambeau's Dad profile picture
Can someone explain this statement someone made. ????

"let's not forget when adding and subtracting dollars there will be over $100M in deficiency payments the last two years of the Redtail pipeline commitments. That comes off the top."

And is this $120,000 or is it $120,000,000 ? And is it per year for how many years??
$100,000,000 plus
That statement was made in response to discussions of their future prospects and projections. They conveniently leave that out of the summary of their results and future projections. Depending on the performance of all their completions in Redtail, that number could actually be closer to $150,000,000. My guess is it will be the latter number, which they get no value for. $150,000,000 is more than 15% of the bonds due in 2019. Down the drain.

Whiting also has a term sale into DAPL from their Sanish field for 15,000 bpd for 7 years. The differential will be around -$7.75 per barrel when the current market is less than -$5.00. Also, their own projections show that sometime in year 3 of the contract the production at Sanish will be less than 15,000 bpd which means if the buyer will allow them to, they will have to satisfy the volume deficiency from other fields that can deliver to DAPL. To bad for the royalty owners and other working interest owners in those fields.
Lambeau's Dad profile picture
A key issue I continue to mention is "the shareholders" rather than "the company".

We need to recognize that one does not automatically benefit shareholders.

1. We've got a huge quantity of now authorized shares.
2. We now are dealing with a reverse stock split that only can benefit new arriving shareholders or short players. It does nothing for the existing.
3 we also have to recognize that many of the not-outstanding stock shares gets sold. . . the money at "whatever the price they get for it" goes to the company . . . and it dilutes the existing shareholders greatly while it preserves "the company" and it's management's safety.

Let's use an example. You spend foolishly or recklessly on your credit card in significant amount. And your mom or dad ends up bailing you out. The pain belongs to the dad or mom, not the one who caused it. Well past and present shareholders are like mom and dad. As the spender is management and the soon to buy at big discount new shareholders.

Even if the debt gets paid down the past and present shareholders are the ones who end up with far less value and far greater dilution for it.

xiang profile picture
IF you want bakken, buy OAS. WLL is not a well run company.
Lambeau's Dad profile picture
Just imagine, year to date high was 53.63 dollars per share (in reversed shares), that high was with 41 dollar oil. Now the stock price is $25.75 and it's 57 dollar oil.
Better sell WLL. I sold mine immediately after the reverse split. It’s already down over $2 a share. Trust me, they are going the way of Halcon. Halcon reverse split several times and took my 8000 share count to 1600 and finally down to 47. Talk about a $crew job that was. Then to top it off, every time they reverse split I got to pay my brokerage a $20 reorganization fee. I had to pay it on Whiting now but I bailed and cut my losses and everyone else should seriously consider doing the same or sit back and watch your share value seriously erode.
>Better sell WLL. I sold mine immediately after the reverse split. It’s already down over $2 a share. Trust me, they are going the way of Halcon.

More and more former shareholders realize, every day, that Whiting is a failure.

It is morally wrong what Jim Volker did to the shareholders, what he did to the bond holders, and worst of all, what he did to his own people.

He's a crook, through and through.

We'll see if this new CEO fails and lies like Jim Volker does.
Little, Einstein profile picture
Today it was worth to deal in stock exchange
Almost everything went up
WLL rose 6.68 +6.68 (954,900.00%
Lambeau's Dad profile picture
Hello batistuta009,

WLL did not go up today, it was actually down today. There was a reverse stock split and as of tomorrow morning you will see a bigger share price for WLL but you will have only 25% of the number of shares.

And shorting should begin at a whole new level soon in my opinion.
The reason WLL wouldn't answer the question from John Freeman with Raymond James is because as of the middle of September the 15 Razor wells were averaging 160 barrels of oil, 100 mcf of gas, and 525 barrels of water per day. Those are 100% numbers so if you take out royalties and taxes the net is miserable. Also, most of the partners (WLL has the majority of the working interest at Redtail) have started taking their oil in kind, meaning they don't share in the pipeline deficiency payments. That's all Whiting. No way these 15 wells are economic at a well cost of $5MM+. Volker had a deal on the table earlier this year from a legitimate company that would have brought in $500MM for half of Redtail. He wouldn't do it because it would have forced Whiting to write down part of the reserves.
why are they not forced to do the write down anyway?
> 15 Razor wells were averaging 160 barrels of oil, 100 mcf of gas, and 525 barrels of water per day.

What an absolutely massive failure!

>Volker had a deal on the table earlier this year from a legitimate company that would have brought in $500MM for half of Redtail. He wouldn't do it because it would have forced Whiting to write down part of the reserves.

Wow! Just when you think they can't screw up any more.....they screw up more!

