EnerCom: Whiting Parts With Chunk Of Williston Core For $500 Million

DENVER—Whiting Petroleum Corp. (NYSE: WLL), fighting off an estimated $300 million overspend of cash despite reducing capex, said Aug. 15 it has agreed to sell some of its core Fort Berthold area assets in North Dakota.

RimRock Oil & Gas Williston LLC agreed to pay $500 million for 29,637 net acres in Dunn and McLean counties, N.D. RimRock was formed in early 2016 with a line-of-equity investment from Warburg Pincus of up to $500 million.

The assets’ production averaged 7,785 barrels of oil equivalent per day (boe/d) in second-quarter 2017.

On Aug. 14 at Enercom’s The Oil and Gas Investor Conference, Jim Volker, Whiting president and CEO, said Dunn was considered one of its core counties. However, the Dunn area constitutes about 7% of the company’s production and roughly 8% of its gross horizontal well inventory in the Williston Basin.

Lease operating expenses (LOE) for the area averaged $12.60 per boe for the 12 months ended June 30 compared to Whiting’s other Bakker production with LOEs of $7.50 per boe.

Whiting said it will use the net proceeds from the sale to repay $500 million of its current $550 million bank debt. Volker said the sale also provides the liquidity it needs to develop in the Williston.

“The price received for these properties, which are largely nonoperated, highlights the quality of Whiting’s Bakken/Three Forks assets,” Volker said. “The sale provides Whiting additional liquidity to develop its industry-leading properties across the Williston Basin, where the company estimates it has 4,850 future gross drilling locations.”

The deal can likely be traced to Whiting’s underperformance in the second quarter.

In July, Whiting set its new capital budget lower at $950 million. Still, Volker said production, predominantly oil, will grow from first-quarter 2017 to the fourth quarter by 14%.

However, with an 11% EBITDA miss in the second quarter, Seaport Global Securities analysts said the company would have to address cash flow shortfalls with either a “significant” equity raise or selling core acreage.

Seaport argued a sale was more likely “given increased interest in the Bakken, particularly from private equity players who have been willing to ink deals at $10,000 to $15,000 per acre,” the July 27 report said.

In Denver, Volker spoke to an Enercom crowd with confidence about new completion techniques as well as a midyear, independent assessment that Whiting’s proved reserved increased 23% compared to year-end 2016.

Volker touted enhanced completion wells in the Williston, with a number of well EURs capable of producing 1 million to 1.5 million boe. At $50 oil prices, a 1.5 million boe well would generate a 118% internal rate of return and a 4x return on investment.

Volker said it has “69 enhanced completion wells across the basin and are all above a 1 million boe type curve.” Dunn has four enhanced completion pads but Whiting’s presentation showed no wells with 1 million boe or greater wells.

The effective and closing date of the sale is Sept. 1, Whiting said. Kirkland & Ellis LLP advised RimRock and its sponsor Warburg Pincus in the agreement to purchase Whiting’s Fort Berthold assets.

Darren Barbee can be reached at dbarbee@hartenergy.com.