Whiting raises 2016 output guidance

OREANDA-NEWS. April 28, 2016. Top Bakken producer Whiting Petroleum raised its 2016 output guidance as it signed an agreement with an undisclosed "private party" to share drilling and completion costs.

The new guidance is 131,400-136,900 b/d of oil equivalent (boe/d) it said. Back in February when the producer announced a steep cut of 80pc in its 2016 capital expenditure (capex) from a year earlier to \\$500mn, it had reduced its output guidance for the year to 128,000-138,000 boe/d. That compared with an output of 163,200 boe/d in 2015.

Under the agreement signed on 14 April, the party will pay 65pc of drilling and completion costs for a 50pc working interest in 44 gross Williston basin wells in North Dakota. Whiting, which already received a \\$30.7mn cash payment in April for wells that have already been drilled, will continue to run two drilling rigs and will add a completion crew as a result of the deal.

"With this participation agreement, Whiting plans to add production and proved reserves with no increase to its capex budget," it said.

The majority of completions under the agreement are scheduled for the second half of the year. The company said it expects to "realize the full production benefit in late 2016 and 2017."

The agreement is among the many measures producers are deploying to cope with a prolonged market downturn that saw prices plunge to \\$30/bl. Whiting Petroleum has been under particular pressure following its ill-timed purchase of Kodiak in 2014 in an all-stock transaction valued at \\$6bn, which made it the largest producer in the Bakken shale basin. Whiting agreed to shoulder Kodiak's \\$2.2bn in debt and fork out over \\$3.8bn in stock.

The bulk of US oil and gas independents will post their earnings next week, but the first set of announcements point to producers including Pioneer Natural Resources, Hess and Whiting holding on to their capex guidance given earlier in the year. This is perhaps an indication that the industry sees the first quarter as the through of the downturn amid the recent recovery in prices. Producers are also not aggressively raising output, but are baking in higher guidance on the back of technology and efficiency improvements and cost cuts.

Whiting's output in the first quarter fell to 146,770 boe/d compared with \\$166,930 boe/d a year earlier. It earned an average of \\$25.82/bl on its crude oil sales compared with \\$37.97/bl a year earlier. Its long-term debt rose to \\$5.33bn as of 31 March, from \\$5.2bn a year earlier.

Whiting posted a net loss of \\$172mn in the first quarter compared with a loss of \\$106mn a year earlier.