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Whiting Doubles 2017 Capex: What to Make of It

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Whiting’s capex budget in 2017

Whiting Petroleum’s (WLL) 2017 capital budget is $1.1 billion, almost double its 2016 figure. It estimates that 96% of its total budget will be spent in its core Williston Basin and DJ (Denver-Julesburg) Basin (Redtail) regions.

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Increased focus on the Bakken and DJ

Whiting has been increasing its focus on the Williston and DJ basins. In line with this strategy, Whiting recently announced the divestiture of its Bakken midstream assets. In a press release following this news, Whiting’s management stated that this transaction provides “financial flexibility to invest for growth in Whiting’s top tier producing assets in the Williston and DJ Basins. This sale aligns with our ongoing strategy to divest non-core midstream assets and focus capital in the company’s highly productive upstream business.”

Bakken activity in 2017

Whiting plans to spend $580 million on development activities in the Williston Basin, where its focus regions are the Bakken and Three Forks formations. It plans to run five rigs in the region. The company plans to spend an additional $60 million for non-operated drilling in the Williston Basin.

The Williston Basin is home to one of the biggest shale plays in the United States, the Bakken Shale. Continental Resources (CLR) and Hess (HES) are two key operators in the Bakken Shale. Other operators include Newfield Exploration (NFX) and Oasis Petroleum (OAS).

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DJ basin activity in 2017

In the DJ Basin, Whiting plans to spend $420 million on development activities, where it will focus on the Niobrara “A,” “B,” and “C” zones and the Codell and Fort Hays formations. It plans to run one rig in the region. Whiting’s DJ Basin 2017 operating plan comprises the completion of 105 drilled (DUC) wells.

Top players in the DJ Basin include Noble Energy (NBL) and Anadarko Petroleum (APC). These companies, along with Whiting, make up ~15% of the iShares US Oil & Gas Exploration & Production ETF (IEO).

What does the market think of Whiting’s 2017 capex budget?

Despite the massive increase in its 2017 capex forecast, Whiting hasn’t forecast a similar increase in its 2017 production, which has resulted in subdued stock movement in spite of upbeat 4Q16 earnings. To learn more about this, read What’s Keeping Whiting Petroleum Stock from Rising?

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