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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