Whiting Petroleum Corporation's Third Quarter 2008 Earnings Reach a
Record $112.4 Million or $2.65 per Share
Discretionary Cash Flow Increases to a Record $255.6 Million
Record Q3 08 Average Production of 50,480 BOE/D Up 24% from Q3 07
and
Up 14% from Q2 08
Record September 2008 Production of 51,700 BOE/D Up 10% from June
2008
Average of 47,100 BOE/D
DENVER, Oct. 29 /PRNewswire-FirstCall/ -- Whiting Petroleum
Corporation
(NYSE: WLL) today reported record third quarter 2008 net income of
$112.4
million, or $2.66 per basic share and $2.65 per diluted share, on
total
revenues of $388.4 million. This compares to third quarter 2007 net
income
of $47.7 million, or $1.14 per basic share and $1.13 per diluted
share, on
total revenues of $233.5 million. During the third quarter of 2008,
Whiting
recognized a non-cash, after-tax unrealized gain on commodity
derivative
contracts of $6.7 million, or $0.16 per share.
Discretionary cash flow in the third quarter of 2008 totaled a
record
$255.6 million, more than double the $108.0 million reported for the
same
period in 2007. A reconciliation of discretionary cash flow to net
cash
provided by operating activities is included at the end of this news
release. The increases in net income and discretionary cash flow in
the
third quarter of 2008 versus the comparable 2007 period were primarily
the
result of a 24% increase in the Company's total equivalent production,
a
43% increase in the Company's realized oil price (net of hedging) and
a 71%
increase in its realized gas price.
Production in the third quarter of 2008 totaled a record of 4.64
million barrels of oil equivalent (MMBOE), of which 3.28 million
barrels
were crude oil (71%) and 1.36 MMBOE was natural gas (29%). This third
quarter 2008 production total equates to a daily average production
rate of
50,480 barrels of oil equivalent (BOE), compared to the 40,640 BOE per
day
average rate in 2007's third quarter. The third quarter 2008 daily
average
production rate of 50,480 BOE represents a 14% sequential increase
from the
second quarter 2008 average daily rate of 44,200 BOE. September 2008
average production of 51,700 BOE per day represents a 10% increase
from the
June 2008 average daily rate of 47,100 BOE.
Approximately 1,480 BOE per day of production was interrupted
during
September 2008 due to Hurricane Ike. Substantially all of this
production
was back on stream by October 1, 2008.
Production increases were due to a combination of successful
drilling
results in the prolific Bakken and Piceance projects as well as
continued
production increases from the Company's CO(2) flood projects at the
Postle
and North Ward Estes fields. The primary contributor to Whiting's
production increases in the third quarter of 2008 came from new wells
in
the Middle Bakken formation in the Sanish and Parshall fields in
Mountrail
County, North Dakota. The following table summarizes the Company's
operated
and non-operated net production from the Sanish and Parshall fields in
the
third quarter and in September 2008:
Operated and Non-operated Bakken Net Production by Field
(In BOE)
3rd Qtr 2008 September 2008
------------ --------------
Parshall Sanish Total Parshall Sanish Total
-------- ------ ----- -------- ------ -----
Whiting
Operated 72,126 418,100 490,226 38,435 156,070
194,505
Non-Operated 446,679 -- 446,679 156,049 --
156,049
Other
Non-Operated 5,592 41,919 47,511 2,305 19,736
22,041
----- ------ ------ ----- ------
------
524,397 460,019 984,416 196,789 175,806
372,595
======= ======= ======= ======= =======
=======
Daily BOE 5,700 5,000 10,700 6,560 5,860
12,420
Commercial Banking Facility
In September, Whiting's bank group, as requested, reconfirmed the
Company's $900 million borrowing base, maturing in August 2010. The
Whiting
bank group is comprised of 24 commercial banks holding between 1.8%
and
6.8% of the total facility. As of September 30, 2008, approximately
$500
million was drawn on the facility and approximately $3 million in
letters
of credit were outstanding, resulting in approximately $397 million of
availability. The large number of banks and relatively low hold levels
allow for flexibility should there be additional consolidation within
the
banking sector.
