Why Whiting Petroleum Didn’t Have a Good Week


Nov. 20 2020, Updated 5:11 p.m. ET

Whiting Petroleum’s stock

Whiting Petroleum is not off to a good start in 2017, as we can see in the image below. The stock has given a return of -9% since the beginning of this month, underperforming the broader energy sector—the Energy Select Sector SPDR ETF (XLE), which gave a return of -2.6% in the same period.

The broader market S&P 500 ETF (SPY) gave a return of ~1.7%.

The spike in WLL’s stock during the first two weeks of 2017 likely resulted from its announcement on January 3, 2017, stating that it had closed its previously announced Bakken midstream asset sale. Soon after this announcement, WLL’s management announced that it plans to redeem its 6.5% senior subordinated notes due October 2018 from the proceeds of the Bakken Midstream asset sale.

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However, things went downhill from there as crude oil prices (USO) started sliding. While crude prices did recover, WLL failed to do so. The energy sector as a whole saw weakness last week. This weakness was probably on the back of the dismal 4Q16 GDP estimate released on Friday (notice the sharp decline in WLL’s stock last Friday). Gross domestic product or GDP was estimated to have increased at a 1.9% annual rate in 4Q16, compared to the 3.5% recorded in 3Q16.

Year-over-year, Whiting has given returns of ~63%, compared to the XLE’s ~35%. WLL’s superior performance is likely because of its focus on debt reductions, operational efficiencies, and strong cash flows as well as an improving oil price environment.


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