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Whiting (WLL) Suffers Q2 Loss on Weak Price Realizations

Zacks Equity Research

Whiting Petroleum Corporation WLL reported second-quarter 2019 adjusted net loss per share of 28 cents versus the Zacks Consensus Estimate for earnings of 24 cents and the year-ago bottom line figure of 62 cents. Lower-than-expected oil, natural gas liquids (NGLs) and gas prices caused this underperformance. Precisely, the company’s realized NGLs price was $8.43 a barrel, significantly lagging the Zacks Consensus Estimate of $12.67. Realized prices of oil and gas also missed the consensus estimate by 4.3% and 60.2%, respectively. Shares of Whiting Petroleum shed around 39% of value following the quarterly loss.

Total operating revenues came in at $426.3 million, missing the Zacks Consensus Estimate of $450 million. The top line also declined 19% from the year-ago level of $515.1 million.

On a further discouraging note, the company’s discretionary cash flow of $225.4 million was lower than the capital spending of $232 million, translating to a negative free cash flow of $6.6 million.

Amid this dull scenario, the company’s second-quarter earnings offered something positive to buoy long-term investors’ optimism as total operating expenses decreased 24.4% from the prior-year level to $360.4 million.

Whiting Petroleum Corporation Price, Consensus and EPS Surprise

Whiting Petroleum Corporation Price, Consensus and EPS Surprise

Whiting Petroleum Corporation price-consensus-eps-surprise-chart | Whiting Petroleum Corporation Quote

Production & Prices

Whiting Petroleum’s total oil and gas production recorded a nominal year-over-year increase of 1% to 11.57 million oil-equivalent barrels (comprising 81% liquids) but fell short of the Zacks Consensus Estimate of 11.72 million oil-equivalent barrels. In particular, oil volumes at 7.46 million barrels were down 3% from the level achieved in second-quarter 2018 as infrastructure bottlenecks induced operating delays and hampered production.

The average realized crude oil price during the second quarter was $54.14 per barrel, reflecting a decrease of 14% from the year-ago realization of $62.61. Moreover, the average realized natural gas liquids price was $8.43 per barrel, plummeting 45% from the year-ago period. Natural gas prices also tumbled 64% year over year to 47 cents per thousand cubic feet. 

Balance Sheet & Capital Expenditure

As of Jun 30, Whiting Petroleum had approximately $6.7 million in cash and cash equivalents. The oil explorer had a long-term debt of $2,303.9 million, representing a debt-to-capitalization ratio of 35.4%. In the reported quarter, the company spent $232 million on its capital program.

Lowers Output Guidance, Announces Restructuring

Whiting Petroleum has revised its 2019 production guidance due to issues related to infrastructure constraints that are expected to persist in the remaining year. The firm expects 2019 production in the range of 45-46.5 million barrels of oil equivalent, down from 46.7-47.7 million barrels of oil equivalent projected before. However, the company maintained its 2019 capital spending forecast in the band of $800-$840 million.

Whiting Petroleum also announced its streamlining initiative that will include a 33% cutback in headcount including the elimination of 94 positions at the executive and corporate levels. Management predicts this strategic move to save $50 million annually.

Zacks Rank & Key Picks

Whiting Petroleum carries a Zacks Rank #3 (Hold). Better-ranked players in the energy space include Oasis Midstream Partners L.P. OMP, Plains Group Holdings L.P. PAGP and Magellan Midstream Partners, L.P. MMP. While Oasis Midstream and Plains Group sport a Zacks Rank #1 (Strong Buy), Magellan Midstream Partners holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Oasis Midstream Partners LP:  The firm’s earnings beat the Zacks Consensus Estimate in two of the last four quarters.

Plains Group Holdings, L.P.: The partnership delivered average positive earnings surprise of 62.68% in the trailing four quarters.

Magellan Midstream Partners, L.P.: The partnership has average trailing four-quarter positive earnings surprise of 1.91%.

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