2009 Capital Spending Budget
Although the Company will not submit its 2009 capital spending
budget
to its Board of Directors until later this year, Whiting expects to
submit
a budget in line with the Company's estimated 2009 discretionary cash
flow.
Such a budget is expected to generate double-digit production growth
in
2009.
Nine Months Financial and Operating Results
For the nine months ended September 30, 2008, Whiting reported net
income of $255.2 million, or $6.03 per basic share and $6.01 per
diluted
share, on total revenues of $998.3 million. This compares to net
income of
$84.9 million, or $2.20 per basic share and $2.19 per diluted share,
on
total revenues of $586.4 million in the first nine months of 2007.
Discretionary cash flow for the first nine months of 2008 totaled
$633.4
million, compared to $282.3 million in the comparable 2007 period.
Production in the first nine months of 2008 totaled 12.4 MMBOE, or
45,280 BOE per day, compared to production of 11.0 MMBOE, or 40,280
BOE per
day, in the first nine months of 2007.
James J. Volker, Whiting's Chairman, President and CEO, commented,
"We
continue to generate substantially all of our production growth
organically. Our net production from the Middle Bakken formation rose
48%
to 12,420 BOE per day in September 2008 from 8,400 BOE per day in June
2008. Combined production from our CO(2) projects increased 15% to
13,400
BOE per day in September from 11,700 BOE in June as both projects are
responding to CO(2) injection and waterflooding. In addition, our net
production from the Boies Ranch prospect in the Piceance Basin ramped
up to
more than 9.5 million cubic feet of gas per day (1,583 BOE per day) in
September 2008, an increase of 56% from the June 2008 average daily
net
rate of 6.1 million cubic feet of gas (1,017 BOE per day)."
Mr. Volker continued, "We expect the trend established in the
first
nine months of 2008 to continue during the fourth quarter of this year
and
through 2009."
As of October 20, 2008, 18 operated drilling rigs and 37 operated
workover rigs were active on our properties. We were also
participating in
the drilling of eight non-operated wells, four of which are located in
the
Parshall field. The breakdown of our operated rigs is as follows:
Region Drilling Workover
------ -------- --------
Rocky Mountain
Bakken / Williston 5 3
Piceance 3 1
Other Rockies 2 2
Permian 2 7
Mid-Continent/Michigan 1 1
Gulf Coast 2 0
Postle 2 4
North Ward Estes 1 19
-- --
Totals 18 37
Other Noteworthy Events and Results
-- Since July 1, 2008, Whiting has completed 12 significant
single-lateral
Bakken oil and gas producers in the Sanish field. The
following table
summarizes the results of these recent wells and the results
of all 21
Whiting-operated wells in the Sanish field:
Well Name WI NRI Completion IP 1st
1st
--------- -- --- Date (BOE/D) 30 Days
60 Days
---- 24-hr. (BOE/D)
(BOE/D)
Test -------
-------
----
1) Kinnoin
11-14H 52% 42% 10/29/08 3,646 N/
A N/A
2) Richardson
Fed 11-9H 85% 69% 10/22/08 4,570(1) N/
A N/A
3) Roggenbuck
11-25H 78% 64% 10/13/08 1,950 N/
A N/A
4) Lacey
11-10H 73% 59% 09/29/08 1,811 N/
A N/A
5) Pennington
11-3H 66% 54% 09/20/08 1,473
714 N/A
6) Neisheim
1-24H 67% 54% 09/10/08 2,169
1,048 N/A
7) Brehm
44-5H 99% 81% 09/04/08 1,298
709 N/A
8) Kannianen
11-4H 95% 77% 08/09/08 2,226
914 714
9) Smith
11-7H 69% 56% 07/31/08 2,421
717(2) 757
10) Littlefield
11-29H 93% 75% 07/27/08 1,986
673(2) 640
11) Stenseth
Trust
11-5H 73% 59% 07/06/08 3,044
903(2) 717
12) Lacey
11-1H 86% 70% 07/01/08 2,330
976 793
13) Behr
11-34H 54% 44% 06/20/08 3,245
1,335 969
14) Abbott
11-18H 99% 80% 06/16/08 1,959
1,088 892
15) Locken
14-28H 78% 63% 05/31/08 1,719
935 756
16) Braaflat
11-11H 97% 78% 05/23/08 2,997 1,505
1,271
17) Maynard
Uran
11-24H 84% 68% 04/23/08 2,132
1,056 883
18) Peterson
11-34H 91% 75% 03/19/08 1,088
541 437
19) Liffrig
11-27H 81% 67% 01/24/08 2,530
1,114 932
20) Locken
11-22H 99% 82% 12/16/07 1,651
946 756
21) Peery
State
11-25H 99% 80% 05/13/07 1,254
825 738
--- --- -----
--- ---
Averages 82% 67% 2,262
941 804
(1) The Richardson Federal 11-9H recorded the highest initial
production
rate for any Bakken well drilled to date, according to
filings with
the North Dakota Industrial Commission.
