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Why Is Whiting (WLL) Down 28.3% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Whiting Petroleum (WLL). Shares have lost about 28.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Whiting due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Whiting Reports Wider Than Expected Q3 Loss

Whiting Petroleum Corporation incurred third-quarter 2019 adjusted net loss per share of 38 cents, wider than the Zacks Consensus Estimate of a loss of 8 cents. Moreover, the loss came in against the year-ago earnings of 92 cents. Lower-than-expected oil, natural gas liquids (NGLs) and gas prices resulted in this underperformance.

The company’s realized NGLs price was $3.07 a barrel, significantly lagging the Zacks Consensus Estimate of $9.21. Realized prices of oil and gas also missed the consensus estimate by 7.9% and 95.8%, respectively.

Additionally, total operating revenues of $375.8 million fell short of the Zacks Consensus Estimate of $411 million. The top line also declined 33.7% from the year-ago level of $566.7 million.

On a further discouraging note, the company’s discretionary cash flow of $178.5 million was lower than the capital spending of $225 million, translating to a negative free cash flow of $46.5 million.

Despite this dull scenario, the company’s third-quarter results offered some relief to buoy long-term investors’ optimism as total operating expenses decreased 11.6% from the prior-year level to $351.2 million.

Production & Prices

Whiting Petroleum’s total oil and gas production recorded a nominal year-over-year decrease of 4.03% to 11.36 million oil-equivalent barrels (comprising 81.6% liquids) and further fell shy of the Zacks Consensus Estimate of 11.42 million oil-equivalent barrels. In particular, oil volumes at 7.44 million barrels were down 5.9% from the level achieved in third-quarter 2018 as adverse weather induced operating delays and hampered production.

The average realized crude oil price during the third quarter was $51.12 per barrel, reflecting a decrease of 10.03% from the year-ago realization of $56.82. Moreover, the average realized natural gas liquids price was $3.07 per barrel, plummeting 86.18% from the year-ago period.Natural gas prices also tumbled 97.05% year over year to 3 cents per thousand cubic feet.

Balance Sheet & Capital Expenditure

As of Sep 30, the oil explorer had long-term debt of $2,605.02 million, representing a debt-to-capitalization ratio of 25.09%. In the reported quarter, the company spent $225 million on its capital program.

Capex Guidance

Whiting Petroleum forecasts a decline in capital spending for the fourth quarter to $134-$154 million as a significant portion of the capital investment required for wells during the fourth quarter was incurred in the third quarter and as activity declines seasonally.

Whiting Petroleum maintained its 2019 production guidance on account of issues related to infrastructure constraints, which are expected to persist in the remaining year. The company expects full-year production in the range of 45-46.5 million barrels of oil equivalent. However, it tightened its 2019 capex outlook to the $810-$830 million band.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -3400% due to these changes.

VGM Scores

Currently, Whiting has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Whiting has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.



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