Whiting Petroleum Corporation Announces Second Quarter 2013 Financial and Operating Results
Whiting Petroleum Corporation Announces Second Quarter 2013 Financial and Operating Results
Record Q2 2013 Production of 93,380 BOE/d Up 4.8% over Q1 2013
Q2 2013 Net Income Available to Common Shareholders of $134.7 Million or $1.14 per Diluted Share and Adjusted Net Income of $121.3 Million or $1.02 per Diluted Share
Q2 2013 Discretionary Cash Flow Totals a Record $440.9 Million
Niobrara Well in DJ Basin Completed Flowing 1,069 BOE/d
DENVER--(BUSINESS WIRE)-- Whiting Petroleum Corporation's production in the second quarter of 2013 totaled 8.5 million barrels of oil equivalent (MMBOE), 87% crude oil/natural gas liquids (NGLs). Second quarter 2013 production equals 93,380 barrels of oil equivalent per day (BOE/d) representing a 4.8% increase over the first quarter of 2013. Second quarter production was up 15.7% over the second quarter 2012 average of 80,700 BOE/d and up 18.3% excluding the production associated with the Postle field assets which were sold on July 15, 2013.
Success in several areas contributed to production for the second quarter exceeding the high end of guidance issued in our April 24, 2013 first quarter results press release. In the Williston Basin, at our Western Williston area, production grew 231% year-over-year. We modified our completion design at our Missouri Breaks prospect and have been pleased with recent wells we placed on production. At our Redtail prospect in the DJ Basin, we implemented a new completion design and have been experiencing very strong and consistent results. We also continued to see increased production at our North Ward Estes EOR project where several phases of the CO2 flood are continuing to respond.
Despite the sale of our Postle assets, which accounted for approximately 7,560 BOE per day of production in the second quarter, our new 2013 guidance of 33.8 MMBOE (92,700 BOE/d) remains within the range of our prior guidance issued in our April 24, 2013 results press release. We are increasing our capital budget to $2.5 billion from $2.2 billion.
James J. Volker, Whiting's Chairman and CEO, commented, "With the sale of our Postle assets, we have the liquidity to accelerate development of our high rate of return Williston Basin Bakken and DJ Basin Niobrara assets.Our revised 2013 production growth guidance equates to a 12% increase over 2012 levels and a 19% increase excluding the production associated with the Postle assets.In the third quarter we anticipate replacing nearly all of the production from the Postle assets sale, which generated $837 million in net sale proceeds, while increasing our capital budget by only $300 million.We believe this demonstrates the potential of our new, streamlined portfolio and the validity of our asset rationalization strategy."
Mr. Volker added, "With the Postle sale proceeds, we expect to capitalize on the potential of our DJ Basin Redtail Niobrara area.Our most recent wells have benefited from longer laterals and larger sand volumes.We believe our completion practices translate into higher EURs and greater returns on capital.We are moving into development mode in this area with the recent arrival of a second pad capable rig and a third rig contracted to arrive in October of this year.This approximate 88,000 net acre lease position with a large amount of estimated original oil in place (59 MMBOE in the Niobrara "B" and "A" per 960-acre spacing unit) affords us the opportunity to enhance recovery by drilling on tighter spacing.Consequently, Redtail has the potential for a 33% increase to our current estimate of 2,400 gross drilling locations."