(2) The first 30-day average production rate was restricted due
to
maintenance on the Enbridge crude oil line that transports
oil from
the Sanish and Parshall fields.
Whiting's net production from the Middle Bakken formation in the
Sanish
and Parshall fields of Mountrail County, North Dakota averaged 12,420
BOE
per day in September 2008, up 48% from the 8,400 BOE average daily
rate in
June 2008.
Whiting's net production from the Sanish field in September 2008
averaged 5,860 BOE per day, compared to a net daily rate of 3,400 BOE
in
June 2008. As reflected in the footnote above, production volumes were
restricted as a result of the maintenance performed on the Enbridge
pipeline that transports crude oil from the Sanish and Parshall fields
to
Midwestern markets. However, there was only a minor impact on August
production as Whiting found additional crude oil purchasers for its
oil
production from the area during this period. Whiting expects its 17-
mile
oil line connecting the Sanish field to the Enbridge pipeline to be in
service by February 2009.
Whiting is currently drilling or completing five operated wells in
the
Sanish field with an average working interest of 86%. These wells
include
the Company's first Three Forks well, the Braaflat 21-11TFH. Test
results
from this well are expected in December 2008.
Whiting is also drilling its first in-fill well, the McNamara
42-26H
well, an approximate 10,000-foot lateral across two 1,280-acre spacing
units in the Sanish field. Test results from this well are also
expected in
December 2008.
The Company currently has five operated rigs working in the Sanish
field and expects to have eight operated rigs drilling in the area by
year-end 2008. From January 1 through September 30, 2008, Whiting
completed
18 operated wells in the Sanish field and expects to complete an
additional
14 to 16 wells during the balance of the year. Whiting expects all of
these
to be single-lateral wells drilled on 1,280-acre spacing units.
Whiting
estimates that it has a total of 128 operated locations in the Sanish
field, of which 21 have been completed. The 107 remaining operated
locations are expected to be drilled during the next 24 to 30 months.
Potential in-fill drilling could bring the total to over 200 Middle
Bakken
wells in the Sanish field alone. Whiting holds interests in a total of
118,571 gross acres (83,310 net acres) in the Sanish field.
Whiting completed construction of the first phase of its Robinson
Lake
gas processing plant in the Sanish field in late June 2008 and the
installation of a 17-mile natural gas/natural gas liquids (NGLs)
pipeline
to Stanley, North Dakota in August 2008. Whiting-operated net gas
sales
from the plant are currently averaging approximately 1.0 million cubic
feet
(MMcf) per day and net NGL sales are currently averaging approximately
130
barrels per day. Whiting expects to complete the expansion of the
Robinson
Lake gas plant to a capacity of 33 MMcf of gas per day in December
2008, at
which time net daily sales are expected to approximate 3 MMcf to 4
MMcf of
gas and 700 barrels of NGLs. Net sales are expected to reach
approximately
20 MMcf of gas and 3,000 barrels of NGLs by mid-2010.
In the Parshall field, Whiting owns interests in 72,790 gross
acres
(14,982 net acres). As of September 30, 2008, Whiting has participated
in a
total of 64 wells that produce from the Bakken formation, 40 of which
have
been completed in 2008. Whiting expects to participate in an
additional 20
to 30 wells in the Parshall field in 2008 with an average working
interest
of 25%. Four drilling rigs are expected to be working in the Parshall
field
through 2008. Whiting's net production from the Parshall field in
September
2008 averaged 6,560 BOE per day, up 31% from a net daily rate of 5,000
BOE
in June 2008.
