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Whiting Petroleum Corporation Announces Second Quarter 2013 Financial And Operating Results

Stocks in this article: WLL

Enhanced Oil Recovery

North Ward Estes Field. Net production from our North Ward Estes field averaged 9,275 BOE/d, a 9% increase over the 8,545 BOE/d in the first quarter of 2013. Whiting is injecting approximately 350 MMcf of CO 2 per day into the field, of which about 63% is recycled gas.

Operated Drilling Rig Count

As of July 15, 2013, 25 operated drilling rigs were active on our properties. The breakdown of our operated rigs as of July 15, 2013 was as follows:

   

Region

 
 

Northern Rockies

20
Permian Basin 1
Central Rockies 2
Gulf Coast 1
EOR Project:
North Ward Estes 1
Total 25
 

Other Financial and Operating Results

The following table summarizes the Company’s net production and commodity price realizations for the quarters ended June 30, 2013 and 2012:

  Three Months Ended  
June 30,

Production

2013   2012 Change
Oil (MMBbl) 6.70 5.58 20%
NGLs (MMBbl) 0.69 0.70

(1%)

Natural gas (Bcf) 6.62 6.38 4%
Total equivalent (MMBOE) 8.50 7.34 16%
 

Average Sales Price

Oil (per Bbl):
Price received $ 89.15 $ 79.92 12%
Effect of crude oil hedging   (1.05) (1)   (1.35)
Realized price $ 88.10 $ 78.57 12%
NYMEX oil (per Bbl) $ 94.23 $ 93.51 1%
 
NGLs (per Bbl):
Realized price $ 37.80 $ 37.45 1%
 
Natural gas (per Mcf):
Price received $ 4.27 $ 3.25 31%
Effect of natural gas hedging   -   0.06
Realized price $ 4.27 $ 3.31 29%
NYMEX natural gas (per Mcf) $ 4.10 $ 2.21 86%
 
(1)   Whiting realized pre-tax cash settlement losses of $7.0 million on its crude oil hedges during the second quarter of 2013. A summary of Whiting’s outstanding hedges is included later in this news release.
 

Second Quarter and First Half 2013 Costs and Margins

A summary of production, cash revenues and cash costs on a per BOE basis is as follows:

  Per BOE, Except Production
Three Months Ended   Six Months Ended
June 30, June 30,
2013   2012 2013   2012
Production (MMBOE) 8.50 7.34 16.52 14.69
 
Sales price, net of hedging $ 75.88 $ 66.13 $ 75.34 $ 70.15
Lease operating expense 12.37 12.19 12.41 12.54
Production tax 6.33 5.55 6.36 5.81
General & administrative 3.44 3.43 3.52 4.06
Exploration 2.86 1.84 2.62 1.58
Cash interest expense 2.42 2.12 2.40 2.16
Cash income tax expense (benefit)   (0.30)   0.15   (0.13)   0.17
$ 48.76 $ 40.85 $ 48.16 $ 43.83
 

Second Quarter and First Half 2013 Drilling and Expenditures Summary

The table below summarizes Whiting’s operated and non-operated drilling activity and capital expenditures for the three and six months ended June 30, 2013:

  Gross/Net Wells Completed  
    Total New   % Success CAPEX
Producing Non-Producing Drilling Rate (in MM)
Q2 13 112 / 61.0 2 / 1.9 114 / 62.9 98% / 97% $ 663.2 (1)
6M 13 194 / 99.0 3 / 2.9 197 / 101.9 98% / 97%

$

1,232.5

 
 

(1)

  Includes $77 million for land and $43 million for facilities.
 

Outlook for Third Quarter and Full-Year 2013

The following table provides guidance for the third quarter and full-year 2013 based on current forecasts, including Whiting’s full-year 2013 capital budget of $2,500.0 million.