Operating and Financial Results
The following tables summarize the second quarter and first six months operating and financial results for 2013 and 2012:
Three Months Ended June 30, | |||||||||
2013 | 2012 | Change | |||||||
Production (MBOE/d) (1) | 93.38 | 80.70 | +16% | ||||||
Discretionary Cash Flow-MM$ (2) | 440.9 | 310.5 | +42% | ||||||
Realized Price ($/BOE) | 75.88 | 66.13 | +15% | ||||||
Total Revenues-MM$ | 663.6 | 502.2 | +32% | ||||||
Net Income Available to Common Shareholders-MM$ (3) | 134.7 | 150.6 | (11)% | ||||||
Per Basic Share | $1.14 | $1.28 | (11)% | ||||||
Per Diluted Share | $1.14 | $1.27 | (10)% | ||||||
Adjusted Net Income Available to Common Shareholders-MM$ (4) | 121.3 | 86.2 | +41% | ||||||
Per Basic Share | $1.03 | $0.73 | +41% | ||||||
Per Diluted Share | $1.02 | $0.73 | +40% | ||||||
(1) | The production attributable to the Postle field, which was sold on July 15, 2013, was 7.56 MBOE/d for the three months ended June 30, 2013 and 8.15 MBOE/d for the three months ended June 30, 2012. | |
(2) | A reconciliation of discretionary cash flow to net cash provided by operating activities is included later in this news release. | |
(3) | For the three months ended June 30, 2013, net income available to common shareholders included $36.8 million of pre-tax, non-cash hedging gains or $0.20 per basic share and $0.19 per diluted share after tax. For the three months ended June 30, 2012, net income available to common shareholders included $107.9 million of pre-tax, non-cash hedging gains or $0.57 per basic and diluted share after tax. | |
(4) | A reconciliation of adjusted net income available to common shareholders to net income available to common shareholders is included later in this news release. |
Six Months Ended June 30, | |||||||||
2013 | 2012 | Change | |||||||
Production (MBOE/d) (1) | 91.27 | 80.72 | +13 % | ||||||
Discretionary Cash Flow-MM$ (2) | 841.9 | 662.4 | +27 % | ||||||
Realized Price ($/BOE) | 75.34 | 70.15 | + 7 % | ||||||
Total Revenues-MM$ | 1,276.9 | 1,065.9 | +20 % | ||||||
Net Income Available to Common Shareholders-MM$ (3) | 220.7 | 248.8 | (11) % | ||||||
Per Basic Share | $1.87 | $2.12 | (12) % | ||||||
Per Diluted Share | $1.86 | $2.10 | (11) % | ||||||
Adjusted Net Income Available to Common Shareholders-MM$ (4) | 233.0 | 208.8 | +12 % | ||||||
Per Basic Share | $1.98 | $1.78 | +11 % | ||||||
Per Diluted Share | $1.96 | $1.76 | +11 % | ||||||
(1) | The production attributable to the Postle field, which was sold on July 15, 2013, was 7.62 MBOE/d for the six months ended June 30, 2013 and 8.23 MBOE/d for the six months ended June 30, 2012. | |
(2) | A reconciliation of discretionary cash flow to net cash provided by operating activities is included later in this news release. | |
(3) | For the six months ended June 30, 2013, net income available to common shareholders included $10.6 million of pre-tax, non-cash hedging gains or $0.06 per basic and diluted share after tax. For the six months ended June 30, 2012, net income available to common shareholders included $93.4 million of pre-tax, non-cash hedging gains or $0.50 per basic share and $0.49 per diluted share after tax. | |
(4) | A reconciliation of adjusted net income available to common shareholders to net income available to common shareholders is included later in this news release. | |
2013 Capital Budget
We have increased our 2013 capital budget to $2.5 billion from $2.2 billion. Our revised 2013 capital budget is currently allocated among our major development areas as indicated in the table below:
2013 | Gross | Net | % of Total | ||||||||
Northern Rockies | $ | 1,303 | 247 | 167 | 52% | ||||||
EOR | 213 | NA(1) | NA(1) | 8% | |||||||
Permian | 75 | 7 | 7 | 3% | |||||||
Central Rockies | 166 | 43 | 32 | 7% | |||||||
Gulf Coast | 25 | 3 | 3 | 1% | |||||||
Non-Operated | 200 | 8% | |||||||||
Land | 138 | 6% | |||||||||
Exploration Expense(2) | 85 | 3% | |||||||||
Facilities(3) | 145 | 6% | |||||||||
Well Work, Misc. Costs, Other | 150 | 6% | |||||||||
Total Budget | $ | 2,500 | 300 | 209 | 100% | ||||||
(1) | These multi-year CO2 projects involve many re-entries, workovers and conversions. Therefore, they are budgeted on a project basis and not a well basis. | |
(2) | Comprised primarily of exploration salaries, seismic activities and delay rentals. | |
(3) | Includes capital reduction from Postle sale. | |
The following table provides a breakdown of our $300 million budget increase:
Breakdown of 2013 CAPEX Increase | |||||
$MM | |||||
New Drilling in Northern Rockies | $ | 161 | |||
New Drilling in Permian Basin | 75 | ||||
Non-Operated Drilling | 36 | ||||
New Drilling at Redtail(1) | 30 | ||||
Land | 30 | ||||
New Drilling in Gulf Coast | 25 | ||||
Exploration Expense | 3 | ||||
Downward Adjustments(2) | (60) | ||||
$ | 300 | ||||
(1) | A third rig is scheduled to arrive at Redtail in the fourth quarter. Therefore, a larger capex impact is anticipated in 2014. | |
(2) | Consists of $33 million downward adjustment for facilities and $27 million downward adjustment for EOR projects due to the sale of the Postle field assets. | |
Operations Update
Core Development Areas
Bakken and Three Forks Development
In the Williston Basin, we control 1,096,506 gross (697,259 net) acres that target the Middle Bakken, Three Forks and Pronghorn Sand formations. Our average acreage cost in this area is $549 per net acre.
