Convertible Notes: Whiting Petroleum Addresses Debt Concerns


Jul. 25 2016, Updated 10:05 a.m. ET

Whiting Petroleum’s stock performance

Whiting Petroleum (WLL) stock was mostly in a falling trend in the second half of 2015. However, since the start of 2016, WLL has been mostly on an uptrend, mirroring the rally in crude oil prices (USO).

Recently, the stock has fallen a few times, even as energy prices remain volatile.

Year-over-year, Whiting Petroleum stock has fallen ~65%. Crude oil prices have fallen ~9% in the same period. The broader energy ETF, the Energy Select Sector SPDR ETF (XLE), has fallen by 3.6% in the same period.

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Whiting’s convertible notes

In June 2016, Whiting Petroleum announced that it has entered into a private agreement with its bondholders to exchange $1.1 billion in notes for new mandatory convertible notes. Under the agreement, WLL will exchange $377 million of non-convertible notes for the same principal value of new mandatory convertible notes. It has also agreed to exchange $687.9 million in convertible notes for the same principal amount of new mandatory convertible notes.

In March 2016, Whiting Petroleum completed the exchange of $429.7 million unsecured notes for new unsecured convertible notes.

After its Kodiak Oil and Gas acquisition in 2014, WLL took on a lot of debt—$5.2 billion as of December 31, 2015. However, the above measures show that the company is working on improving its financial position. It has raised more than $3 billion through its debt and equity offerings in 2015.

According to its July 2016 presentation, Whiting Petroleum has no debt maturities until 2018.

Like Whiting, Chesapeake Energy (CHK) has resorted to similar measures to address its debt. In May 2016, Chesapeake announced plans to issue 4.1% of its outstanding equity in exchange for debt.

These companies combined make up 1.1% of the iShares US Oil & Gas Exploration & Production ETF (IEO).


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