Current WLL Stock Info

Gas Plant Sales on the Horizon?

Whiting Petroleum (ticker: WLL), a Denver-based exploration and production company with operations focused on the Bakken Shale and Denver Julesburg Basin, has closed on the sale of its DJ water business for $75 million. The buyer, Tallgrass Energy Partners LP (ticker: TEP), announced the transaction via a press release on December 17, 2015.

Tallgrass is a midstream provider with assets throughout the Rocky Mountains and Midwest regions, and provides water infrastructure through its subsidiary, BNN Water Solutions. The company’s board recommended a distribution increase of 6.7% on a quarter-over-quarter basis in accordance with the announcement.

Whiting management alluded to potential midstream divestitures in its Q3’15 conference call, saying it had received plenty of interest in the assets. Comments from Michael Stevens, Chief Financial Officer, offer a compliment to Tallgrass even though they were made months ago. “We want to sell them for a good price, and most importantly, actually we want a good partner in there, someone who we believe will be a good operator of plants and putting forth the necessary capital,” he said.

Asset Overview

wll-assetsWhiting’s water business consists of delivery, disposal, gathering and storage systems, along with associated contracts ranging from five to nine years. The 62 miles of pipeline span approximately 148,000 acres throughout Whiting’s DJ position, which it refers to as the Redtail asset. Whiting holds the acreage in high regard and believes it can return a profit at prices of $30/barrel.

Whiting still holds full possession of the region’s gas plant, along with approximately 270 miles of oil and gas pipelines. Other possible sales, like the Bakken’s gas processing plants and an Enhanced Oil Recovery asset in Texas, are valued by Capital One Securities at $300 million and $455 million, respectively. “We view these potential asset sales as the next catalyst on the horizon for WLL,” the firm said.

While the $75 million divesture isn’t substantial in terms of Whiting Petroleum’s balance sheet, the extra liquidity was generally viewed as a positive from analysts, particularly in such a difficult environment. A note from Stifel called the price “reasonable,” although it was slightly below expectations. Wells Fargo added, “While Redtail’s SWD is not a game changer, $75M still represents somewhere in the range of 7-10% of 2016 capital budget.”

To date in 2015, Whiting has divested $475 million worth of assets, including upstream non-core, non-operated properties throughout the Rockies, Permian and Gulf Coast areas. In the Q3’15 conference call, Jim Volker, President and Chief Executive Officer of Whiting, expressed optimism on completing a midstream sale before year-end.

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