Please ensure Javascript is enabled for purposes of website accessibility

3 Reasons Why Whiting Petroleum Corp Surged 53.5% in April

By Matthew DiLallo - May 10, 2016 at 11:20AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The stock's rise was ignited by earnings, analysts, and oil.

What: Shares of Whiting Petroleum (WLL) caught fire last month, jumping 53.5%. Fueling this big move was a trio of catalysts.

So what: For Whiting Petroleum it all starts with oil, which surged nearly 20% last month. Driving the crude oil rally was a growing belief by the oil market that supply and demand will be back into balance by the end of the year.

A big reason why that belief is taking hold is because companies like Whiting Petroleum have significantly reduced spending on new wells, which is causing their production to decline. That slide was evident when looking at Whiting Petroleum's own first-quarter oil production, which fell from a total of 12.18 million barrels in last year's first quarter to 9.96 million barrels in the first quarter of 2016.

That being said, while additional declines are on the way at Whiting Petroleum, the company did report stronger first-quarter production and announced that it had entered into a participation agreement with a financial sponsor so that it could drill more wells. That agreement, in which the partner will pay 65% of its well costs, will enable the company to complete an additional 44 wells this year. Further, Whiting Petroleum reported that it had strengthened its financial position during the quarter by exchanging $477 million of bond debt into convertible debt. These first-quarter updates showed investors that the company is battling through the downturn and making progress. 

The final fuel driving last month's rally was a bullish take by analysts at Goldman Sachs, which named Whiting Petroleum as one of its "nine favorites for a Goldilocks oil price." While Whiting wasn't at the top of its list it was on the "next rung down" with the likes of fellow Bakken peers Hess (HES -0.52%) and Continental Resources (CLR 0.47%). What made these companies attractive was their ability to survive $35 oil through the second half of the year, while being well positioned for higher oil prices in 2017. This trio were seen as survivors due to the fact that each has an improving balance sheet with Hess, Continental Resources, and Whiting Petroleum all selling assets over the past year to bolster their financial position. Meanwhile, the three were also well positioned for higher oil prices thanks to their strong backlog of drilling opportunities not just in the Bakken but in STACK/SCOOP for Continental, the Utica for Hess, and the Niobrara for Whiting Petroleum.

Now what: April was a really good month for Whiting Petroleum because not only did oil prices improve, but so did its financial situation. That is putting the company in a better position to weather the current downturn so that it can take advantage of the eventual upturn.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Whiting Petroleum Corporation Stock Quote
Whiting Petroleum Corporation
WLL
Hess Corporation Stock Quote
Hess Corporation
HES
$105.39 (-0.52%) $0.55
The Goldman Sachs Group, Inc. Stock Quote
The Goldman Sachs Group, Inc.
GS
$299.23 (0.74%) $2.21
Continental Resources, Inc. Stock Quote
Continental Resources, Inc.
CLR
$65.66 (0.47%) $0.31

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.