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Whiting Petroleum: Is the Reverse Stock Split a Good Idea?

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Whiting Petroleum: Is the Reverse Stock Split a Good Idea? PART 1 OF 4

Whiting Petroleum: What to Expect from Its Stock

Whiting Petroleum’s stock movements

Whiting Petroleum (WLL) stock has fallen 68% since the beginning of 2017.

Meanwhile, the Energy Select Sector SPDR (XLE), or the broader energy sector, has fallen ~15.5% during the same period. The fall has been driven by weak crude oil (UCO) and natural gas (UGAZ) prices. Crude oil and natural gas prices have fallen ~9.3% and 13%, respectively, since the beginning of 2017.

Whiting Petroleum: What to Expect from Its Stock

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The S&P 500 SPDR ETF (SPY), or the broader market, has risen ~9.5% since the beginning of 2017.

Whiting Petroleum’s recent steps 

Whiting Petroleum has been taking several steps to deal with the current energy price environment. The company revised its 2017 capital expenditure from $1.1 billion to $950 million. Its previous capex guidance was almost double its 2016 capex.

In August, Whiting Petroleum announced that it planned to sell its North Dakota Fort Berthold assets in exchange for $500 million in cash. The proceeds were used to pay down a major portion of the company’s $550 million bank debt.

On September 7, 2017, Whiting Petroleum announced it plans to undertake a reverse stock split of its common stock at a ratio ranging from any whole number between one-for-two and one-for-six, as determined by its board at the meeting during 4Q17.

Whiting Petroleum anticipates an increased per share trading price, “which may improve marketability and facilitate its trading.”

However, it won’t impact shareholder’s equity interests or voting rights.

Usually, the motivation behind reverse stock splits is to meet stock exchange requirements. For example, to remain listed on the New York Stock Exchange, a stock has to avoid trading below $1.00 for an extended period.

Following this news, Whiting Petroleum stock fell 6.5% on September 7. Investors should watch Whiting Petroleum as the markets take in the company’s recent activity.

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