Is Whiting Petroleum Stock A Buy After Bankruptcy Restructuring?


Shares of Whiting Petroleum (WLL) are currently open for trading again after trading was briefly halted on Wednesday. It was reported that Whiting Petroleum had emerged from Chapter 11 restructuring from bankruptcy, having initially filed for bankruptcy on April 1, 2020.

So why did Whiting file for Chapter 11? Like many other exploration and production companies, Whiting’s financial condition has been significantly impacted by the COVID-19 pandemic and the sustained decline in oil and gas prices.

In a March 11 note, Bernstein analyst Bob Brackett expressed concern about the company’s ability to meet debt maturities in 2020 and suggested Whiting is likely to rely on “a refinancing or other corrective measures”. The company’s management team has prioritized improving its capital efficiency, reducing its overall cost structure, reducing debt and allocating more resources competition during this period.

What were the highlights of the restructuring? Well, Whiting Petroleum wiped $3 billion worth of debt off its balance sheet for starters. The company will also implement its new capital structure which provides for a $750 million credit facility maturing in 2024. Shareholders have shockingly received equity here thanks to the restructuring plan (rare for bankruptcies) , with current Whiting shareholders receiving a share of the new reorganized Whiting common stock. for approximately 75 shares previously held.

KeyBank analysts recently covered the stock and upgraded it to overweight with a price target of $25. Analysts cited Whiting Petroleum’s healthy balance sheet and low multiple as reasons for the upgrade, and also expressed that the $25 price target is based on a 1.8x multiple of the DACF 2021E (flow of debt-adjusted cash) at $55 WTI (West Texas Intermediate).

Whiting Petroleum’s new board is also excited about the near-term future, with CEO Lynn Peterson recently saying, “We are excited to begin our new chapter at Whiting, with a focus on capital discipline and generation of free cash flow to create long-term value for our shareholders. The company is expected to report 3Q20 sales of $214.9 million, representing an approximately 100% increase from 2Q20 revenue of $107.5 million.

Shares of Whiting Petroleum are currently trading near $23 at press time.

Disclosure: At the time of publication, I do not own Whiting Petroleum, I wrote this article myself, and it expresses my own opinions. I receive no compensation for creating this article (other than from TheStreet) and have no business relationship with any company whose stock is mentioned in this article.


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