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Whiting Petroleum Corporation Announces Second Quarter 2013 Financial And Operating Results

Whiting Petroleum Corporation’s (NYSE: WLL) production in the second quarter of 2013 totaled 8.5 million barrels of oil equivalent (MMBOE), 87% crude oil/natural gas liquids (NGLs). Second quarter 2013 production equals 93,380 barrels of oil equivalent per day (BOE/d) representing a 4.8% increase over the first quarter of 2013. Second quarter production was up 15.7% over the second quarter 2012 average of 80,700 BOE/d and up 18.3% excluding the production associated with the Postle field assets which were sold on July 15, 2013.

Success in several areas contributed to production for the second quarter exceeding the high end of guidance issued in our April 24, 2013 first quarter results press release. In the Williston Basin, at our Western Williston area, production grew 231% year-over-year. We modified our completion design at our Missouri Breaks prospect and have been pleased with recent wells we placed on production. At our Redtail prospect in the DJ Basin, we implemented a new completion design and have been experiencing very strong and consistent results. We also continued to see increased production at our North Ward Estes EOR project where several phases of the CO 2 flood are continuing to respond.

Despite the sale of our Postle assets, which accounted for approximately 7,560 BOE per day of production in the second quarter, our new 2013 guidance of 33.8 MMBOE (92,700 BOE/d) remains within the range of our prior guidance issued in our April 24, 2013 results press release. We are increasing our capital budget to $2.5 billion from $2.2 billion.

James J. Volker, Whiting’s Chairman and CEO, commented, “With the sale of our Postle assets, we have the liquidity to accelerate development of our high rate of return Williston Basin Bakken and DJ Basin Niobrara assets. Our revised 2013 production growth guidance equates to a 12% increase over 2012 levels and a 19% increase excluding the production associated with the Postle assets. In the third quarter we anticipate replacing nearly all of the production from the Postle assets sale, which generated $837 million in net sale proceeds, while increasing our capital budget by only $300 million. We believe this demonstrates the potential of our new, streamlined portfolio and the validity of our asset rationalization strategy.”

Mr. Volker added, “With the Postle sale proceeds, we expect to capitalize on the potential of our DJ Basin Redtail Niobrara area. Our most recent wells have benefited from longer laterals and larger sand volumes. We believe our completion practices translate into higher EURs and greater returns on capital. We are moving into development mode in this area with the recent arrival of a second pad capable rig and a third rig contracted to arrive in October of this year. This approximate 88,000 net acre lease position with a large amount of estimated original oil in place (59 MMBOE in the Niobrara “B” and “A” per 960-acre spacing unit) affords us the opportunity to enhance recovery by drilling on tighter spacing. Consequently, Redtail has the potential for a 33% increase to our current estimate of 2,400 gross drilling locations.”

Operating and Financial Results

The following tables summarize the second quarter and first six months operating and financial results for 2013 and 2012:

 

Three Months Ended June 30,

    2013     2012     Change
Production (MBOE/d) (1) 93.38 80.70 +16%
Discretionary Cash Flow-MM$ (2) 440.9 310.5 +42%
Realized Price ($/BOE) 75.88 66.13 +15%
Total Revenues-MM$ 663.6 502.2 +32%
Net Income Available to Common Shareholders-MM$ (3) 134.7 150.6 (11)%
Per Basic Share $1.14 $1.28 (11)%
Per Diluted Share $1.14 $1.27 (10)%
Adjusted Net Income Available to Common Shareholders-MM$ (4) 121.3 86.2 +41%
Per Basic Share $1.03 $0.73 +41%
Per Diluted Share     $1.02     $0.73     +40%
 
(1)   The production attributable to the Postle field, which was sold on July 15, 2013, was 7.56 MBOE/d for the three months ended June 30, 2013 and 8.15 MBOE/d for the three months ended June 30, 2012.
(2) A reconciliation of discretionary cash flow to net cash provided by operating activities is included later in this news release.
(3) For the three months ended June 30, 2013, net income available to common shareholders included $36.8 million of pre-tax, non-cash hedging gains or $0.20 per basic share and $0.19 per diluted share after tax. For the three months ended June 30, 2012, net income available to common shareholders included $107.9 million of pre-tax, non-cash hedging gains or $0.57 per basic and diluted share after tax.
(4) A reconciliation of adjusted net income available to common shareholders to net income available to common shareholders is included later in this news release.
 

