Whiting Petroleum Corp. (NYSE:WLL), the largest oil producer in North Dakota, has announced that it will suspend all fracking in the state and cut its budget for this year by 80 percent in a move that sent its shares up 9 percent on Wednesday, back down to a record low on Thursday, and $4.02 this morning.
Across the E&P patch, it’s a volatile game of craps right now that has investors torn between responding positively to spending cuts to weather the oil price downturn, and negatively to the notion that all these companies are doing is narrowly avoiding bankruptcy.
As of 1 April, Whiting will halt all fracking and stop completing its wells at 20 Bakken and three Forks sites. By this summer it will cut spending to $160 million for the rest of year to fund maintenance.
These are some of the biggest spending cuts in the industry so far, and investors have responded positively to Whiting’s strategy for waiting out low oil prices.
"We believe this conservative strategy should help us to maintain our liquidity position and leave us well positioned to capitalize on a rebound in oil prices," Whiting Chief Executive Jim Volker said in a statement carried by Reuters.
The news comes along with Whiting’s fourth-quarter results, which posted a net loss of $0.80 per share and revenues of $2.05 billion compared with 2014 EPS of $4.15 and revenues of $3.09 billion.
In an earnings call on 25 February, Whiting noted that its production for the fourth quarter averaged 155,210 barrels of oil equivalent per day, and that enhanced completion designs in the Williston Basin drove performance by delivering 22 percent production increases quarter over quarter on a per well basis.
“Despite the sharp drop in commodity prices, our proved reserves increased 5 percent to 821 million barrels of oil equivalent, even after 53 million barrels of oil equivalent of asset sales which equated to almost 7 percent of our year-end 2014 reserves,” Whiting executives noted.
The company sold $512 million of assets last year, ending the year with $2.7 billion of liquidity. It’s also in a better position despite all the setbacks because it doesn’t have any bonds maturing until 2019, and will not be negatively affected by the “March madness” that is threatening other producers.
“Our 2016 plan is designed to maximize current and future returns and preserve balance sheet strength. We're decreasing CapEx by 80 percent from 2015 levels and adjusting our activity levels to four rigs versus our monthly average of 11 in 2015 and our high of 25 rigs in 2014,” according to Whiting.
Whiting said on Thursday, a day after reporting its quarterly results, that if oil prices recover back to the $40-$45 per barrel range, it would consider completing some of its wells.
Whiting has some 667,000 net acres in the Williston Basin in North Dakota and Montana, and the wells put on hold there were just in the planning stage. But the side effects of a move like this mean that it will also be putting on hold a pipeline project slated to be built by Tesoro Logistics.
The debt picture might look better, but Whiting’s shares have suffered more than some of its key peers. Shares have slid 63 percent since the beginning of this year.
On Thursday, Whiting’s shares opened at $3.53, its one-year low. The company has a one-year high of $41.57. In Wednesday trading, the company’s shares had jumped 9 percent on news that it would suspend fracking.
Whiting is slashing spending and appeasing investors as much as it can, but right now it’s all about avoiding bankruptcy for this company and its peers as the waiting game continues.
By Charles Kennedy of Oilprice.com
More Top Reads From Oilprice.com:
- Oil Up On OPEC Rumors, U.S. Shale Shutdowns
- UK Oil Industry At The “Edge Of A Chasm”
- Why Oil Booms And Busts Happen