   

Guidance

Third Quarter     Full-Year

2013

2013

Production (MMBOE) 8.30 - 8.70 33.50 - 34.10
Lease operating expense per BOE $ 12.00 - $ 12.50 $ 12.15 - $ 12.45
General and admin. expense per BOE (1) $ 6.25 - $ 6.65 $ 4.10 - $ 4.50
Interest expense per BOE $ 2.40 - $ 2.60 $ 2.50 - $ 2.70
Depr., depletion and amort. per BOE $ 26.25 - $ 27.25 $ 26.00 - $ 27.00
Prod. taxes (% of production revenue) 8.6% - 8.8% 8.5% - 8.7%
Oil price differentials to NYMEX per Bbl (2) ($ 6.50) - ($ 7.50) ($ 6.00) - ($ 6.50)
Gas price premium to NYMEX per Mcf (3) $ 0.10 - $ 0.40 $ 0.10 - $ 0.40
 
(1)   Includes a $21.7 million charge under the Whiting Production Participation Plan related to the Postle sale.
(2) Does not include the effect of NGLs.
(3) Includes the effect of Whiting’s fixed-price gas contracts. Please refer to fixed-price gas contracts later in this news release.
 

Hedges and Fixed Price Natural Gas Contracts

The following summarizes Whiting’s crude oil hedges as of July 15, 2013:

        Weighted Average   As a Percentage of
Derivative Hedge Contracted Volume NYMEX Price June 2013
Instrument Period (Bbls per Month) (per Bbl) Oil Production
 
Three-way Collars (1) 2013
Q3 1,040,000 $ 71.25 - $ 85.63 - $ 113.95 45.8%
Q4 1,040,000 $ 71.25 - $ 85.63 - $ 113.95 45.8%
 
2014
Q1 800,000 $ 71.50 - $ 85.00 - $ 101.91 35.2%
Q2 800,000 $ 71.50 - $ 85.00 - $ 101.91 35.2%
Q3 800,000 $ 71.50 - $ 85.00 - $ 101.91 35.2%
Q4 800,000 $ 71.50 - $ 85.00 - $ 101.91 35.2%
 
Collars 2013
Q3 294,450 $ 48.16 - $ 90.70 13.0%
Oct 294,340 $ 48.15 - $ 90.69 13.0%
Nov 194,340 $ 47.96 - $ 85.90 8.6%
Dec 4,340 $ 80.00 - $ 122.50 0.2%
 
2014
Q1 4,250 $ 80.00 - $ 122.50 0.2%
Q2 4,150 $ 80.00 - $ 122.50 0.2%
Q3 4,060 $ 80.00 - $ 122.50 0.2%
Q4 3,970 $ 80.00 - $ 122.50 0.2%
   

(1)

  A three-way collar is a combination of options: a sold call, a purchased put and a sold put. The sold call establishes a maximum price (ceiling) we will receive for the volumes under contract. The purchased put establishes a minimum price (floor), unless the market price falls below the sold put (sub-floor), at which point the minimum price would be NYMEX plus the difference between the purchased put and the sold put strike price.
 

Whiting also has the following fixed-price natural gas contracts in place as of July 15, 2013:

        Weighted Average   As a Percentage of
Hedge Contracted Volume Contracted Price June 2013
Period (MMBtu per Month) (per MMBtu) Gas Production
 