Western Williston Basin
The Western Williston Basin includes our Hidden Bench, Tarpon, Missouri Breaks and Cassandra prospects. These areas represent a total of 171,408 gross (106,952 net) acres. Production from the Western Williston Basin averaged 9,385 BOE/d in the second quarter of 2013, which represented a 44% increase over the 6,520 BOE/d average rate in the first quarter of 2013.
Missouri Breaks Prospect. We hold 84,213 gross (57,526 net) acres in the Missouri Breaks prospect, located in Richland County, Montana and McKenzie County, North Dakota. We have implemented a new completion design in our Missouri Breaks area that utilizes cemented liners and higher sand volumes. The new frac design appears to significantly improve production rates. We recently completed the Weber 24-30-1H flowing at a rate of 1,164 BOE/d using our new completion design. This well offset the Mullin 21-24-1H, which tested at a rate of 481 BOE/d and was completed using our prior frac design, an uncemented liner with sliding sleeve technology.
Southern Williston Basin
The Southern Williston Basin encompasses our Pronghorn and Lewis & Clark prospects, which encompass a total of 395,441 gross (262,630 net) acres. Production from the Southern Williston averaged 13,325 BOE/d, relatively flat with first quarter 2013 production and up 30% year-over-year. We have been shifting to pad drilling in the Pronghorn area in the first half of 2013 and have generated a backlog of uncompleted wells. As of quarter end, we had 13 wells being completed or waiting on completion at our Pronghorn prospect.
Sanish Field Area
Whiting's net production from the Sanish field area averaged 36,315 BOE per day in the second quarter of 2013 compared to 35,805 BOE/d in the first quarter 2013. The increase was in part attributable to a higher density drilling program at the Parshall field. We have initiated our higher density pilot project in the Sanish field. If successful, this could add 191 gross well locations.
Denver Basin: Redtail Niobrara Area
We hold a total of approximately 121,000 gross (88,000 net) acres in our Redtail area, located in the Denver Julesberg Basin in Weld County, Colorado. Our Redtail acreage produces from the Niobrara "B" zone and is also prospective in the Niobrara "A" and "C" zones as well as the Codell formation.
Highlighting recent drilling results at Redtail was the completion of the Razor 33-2813H, which flowed 966 barrels of oil and 620 Mcf of gas (1,069 BOE) per day from the Niobrara "B" zone on July 9, 2013. The well's 6,047-foot lateral was fracture stimulated in a total of 32 stages using our new frac design. Whiting holds a 73.4% working interest and a 58.7% net revenue interest in the Razor well, which was drilled on a 960-acre spacing unit. We have also applied this new frac design to our 640-acre spacing unit wells with positive results. The Razor 25-2514H flowed 593 barrels of oil and 255 Mcf of gas (636 BOE) per day from the Niobrara "B" zone on June 30, 2013. The well's 3,716-foot lateral was fracture stimulated in a total of 18 stages. Whiting holds an 87.5% working interest and a 74.8% net revenue interest in the well. Production results from our most recent six wells using this new completion design are consistent with a 400+ MBOE type curve.
