Quarterly / Earnings Reports | Third Quarter (3Q) Update

Whiting Reports Q3 2019 Results

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   |    Wednesday,November 06,2019

Whiting Petroleum Corp. reported its Q3 2019 results.

Highlights:

• Delivered Oil Production Above Mid-Point of Guidance, Despite Adverse Weather
• Capital Spending Below Low End of Company's Guidance Range
• Anticipating Free Cash Flow Generation in the Fourth Quarter
• Maintained $1.75 Billion of Credit Facility Commitments Following Redetermination of Borrowing Base
• Successfully Tendered for $300 Million and Repurchased $100 Million of Near-Term Debt Maturities at a Discount
• Reaffirms Full-Year 2019 Production Guidance; Tightens Range for Full-Year 2019 Capital Expenditure Guidance to $810 - $830 Million

In the third quarter, Whiting delivered oil production of 80,880 barrels per day, despite adverse weather conditions and ongoing gas and natural gas liquid (NGL) infrastructure and processing constraints. The Company maintained strong capital spending discipline, with capital expenditures in the third quarter below the Company's previously announced guidance range.

Bradley J. Holly, Whiting's Chairman, President and CEO commented, "Today, Whiting is more energized than ever as we continue our hard work to position the Company for near- and long-term success. As part of our value-based strategy - and following significant organizational changes - we are a more focused company committed to operational efficiency and disciplined capital allocation to improve returns for investors."

Holly added, "In the third quarter, we took decisive steps to streamline operations, improve cash flow and strengthen our financial position. From an operations standpoint, we have increased communication and efficiency throughout the organization, which contributed to solid production results despite challenging operating conditions. Improved planning processes and enhanced technology enabled us to deliver on our commitments while controlling capital spending. We remain on track to achieve our full-year 2019 production targets while reducing lease operating expenses over the coming quarters and intend to build on our results to drive further performance improvement and generate free cash flow. In addition, we are tightening the range for our full-year capital expenditure guidance to recognize the benefits of more efficient execution of our capital plan. This reflects enhanced drilling and completion efficiency in the field driven by new technologies and design optimization."

Operations Update - Weather Causes Delays

During the third quarter, heavy rain and flooding across Whiting's properties resulted in road closures and restricted activity. Whiting's field operations took preemptive steps to prepare well sites, allowing for uninterrupted operations at some locations and expedited recovery at others, which resulted in the Company achieving its quarterly production goal. Consistent with its plan, Whiting put on production 39 wells during the third quarter and remains on track to put on production 31 wells in the fourth quarter.

Whiting continued to deliver strong incremental project results during the quarter that set the stage for multi-year drilling programs with attractive and stable returns.

• Sanish Field:Whiting re-entered the Sanish field in 2017 based on extensive technical evaluation that indicated the potential for higher levels of resource recovery. Its initial project, the McNamara infill pilot validated this analysis. Results confirmed that with the application of new technology, it was possible to double the recovery of oil in place. Subsequent to the McNamara project, which is located in southeastern Sanish, Whiting delivered successful infill tests at its Sprague project in southwestern Sanish and Pod 8 infill pilots in northern Sanish. Results have been consistently strong, characterized by a significant increase in oil recovery, positive parent to child well interactions and attractive project level returns.
  • During the third quarter, Whiting brought on the Pod 9 infill pilot located in the northwest portion of the field. At Pod 9, Whiting drilled nine Bakken wells in an area that had eleven parent Bakken wells. Results have been strong with the average well producing 760 barrels of oil equivalent per day (BOE/d) over the first 90 days and continuing to produce with little to no decline. The new wells are producing above the parent wells, and the parent wells are producing above their prior trend due to positive stimulation from child wells. With Pod 9, Whiting has completed four successful infill pilots that span the field and demonstrate the potential for a full-scale redevelopment program.

• Foreman Butte: Whiting acquired the Forman Butte property in 2018. The Company has completed its delineation program and established production from its first 17 wells in the field. These wells have produced at an average per well rate of 695 BOE/d over the first 70 days, 2.5x above the early generation wells drilled in the area. Whiting is currently working with third-parties to install gathering infrastructure in preparation for full field development.

In the third quarter, Whiting introduced multiple cost-saving initiatives focused on lease operating expense (LOE) reduction. Among the most impactful are cost optimization of chemical and freshwater programs, renegotiation of saltwater disposal contracts and an enhanced focus on cost effective utilization of rental equipment. Whiting intends to fully realize the savings from these programs throughout 2020 and estimates it could reduce absolute LOE by 10% to 15% compared to 2019 levels.

Financial Update

During the third quarter, Whiting executed on multiple initiatives to enhance its financial flexibility. The Company successfully completed a cash tender offer for $300 million of its 2020 convertible notes using proceeds from its credit facility. It also recently repurchased $100 million of debt in the open market at an average discount of 4.7%. In addition, Whiting maintained $1.75 billion of commitments under its credit facility following redetermination by the lenders of a $2.05 billion borrowing base.

Capital Expenditure Summary and Outlook for Full-Year 2019

During the third quarter, Whiting's capital expenditures totaled $225 million. This includes $22.6 million for non-operated drilling and completions. Looking to the fourth quarter, Whiting forecasts a decline in capital spending to $134 - $154 million as a significant portion of the capital for wells being put on production during the fourth quarter was incurred in the third quarter and as activity declines seasonally. The Company also forecasts a reduction in LOE per barrel of oil (BOE) as it continues to realize the benefits of its reorganization and ongoing field initiatives. The Company expects to generate free cash flow at current strip commodity prices in the fourth quarter of 2019.

The following table provides guidance for the full-year 2019 based on current forecasts, including Whiting's revised full-year capital budget of $810 to $830 million.

Selected Operating and Financial Statistics