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Why Whiting Petroleum Corp's Shares Plunged 11% Today

By Travis Hoium – May 30, 2017 at 1:19PM

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A downgrade sent Whiting's shares sharply lower today.

What happened

Shares of oil and gas explorer Whiting Petroleum Corp (WLL) dropped as much as 10.5% in trading Tuesday after being downgraded by an analyst. At 12:30 p.m. EDT shares were still trading 9.6% lower on the day. 

So what

Analysts at Goldman Sachs lowered their rating on Whiting Petroleum stock from neutral to sell, and estimated the company would lose $0.54 per share this year, $0.06 lower than their previous estimate. Lower oil prices are anticipated to be a headwind Whiting can't overcome, and not only will it squeeze margins, but it will make it harder for the company to borrow money at attractive rates. 

Drilling rig with setting sun in the background.

Image source: Getty Images.

Over the last couple of weeks we've seen oil prices fall below $50 per barrel on lower-than-expected cuts to OPEC's production. Rising oil prices had made some investors more bullish on oil stocks recently. 

Now what

Whiting Petroleum has lost money each of the last two years, and with losses expected again this year, It's hard to see value in the stock. If oil prices don't see a big recovery, the whole shale industry could be losing money. This downgrade has sent shares lower today, but I still don't see any value in the stock and would stay away until the energy market overall makes a much more sustainable recovery. 

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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