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Whiting Petroleum Third Quarter 2020 Results

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   |    Tuesday,November 10,2020

Whiting Petroleum Corp. announced third quarter 2020 results.

Third Quarter 2020 Highlights

  • Revenue was $184 million for the quarter ending September 30, 2020
  • Net income was $278 million, or $7.30 per diluted share for the quarter ending September 30, 2020
  • Adjusted EBITDAX was $100 million for the quarter ending September 30, 2020 (see further discussion regarding the presentation of adjusted EBITDAX in "About Non-GAAP Financial Measures" below)
  • Emerged from bankruptcy with a strong balance sheet and liquidity position

Lynn A. Peterson, President and CEO of WLL commented, "The past quarter saw the Company complete its restructuring work and emerge from bankruptcy in September. The Whiting team remained extremely focused during the process and I commend all of our staff for their efforts.

"We are in a challenging and volatile commodity price environment and we will continue to prioritize cash flow generation. As we look ahead at consensus commodity prices in 2021, our goals will be 1) to maintain production levels near our 2020 exit rate, and 2) operate within internally generated cash flow, which in combination should produce an attractive free cash flow yield. We anticipate holding 2021 spending levels in the same range as our 2020 capital expenditures to achieve these goals. We believe this strategy will create value for the Company's stakeholders while always operating in a safe environment."

Bankruptcy Emergence

On September 1, 2020 the Company emerged from voluntary bankruptcy under Chapter 11 of the Bankruptcy Code. Beginning on the Emergence Date, the Company applied fresh start accounting, which resulted in a new basis of accounting, and became a new entity for financial reporting purposes. As a result of the application of fresh start accounting and the effects of the implementation of the Company's chapter 11 plan of reorganization, the consolidated financial statements after September 1, 2020 are not comparable with the consolidated financial statements on or prior to that date. References to "Successor" refer to the Whiting entity after emergence from bankruptcy on the Emergence Date. References to "Predecessor" refer to the Whiting entity prior to emergence from bankruptcy. References to "Successor Period" refer to the period from September 1, 2020 through September 30, 2020. References to "Current Predecessor Quarter" and "Current Predecessor YTD Period" refer to the periods from July 1, 2020 through August 31, 2020 and January 1, 2020 through August 31, 2020, respectively. References to "Prior Predecessor Quarter" and "Prior Predecessor YTD Period" refer to the three and nine months ended September 30, 2019, respectively.

Q3 Financials

Revenue for the Combined Current Quarter decreased $192 million to $184 million when comparing to the quarter ending September 30, 2019. A decrease in total production accounted for approximately $111 million of the change in revenue and decreases in commodity prices realized accounted for approximately $81 million of the change in revenue between periods.

Net income for the Combined Current Quarter was $278 million, or $7.30 per share, as compared to a net loss of $19 million, or $0.21 per share, in the quarter ended September 30, 2019. Adjusted net loss for the Combined Current Quarter was $13 million or $0.34 per share.

Adjusted EBITDAX for the Combined Current Quarter was $100 million compared to $236 million for the quarter ended September 30, 2019.

Liquidity

Since emergence, the Company paid down approximately $25 million on its revolver. As of September 30, 2020, the Company had $400 million outstanding on its revolver and $14 million in cash resulting in total liquidity of $364 million. Whiting expects to fund its operations fully within operating cash flow through at least 2021.

Commodity Price Hedging

Whiting uses commodity hedges in order to reduce the effects of commodity price volatility and to adhere to the requirements of its credit facility. As of October 30, 2020, the Company has approximately 1.9 million Bbls of oil hedged at a weighted-average floor price of approximately $39 per Bbl in 2020, approximately 8.8 million Bbls of oil hedged at a weighted-average floor price of approximately $39 per Bbl in 2021 and approximately 3.5 million Bbls of oil hedged at a weighted-average floor price of approximately $38 per Bbl in 2022. Additionally, the Company has approximately 2.2 billion British thermal units ("Bbtu") of natural gas hedged at a weighted-average floor price of $2.36 per million British thermal units ("MMbtu") in 2020, approximately 23.5 Bbtu of natural gas hedged at a weighted-average floor price of $2.65 per MMbtu in 2021 and approximately 12.1 Bbtu of natural gas hedged at a weighted-average floor price of $2.38 per MMbtu in 2022. These floor prices are the weighted-average of swaps and the floors of collared transactions.

G & A

G&A expenses decreased to $27 million in the Combined Current Quarter, which includes $15 million of specific costs related to restructuring. This compares to $28 million in the second quarter 2020 and $30 million in the third quarter 2019, which included $11 million and $8 million of non-recurring items, respectively.

Operations

During the second quarter, the Company filed for bankruptcy, at which time all operations were suspended, except for workover operations. This suspension of operations clearly resulted in a steep decline in production over the past two quarters. During the third quarter of 2020, total production averaged 93.9 thousand barrels of oil equivalent per day ("MBOE/d"), of which 60% was crude oil, a decrease of 5% from the second quarter of 2020. Production for the same period of 2019 was 123 MBOE/d.

During the third quarter the Company turned seven wells to production in the Williston Basin. In the fourth quarter of 2020, Whiting expects to turn five additional wells to production as well as commence completion operations on another five wells at year end that will impact 2021 production. The Company expects capital expenditures of $27 million during the fourth quarter, bringing full year capital expenditures to the midpoint of guidance. Due to the timing of wells put on production during the third and fourth quarters, combined with completion work being done near the end of the year, we anticipate fourth quarter production will decline from the third quarter.

LOE declined to $51 million in the Combined Current Quarter from $53 million in the second quarter of 2020. This 4% decrease is primarily due to the company's focus on saltwater disposal optimization, lower non-op spending and improved rental agreements. This also marked a 40% decrease from the same period in 2019. Whiting continues to focus on costs to improve margins during the current price environment.

Whiting has consistently outperformed the NDIC requirement for gas capture since the regulatory requirement began. In September, Whiting captured 96% of its gas and continues to explore new technologies to reduce overall emissions.

Outlook for Full-Year 2020

The following table provides guidance for the full-year 2020 based on current forecasts.


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