Whiting reports year-end liquidity of $2.7 billion, no near maturities

By Paul Deckelman

New York, March 8 – Whiting Petroleum Corp. ended 2015 with what its president and chief executive officer called “a good, strong, flexible balance sheet,” including $2.7 billion of liquidity – a cushion bigger than those enjoyed by most of the Denver-based independent oil and natural gas exploration and production company’s sector peers.

And James J. Volker told participants at the 37th annual Raymond James Institutional Investors Conference on Tuesday in Orlando, Fla., that Whiting has no near-term maturities and is in compliance with all of its credit facility and bond covenants.

Liquidity tops most peers

Volker said that at the end of the 2015 fourth quarter and fiscal year on Dec. 31, Whiting had $3.5 billion of financing commitments under its $4 billion borrowing-base revolving credit facility, with $800 million of that having been drawn, for liquidity of a little over $2.7 billion.

Besides the credit facility availability, Whiting’s balance sheet at Dec. 31 showed $16.05 million of cash, although that was down from $78.1 million at the end of 2014.

“So [we have] excellent liquidity,” he declared.

As part of his presentation, Volker showed a series of slides to the investors, including one comparing Whiting’s $2.71 billion liquidity figure with the corresponding figures for a number of its peers – Cimarex Energy Co., Concho Resources Inc., Continental Resources, Inc., Denbury Resources Inc., EOG Resources Inc., Linn Energy, LLC, Murphy Oil Corp., Newfield Exploration Co., Oasis Petroleum Inc., Pioneer Natural Resources Co., Range Resources Corp. and SM Energy Co.

Out of the 12 companies to which Whiting compared itself, only two (which were not specifically identified) had more Dec. 31 liquidity. One had $2.89 billion, and the other barely shaded Whiting at $2.74 billion. The year-end liquidity of the other 10 companies ranged from a high of $2.5 billion to a low of $877 million. The average liquidity figure for the 12-company peer group was $1.81 billion, so “obviously we have excellent liquidity here with $2.7 billion compared to our peers, and we feel very good about that,” Volker said.

Debt cut over past year

The CEO noted that Whiting has “no bond maturities until 2018 and certainly no large maturities – as that first one is only about $350 million – until 2019.”

At the end of the year, Whiting’s balance-sheet debt stood at $5.20 billion, down from the $5.60 billion at which it had ended 2014.

In 2014, Whiting acquired cross-town Denver rival Kodiak Oil & Gas Corp. in a transaction that created the biggest company operating in the lucrative Bakken oil field in North Dakota. Although there was little cash outlay associated with the acquisition, since it was a straight exchange of Whiting stock for Kodiak shares, the $6 billion transaction value included the assumption by Whiting of $2.2 billion of Kodiak’s net debt, including three series of outstanding junk bonds.

That boosted Whiting’s total debt as of the end of fiscal 2014 to $5.63 billion. By June 30 of last year, Whiting had managed to whittle that debt figure down to $5.25 billion, having taken out $351 million of Kodiak 5½% notes due 2021 and $401 million of Kodiak’s 5½% notes due 2022 under the notes’ change-of-control provisions. It paid $760 million in cash, funded through draws on its revolving credit facility.

Earlier last year, it issued $1.25 billion of 1¼% convertible notes due 2020 and, in the junk market, $750 million of 6¼% senior notes due 2023. It also sold $1.25 billion of new common stock, with the proceeds from those stock and debt transactions used to repay revolver borrowings and for general corporate purposes.

As of June 30, 2015, with the Kodiak 5½% notes due 2021 and 2022 notes having been extinguished and all revolver borrowings repaid, Whiting’s capital structure consisted of $350 million of 6½% senior subordinated notes due 2018, $819 million of Kodiak 8 1/8% senior notes due 2019 that remained outstanding after the acquisition, $1.1 billion of its own 5% senior notes due 2019, the 2020 convertible notes, $1.2 billion of 5¾% senior notes due 2021 and the new 2023 senior notes.

Just before the end of 2015, Whiting redeemed all of the remaining outstanding Kodiak 8 1/8% notes, which it called for redemption on Dec. 24 at a price of 104.063, funding that redemption by drawing on its credit facility.

In compliance with covenants

Volker noted that Whiting was “well within” all of its credit facility and bond convents.

The company is allowed a leverage ratio of total senior secured debt – its revolver borrowings – as a multiple of EBITDAX (an energy industry variation on the familiar EBITDA earnings measure that also includes exploration costs) of less than 2.5 times; that ratio was only 0.57 times as of the year’s end.

The credit facility covenant measuring total EBITDAX versus consolidated interest costs requires a multiple of no less than 2.25 times; Whiting’s interest coverage was 6.34 times at year’s end, “so very strong,” Volcker said.

The company’s current ratio of assets versus liabilities under the bank facility covenant stood at 5.14 to 1 at year’s end, well up from the required 1 to 1.

On the bond side of the ledger, the ratio of consolidated cash flows to fixed charges (i.e., interest expense) must be greater than 2 to 1; it stood at 4.28 to 1 at year’s end.

Lower borrowing base no problem

Volker noted that Whiting’s next borrowing-base determination date is May 31.

He speculated that the $4 billion borrowing base established Nov. 1 will likely be reduced and along with it the banks’ commitments to around $2.5 billion from the current $3.5 billion, although he said that the lower figure “still provides us with excellent liquidity, and I expect that we’ll receive a larger second-lien basket than we have today, so that will provide us with additional flexibility.” The facility matures in December 2019.

“We have an excellent relationship with our banks,” he concluded. “Our bank group is about 22 different banks, and as you know, during our history since going public, we’ve paid them off completely a number of times, and as a consequence, we have excellent relationships with them.”

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