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Digging Deeper into Whiting Petroleum’s Key Fundamentals

PART:
1 2 3 4 5 6 7 8
Part 4
Digging Deeper into Whiting Petroleum’s Key Fundamentals PART 4 OF 8

Comparing Whiting Petroleum’s Valuation to Historical Numbers

Whiting Petroleum’s valuation

Whiting Petroleum’s (WLL) 2Q17 EV (enterprise value)-to-adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) ratio was ~6.5x. The enterprise value is the sum of a company’s market capitalization and net debt.

Comparing Whiting Petroleum’s Valuation to Historical Numbers

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Breaking down Whiting Petroleum’s valuation

Between 2Q15 and 2Q17, Whiting Petroleum’s EV-to-EBITDA multiple has averaged 8.6x. Whiting Petroleum’s EV-to-EBITDA multiple is trading at a discount to its two-year historical average.

The market value of Whiting Petroleum’s equity has fallen ~33.5% YoY (year-over-year). Its net debt fell from ~$4.9 billion in 2Q16 to ~$3.2 billion in 2Q17. The net result was a 27.4% fall in its EV in 2Q17—compared to 2Q16.

As we saw in Part 1, Whiting Petroleum’s 2Q17 trailing 12-month EBITDA was similar to 2Q16. It explains the lower EV-to-EBITDA multiple in 2Q17—compared to 2Q16.

Forward EV-to-EBITDA

Whiting Petroleum’s forward EV-to-EBITDA multiple, which uses market expectations for a company’s EBITDA for the current fiscal year, is ~5.6x. The lower forward EV-to-EBITDA multiple indicates that Wall Street analysts expect Whiting Petroleum’s EBITDA to be higher this fiscal year—compared to the last 12 months. The change would also mean that Whiting Petroleum would continue to trade at a discount compared to its historical levels.

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