Drilling & Completions | Quarterly / Earnings Reports | Fourth Quarter (4Q) Update | Capital Markets | Capital Expenditure | Capital Expenditure - 2020 | 2020 Guidance

Whiting Petroleum Details 2020 Plans; Fourth Quarter 2019 Results

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   |    Thursday,February 27,2020

Whiting Petroleum Corp. announced fourth quarter and full-year 2019 results.

Highlights:

• Full-Year 2019 Capital Expenditures were $778 Million, $42 Million below the Mid-Point of Guidance; Fourth Quarter 2019 Capital Expenditures were $103 Million
• Fourth Quarter Net Cash Provided by Operating Activities Totaled $235 Million and Free Cash Flow was $86 Million⁽¹⁾
• Fourth Quarter Total Production of 123,000 BOE per day was above the Mid-Point of Guidance; Oil Production of 80,200 BO per day was at the Mid-Point
• Full-Year 2019 LOE and G&A⁽²⁾ per BOE were below the Mid-Point of Guidance
• All-in 2020 Capital Budget of $585 - $620 Million, a 23% Decline from 2019 at the Mid-Point

Consistent with the Company’s guidance, fourth quarter total production and oil production remained flat relative to production in the third quarter. The Company maintained strict control over capital expenditures, underspending its full-year capital budget of $820 million by $42 million or 5%. This was driven by improvements in cycle times and well cost reductions. On the cost side, full year lease operating expense (LOE) of $7.17 per barrel of oil equivalent (BOE) and general and administrative (G&A) of $2.45 per BOE⁽²⁾ were below the mid-point of the Company’s guidance. These results reflect ongoing savings from the Company’s mid-year reorganization and the benefit of comprehensive cost reduction initiatives that were introduced in the second half of the year. Subsequent to the quarter, Whiting divested $25 million of non-core, non-operated assets with associated production of 575 BOE per day as of December 2019.

Bradley J. Holly, Whiting’s Chairman, President and CEO, commented, “Whiting delivered solid results following significant organizational changes during 2019 to streamline our organization, realize savings and enhance productivity. Our strong fourth quarter results were underpinned by disciplined spending, lower costs and increased operational efficiency, which drove significant free cash flow generation.

“We believe we are positioning Whiting for long-term success as a top-tier operator of unconventional assets. In the second half of 2019, we achieved our cost reduction goals, reducing annualized LOE and G&A rates by approximately $100 million based on second quarter levels. We intend to build on our momentum to further reduce G&A and LOE and realize additional cost savings in 2020.”

Holly concluded, “Today, Whiting has a competitive cost structure on a quality asset base. We expect our 2020 plan, under which we estimate we will reduce all-in capital spending by 23% as compared to 2019, will help us maximize capital efficiency and generate the highest returns possible. Our top priorities in 2020 are to further enhance cash flow and strengthen the balance sheet, and we believe we are taking the right steps to strengthen Whiting’s performance and generate attractive returns.”

2020 Capital Plan

Whiting projects all-in 2020 capital spending of $585-$620 million. Of the total, approximately 90% is planned to be allocated to drilling and completion activity based on the mid-point of guidance. Average well cost in the Williston Basin for 2020 is estimated at $6.6 million. The Company’s estimated average well cost includes an increase of $300,000 per well for additional proppant, which the Company’s analysis indicates could further enhance well productivity. This change represents a 10% decrease pre-optimization and a 6% decrease post-optimization, primarily due to enhanced operational efficiency and service cost reductions.

Whiting projects a rate of return greater than 30% on its 2020 drilling plan. The plan is partially protected from commodity price decreases as the Company proactively entered into hedge agreements on upward price spikes. Currently, 45% of Whiting’s 2020 oil production is hedged at an average weighted floor price of approximately $55 NYMEX. This compares to approximately 11% hedged at the end of the third quarter.

The Company’s capital spend is projected to deliver full-year total production of 111,700 to 118,400 BOE per day and full-year oil production of 68,100 to 72,000 barrels of oil (BO) per day. Total production is forecasted to increase slightly from the fourth quarter of 2019 to the fourth quarter of 2020. The Company plans to run three rigs and two to three completion crews throughout the year. With these resources, Whiting expects to put on production 122 gross wells during 2020.

Operations Update

During the fourth quarter, Whiting drilled 31 wells and put on production 35 wells. 20 of the wells put on production during the quarter were located in the Sanish Field at the Company’s Pod 10 and Pod 16 projects. Results remain strong and demonstrate continuous improvement as Whiting optimizes its infill process.

Pod 10 represents the latest evolution of infill development in the Sanish Field. It spans two 1,280 acre drilling spacing units with 16 parent wells and 10 child wells. Based on prior infill pilot results, the Company optimized proppant and fluid volumes and modified its artificial lift program. On average, cumulative production per well from Pod 10 is trending higher than the Pod 9 and Pod 16 results. Performance relative to parent wells has also been superior with average 30-day cumulative rates for Pod 10 child wells 45% above the parent trend.

At Foreman Butte, Whiting drilled and put on production 17 wells in 2019. The wells have consistently outperformed expectations with the average well outperforming offset wells by over 2.5x over the first 90-days on production. Based on these strong results, Whiting considers Foreman Butte a core property and plans to drill an additional 20 wells there in 2020. Whiting has identified over 300 potential future drilling locations at Sanish and Foreman Butte through the implementation of innovative new completion processes.

First quarter 2020 production has been impacted by severe weather conditions and associated electric submersible pump failures on multiple high-value wells. The Company estimates that this loss of production will impact first quarter 2020 production results by approximately 5,000 BOE per day. Also, the Company plans to put on production only 11 net wells during the quarter. First quarter 2020 production is estimated to range between 108,000 and 110,500 BOE/d, of which 62% is expected to be oil.