Image source: Getty Images.
The continued weakness of crude prices fueled another steep quarterly loss for Whiting Petroleum (WLL +0.00%). However, hidden beneath those awful financial numbers in the third quarter were three impressive metrics. These figures show that the company is not faring as poorly as the headline numbers indicate.
1. Production: 11 million barrels of oil equivalent
Heading into the quarter, Whiting Petroleum thought it would produce between 10.5 million to 11.1 million barrels of oil equivalent (BOE), or about 10.8 million BOE at the midpoint. However, it clocked in with 11 million BOE during the quarter, which was at the high end of its guidance range.
One of the fuels driving that high-end result was production from a 13-well pad in North Dakota, which tested at an average rate of 3,727 barrels of oil equivalent per day (BOE/D) per well. What's noteworthy about these wells is that they are part of the company's leading-edge completion design that uses more than 10 million pounds of frack sand.
2. Free cash flow: $66 million
Whiting was able to deliver that strong production while only spending $85 million on capital expenditures (capex) during the third quarter, which was flat with the prior quarter. That's an important number because the company's cash flow during the quarter was $151 million as a result of its high-end production, lower operating costs, and improving oil prices. After subtracting capex, Whiting still had $66 million in cash flow to spare, which is a rare feat in the oil industry these days, especially in the Bakken.
Because of the Bakken's high costs and steep production decline rates, producers have struggled to maintain their output during the downturn, which has certainly been the case for Whiting up to this point. The capital-intensive nature of the play meant that generating any excess cash flow would be tough to do. That said, it has not been impossible.
Oasis Petroleum (OAS +0.00%), for example, has been able to keep its production roughly flat while still managing to generate free cash flow. In fact, through the second quarter, it has been able to produce $46 million in free cash flow over the past year-and-a-half. It's a goal that Whiting is getting closer to achieving.
Image source: Getty Images.
3: 2016 Production guidance: Increased to 47-47.4 MM BOE
As a result of its stronger-than-expected third-quarter production, Whiting Petroleum is confident that it can beat its full-year expectations. That's leading the company to raise its full-year production guidance to a range of 47 million to 47.4 million BOE, which is above the 46.5 million to 47.3 million BOE it forecast last quarter.
One of the factors driving this stronger production is the meaningful production gains the company is seeing by using more sand to frack its wells. For example, wells fracked with more than 5 million pounds of sand are tracking to produce more than 900,000 BOE over their lifetime. Meanwhile, those fracked with more than 10 million pounds of sand are on track to deliver 1.5 million BOE.
These improving production results are becoming more common in the Bakken as producers find the keys to unlocking its oil. For example, last year, Continental Resources' (CLR +0.00%) average Bakken well tracked to deliver an estimated ultimate recovery (EUR) of 800,000 BOE per well. However, this year, it has increased that up to 900,000 BOE per well.
Meanwhile, Oasis Petroleum's initial forecast for the EUR on a core Bakken well was 1.05 million BOE. However, its latest wells are tracking at an EUR of 1.55 million BOE. These improving recoveries are the primary reason why both Oasis and Continental Resources have also increased their 2016 production guidance.
Investor takeaway
Whiting Petroleum's third-quarter report showed another step forward as the company tries to get back on a sustainable path. It's the ability to deliver more oil than expected without spending any incremental capital that will be a game changer for the company should oil prices continue to recover.
This success is due, in large part, to the robust results the industry is enjoying as they improve their well completion techniques, with Whiting finding that higher sand volumes are the key to unlocking more oil from its position in the Bakken.
