I have updated my forecast model for WLL and it will be available on the website this afternoon. I am raising my valuation by $5.50/share to $42.50/share, compared to First Call's Price Target of $42.08.
Whiting's first quarter production beat my forecast. However, the primary reason I am raising my valuation is that WLL is now "out of the woods". Their equity offering in March and rising oil prices have stabilized the company's outlook and given me a lot more confidence in my cash flow per share forecast. My valuation is 6X cash flow per share from operations (see row 46 of the forecast spreadsheet).
Whiting is the largest oil producer in North Dakota's Bakken / Three Forks play. Despite all the "noise" surrounding their recent merger with Kodiak, this company is still a prime takeover target. Production in 2015 should average ~162,000 boepd (81% crude oil).
If WTI ends the year around $70/bbl, WLL is going to be in great shape heading into 2016.
WLL valuation being raised
WLL valuation being raised
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: WLL valuation being raised
Global Hunter's take on WLL:
Whiting Petroleum Corp. (NYSE: WLL; $36.76; Accumulate; $43.00 PT) Q1 First Look: Getting it done in Dunn County, ND
Production: Actual: 166.9 Mboepd; GHS: 162.7 Mboepd; consensus: 163.2 Mboepd.
EPS/DCPS: Actual: ($0.23)/$1.47; GHS: ($0.32)/$1.50; consensus: ($0.32)/$1.44.
Strong oil production & lower DD&A drive a Q1 earnings beat – we think this trumps a hefty Q1 capex figure since full-year capex guidance was held in check. We think WLL’s operational update is the more important aspect of the release – WLL posted its strongest Bakken results ever this quarter and projects a meaningful drop in well costs ($8.5MM in FY14 to $6.5MM today), which, in our opinion, should enable the company to produce compelling rates of return in the Bakken even at today’s prices
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WLL is reporting some great well results using slickwater fracs. They also report good operational update in Redtail (Niobrara and Codell). - Dan
Whiting Petroleum Corp. (NYSE: WLL; $36.76; Accumulate; $43.00 PT) Q1 First Look: Getting it done in Dunn County, ND
Production: Actual: 166.9 Mboepd; GHS: 162.7 Mboepd; consensus: 163.2 Mboepd.
EPS/DCPS: Actual: ($0.23)/$1.47; GHS: ($0.32)/$1.50; consensus: ($0.32)/$1.44.
Strong oil production & lower DD&A drive a Q1 earnings beat – we think this trumps a hefty Q1 capex figure since full-year capex guidance was held in check. We think WLL’s operational update is the more important aspect of the release – WLL posted its strongest Bakken results ever this quarter and projects a meaningful drop in well costs ($8.5MM in FY14 to $6.5MM today), which, in our opinion, should enable the company to produce compelling rates of return in the Bakken even at today’s prices
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WLL is reporting some great well results using slickwater fracs. They also report good operational update in Redtail (Niobrara and Codell). - Dan
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: WLL valuation being raised
This is Morgan Stanley's take on Whiting's first quarter results:
Positive momentum, but valuation slightly richer on weaker NGL and gas pricing. Guidance indicates Williston Basin production could roll over in 3Q.
Whiting beat 1Q production expectations and raised 2015 volume guidance, while lowering cost guidance. We expect weak NGL and gas pricing to offset these benefits in 2015, but we are more positive on the story than just after the equity raise.
Production beat and raise. Whiting reported production above the high end of guidance, driven by better Bakken volumes, and raised full year production 1% pro forma the divestiture announced today (details below). 1Q15 production of 167 MBoe/d was 2% above consensus and our estimate. 2Q15 production guidance is 2% above our estimate (1% above consensus) despite the divestiture of 2,200 Boe/d (1,840 Boe/d negative impact in 2Q w/ the 4/15/15 close). 2015 production guidance pro forma the asset sale is 1% higher than previous guidance.
3Q production to dip before flattening in 4Q. This is an indication that Williston Basin production could roll over in 3Q, before rebounding slightly in 4Q, in our view. 2015 volume guidance of 58.8-59.4 MMBoe and 4Q15 exit rate of 160 MBoe/d implies 3Q production will decline before flattening in 4Q. The 76 net Bakken completions in 1Q accounted for over half of total projected FY15 completions. We expect completions to slow in 2Q and 3Q before picking up in 4Q and are modeling a 5% production decline in 3Q, followed by flat production in 4Q. The 4Q15 exit rate implies a 3% decline from 1Q15 pro forma production.
NGL pricing below expectations. Whiting's 1Q NGL realization was 46% below our estimates at $13.10/Bbl or 27% of WTI vs. MS at $24.14/Bbl or 50% of WTI. Mgmt attributed the lower NGL realizations to overall weakness in the NGL market. We expect this weak NGL pricing theme to continue for the E&Ps through 2Q, partly due to an overhang of high propylene stocks (see our Chemicals team's note on propylene prices) and low natural gas prices
Positive momentum, but valuation slightly richer on weaker NGL and gas pricing. Guidance indicates Williston Basin production could roll over in 3Q.
Whiting beat 1Q production expectations and raised 2015 volume guidance, while lowering cost guidance. We expect weak NGL and gas pricing to offset these benefits in 2015, but we are more positive on the story than just after the equity raise.
Production beat and raise. Whiting reported production above the high end of guidance, driven by better Bakken volumes, and raised full year production 1% pro forma the divestiture announced today (details below). 1Q15 production of 167 MBoe/d was 2% above consensus and our estimate. 2Q15 production guidance is 2% above our estimate (1% above consensus) despite the divestiture of 2,200 Boe/d (1,840 Boe/d negative impact in 2Q w/ the 4/15/15 close). 2015 production guidance pro forma the asset sale is 1% higher than previous guidance.
3Q production to dip before flattening in 4Q. This is an indication that Williston Basin production could roll over in 3Q, before rebounding slightly in 4Q, in our view. 2015 volume guidance of 58.8-59.4 MMBoe and 4Q15 exit rate of 160 MBoe/d implies 3Q production will decline before flattening in 4Q. The 76 net Bakken completions in 1Q accounted for over half of total projected FY15 completions. We expect completions to slow in 2Q and 3Q before picking up in 4Q and are modeling a 5% production decline in 3Q, followed by flat production in 4Q. The 4Q15 exit rate implies a 3% decline from 1Q15 pro forma production.
NGL pricing below expectations. Whiting's 1Q NGL realization was 46% below our estimates at $13.10/Bbl or 27% of WTI vs. MS at $24.14/Bbl or 50% of WTI. Mgmt attributed the lower NGL realizations to overall weakness in the NGL market. We expect this weak NGL pricing theme to continue for the E&Ps through 2Q, partly due to an overhang of high propylene stocks (see our Chemicals team's note on propylene prices) and low natural gas prices
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group