We currently have two drilling rigs running at Redtail. We plan to add a third rig in October 2013. Our development plan for the Redtail prospect is to drill eight wells per spacing unit to the Niobrara "B" zone and four wells in each spacing unit to the Niobrara "A" zone. We estimate that we have more than 2,400 gross locations and 1,200 net locations at our Redtail prospect on this development pattern. We plan to test tighter spacing in the Niobrara "A" / "B" reservoir system, with the potential to drill up to 16 wells per spacing unit versus our current 12-well plan.
Enhanced Oil Recovery
North Ward Estes Field. Net production from our North Ward Estes field averaged 9,275 BOE/d, a 9% increase over the 8,545 BOE/d in the first quarter of 2013. Whiting is injecting approximately 350 MMcf of CO2 per day into the field, of which about 63% is recycled gas.
Operated Drilling Rig Count
As of July 15, 2013, 25 operated drilling rigs were active on our properties. The breakdown of our operated rigs as of July 15, 2013 was as follows:
Region | ||||
Northern Rockies | 20 | |||
Permian Basin | 1 | |||
Central Rockies | 2 | |||
Gulf Coast | 1 | |||
EOR Project: | ||||
North Ward Estes | 1 | |||
Total | 25 | |||
Other Financial and Operating Results
The following table summarizes the Company's net production and commodity price realizations for the quarters ended June 30, 2013 and 2012:
Three Months Ended | ||||||||
June 30, | ||||||||
Production | 2013 | 2012 | Change | |||||
Oil (MMBbl) | 6.70 | 5.58 | 20% | |||||
NGLs (MMBbl) | 0.69 | 0.70 | (1%) | |||||
Natural gas (Bcf) | 6.62 | 6.38 | 4% | |||||
Total equivalent (MMBOE) | 8.50 | 7.34 | 16% | |||||
Average Sales Price | ||||||||
Oil (per Bbl): | ||||||||
Price received | $ | 89.15 | $ | 79.92 | 12% | |||
Effect of crude oil hedging | (1.05)(1) | (1.35) | ||||||
Realized price | $ | 88.10 | $ | 78.57 | 12% | |||
NYMEX oil (per Bbl) | $ | 94.23 | $ | 93.51 | 1% | |||
NGLs (per Bbl): | ||||||||
Realized price | $ | 37.80 | $ | 37.45 | 1% | |||
Natural gas (per Mcf): | ||||||||
Price received | $ | 4.27 | $ | 3.25 | 31% | |||
Effect of natural gas hedging | - | 0.06 | ||||||
Realized price | $ | 4.27 | $ | 3.31 | 29% | |||
NYMEX natural gas (per Mcf) | $ | 4.10 | $ | 2.21 | 86% | |||
(1) | Whiting realized pre-tax cash settlement losses of $7.0 million on its crude oil hedges during the second quarter of 2013. A summary of Whiting's outstanding hedges is included later in this news release. | |
Second Quarter and First Half 2013 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 Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Production (MMBOE) | 8.50 | 7.34 | 16.52 | 14.69 | ||||||||
Sales price, net of hedging | $ | 75.88 | $ | 66.13 | $ | 75.34 | $ | 70.15 | ||||
Lease operating expense | 12.37 | 12.19 | 12.41 | 12.54 | ||||||||
Production tax | 6.33 | 5.55 | 6.36 | 5.81 | ||||||||
General & administrative | 3.44 | 3.43 | 3.52 | 4.06 | ||||||||
Exploration | 2.86 | 1.84 | 2.62 | 1.58 | ||||||||
Cash interest expense | 2.42 | 2.12 | 2.40 | 2.16 | ||||||||
Cash income tax expense (benefit) | (0.30) | 0.15 | (0.13) | 0.17 | ||||||||
$ | 48.76 | $ | 40.85 | $ | 48.16 | $ | 43.83 | |||||
Second Quarter and First Half 2013 Drilling and Expenditures Summary
The table below summarizes Whiting's operated and non-operated drilling activity and capital expenditures for the three and six months ended June 30, 2013:
