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Bear of the Day: Whiting Petroleum (WLL)

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Whiting Petroleum Corp. (WLL - Free Report) continues to navigate the difficult energy market even as its stock price sinks. This Zacks Rank #5 (Strong Sell) is expected to see its earnings decline 111% in 2019.

Whiting is one of the largest independent exploration and production companies in the US with its focus on oil. It has one of the largest acreage positions in the Bakken/Three Forks in the Williston Basin of North Dakota and Montana, totaling 473,781 net acres.

The company also has 86,532 net acres in the new oil prone region of the eastern DJ Basin of Colorado.

A Big Miss in the Second Quarter

On July 31, Whiting reported its second quarter results and missed on the Zacks Consensus Estimate by 52 cents, reporting a loss of $0.28 compared to the Zacks Consensus of $0.24.

Production totaled 11.6 million barrels of oil equivalent (MMBOE), and average of 127,090 barrels of oil equivalent per day (BOE/d).

Crude oil was 65% of total production with natural gas liquids 17%.

Focusing on the Balance Sheet

On Sep 27, the company did a successful tender offer of $300 million of the outstanding 1.25% 2020 convertible notes. That leaves $262 million remaining.

It also has another $874 million coming due in 2021.

But it recently amended its credit facility to double the amount it could put on the revolver. It now has a credit facility with a $1.75 billion elected commitment and a $2.25 billion borrowing base.

The company intends to focus on paying down debt using free cash flow.

Stock Will Move with the Price of Crude

Whiting has one of the higher percentages of oil production among the E&Ps that means its stock will move with the price of oil, both up and down.

As of Oct 7, in an new presentation it posted on its IR site, the company had 62% of its second half 2019 production hedged and 18% of the 2020 production hedged.

It will continue to layer on additional hedges when it sees the opportunity to mitigate the price volatility.

But the traders will still trade on the crude price.

Analysts Cut Estimates Again

The analysts have gotten pessimistic about the upcoming quarter and 2019 in the last week.

Three analysts cut their earnings estimate for the third quarter pushing it down to just $0.02 from $0.47 just three months ago.

Similarly, 2019 is looking bleaker as well.

The Zacks Consensus Estimate has fallen to a loss of $0.25 from $1.14 in the last 90 days.

That's an earnings decline of 111% as the company made $2.18 in 2018.

Two analysts also cut for 2020 in the last week pushing the Zacks Consensus down to $1.01 from $1.20.

Shares Have Gotten Hammered

The energy stocks have been among the worst performers all year. Whiting is down 69.4% year-to-date.

Whiting is now trading at 5 year lows.

With Wall Street completely ignoring the energy stocks, is now finally the time to buy?

The E&Ps, as a group, rank in the bottom 25% of the Zacks Industry Rank.

There are no Zacks Rank #1 (Strong Buys) in the group, but Lonestar Resources (LONE - Free Report) is a Zacks Rank #2 (Buy).

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