Whiting Keeps Up Its Winning Ways

7/14/2014


  Recent Price
$80
  Dividend
$0.00
  Yield
0.0%
  P/E Ratio
19
  Shares (millions)
120
  Long-Term Debt as % of Capital
40%
  52-Week Price Range
$82.35 - $48.05

Energy producer Whiting Petroleum ($80; WLL) mostly operates in the Permian Basin (West Texas) and the Rocky Mountains, an area that includes the Williston basin (Dakotas and Montana) and the Niobrara formation (primarily Colorado). Crude oil accounted for 92% of Whiting's revenue and 79% of production in 2013.

Shares of Whiting and other U.S. energy producers have rallied on signs the U.S. may be softening its stance on the export of unrefined oil. In June, the Commerce Department approved the shipment of a type of light oil after minimal processing. The end result could lead to higher realized oil prices and increased production.

Whiting ranks in the top 25% of our research universe in five of six Quadrix categories, contributing to an Overall rank of 95. Whiting Petroleum is a Focus List Buy and a Long-Term Buy.

Business breakdown

The company enjoys outstanding operating momentum. While Whiting has grown sales, per-share profits, and operating cash flow at annualized rates of more than 20% over the last five years, growth over the last 12 months exceeded the five-year rate for all three metrics. Efficiency improvements have kept costs down; Whiting is drilling more wells with fewer rigs, and a new well design is boosting production. Management sees production rising 17% to 19% this year.

Whiting's production has nearly doubled since 2008, while proved reserves have soared more than 80%. At 2013 production levels, current proved reserves are sufficient for nearly 13 years of drilling. These reserves are primarily located in the Rocky Mountains (68%) and Permian Basin (29%). Oil represents nearly 80% of proved reserves.

The company's growth reflects strong industry trends. In 2013, U.S. production of crude oil reached its highest level in 24 years, according to the U.S. Energy Information Administration (EIA). The U.S. entered 2014 with its highest proved oil reserves since 1976.

About 48% of U.S. crude oil comes from Texas and North Dakota, compared to 17% from the Gulf of Mexico. Just four years ago, those two states generated 26% of the country's crude oil. U.S. production last year satisfied 84% of the country's total energy demand, up from a historical low of 69% in 2005. That pushed net energy imports to their lowest level in more than 20 years.

Conclusion

The consensus targets per-share profits of $1.17 in the June quarter, up 15%, and sales growth of 16%. Whiting expects 21% to 23% higher production in the quarter. For the year, per-share profits are projected to advance 16% to $4.77, and analyst estimates have risen in the past month.

The stock's 29% total return in 2014 has pushed its Value score down to 61. But while Whiting shares seem expensive relative to historical norms, they look cheap versus their peers. The trailing P/E ratio of 19 lags the median for S&P 1500 energy explorers and producers by 16%.

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
Mar '14
1.05
vs.
0.94
19%
72.32
-
54.93
18 - 13
Dec '13
0.88
vs.
0.87
24%
70.57
-
56.40
17 - 14
Sep '13
1.28
vs.
0.77
35%
60.65
-
46.13
17 - 13
Jun '13
1.02
vs.
0.73
31%
50.96
-
42.44
15 - 13
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2013
2.70
4.11
0.00
70.57
-
42.44
17 - 10
2012
2.17
3.39
0.00
63.97
-
35.68
19 - 11
2011
1.88
3.85
0.00
75.91
-
28.87
20 - 7
2010
1.51
2.71
0.00
59.40
-
31.33
22 - 12
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
95
86
61
78
91
92
91

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


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