-- Whiting's expansion of its CO(2) flood at the Postle field,
located
in Texas County, Oklahoma, continues to generate positive
results.
Production from the field has increased from a net 5,800 BOE
per day in
December 2007 to a net 6,800 BOE per day in September 2008, an
increase
of 17%. This project is part of the Company's plan to expand
the
existing water and CO(2) floods from the eastern half of the
Postle
field to the western half of the field. The field includes
six
producing units covering a total of approximately 25,600 gross
acres
(24,223 net acres) with working interests of 94% to 100%.
-- The North Ward Estes field in Ward and Winkler Counties, Texas
is
responding to the Company's waterflood and CO(2) injection,
which
it initiated in May 2007 at 2 MMcf per day and ramped up to
100 MMcf per
day of CO(2) injection in January of 2008. Net production
from North
Ward Estes in September 2008 averaged 6,600 BOE per day, up
31% from
5,050 BOE per day in December 2007. The Company expects
production
rates to continue to increase from both the North Ward Estes
and Postle
fields.
-- Whiting recently completed its first well at the Company's
Jimmy
Gulch prospect in Rio Blanco County, Colorado as a successful
gas
producer. The Federal 397-3G-G1 was completed in early
October flowing
4.4 MMcf of gas per day through a 32/64-inch choke with a
flowing casing
pressure of 1,600 psi. Production is from 414 feet of net pay
in the
Iles and Williams Fork formations. The well was fracture
stimulated in
nine stages. The Company holds an 87% working interest and a
76% net
revenue interest in the new gas well. Based on 20-acre
spacing, Whiting
has a total of approximately 32 potential locations at its
Jimmy Gulch
prospect. Potential 10-acre downspacing would add
approximately 32 well
locations.
At our Boies Ranch prospect in Rio Blanco County, 15 wells were
producing at a combined average net rate to Whiting of 9.5 MMcf of gas
per
day in September 2008, representing a 56% increase from the June 2008
average daily net rate of 6.1 MMcf of gas. Whiting made alternative
marketing arrangements for its Piceance Basin gas production in
September
to mitigate the impact of hydro-testing on a section of the REX
pipeline
for most of the month. The Company holds an average 72% working
interest
and an average 63% net revenue interest in the 15 Boies Ranch gas
wells. As
of October 22, 2008, four additional gas wells had been completed,
bringing
the total number of gas producers in the field to 19, three wells were
being drilled, four wells were being completed and four wells were
awaiting
completion. Eight of these 11 wells are expected to be on stream by
December 2008.
Whiting holds interests in 2,760 gross acres (1,570 net acres) on
the
Boies Ranch and Jimmy Gulch prospects. Currently, Whiting plans to
drill a
total of 153 wells at Boies Ranch, 77 on 20-acre spacing and 76 on 10-
acre
spacing. At Jimmy Gulch, we plan to drill 32 wells on 20-acre spacing.
In
addition, we own an average 16% working interest in an additional
14,133
lease federal acres in the area.
The following table summarizes the Company's net production and
commodity price realizations for the quarters ended September 30, 2008
and
2007:
Three Months Ended
------------------
Production 9/30/08 9/30/07
Change
---------- ------- -------
------
Oil and condensate (MMbbls) 3.28
2.48 32%
Natural gas (Bcf) 8.16
7.55 8%
Total equivalent (MMBOE) 4.64
3.74 24%
Average Sales Price
-------------------
Oil and condensate (per Bbl):
Price received $108.04
$67.51 60%
Effect of crude oil hedging
(1) (12.76) (0.85)
------- ------
Realized price $95.28
$66.66 43%
====== ======
Natural gas (per Mcf):
Price received $8.65
$5.06 71%
Effect of natural gas hedging - -
Realized price $8.65
$5.06 71%
===== =====
(1) Whiting realized a cash loss of $41.9 million before tax on
its
crude oil hedges during the third quarter of 2008. A summary
of
Whiting's outstanding hedges is included later in this news
release.
