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Digging Deeper into Whiting Petroleum’s Key Fundamentals

PART:
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Part 2
Digging Deeper into Whiting Petroleum’s Key Fundamentals PART 2 OF 8

Whiting Petroleum’s Leverage and Financial Position

Whiting Petroleum’s leverage

Since 2Q15, Whiting Petroleum’s (WLL) total debt has fallen ~38%. In 2Q17, the company’s total debt was $3.3 billion—compared to ~$5.2 billion in 2Q15. In 2Q16, Whiting Petroleum’s total debt was $4.9 billion.

Whiting Petroleum’s Leverage and Financial Position

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Whiting Petroleum’s total DE (debt-to-equity) ratio rose from 78.3% in 2Q15 to ~104% in 2Q16. By 2Q17, its total DE ratio fell to 65.5%

When the DE ratio is over 100%, it means that a company has more debt than equity. Therefore, the higher the DE ratio, the higher the risk.

Debt maturities and covenants

Whiting Petroleum doesn’t have any debt maturities until 2019. In its September presentation, the company noted that its bond finance covenants required it to maintain consolidated cash flows-to-fixed charges (or interest expense) ratio of over 2:1. As of June 30, 2017, the ratio was 4.1:1.

Whiting Petroleum’s bank credit agreement covenants require the total senior secured debt (or revolver borrowings)-to-EBITDAX (earnings before interest, taxes, depreciation, depletion, amortization and exploration expenses) ratio to be less than 3.0:1. The ratio was 0.70:1 as of June 30, 2017. In the bank credit agreement covenants, there’s also the requirement that the total EBITDAX-to-consolidated cash interest ratio should be no less than 2.25:1. As of June 30, 2017, the ratio was 5.00:1. The final covenant under Whiting Petroleum’s bank credit agreement is that the company’s current ratio should be greater than 1:1. As of June 30, 2017, the ratio was 4.95:1.

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