OREANDA-NEWS. Whiting Petroleum swapped over $1bn of debt with instruments that can be converted to equity, a further sign to the pressure producers with large debt face despite the recovery in prices.

The swap follows a similar deal by the top Bakken producer involving $430mn in debt in March. In both cases, Whiting privately negotiated agreements with some of its debt holders to exchange unsecured notes with unsecured convertible notes. Convertible notes allow investors to turn the debt into shares of the company at a future date, which can be an attractive option if the company has strong growth prospects.

While the swap eases the immediate pressure on Whiting to service its debt, it risks capping an upside to its stock price as investors now hold more shares of the company.

"While the deal does make Whiting's leverage profile more palatable, it also removes a large amount of upside," according to analysis firm Tudor Pickering and Holt (TPH).

The latest deal involved notes due between 2018 and 2023. The largest amount due was $687.9mn in 2020, followed by $172.7mn in 2021 and $157.9mn in 2023.

While the near doubling in oil prices since the lows touched in the first quarter is allowing some low-cost producers like Pioneer Natural Resource, Devon and Antero to plan for a step-up in drilling later this year, the vast majority of US independents are using the recovery to pay down debt and shore up their balance sheets.

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.