Whiting Petroleum (NYSE: WLL) has grown massively in a little more than seven years. Going from a market cap of $300 million in late 2003 to a current valuation of $6.5 billion, this company has come a long way.

The crux of the matter
Whiting has been steadily increasing its reserves since 2003, which are now yielding results. Production has grown steadily over the last three years, which has translated into higher revenues. Total production in 2010 grew by 16% over 2009 and by 35% over 2008. The result: a whopping 65% increase in operating cash flows in the last 12 months.

With solid fundamentals backing up operations, this stock has clearly made an impressive recovery since the Great Recession, which crippled the oil industry. In fact, the share price has risen a thumping 462% since March 2009.

The best strategy in this industry
Management's game plan has been nothing short of impressive, as well. Through acquisitions and organic growth in existing acreage, total asset value has more than doubled. Since 2006, net property, plant and equipment have seen a 113% growth to $4.6 billion.

Whiting has been diversifying its portfolio of assets. While the Permian Basin and the Rocky Mountains still contain 80% of its proved reserves, the company has also set its sights on the shale plays of North Dakota.

Whiting has prodigiously been seeking out long-lived, low-risk assets that could provide stable cash flows. Development of its Williston Basin properties in the Bakken shale play has become one main objective in terms of further growth. The company has ambitious plans to double its total rig count to 10 by the end of this year.

Ambitious plans
Not surprisingly, capital expenditures for this year have gone up to more than $1.3 billion, a fantastic 38% increase from what the company has incurred in exploration and development activities in 2010.

However, the company's low cash balance and slightly negative free cash flow might considerably hinder its plans. Also, a capital ratio of only 0.5 indicates liquidity issues, which can deter long-term investors.

How is the stock valued?
This is how Whiting stacks up when compared with its peers:

Company

P/E

(TTM)

EBITDA Margin

(TTM)

TEV/EBITDA

(TTM)

P/B

Whiting Petroleum 28.8 59.4% 9.3 3.4

Denbury Resources

(NYSE: DNR)

30.7 60.3% 9.9 2.0

Enerplus Corporation

(NYSE: ERF)

43.2 81.0% 8.4 1.4

Concho Resources

(NYSE: CXO)

55.0 44.6% 20.1 4.6

Plains E&P

(NYSE: PXP)

49.6 55.1% 9.4 1.5

Source: Capital IQ, a Standard & Poor's company. TTM = trailing 12 months.

Whiting's numbers reflect that it is still relatively undervalued. I believe the overall market hasn't factored in the huge potential of the company diversifying its assets, especially into the lucrative Bakken shale plays in North Dakota.

A near 60% conversion of revenues into operational earnings (EBITDA) shows a healthy operational framework. Price-to-book indicates that the assets have appreciated in value and are of higher worth compared with peers. Return on assets stands at 6.8%, the highest in the peer group. These assets are definitely capable of generating solid returns.

Foolish bottom line
Whiting's management seems to know exactly what it is doing. 2010 saw an 11% growth in the company's proved reserves over 2009. While certain issues still need to be sorted out, these can easily be addressed. Overall, I consider this a safe stock for long-term investing.