Whiting increases capex
Whiting Petroleum (ticker: WLL) announced that it will increase its capital expenditures for 2015 to $2.3 billion, $300 million more than originally planned, on the back of strong well results. According to a company press release, Whiting estimates second quarter production at 15.5 MMBOE, or 170,200 BOEPD. These production estimates represent a 2% increase over the first quarter despite non-core property sales of 8,300 BOEPD.
Based on the increase in production, the company now expects full-year 2015 volumes of 59.7 MMBOE, or 7% growth over 2014. The company drilled and completed 23 more net wells than expected in H1’15 due to drilling efficiencies.
The additional $300 million that Whiting plans to add to its capital expenditures will be used primarily for the company’s operated drilling budget. $158 million will go to the operated drilling costs, $120 million will be put toward the non-operated drilling budget and $22 million will be used for rig termination fees incurred during the second quarter.
Whiting sees production increase 40%-50% in the Williston
Much of the company’s production is coming from its core assets in North Dakota’s Williston Basin, where the company says it has increased production from its wells by using four to six million pounds of sand per well. In the Polar field where the company completed two higher sand volume slickwater wells, the wells had 60-day rates of 935 BOEPD, 40% greater than 12 offsetting wells completed with lower sand volumes. Two higher-volume sand wells completed in the Walleye field saw 60-day rates of 1,095 BOEPD, 50% greater than three offsetting wells. Nine wells drilled using the higher volume sand in the Pronghorn field saw 120-day rates of 755 BOEPD, 50% more than 42 offsetting wells completed with lower sand volumes.
During a speech given at the American Association of Petroleum Geologists in Denver, Whiting SVP of Exploration and Development Mark Williams explained that the company had seen a strong correlation between the amount of sand used and the wells’ productivity. He said one thing Whiting found to be consistent was a “firm, strong correlation between higher volumes of sand and better production.”
According to the company’s press release, Whiting is completing the high-volume sand wells in its core property for between $6.5 million to $7.5 million per well.
Continuing the sale of non-core assets
Along with its operations update, Whiting announced that it sold two packages of older, conventional, operated and non-operated properties to private buyers in the second quarter. The total price of the sales amounted to $185 million, continuing the company’s strategy of selling off older, non-core assets.
Reserves for the assets totaled an estimated 18.0 MMBOE (59% oil) with estimated remaining 2015 production of 6,100 BOEPD.
Whiting has said that it plans to sell properties with higher LOE per BOE than its core Bakken and Niobrara assets. LOE for the sold properties averaged approximately $18.00 per BOE, compared to $6.50 and $7.50 per BOE in the Bakken and Niobrara, respectively.
Analysis from KLR Group estimates that the transactions equated to about $30,300 per flowing BOE and about $10.28 per BOE of proved reserves.
In addition to the $108 million of non-core property sales made by the company in the first quarter, year-to-date the company has sold $293 million of non-core assets. Jim Volker, Whiting’s CEO, said he expects total asset sales in 2015 to fall in the range of $500 to $1,000 million. “Speaking about that in terms of covering an outspend, I think we’ll sell more than enough assets to cover the outspend and perhaps even help us a little bit with some debt retirement,” he said, adding that midstream assets are a part of the potential divesture mix.
No money borrowed on the revolver, capex spending trending down
The company announced that it ended the second quarter with $60 million in cash and nothing drawn on its $4.5 billion borrowing base. Whiting’s rate of capital spending has also been declining in line with the company’s forecast of $340 to $380 million per quarter in the second half of 2015.
In June, WLL estimates that spending totaled $155 million, down about 48% from an average monthly rate of approximately $300 million in April and May. The lower spending was driven by a decrease in the company’s drilling activity with a drop to a 10-rig drilling program, the monetization of non-operated drilling expenditures and a reduction in facilities spending upon the completion of two major gas plant expansion projects.
