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Digging Deeper into Whiting Petroleum’s Key Fundamentals

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Part 3
Digging Deeper into Whiting Petroleum’s Key Fundamentals PART 3 OF 8

Whiting Petroleum’s Free Cash Flow Expectations for 2018

Whiting Petroleum’s cash flows

In 2Q17, Whiting Petroleum (WLL) reported CFO (cash flow from operations) of ~$111 million, which is ~31% lower than its CFO in 2Q16. The fall was primarily due to lower revenue in 2Q17—compared to 2Q16. Whiting Petroleum’s revenue was $311.5 million in 2Q17—compared to $337 million in 2Q16. The revenue was likely lower due to lower production volumes in 2Q17—compared to 2Q16. In 2Q17, the production was 112.7 Mboepd (thousand barrels of oil equivalent per day)—compared to production of 134.2 Mboepd in 2Q16.

Whiting Petroleum’s Free Cash Flow Expectations for 2018

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Free cash flow expectations

In 2Q17, Whiting Petroleum’s FCF (free cash flow), which is its operating cash flow minus its capex, was -$94 million.

Recently, Whiting Petroleum lowered its capex budget by $150 million. It lowered the forecast exit rate production estimates for 2017 from 140 Mboepd to 133.5 Mboepd. Holding the exit rate production flat while spending $750 million in maintenance capex, Whiting Petroleum expects to be free cash flow neutral or cash flow positive in 2018 at $50 NYMEX oil prices.

At the 2Q17 earnings conference, an analyst asked about the company’s long-term strategies in a $50 long-term oil price environment and how that would alter the company’s spending plans in 2018. Whiting Petroleum’s management said, “we have a number of tricks up our sleeve to get us even higher EURs without spending much more money.”

Taking a jibe at the Permian rush, Whiting Petroleum’s CEO James Volker said, “What We’re pretty good at is finding oil and gas in places where we already have leases. Leases that cost us a couple of hundred bucks an acre, not $25,000 to $50,000 an acre.” He said that the company would focus on coming up with new zones to carry out completions where Whiting Petroleum already holds acreage at well below $1,000 an acre. He said, “That’s how you grow an independent oil company without having to go out and right now, frankly, pay up in the Permian.”

Read How Have Permian Acreage Costs Changed since Last Year? to learn about Permian acreage costs.

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