Third Quarter and Nine Months Costs and Margins
A summary of production, cash revenues and cash costs on a per BOE
basis is as follows:
Per BOE, Except Production
--------------------------
Three Months Nine Months
Ended September 30, Ended September
30,
-------------------
-------------------
2008 2007 2008 2007
---- ---- ---- ----
Production (MMBOE) 4.6 3.7 12.4 11.0
Sales price, net
of hedging $82.59 $54.43 $79.77 $50.55
Lease operating
expense 13.93 14.30 14.33 14.05
Production tax 6.08 3.53 5.80 3.17
General &
administrative 3.72 2.88 4.18 2.54
Exploration 1.58 2.11 1.74 1.74
Cash interest
expense 3.45 3.91 3.56 4.69
Cash income tax
expense 0.10 0.91 0.11 0.50
---- ---- ---- ----
$53.73 $26.79 $50.05 $23.86
====== ====== ====== ======
With the exception of the Company's gas price basis differential,
all
of the above financial and operating statistics for the third quarter
were
in line with or better than its previously announced guidance.
The company-wide basis differential for natural gas compared to
NYMEX
in the third quarter was $1.62 per Mcf, which compared to $1.10 per
Mcf in
the third quarter of 2007 and $0.92 per Mcf in the second quarter of
2008.
Whiting expects its gas price differential to be in the range of $1.00
to
$1.50 in the fourth quarter of 2008.
During the third quarter, the company-wide basis differential for
crude
oil compared to NYMEX was $10.09 per barrel, which compared to $7.52
per
barrel in the third quarter of 2007 and $10.72 per barrel in the
second
quarter of 2008. Whiting expects its oil price differential to be in
the
range of $9.00 to $10.25 in the fourth quarter of 2008.
Third Quarter 2008 Drilling Summary
The table below summarizes Whiting's drilling activity and
exploration
and development costs incurred for the three and nine months ended
September 30, 2008:
Gross/Net Wells Completed
-------------------------
Expl.
& Dev.
Total New % Success
Cost
Producing Non-Producing Drilling Rate (in
millions)
--------- ------------- -------- ----
-------------
Q308 70 / 27.4 8 / 5.1 78 / 32.5 90% / 84%
$273.2
9M08 201/ 83.2 17 / 7.2 218/ 90.4 92% / 92%
$683.5
Outlook for Fourth Quarter and Full-Year 2008
The following table provides a summary of certain estimates for
the
fourth quarter and full-year 2008 based on current forecasts.
Whiting's
full-year 2008 capital budget is $900 million (excluding acquisition
costs).
Guidance for the fourth quarter and full-year 2008 is as follows:
Guidance
--------
Fourth Quarter Full-
Year
2008
2008
----
----
Production (MMBOE) 4.90 - 5.10 17.30 -
17.50
Lease operating expense per BOE $12.90 - $13.20 $13.90 -
$14.10
General and admin. expense per BOE $2.80 - $3.00 $3.70 -
$3.90
Interest expense per BOE $3.60 - $3.80 $3.80 -
$3.95
Depr., depletion and amort. per
BOE $16.80 - $17.20 $15.10 -
$15.30
Prod. taxes (% of production
revenue) 6.7% - 7.0% 6.5%
- 6.7%
Oil Price Differentials to NYMEX
per Bbl $9.00 - $10.25 $9.25 -
$ 9.75
Gas Price Differentials to NYMEX
per Mcf $1.00 - $1.50 $0.90 -
$ 1.10
Oil Hedges and Fixed-Price Gas Contracts
Whiting Petroleum Corporation's outstanding hedges and fixed-price
gas
contracts as of October 1, 2008 are summarized below:
NYMEX Price As a
Percentage of
2008 Contracted Volume Collar Range
September 2008
Hedges (Bbls per Month) (per Bbl) Oil
Production
------ ---------------- ---------
--------------
Q4 110,000 $48.00 - $70.20
10%
Q4 120,000 $60.00 - $75.85
11%
Q4 100,000 $65.00 - $81.20
9%
Fixed Price Natural Gas 2008 Contract As
a
Contracts Volumes in Price (1)
Percentage of
--------- MMBtu per per MMBtu
September 2008
Month --------- Gas
Production
-----
--------------
Oct. 2008 - May 2011 24,000 $4.94 1%
Oct. 2008 - Sep. 2012 67,000 $4.38 3%
(1) Annual 4% price escalation on fixed price contracts.