Volker was delusional!
Little, Einstein profile picture
Trash by trash
Buy MCF at 3.50US

I can not understand, because it will reverse split:
Whiting Petroleum Corporation Announces 1-for 4 Reverse Stock Split
Lambeau's Dad profile picture
1st the reverse split was voted on with a resulting 150 million shares as the effect. Then they voted to auth0orize a higher share count to issues 75 million new shares that were already reverse split. So 150 million after reverse split and then an authorized new number totally 225 million (that 75 million new shares).

And don't forget the tricky statement in the announcement that reads:
"Shares have rallied 27% during the past month but have shed 45% YTD."

What that means in since the beginning of 2017 the stock price was $12.50 with $41 oil prices and now with $57 oil prices - the stock rose to $7.00. Isn't that patting yourself on the back because no one else will.
Lambeau's Dad profile picture
Well its now official - what many of us thought would happen - the reverse stock split was approved - a 1 for 4 no less.

BUT EVEN MORE IMPORTANT - is they voted to change their stock limit from 600 million shares to 225 million shares. Now think about it a second - that means the equivalent of 900 million of today's shares. So they are going to reverse split and then dump up to 50% more shares into the market - and think what the dilution effect will be.

P.S. now I don't need a response that a reverse stock split is any dilution. But adding the equivalent of 300 million more of current shares - certainly be a heavy dilution - especially if the reverse stock split goes as most of them do.

And boy it sure takes any concern or pressure off the shorts - and gives them an opportunity to make more money at the same time.

Once again its a "save the company and starve the shareholders" management concept.
Has Whiting done anything right lately?

1. Sells off their most oily assets on August 15th, when crude is $47/bbl WTI / $39/bbl Bakken. If they would have waited a few months, could have sold it when Bakken crude was 25% higher, $57/bbl WTI / $49/bbl Bakken. That 26% increase in Bakken crude would make the profit margin, and sale price, increase by much more that 26%.

2. Get rid of Volker, but bring in an even worse guy to run the company.

3. Hedge 52% of 2018 production with a $57/bbl max price. Then oil price starts to go above $57/bbl, so WLL will see no benefit for that production.
xiang profile picture
WLL is junk, buy ECA/CVE/OAS.

Did you used to be pro WLL a few months ago?
xiang profile picture
Yes, I was stupid then, now got a little less stupid.
Which oil stocks do you like?
Cool man, I'm glad you saw the light.

I haven't really done any research on oil stock at the moment, I don't feel qualified to give advice. If I do some research, and find good oil stocks, I'll let you know.

Right not I am negative on WLL and TSLA. I think Tesla is the next Whiting Petroleum. Tesla has an incompetent CEO, just like Whiting. Both liked to hype things up, and then failed massively when earnings time came. Tesla is in a hyped up, popular industry of alternative energy. He is a computer programmer who is trying to run an auto company. He's been such a failure.
Good summary but let's not forget when adding and subtracting dollars there will be over $100M in deficiency payments the last two years of the Redtail pipeline commitments. That comes off the top.
Great point. Redfail will continue to haunt them.

Elephant also needs to remember that WLL hedged 52% of oil production with a $56.94 ceiling for 2018. So anytime oil goes above $56.94, WLL will see a reduced benefit.
Lambeau's Dad profile picture

Can you elaborate for me on what the $100 million in deficiency payments come from and is that per year for two years ???

shiprepair profile picture
Hi to all the dooms thinkers, as predicted in my last commend on WLL,it is not the past, but the future only. WLL jumped yesterday from US 6.51/share to US 7.06 per share, which is the start of the improved company and still a good time to jump in.
Remember me !!
fundamentals and financials are not driving the stock price up. it is following oil prices lock and barell.
Lambeau's Dad profile picture

Part of your recent comment is the following:
"as predicted in my last commend on WLL,it is not the past, but the future only."

What you don't seem to recognize Shiprepair - is that your statement is the sad part of the story. WTI is $57+ as I write this and WLL stock price is slightly less than $7 a share. There have been no forward or reverse splits in the stock in the last almost 3 years since the merger.

So lets look at the past compared to the current. When last the WTI oil price was $57 do you remember what WLL's stock price was ? It was just under $60 a share - meanwhile today it is just under $7. Now the future of WLL carries with it that significant pattern that will never be what it was at the last time it was $57 - because management not only effected the perception of WLL - but also effected its future value in considerable ways.