2013
Q3 368,000 $5.47 16.7%
Q4 368,000 $5.47 16.7%
 
2014
Q1 330,000 $5.49 14.9%
Q2 333,667 $5.49 15.1%
Q3 337,333 $5.49 15.3%
Q4 337,333 $5.49 15.3%
 

Selected Operating and Financial Statistics

   
Three Months Ended

June 30,

Six Months Ended

June 30,

2013   2012 2013   2012
Selected operating statistics
Production
Oil, MBbl 6,701 5,577 12,951 11,159
NGLs, MBbl 694 703 1,404 1,367
Natural gas, MMcf 6,617 6,383 12,988 12,987
Oil equivalents, MBOE 8,498 7,344 16,520 14,691
Average Prices
Oil per Bbl (excludes hedging) $ 89.15 $ 79.92 $ 88.65 $ 85.22
NGLs per Bbl $ 37.80 $ 37.45 $ 40.20 $ 41.73
Natural gas per Mcf (excludes hedging) $ 4.27 $ 3.25 $ 4.04 $ 3.35
Per BOE Data
Sales price (including hedging) $ 75.88 $ 66.13 $ 75.34 $ 70.15
Lease operating $ 12.37 $ 12.19 $ 12.41 $ 12.54
Production taxes $ 6.33 $ 5.55 $ 6.36 $ 5.81
Depreciation, depletion and amortization $ 26.29 $ 21.87 $ 25.70 $ 21.56
General and administrative $ 3.44 $ 3.43 $ 3.52 $ 4.06 (1)
Selected Financial Data
(In thousands, except per share data)
Total revenues and other income $ 663,569 $ 502,174 $ 1,276,940 $ 1,065,880
Total costs and expenses $ 455,598 $ 260,894 $ 931,205 $ 667,155
Net income available to common shareholders $ 134,687 $ 150,612 $ 220,681 $ 248,813
Earnings per common share, basic $ 1.14 $ 1.28 $ 1.87 $ 2.12
Earnings per common share, diluted $ 1.14 $ 1.27 $ 1.86 $ 2.10
 
Average shares outstanding, basic 117,930 117,622 117,859 117,569
Average shares outstanding, diluted 118,901 118,853 118,929 118,889
Net cash provided by operating activities $ 442,617 $ 282,193 $ 740,231 $ 635,185
Net cash used in investing activities $ (574,590) $ (464,883) $ (1,203,081) $ (677,935)
Net cash provided by financing activities $ 147,103 $ 179,672 $ 441,362 $ 33,746
 
(1)   For the six months ended June 30, 2012, the cost includes the effect of a charge under our Production Participation Plan related to the Whiting USA Trust II divestiture of $0.59 per BOE.
 

SELECTED FINANCIAL DATA

For further information and discussion on the selected financial data below, please refer to Whiting Petroleum Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, to be filed with the Securities and Exchange Commission.

 

WHITING PETROLEUM CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands)

   

June 30, 2013

December 31, 2012

ASSETS
 
Current assets:
Cash and cash equivalents $ 23,312 $ 44,800
Accounts receivable trade, net 345,792 318,265
Prepaid expenses and other 26,011 21,347
Assets held for sale (1)   701,701     -  
Total current assets   1,096,816     384,412  
 

Property and equipment:

Oil and gas properties, successful efforts method:
Proved properties 9,021,657 8,849,515
Unproved properties 381,653 362,483
Other property and equipment   169,549     141,738  
Total property and equipment 9,572,859 9,353,736
Less accumulated depreciation, depletion and amortization   (2,691,827 )   (2,590,203 )
Total property and equipment, net 6,881,032 6,763,533
 

Debt issuance costs

27,276 28,748
 

Other long-term assets

  112,586     95,726  
 

TOTAL ASSETS

$ 8,117,710   $ 7,272,419  
 
(1)   Represents primarily proved property costs related to the Postle property divestiture.
 

WHITING PETROLEUM CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share and per share data)

   

June 30, 2013

December 31, 2012

LIABILITIES AND EQUITY
 
Current liabilities:
Current portion of long-term debt $ 250,000 $ -
Accounts payable trade 105,899 131,370
Accrued capital expenditures 104,803 110,663
Accrued liabilities and other 149,064 180,622
Revenues and royalties payable 160,653 149,692
Deposit received on properties held for sale 85,980 -
Taxes payable 44,777 33,283
Derivative liabilities 9,262 21,955
Deferred income taxes 9,803 9,394
Liabilities related to assets held for sale   8,616     -  
Total current liabilities 928,857 636,979
Long-term debt 2,000,000 1,800,000
Deferred income taxes 1,190,146 1,063,681
Derivative liabilities 857 1,678
Production Participation Plan liability 106,613 94,483
Asset retirement obligations 89,675 86,179
Deferred gain on sale 95,139 110,395
Other long-term liabilities   26,072     25,852  
Total liabilities   4,437,359     3,819,247  
Commitments and contingencies
Equity:

Preferred stock, $0.001 par value, 5,000,000 shares authorized; 6.25% convertible perpetual preferred stock, no shares authorized, issued or outstanding as of June 30, 2013 and 172,391 shares issued and outstanding as of December 31, 2012

