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What’s Wall Street Saying about WLL’s Bakken Divestiture?

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Wall Street vibes

In this article, we’ll discuss how analysts view Whiting Petroleum’s (WLL) latest divestiture announcement. According to Stifel, the assets sold equate to a ~9.4x EBITDA (earnings before interest, tax, depreciation, and amortization) multiple, 22% lower than the gas gathering and processing peer group average.

KLR Group estimated that the assets divested would generate an EBITDA of ~-$40 million, equating to an EBITDA multiple of ~9.4x, the same as was estimated by Stifel. According to KLR’s estimation, the company will utilize ~$275 million of the divestiture’s proceeds to pay down debt, while it will use the remaining ~$100 million to accelerate drilling in 2017. WLL’s net-debt-to-EBITDA ratio is expected to fall to ~2.6x from the previous ~2.9x.

According to Stephens, the transaction would lower WLL’s net debt-to-EBITDA to below 3.0x, assuming the conversion of mandatory convertible notes in 2017.

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Analysts’ projections

For the current quarter, 35 analysts have projected an average earnings estimate of -$0.33 per share for WLL. Low estimates stand at -$0.99 per share, and high estimates stand at -$0.21 per share.

The average revenue estimate for WLL is $354.0 million for the current quarter. The low revenue estimate stands at $309.2 million, while the high revenue estimate is $437.6 million.

Read Whiting Petroleum’s 3Q16 Earnings and Revenue Disappoint to learn more about WLL’s 3Q16 performance.

~22% of analysts surveyed call WLL a “strong buy,” and ~57% of analysts recommend it as a “hold.” Raymond James recently upgraded WLL to a “strong buy,” as we can see in the image above.

The average target price for WLL is $11.39 compared to its current price of $10.12. This difference implies a potential return of 12.5% for WLL in the next 12 months. Analysts’ high and low target prices for WLL are $20 and $6.9, respectively.

Whiting Petroleum makes up 0.74% of the First Trust Energy AlphaDEX ETF (FXN).

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