Whitings prime comparison of a competitor back in 2015 was Continental Resources. Back when WTI was $57 CLR was in the $50s and today at $57 wti oil -CLR is $43+. The point is even with a major issue of a very public divorce that effected CLR - its management didn't make the mistakes WLL did and so it preserved its company value for the future. Today and for the future - there should have been no reason that WLL couldn't have done the same thing - plus it didn't have the divorce issues either that CLR did - WLL's properties and technology were very similar to Continental Resources because KOG had the similar advanced exploration methods and WLL was KOG plus old Whiting. But shareholders don't have anywhere even close to the same future outlook in WLL that CLR shareholders have. That's not an opinion - its a factual observation of how things have been and stand today as we look forward. Now depending on how Nov. 8th's reverse split meeting goes - you may have a chance to see WLL stock price the same as it was when WTI was $42 and the stock price was in the low $20s or again when it was $13 and again when it was $8. The point is - today WLL looking forward is not the WLL of 2015 or even 2016 or even early 2017. Its lower and smaller and less respected by analysts and investors. A possible reverse split does not fix any of the management shortcomings that have changed this company. Even now late in the game - a change in CEO's may certainly benefit WLL to not have the tremendous blunders of the past 3 years - but it won't undo them or the effect on its shareholders.

shiprepair profile picture
LD, Appreciated your comments, we are long WLL
Lambeau's Dad profile picture
For those who have not been paying attention to Saudi Arabia in the last few weeks and especially later last week . . . . Saudi Arabia - an ally of ours for quite some time, has recently been extremely friendly with Russia and Russia offering to do a bunch of things for them and provide technical assistance on many areas etc. etc..

Then just later last week - its become a regime change as MANY of the princes have been jailed or thrown out of government positions. No not by the people, but by one prince who is condensing power to himself. Its feeling like an Iran type of change - but Saudi Arabia has a good quantity of weaponry and training from the U.S. prior allied tendency. Russia has "made another move", and Israel and the U.S. can't be happy about it at all - including the energy sector.
I have to say I agree. there is a lot more to all these moves than meets the eye. call it crackdown on corruption all you want. the place has always been corrupt. will be interesting to see what happens with our record export numbers. I think SA is just putting more bullets in the magazine for the second gunfight against shale.
Lambeau's Dad profile picture
Of all places, PBS ran an interview Monday between Charlie Rose and a women who was some type of expert on the Middle East. And she was talking about the Crown prince moves of the last three years and the last few weeks. Remember he isn't old and his Dad the actual leader of SA is not in good health.

Now I'm really confused because she was claiming his moves were unprecedented in all the important KEY players jailed in SA. That's easy to see, but she claims these moves are *good* and in agreement with Trump and his son and son-in-law, rapid change for the SA people.

But that is contradicting all the very recent involvement with Russia. Currently Russia is far more involved in SA than at any point in the history of SA.

I don't see how the two wildly different scenarios can be accurate. And the Crown Prince has a plan called 2030 which is supposed to modernize SA by that year. I'd say things are getting potentially very dicey in SA. At 31 years old the crown prince in more minor positions has messed up in those last couple years and now it seems like a lot of control could get out of control very rapidly.

I think gold and silver feel like safehavens right now. One of Russia's deals with SA is to help them with nuclear developments (and it isn't nuclear power plants either).
Lambeau's Dad profile picture
I'd like to highlight juuuuust a few points using the author's statements as part of it

1. I noted in the 3rd quarter numbers that WLL price received seemed to be a discount to the market prices. If that is the case. . . $55 WTF oil is not what WLL is going to get.

2. The author mentioned 2020 as a return point for $50 oil. Sorry but if WLL actually gets 50 dollar oil they aren't yet making money.

3. Author mentions the per share price value would be $6.60. Well the price for many millions of the shares is a gigantic loss at $20 and $30 much less $12 & $15 on many millions more shares. And that is with price averaging included.

I believe the author's article is a good one but in no way is it a good sign for most shareholder's average price. The only people who would consider $6.60 a share as a positive are the few who never owned and held. . . . Just the very slightest buyers at its low of $4.50, or the many millions of shorted shares.

Being a long term investor myself, I surely wouldn’t hold on to the stock if I felt bk was “imminent” (def. near, close, or about to happen). A 3-5 yr. time frame to predict bk is a true poke in the dark. If oil is not higher than where it is today in that time frame, there will be plenty of other shale operators circling the drain with WLL. If that big flush does occur, oil will have nowhere to go but much higher.
Hmm, unless I missed something I did not see any mention of WLL bankruptcy. In light of the mediocre performance of Redtail (as the author mentions several times) it doesn’t sound imminent (bk) to me after reading this article.Thanks for the good article Elephant Analytics.
Depends on your definition of imminent. For investors like myself, in for the long term, a bankruptcy filing in 1-5 years is 'imminent.'

Many on this board are oil price speculators, and are looking for a quick pop in stock price in a few days or a few weeks.

Send me a telegram when Whiting makes a quarterly profit.

WLLs costs will rise if oil prices does. Service costs go up as oil price rises.

The 'they're just a small increase in oil price away from a profit' schtick has been said many times. Whiting has continually failed.

The state of ND allows you to view wellbore paths on a website. WLL is running out of quality drill spots. Very few left.
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