- -

Common stock, $0.001 par value, 300,000,000 shares authorized; 120,134,157 issued and 118,654,184 outstanding as of June 30, 2013, 118,582,477 issued and 117,631,451 outstanding as of December 31, 2012

120 119
Additional paid-in capital 1,572,835 1,566,717
Accumulated other comprehensive loss (826 ) (1,236 )
Retained earnings   2,100,069     1,879,388  
Total Whiting shareholders’ equity 3,672,198 3,444,988
Noncontrolling interest   8,153     8,184  
Total equity   3,680,351     3,453,172  
 

TOTAL LIABILITIES AND EQUITY

$ 8,117,710   $ 7,272,419  
 

WHITING PETROLEUM CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data)

   

Three Months Ended June 30,

Six Months Ended June 30,

2013   2012 2013   2012
REVENUES AND OTHER INCOME:
Oil, NGL and natural gas sales $ 651,868 $ 492,756 $ 1,256,982 $ 1,051,453
Gain (loss) on hedging activities (437 ) 759 (648 ) 1,886
Amortization of deferred gain on sale 7,954 8,892 15,930 12,645
Gain (loss) on sale of properties 3,387 (362 ) 3,432 (362 )
Interest income and other   797     129     1,244     258  
Total revenues and other income   663,569     502,174     1,276,940     1,065,880  
COSTS AND EXPENSES:
Lease operating 105,080 89,504 204,958 184,294
Production taxes 53,814 40,763 105,085 85,374
Depreciation, depletion and amortization 223,446 160,589 424,605 316,709
Exploration and impairment 43,393 27,902 80,673 55,480
General and administrative 29,213 25,209 58,098 59,577
Interest expense 23,121 17,905 44,591 36,361
Change in Production Participation Plan liability 7,723 (953 ) 12,130 (18 )
Commodity derivative (gain) loss, net   (30,192 )   (100,025 )   1,065     (70,622 )
Total costs and expenses   455,598     260,894     931,205     667,155  
INCOME BEFORE INCOME TAXES 207,971 241,280 345,735 398,725
INCOME TAX EXPENSE (BENEFIT):
Current (2,511 ) 1,109 (2,089 ) 2,535
Deferred   75,538     89,320     126,636     146,893  
Total income tax expense   73,027     90,429     124,547     149,428  
NET INCOME 134,944 150,851 221,188 249,297
Net loss attributable to noncontrolling interest   12     31     31     55  
NET INCOME AVAILABLE TO SHAREHOLDERS 134,956 150,882 221,219 249,352
Preferred stock dividends   (269 )   (270 )   (538 )   (539 )
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 134,687   $ 150,612   $ 220,681   $ 248,813  
EARNINGS PER COMMON SHARE:
Basic $ 1.14   $ 1.28   $ 1.87   $ 2.12  
Diluted $ 1.14   $ 1.27   $ 1.86   $ 2.10  
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic   117,930     117,622     117,859     117,569  
Diluted   118,901     118,853     118,929     118,889  
 

WHITING PETROLEUM CORPORATION Reconciliation of Net Income Available to Common Shareholders to Adjusted Net Income Available to Common Shareholders (In thousands, except for per share data)

   
Three Months Ended Six Months Ended
June 30, June 30,
2013   2012 2013   2012
Net Income Available to Common Shareholders $ 134,687 $ 150,612 $ 220,681 $ 248,813
 
Adjustments Net of Tax:
Amortization of Deferred Gain on Sale (5,002 ) (5,560 ) (10,017 ) (7,906 )
(Gain) Loss on Sale of Properties (2,130 ) 227 (2,158 ) 227
Impairment Expense 11,979 8,998 23,557 20,149
Charge Under Production Participation Plan Related to Trust II Offering - - - 5,928
Change in Production Participation Plan Liability 4,856 (596 ) 7,627 (12 )
Unrealized Derivative Gains   (23,126 )   (67,470 )   (6,674 )   (58,378 )
Adjusted Net Income (1) $ 121,264   $ 86,211   $ 233,016   $ 208,821  
 
