Whiting Petroleum price target raised to $75 from $67 at Brean Capital
Brean Capital raised its price target on Whiting Petroleum following Q2 results. The firm expects improving well results from the company's Bakken and Redtail Niobrara plays to drive share price appreciation. Shares are Buy rated.
I will be updating my forecast models for Sweet 16 members WLL, RRC and HP today. All three released Q2 results this week.
WLL
Re: WLL
Redtail Project has now become a significant growth area for WLL. Niobrara gets a big boost from the increase in WTI crude oil prices. - Dan
James J. Volker, Whiting’s Chairman and CEO, commented, “With the sale of our Postle assets, we have the liquidity to accelerate development of our high rate of return Williston Basin Bakken and DJ Basin Niobrara assets. Our revised 2013 production growth guidance equates to a 12% increase over 2012 levels and a 19% increase excluding the production associated with the Postle assets. In the third quarter we anticipate replacing nearly all of the production from the Postle assets sale, which generated $837 million in net sale proceeds, while increasing our capital budget by only $300 million. We believe this demonstrates the potential of our new, streamlined portfolio and the validity of our asset rationalization strategy.”
Mr. Volker added, “With the Postle sale proceeds, we expect to capitalize on the potential of our DJ Basin Redtail Niobrara area. Our most recent wells have benefited from longer laterals and larger sand volumes. We believe our completion practices translate into higher EURs and greater returns on capital. We are moving into development mode in this area with the recent arrival of a second pad capable rig and a third rig contracted to arrive in October of this year. This approximate 88,000 net acre lease position with a large amount of estimated original oil in place (59 MMBOE in the Niobrara “B” and “A” per 960-acre spacing unit) affords us the opportunity to enhance recovery by drilling on tighter spacing. Consequently, Redtail has the potential for a 33% increase to our current estimate of 2,400 gross drilling locations.”
James J. Volker, Whiting’s Chairman and CEO, commented, “With the sale of our Postle assets, we have the liquidity to accelerate development of our high rate of return Williston Basin Bakken and DJ Basin Niobrara assets. Our revised 2013 production growth guidance equates to a 12% increase over 2012 levels and a 19% increase excluding the production associated with the Postle assets. In the third quarter we anticipate replacing nearly all of the production from the Postle assets sale, which generated $837 million in net sale proceeds, while increasing our capital budget by only $300 million. We believe this demonstrates the potential of our new, streamlined portfolio and the validity of our asset rationalization strategy.”
Mr. Volker added, “With the Postle sale proceeds, we expect to capitalize on the potential of our DJ Basin Redtail Niobrara area. Our most recent wells have benefited from longer laterals and larger sand volumes. We believe our completion practices translate into higher EURs and greater returns on capital. We are moving into development mode in this area with the recent arrival of a second pad capable rig and a third rig contracted to arrive in October of this year. This approximate 88,000 net acre lease position with a large amount of estimated original oil in place (59 MMBOE in the Niobrara “B” and “A” per 960-acre spacing unit) affords us the opportunity to enhance recovery by drilling on tighter spacing. Consequently, Redtail has the potential for a 33% increase to our current estimate of 2,400 gross drilling locations.”
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: WLL
Whiting Petroleum (WLL): The company reported strong 2nd quarter results. An updated Net Income & Cash Flow Forecast model has been posted under the Sweet 16 Tab.
I have a high level of confidence in my forecast model for WLL, primarily because the company gives very good production and line-by-line expense guidance.
I have raised my Fair Value Estimate (current break-up value) to $87/share. If you'd like to see how I arrive at my valuation, you can find it near the bottom of the forecast model. IMO the valuation should be higher for a company with this much running room and double digit production growth locked in for at least five years. It is puzzling to me why WLL trades at a much lower multiple than CLR.
It appears that Whiting has made a major breakthrough on how to complete horizontal wells in the Niobrara. If they can keep getting outstanding results up there, the share price should respond. The analysts on the conference call were very interested in the Niobrara results. Look for more upgrades on this one next week.
I have a high level of confidence in my forecast model for WLL, primarily because the company gives very good production and line-by-line expense guidance.
I have raised my Fair Value Estimate (current break-up value) to $87/share. If you'd like to see how I arrive at my valuation, you can find it near the bottom of the forecast model. IMO the valuation should be higher for a company with this much running room and double digit production growth locked in for at least five years. It is puzzling to me why WLL trades at a much lower multiple than CLR.
It appears that Whiting has made a major breakthrough on how to complete horizontal wells in the Niobrara. If they can keep getting outstanding results up there, the share price should respond. The analysts on the conference call were very interested in the Niobrara results. Look for more upgrades on this one next week.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: WLL
I made some minor adjustments to the Whiting forecast model and I reposted it under the Sweet 16 Tab. No change in my $87/share Fair Value Estimate.
$100/bbl WTI will really help their Bakken and Niobrara revenues.
$100/bbl WTI will really help their Bakken and Niobrara revenues.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group