Whiting Petroleum Corporation (WLL) (“Whiting”) announced that it has entered into two separate definitive agreements to acquire non-operated oil and gas assets in the Williston Basin of North Dakota. The Company also announced its 2022 capital, operating costs and production guidance, reflecting an operating plan focused on delivering sustainable free cash flow. The board of directors declared a quarterly cash dividend of $0.25 per share of common stock to shareholders of record as of February 21, 2022.
The assets are being acquired from two private companies for total cash consideration of $273 million, before typical closing adjustments. The assets are located in Mountrail County, North Dakota and increase the average operated working interest from 61% to 74% throughout Whiting’s Sanish field, impacting many of the drilling units included in the Company’s current 2022 development program. The assets include 14,563 net acres, 4 gross / 0.2 net drilled and uncompleted well interests, and 277 gross / 32 net undrilled locations. The Company expects to develop the undeveloped locations near term. The assets should contribute approximately 4,500 barrels of oil equivalent per day (BOE/d) (67% oil) at closing. The smaller transaction closed in the fourth quarter of 2021, and the larger acquisition is scheduled to close in the first quarter of 2022.
Lynn A. Peterson, President and CEO of Whiting commented, “These transactions continue the strategy we put forth beginning in late 2020. By increasing our working interest, we are immediately recognizing substantial cash flow that is accretive for shareholders. We know and understand the Sanish field extremely well and are very comfortable with the rate of return we are achieving.”
Outlook for Full-Year 2022
Whiting has set out a capital plan that includes operating two drilling rigs and one completion crew in the Williston Basin for the majority of 2022. The 2022 budget was designed with higher working interests and slightly greater activity. The Company encountered a delay on a five-well pad in January that will impact the timing of production until later in the year. While Whiting has shifted operations to the Sanish field, the Company’s continued focus on sustainability through increasing its high gas capture percentage will result in production volumes not entirely replacing those lost by the delay. The 2022 plan is to reinvest approximately 40% of the expected EBITDA for the period, which is consistent with the prior year. Low double-digit inflation has also been built into the projections.
The rigs will operate in Mountrail, McKenzie and Williams Counties, North Dakota. While the Company has had success with three-mile laterals in its Sanish field, Whiting plans to drill additional three-mile laterals further west in McKenzie County, North Dakota during the year which will help improve economics on additional inventory. As oil prices have rebounded, the Company is seeing increased non-operated activity from other operators and expects this trend to continue.
As a result of this updated guidance, and an assumed WTI oil price of $70 per barrel, the Company now expects to generate over $900 million of EBITDA and over $500 million of adjusted free cash flow in 2022.
Whiting declared a $0.25 per share dividend for the first quarter of 2022 ($1.00/share annualized) for shareholders of record as of February 21, 2022, payable on March 15, 2022.
Peterson continued, “We executed on our strategy last year of paying down the revolving credit facility. With the expected sizable cash flow generation and the strength of the balance sheet, we believe this dividend payment is sustainable under significant commodity changes. Along with our acquisition of non-operated interests, the initiation of the dividend is the latest commitment to realize value and shareholder return. The capital plan this year leverages our low base decline and assets across the basin to continue delivering peer leading sustainable cash flow back to our shareholders.”
Fourth Quarter 2021 Conference Call
Whiting will host a conference call on Thursday, February 24, 2022 at 11:00 a.m. Eastern time (9:00 a.m. Mountain time) to discuss the fourth quarter 2021 results. The call will be conducted by President and Chief Executive Officer Lynn A. Peterson, Executive Vice President Finance and Chief Financial Officer James P. Henderson, Executive Vice President Operations and Chief Operating Officer Charles J. Rimer and Investor Relations Manager Brandon Day. A question and answer session will immediately follow the discussion of the results for the quarter.