Small Investors Getting Whacked in Whiting Petroleum Bankruptcy

Last Friday, Whiting Petroleum Corp. (NYSE: WLL) announced that it had drawn $650 million on its credit facility to fund ongoing operations. On Wednesday morning, the Denver-based oil and gas exploration and production company said it was filing for Chapter 11 bankruptcy protection.

In the filing, Whiting said it had $585 million in cash and expects to continue operating “without material disruption to its vendors, partners or employees.” The company expects cash on hand to be sufficient to meet its financial obligations without more borrowing as the restructuring proceeds.

Whiting has reached an agreement in principle with some debtholders that includes a “comprehensive restructuring” of $2.2 billion in debt in exchange for 97% of the new equity in the reorganized company. Under the proposed plan, which will need to be approved by the bankruptcy court, existing shareholders will receive 3% of the new equity in the reorganized company.

CEO Bradley Holly commented:

The Company has also explored a wide variety of alternatives to address our balance sheet and looming note maturities in a highly capital constrained market environment. Given the severe downturn in oil and gas prices driven by uncertainty around the duration of the Saudi / Russia oil price war and the COVID-19 pandemic, the Company’s Board of Directors came to the conclusion that the principal terms of the financial restructuring negotiated with our creditors provides the best path forward for the Company.

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At the end of 2019, Whiting reported $2.8 billion long-term debt, cash and equivalents of $8.65 million and an accumulated deficit of $2.39 billion.

In the fourth quarter of last year, the company produced 123,000 barrels of oil equivalent a day, of which 55% was oil. The company’s average selling price per barrel of oil was $50.06, and Whiting’s net oil sales for 2019 totaled $1.49 billion. Production this year is expected to be roughly equal to 2019 levels, but prices are unlikely to be anywhere near last year’s average.

In its proxy statement from March 19, Whiting lists five firms with more than 5% stakes in the company: BlackRock owns 15.5% of Whiting’s common stock while State Street owns 14.2% and Vanguard owns 10.7%. Dimensional Fund Advisors owns 7.5% and Hotchkis and Wiley Capital Management owns 5.5%. Insiders own 2.5% of the common stock, with CEO Holly’s 908,464 shares at the top of the list.

That doesn’t leave much for small investors following the reorganization.

Whiting stock traded down about 42% at $0.39 in the late morning Wednesday, after posting a new 52-week low of $0.33. In the summer of 2014, Whiting stock hit a hit of more than $350.00 a share.

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