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Whiting Petroleum (NYSE: WLL) announced it priced the initial public offering of 16,000,000 units of beneficial interest in Whiting USA Trust II at $20.00 per trust unit to the public. Whiting has granted the underwriters an option to purchase up to 2,400,000 additional trust units at the same price per trust unit to cover any over-allotments. Whiting USA Trust II will trade on the NYSE under the symbol WHZ. Whiting expects to close the IPO on March 28, 2012.

Assuming no exercise of the over-allotment option, WLL expects to receive net proceeds from this offering of approximately $296.8 million. The company intends to use the net proceeds from the offering to repay a portion of the debt outstanding under its credit agreement.

OAG360 Comments:

The company disclosed in its S-1 filing dated March 13, 2012, that Whiting USA Trust II was formed in December 2011 to own a term net profits interest in certain long-lived, predominantly producing properties located primarily in the Rocky Mountains, Permian Basin, Gulf Coast and Mid-Continent regions of the United States.


Source: Whiting S-1 Filing

Whiting Trust USA II Details:

WLL plans to contribute a term net profits interest in certain of its properties in exchange for trust units, and then in turn, offer such trust units to the public. As of January 1, 2012, WLL reported that the property interests had estimated reserves of up to 18.3 MMBOE representing up to 5% of its proved reserves at year-end 2011. The property interests also represent 7%, or 4.9 MBOEPD, of WLL’s December 2011 average daily net production. The underlying properties include interests in 1,300 gross (390.3 net) producing wells located in 49 fields in 10 states. At year-end 2011, the estimated proved reserves attributable to the underlying properties for the full economic life of the underlying properties, as estimated in the reserve report, were 18.28 MMBOE with a pre-tax PV10% value of $408.5 million. Based on the reserve report, the total estimated proved reserves attributable to the net profits interest had a pre-tax PV10% value of $323.6 million as of December 31, 2011.

Source: Whiting S-1 Filing

Use of Proceeds:

As mentioned above, WLL plans to use the net proceeds from this offering to repay a portion of the debt outstanding under its credit agreement. At year-end 2011, WLL had $780.0 million in borrowings and $1.4 million in letters of credit outstanding under Whiting Oil and Gas Corporation’s credit agreement with $718.6 million of available borrowing capacity. In October 2011, WLL entered into an amendment to its existing credit agreement that increased WLL’s borrowing base under the facility from $1.1 billion to $1.5 billion.

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Prior Experience with Net Profit Trusts – Whiting USA Trust I (NYSE: WHX):

On April 30, 2008, Whiting completed an IPO of units of beneficial interest in Whiting USA Trust I. Prior to its initial public offering, Whiting conveyed a net profits interest in certain of its oil and gas properties to the 2008 trust in exchange for 13,863,889 trust units. Immediately thereafter, Whiting completed an initial public offering of units of beneficial interest in the 2008 trust, selling 11,677,500 trust units to the public at a price of $20.00 per unit.


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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.