Sources have said that J.P. Morgan has been shopping the entire company recently, but that Whiting’s debt load of $5.63 billion is keeping potential buyers at bay.
Thus, a sale of some assets may be in order. In an investor presentation on March 2, Whiting discussed its assets and plans for its North Dakota and Colorado operations, but it had nothing much to say about its Permian Basin assets. The enhanced oil recovery operation in the Permian Basin is projected to receive $82 million in capital expenditures during 2015, of which $80 million is targeted to pay for carbon dioxide to flood the wells.
ALSO READ: 6 Oil and Gas Stocks Analysts Want You to Buy
Of Whiting’s fourth-quarter 2014 total production of roughly 120,000 barrels of oil equivalent a day, more than 100,000 barrels comes from North Dakota and about 10,000 barrels a day from each of Colorado and Texas.
Whiting has reported that the Permian Basin holds an estimated 133 million barrels of proved reserves of the company’s total of 780.3 million barrels of oil equivalent. The hard part is figuring out what those 133 million barrels are worth in today’s market. Is the right price $15 a barrel? $20? More? Less?
Valued at $20 a barrel in the ground, Whiting’s Permian Basin barrels are worth about $2.66 billion. The company’s market cap Friday morning is around $5.9 billion, indicating that the Permian Basin barrels are worth about $10 a barrel in the ground.
The company’s Permian Basin assets are unlikely to find a buyer who wants to acquire anything more than a steady cash flow at low cost. Such a company is unlikely to be able to pay the kind of price that Whiting needs to give itself some breathing room.
Whiting’s shares traded down nearly 8% Friday morning, at $35.38 in a 52-week range of $24.13 to $92.92.
ALSO READ: Why Top Solar Stocks Should Outperform the Stock Market
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
