A top shale producer in the Bakken lost nearly 40% of its value today as investors dumped a record number of shares. Whiting Petroleum’s stock was hammered due to miserable earnings, a huge drop in oil prices, and additional Chinese tariffs issued by the Trump Whitehouse. Whiting’s stock price fell $7 in a single day to close at $10.84.
As you can see from the chart, Whiting’s share price closed the day before at $17.68, but dropped more than $4 before the opening bell. The gutting of Whiting’s stock must have come as a surprise to investors as the energy market seemed to be on the rebound after the Fed cut interest rates. However, not only did Whiting come out with weak earnings this morning, but it also announced an “Organization Redesign” of the company. I had to get a laugh when I read the title of the news release:
Let me tell you, this news release was a typical response to try and hoodwink investors even more than they are already. How is the management going to transform Whiting into a “LEADER” when they haven’t been able to do so for the past decade?? The company states the restructuring plan will cut $50 million annually. Well, that’s nice, but Whiting still has $2.3 billion in long term debt and $542 million of senior notes CURRENTLY DUE.
So, how is Whiting going to pay off the $542 million of senior notes due?? Well, if we look at their financial statement, I don’t have a clue:
Whiting reported $19.8 million of income from operations (highlighted Blue) in the first half of 2019, but they also had to pay $96.8 million of interest expense (highlighted yellow) for a whopping Net Income loss of $75.9 million. Whiting’s total revenues at the top of the table declined significantly due to much lower realized petroleum and natural gas prices:
While oil prices fell 14% compared to the same period in 2018, the highlighted yellow areas show Whiting’s massive decline in realized prices for NGLs (-45%) and Natural Gas (-64%). Whiting received $8.43 a barrel for the NGLs (natural gas liquids) and only $0.47 per Mcf of natural gas in Q2 2019. Now, compare that to ConocoPhillips who received $19.97 for a barrel of NGLs and $4.08 per Mcf for natural gas. Also, you can check that the NYMEX average market price for natural gas was $2.58. Thus, Whiting received only 18% of the average market value for their natural gas.
Whiting’s oil production declined 8% since the end of 2019, while NGLs and natural gas production increased. Unfortunately, Whiting isn’t being paid much for the NGLs or natural gas, so its Q2 2019 earnings were a real disappointment for investors. So, along with their press release of an “Organizational Redesign,” this spooked investors to dump a record amount of shares:
Investors traded 29.4 million shares of Whiting, the highest one day record in the company’s history. Whiting’s stock now is below the MAJOR SUPPORT LEVEL of $16 that I wrote about a few months ago. Here is an updated chart:
It will be interesting to see how Whiting’s stock behaves over the next 6-12 months. However, I believe it’s going MUCH LOWER. Furthermore, most of the U.S. shale stocks also got clobbered today:
U.S. Shale Stocks Today
- Concho = -22%
- Oasis = -13%
- Pioneer = -8%
- Continental = -8%
As we can see, several of the U.S. shale stocks took a beating. I will be doing more updates on the U.S. shale companies and ExxonMobil when they release their results over the next week.