Rumors are flying that Whiting Petroleum Corp. (NYSE: WLL) is shopping itself to major oil companies.
A Whiting spokesman said the company does not comment on rumor or speculation.
The news, first reported by the Wall Street Journal, caught analysts off guard since Whiting only recently purchased Kodiak Oil & Gas Corp. (KOG) for about $6 billion in stock and debt. The merger vaulted Whiting to the top spot in the Bakken. A Reuters report separately quoted an unnamed source “familiar with the board's thinking” as saying he was unaware of such a plan.
“We are surprised WLL would want to sell so soon after having acquired KOG,” said Pearce Hammond, co-head of E&P research for Simmons & Co. International.
The company, with a market cap of $5.7 billion, said in February that it would sell some or all of its midstream assets. James Volker, chairman, president and CEO, expressed confidence that Whiting would make a deal in 2015.
Still, oil prices have shattered many E&P stocks and Whiting hasn’t been immune. Shares are down 63% from a 52-week high in late August.
“WLL CEO Jim Volker might be interested in retiring and getting equity in a larger E&P or energy company,” Hammond said.
Many analysts said they don’t believe this is the first time Whiting has tried to find a buyer. This time, Whiting has reportedly hired a bank and wants to conduct an auction process.
“This is not the first time,” wrote Daniel Katzenberg, senior analyst, Baird Energy. “Though we don't expect a deal to be completed near-term, we ultimately think WLL's chairman and CEO, James J. Volker's end-game is to monetize WLL through an eventual outright sale of the company.”
Whiting's strong position as the largest Bakken producer should attract companies such as ExxonMobil Corp. (NYSE: XOM), Chevron Corp. (NYSE: CVX), Royal Dutch Shell Plc (NYSE: RDS.A, RDS-B) and Statoil ASA (NYSE: STO)—in that order, Hammond said.
In late February, Whiting reported adjusted fourth-quarter 2014 earnings of $0.44/share, below consensus of $0.51.
“We believe consensus did not fully account for the impact of the Kodiak acquisition on realized prices—higher production at a time when oil prices collapsed,” said Robert Du Boff, analyst, Oppenheimer & Co., in a Feb. 26 report.
Du Boff said the company stands to have large cash reserves by the end of 2015. Whiting’s capex is set at $2 billion in 2015, a 50% drop from combined Whiting/Kodiak in 2014. The company still expects pro forma volume growth of 6%.
“We see WLL exiting the year with over $1.7 billion of liquidity, before $1 billion in planned asset sales,” Du Boff said.
For 2015, Whiting will concentrate drilling around its highest return areas in the central, eastern and southern Williston Basin, including Sanish, Parshall (non-operated), Tarpon, Hidden Bench and
Cassandra, along with new Kodiak acreage in the Polar area to the north and Dunn County to the east, Du Boff said.
Whiting’s fourth-quarter Bakken production was 131.3 thousand barrels of oil equivalent (boe/d), including Kodiak’s acquired assets. The company also had 10.2 Mboe/d in the Denver-Julesburg (D-J) Basin.
As of late February, Whiting was running 19 rigs, 16 in the Bakken and three in the D-J Basin. The company plans to cut three more rigs by midyear. By comparison, the combined Whiting/Kodiak ran 25 rigs in 2014.