Adjusted Net Income Available to Common Shareholders per Share, Basic $ 1.03   $ 0.73   $ 1.98   $ 1.78  
Adjusted Net Income Available to Common Shareholders per Share, Diluted $ 1.02   $ 0.73   $ 1.96   $ 1.76  
 
(1)   Adjusted Net Income Available to Common Shareholders is a non-GAAP financial measure. Management believes it provides useful information to investors for analysis of Whiting’s fundamental business on a recurring basis. In addition, management believes that Adjusted Net Income Available to Common Shareholders is widely used by professional research analysts and others in valuation, comparison and investment recommendations of companies in the oil and gas exploration and production industry, and many investors use the published research of industry research analysts in making investment decisions. Adjusted Net Income Available for Common Shareholders should not be considered in isolation or as a substitute for net income, income from operations, net cash provided by operating activities or other income, cash flow or liquidity measures under U.S. GAAP and may not be comparable to other similarly titled measures of other companies.
 

WHITING PETROLEUM CORPORATION Reconciliation of Net Cash Provided by Operating Activities to Discretionary Cash Flow (In thousands)

   
Three Months Ended Six Months Ended
June 30, June 30,
2013   2012 2013   2012
Net cash provided by operating activities $ 442,617 $ 282,193 $ 740,231 $ 635,185
Exploration 24,343 13,510 43,209 23,254
Exploratory dry hole costs (11,628 ) (4 ) (11,628 ) (255 )
Changes in working capital (14,191 ) 15,095 70,668 4,785
Preferred stock dividends paid   (269 )   (270 )   (538 )   (539 )
Discretionary cash flow (1) $ 440,872   $ 310,524   $ 841,942   $ 662,430  
 
(1)   Discretionary cash flow is a non-GAAP measure. Discretionary cash flow is presented because management believes it provides useful information to investors for analysis of the Company’s ability to internally fund acquisitions, exploration and development. Discretionary cash flow should not be considered in isolation or as a substitute for net income, income from operations, net cash provided by operating activities or other income, cash flow or liquidity measures under U.S. GAAP and may not be comparable to other similarly titled measures of other companies.
 

Conference Call

The Company’s management will host a conference call with investors, analysts and other interested parties on Thursday, July 25, 2013 at 11:00 a.m. EDT (10:00 a.m. CDT, 9:00 a.m. MDT) to discuss Whiting’s second quarter 2013 financial and operating results. Please call (877) 415-3183 (U.S./Canada) or (857) 244-7326 (International) to be connected to the call and enter the pass code 32363164. Access to a live Internet broadcast will be available at http://www.whiting.com by clicking on the “Investor Relations” box on the menu and then on the link titled “Webcasts.” Slides for the conference call will be available on this website beginning at 11:00 a.m. (EDT) on July 25, 2013.

A telephonic replay will be available beginning approximately two hours after the call on Thursday, July 25, 2013 and continuing through Thursday, August 1, 2013. You may access this replay at (888) 286-8010 (U.S./Canada) or (617) 801-6888 (International) and entering the pass code 35627250. You may also access a web archive at http://www.whiting.com beginning approximately one hour after the conference call.

About Whiting Petroleum Corporation

Whiting Petroleum Corporation, a Delaware corporation, is an independent oil and gas company that explores for, develops, acquires and produces crude oil, natural gas and natural gas liquids primarily in the Rocky Mountain, Permian Basin, Mid-Continent, Michigan and Gulf Coast regions of the United States. The Company’s largest projects are in the Bakken and Three Forks plays in North Dakota and its Enhanced Oil Recovery field in Texas. The Company trades publicly under the symbol WLL on the New York Stock Exchange. For further information, please visit http://www.whiting.com.

Forward-Looking Statements

This news release contains statements that we believe to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than historical facts, including, without limitation, statements regarding our future financial position, business strategy, projected revenues, earnings, costs, capital expenditures and debt levels, and plans and objectives of management for future operations, are forward-looking statements. When used in this news release, words such as we “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe” or “should” or the negative thereof or variations thereon or similar terminology are generally intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements.

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