Six Months Ended June 30,

    2013     2012     Change
Production (MBOE/d) (1) 91.27 80.72 +13 %
Discretionary Cash Flow-MM$ (2) 841.9 662.4 +27 %
Realized Price ($/BOE) 75.34 70.15 + 7 %
Total Revenues-MM$ 1,276.9 1,065.9 +20 %
Net Income Available to Common Shareholders-MM$ (3) 220.7 248.8 (11) %
Per Basic Share $1.87 $2.12 (12) %
Per Diluted Share $1.86 $2.10 (11) %
Adjusted Net Income Available to Common Shareholders-MM$ (4) 233.0 208.8 +12 %
Per Basic Share $1.98 $1.78 +11 %
Per Diluted Share     $1.96     $1.76     +11 %
 
(1)   The production attributable to the Postle field, which was sold on July 15, 2013, was 7.62 MBOE/d for the six months ended June 30, 2013 and 8.23 MBOE/d for the six months ended June 30, 2012.
(2) A reconciliation of discretionary cash flow to net cash provided by operating activities is included later in this news release.
(3) For the six months ended June 30, 2013, net income available to common shareholders included $10.6 million of pre-tax, non-cash hedging gains or $0.06 per basic and diluted share after tax. For the six months ended June 30, 2012, net income available to common shareholders included $93.4 million of pre-tax, non-cash hedging gains or $0.50 per basic share and $0.49 per diluted share after tax.
(4) A reconciliation of adjusted net income available to common shareholders to net income available to common shareholders is included later in this news release.
 

2013 Capital Budget

We have increased our 2013 capital budget to $2.5 billion from $2.2 billion. Our revised 2013 capital budget is currently allocated among our major development areas as indicated in the table below:

     

2013 CAPEX (MM)

 

Gross Wells

 

Net Wells

 

% of Total

Northern Rockies $ 1,303 247 167 52%
EOR 213 NA (1) NA (1) 8%
Permian 75 7 7 3%
Central Rockies 166 43 32 7%
Gulf Coast 25 3 3 1%
Non-Operated 200 8%
Land 138 6%
Exploration Expense (2) 85 3%
Facilities (3) 145 6%
Well Work, Misc. Costs, Other   150           6%
Total Budget $ 2,500   300   209   100%
 

(1)

  These multi-year CO 2 projects involve many re-entries, workovers and conversions. Therefore, they are budgeted on a project basis and not a well basis.

(2)

Comprised primarily of exploration salaries, seismic activities and delay rentals.

(3)

Includes capital reduction from Postle sale.
 

The following table provides a breakdown of our $300 million budget increase:

   

Breakdown of 2013 CAPEX Increase

  $MM
New Drilling in Northern Rockies $ 161
New Drilling in Permian Basin 75
Non-Operated Drilling 36
New Drilling at Redtail (1) 30
Land 30
New Drilling in Gulf Coast 25
Exploration Expense 3
Downward Adjustments (2)   (60)
$ 300
 

(1)

  A third rig is scheduled to arrive at Redtail in the fourth quarter. Therefore, a larger capex impact is anticipated in 2014.

(2)

Consists of $33 million downward adjustment for facilities and $27 million downward adjustment for EOR projects due to the sale of the Postle field assets.
 

Operations Update

Core Development Areas

Bakken and Three Forks Development

In the Williston Basin, we control 1,096,506 gross (697,259 net) acres that target the Middle Bakken, Three Forks and Pronghorn Sand formations. Our average acreage cost in this area is $549 per net acre.

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