This article was first published by Seeking Alpha on March
25, 2015
By Sarfaraz A. Khan
The shares of Whiting Petroleum (NYSE:WLL), the biggest
hydrocarbon producer from North Dakota's Bakken formation, tanked yesterday,
dropping by 19.5% when the markets closed, after the company announced that it
will issue equity and debt, thereby signaling that the company has failed to
find a buyer. Whiting plans to issue 35 million shares at $30 a piece, $1
billion convertible bonds that haven't been priced yet and $750 million 6.25%
senior notes due in 2023 as it follows in the footsteps of its peers Energy XXI
(NASDAQ:EXXI), RSP Permian (NYSE:RSPP), Antero Resources (NYSE:AR), Encana
Corp. (NYSE:ECA) and Noble Energy (NYSE:NBL) who have also raised equity and
debt.
Last year, Denver-based Whiting purchased its debt-laden
competitor Kodiak Oil & Gas at a time when WTI was still priced at over $95
a barrel. Consequently, Whiting's long term debt climbed from $2.65 billion at
the end of 2013 to $5.63 billion at the end of 2014, but oil prices plunged by
nearly 50% in this period. With a weaker balance sheet, un-hedged oil
production, and the anticipated cash flow deficit, Whiting found itself in a
difficult position. Earlier this month, WSJ reported that Whiting was actively
"seeking a buyer" while Bloomberg said that the company has hired a
bank to help with the process.
Clearly, shareholders, who have been looking towards the
bigger oil producers such as Exxon Mobil (NYSE:XOM), Hess Corp. (NYSE:HES),
Marathon Oil (NYSE:MRO) and Statoil (NYSE:STO) as possible suitors, are
disappointed, and perhaps rightly so. The sale of the … read full article at
Seeking Alpha.
