WLL Upgrade

[dan_s]

JPM raised their price target on Sweet 16 member Whiting Petroleum (WLL) by $5 to $94/share. My Fair Value Estimate is $117/share.

Here are their comments:

On Thursday, April 10th, we hosted a conference call with WLL titled, "Update
on Whiting's Application of New Frac Technology and Its Redtail Niobrara Play.”
We think the incremental data from the call are positive.
 Recent completion modifications. WLL has made at least three recent
modifications to its relatively new completion design. The three modifications
include: 1) using 5 perf clusters per frac stage, up from 3 (1 well), 2) using
coiled tubing-conveyed fracs instead of plug & perf (1 well), and 3) using slick
water fracs instead of cross-linked gel fracs (1 well).
 Effective frac ports. Whiting seems to think that one of the key components of
the new frac technology is the use of more frac ports and, more importantly,
more effective fracking into the reservoir. In one drilling unit in which Whiting
used different techniques on four wells, the last technique, a coiled tubing conveyed
frac, resulted in a 73% increase in production versus a production enhanced
ball-sleeve completion with 4 million lbs. of proppant.
 Increased Bakken production rates 50-75% from plug & perf. In three
Bakken areas (Missouri Breaks, Pronghorn, and Hidden Bench), the plug & perf
completion design has increased production, compared with lower-proppant
sliding sleeve wells, by 52% to 75% on a 30-, 60-, and 90-day basis (see Slide 9
of Whiting’s April 10, 2014, presentation).
 Redtail significant. Whiting indicated that it has comfort that its entire acreage
position, of 122,278 net acres, will be economically successful. It also indicated
that the optimal spacing likely will be 16 wells per drilling unit, but it is testing
32 wells in case it is able to downspace further. Its recent wells continue to
perform well above the 400 MBoe type curve.

[dan_s]

JPM's new financial forecast for WLL shows CFPS of $16.55, compared to my forecast of $16.29. It is always encouraging to me to see another analysts come close to my forecast. - Dan

BTW my forecast for WLL assumes WTI will average $90/bbl for 2014. A lot of the production is hedged with collars that have $85 floors and $103.34 ceilings.