In conjunction with the Whiting USA Trust I, Whiting entered into
certain oil and natural gas hedges on the underlying properties.
Whiting's
retained 10% interest in the underlying properties combined with its
ownership of 2,186,389 trust units results in third-party public
holders of
trust units receiving 75.8%, and Whiting retaining 24.2%, of the
future
economic results of the hedge contracts listed below.
Contracted Volume NYMEX Price Collar
Range
-----------------
------------------------
Oil Natural Gas
Bbls per Mcf per Oil
Gas
Hedges Month Month (per Bbl) (per
MMBtu)
------ ----- ----- ---------
-----------
Q4 08 51,436 228,830 $82.00 - $131.58 $7.00 -
$19.00
2009 48,166 198,974 $76.00 - $137.43 $6.50 -
$17.11
2010 43,488 170,589 $76.00 - $134.98 $6.50 -
$15.06
2011 39,614 150,313 $74.00 - $140.15 $6.50 -
$14.62
2012 36,189 132,232 $74.00 - $141.72 $6.50 -
$14.27
Selected Operating and Financial Statistics
Three Months Ended Nine Months
Ended
------------------
-----------------
September 30, September
30,
-------------
-------------
2008 2007 2008
2007
---- ---- ----
----
Selected
operating
statistics
Production
Oil and
condensate,
Mbbl 3,284 2,480 8,676
7,106
Natural gas,
MMcf 8,160 7,551 22,394
23,336
Oil equivalents,
MBOE 4,644 3,739 12,408
10,995
Average Prices
Oil, Bbl
(excludes
hedging) $108.04 $67.51 $104.21
$58.37
Natural gas, Mcf
(excludes
hedging) $8.65 $5.06 $8.87
$6.14
Per BOE Data
Sales price
(including
hedging) $82.59 $54.43 $79.77
$50.55
Lease operating $13.93 $14.30 $14.33
$14.05
Production taxes $6.08 $3.53 $5.80
$3.17
Depreciation,
depletion and
amortization $15.99 $13.19 $14.47
$13.02
General and
administrative $3.72 $2.88 $4.18
$2.54
Selected
Financial Data
(In thousands,
except per
share data)
Total revenues
and other
income $388,434 $233,528 $998,258
$586,355
Total costs and
expenses $211,487 $156,181 $594,666
$450,890
Net income $112,417 $47,713 $255,179
$84,850
Net income per
common share,
basic $2.66 $1.14 $6.03
$2.20
Net income per
common share,
diluted $2.65 $1.13 $6.01
$2.19
Average shares
outstanding,
basic 42,322 42,027 42,305
38,555
Average shares
outstanding,
diluted 42,465 42,152 42,464
38,728
Net cash
provided by
operating
activities $282,361 $122,656 $611,452
$272,609
Net cash used in
investing
activities $(286,922) $(82,318) $(855,586)
$(325,047)
Net cash
provided by
(used in)
financing
activities $ - $(39,523) $250,000
$50,771
Conference Call
The Company's management will host a conference call with
investors,
analysts and other interested parties on Thursday, October 30, 2008 at
11:00 a.m. EDT (10:00 a.m. CDT, 9:00 a.m. MDT) to discuss Whiting's
third
quarter 2008 financial and operating results. Please call (800)
688-0836
(U.S./Canada) or (617) 614-4072 (International) and enter the pass
code
75669563 to be connected to the call. Access to a live Internet
broadcast
will be available at http://www.whiting.com by clicking on the link
titled
"Webcasts." Slides for the conference call will be available on this
website beginning at 11:00 a.m. (EDT) on October 30, 2008.
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