Whiting Taps Its Growth Reservoir

10/14/2013


  Recent Price
$62
  Dividend
$0.00
  Yield
0.0%
  P/E Ratio
18
  Shares (millions)
119
  Long-Term Debt as % of Capital
35%
  52-Week Price Range
$64.89 - $40.19

Whiting Petroleum ($62; WLL), a producer of oil and natural gas, benefits from strong energy prices and the kind of production growth that causes larger rivals to salivate. The company's total production, skewed heavily toward oil, has risen 5% to 22% in each of the past five years, averaging 16%. It operates exclusively in the U.S., with assets concentrated in the Rocky Mountains, North Dakota's Bakken formation, and the Permian Basin in Texas and New Mexico.

Per-share profits are projected to surge 36% in the September quarter and 27% in the December quarter, while the S&P 500 energy sector is projected to post a 1% decline for both quarters. Whiting's per-share-profit targets for both quarters have risen 22% over the last 90 days, while the energy sector index's profit estimates for the September and December quarters have declined.

Despite the superior growth outlook, Whiting shares trade at less than 18
times trailing earnings, a 16% discount to the median S&P 1500 exploration & production stock. Should Whiting meet the consensus 2013 profit estimate of $4.00 per share and its P/E ratio stay constant, shares will rally 14% by early 2014. Whiting, scoring at least 70 in all six Quadrix categories, is a Buy and Long-Term Buy.

Wells swell momentum

Founded in 1980, Whiting aggressively built up its portfolio of properties through 2006. Since then Whiting has focused on development, but it still adjusts its portfolio. During the September quarter, Whiting spent $260 million to acquire Bakken assets and another $112 million on other oilfields, while selling Oklahoma-based assets for $837 million. The Oklahoma sale represented about 8% of Whiting's production and 12% of its proved reserves.

Yet proved reserves increased 5% in the first seven months of 2013, including the Oklahoma sale. Whiting has grown proved reserves 10% to 13% in each of the past three years. The company entered 2013 with proved reserves capable of sustaining production for 13 years; oil makes up roughly 80% of those reserves.

Total production climbed 12% in the first half of 2013 from the same period a year earlier, driven by a 17% jump in oil. Oil accounted for 91% of energy sales in the six months ended June. Although production of natural gas held flat for the six-month period, average realized prices rose 21%. Realized oil prices increased 4%.

In some cases, Whiting drills horizontal wells, requiring the type of complex rigs supplied by Helmerich & Payne ($72; HP), reviewed on page 4. It also practices hydraulic fracturing (fracking), a controversial procedure in which drillers blast water, sand, and chemicals into underground caverns to stimulate production.

Whiting's customer base is highly concentrated, with six companies accounting for 60% of energy sales. Still, growth has been remarkably steady. Sales have risen in 15 straight quarters, including 31% growth in the June quarter. Cash from operations, up 57% in the June quarter, has risen in 11 of the past 14 quarters.

An annual report for Whiting Petroleum Corp. is available at 1700 Broadway, Suite 2300, Denver, CO 80290-2300; (303) 837-1661;
www.whiting.com.

WHITING PETROLEUM
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Jun '13
1.02
vs.
0.73
31%
50.96
-
42.44
16 - 13
Mar '13
0.94
vs.
1.03
9%
52.02
-
43.60
16 - 13
Dec '12
0.83
vs.
1.05
15%
48.87
-
40.19
14 - 11
Sep '12
0.73
vs.
0.95
12%
54.86
-
38.29
15 - 10
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2012
2.17
3.31
0.00
63.97
-
35.68
19 - 11
2011
1.88
3.85
0.00
75.91
-
28.87
20 - 7
2010
1.51
2.55
0.00
59.40
-
31.33
23 - 12
2009
0.97
(1.18)
0.00
37.83
-
9.63
NM
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
95
75
70
80
87
81
82

   * Earnings exclude special items.
   † Quadrix® scores are percentile ranks, with 100 the best.


Current Hotline

Stock Spotlight

Individual Stock Reports

ISRs make stock research easy!

Perhaps the most valuable two page reports available anywhere.

All the data you would normally have to plow through years of 10-K filings, earnings reports, and reams of market data to assemble — yours all in one concise report.

ISRs contain our proprietary Quadrix scores — find out how we rate all the stocks in the S&P 500.

Visit us at individualstockreports.com