Whiting Petroleum Is Staring at Deeper Losses

Shale oil producers in the U.S. have been in a bad shape this year on the stock market, and Whiting Petroleum [stock_market_widget type="inline" template="generic" color="default" assets="WLL" markup="(NYSE: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] is no different. The stock is down more than 20% in 2019, and it didn’t give investors much reason to rejoice when the first-quarter 2019 results came out.

Whiting missed the market’s expectations by a mile in the first quarter. It delivered a non-GAAP loss of $0.16 per share, while the market was expecting a profit of $0.20 per share. What’s more, the company’s revenue fell 24.4% year over year to $389.5 million, missing the Wall Street estimate by a margin of nearly $32 million.

Let’s see what went wrong for Whiting last quarter and if things could improve in the coming quarters.

Weak Oil Pricing is a Problem for Whiting

Whiting Petroleum’s first-quarter 2019 oil production averaged 128,670 barrels of oil equivalent. Williston Basin provided the bulk of Whiting’s first-quarter production with an output of 113,215 BOE/day, which was an increase of 10% over the prior-year period.

However, Whiting’s overall first-quarter 2019 production was almost flat year over year as its production in the Redtail field fell. But that wasn’t what caused Whiting’s downfall.

The company’s average realized price per barrel of oil equivalent fell to $33.77 during the first quarter from $42.87 per BOE in the prior-year period. As a result of this decline in prices, Whiting’s operating revenue during the first quarter of 2019 dropped to $389 million as compared to $515 million in the year-ago period.

The company also swung to a net loss of nearly $69 million as compared to a profit of $15 million in the prior-year period. On an adjusted basis, Whiting delivered a loss of $14.2 million during the quarter as compared to a profit of $83.7 million in the year-ago period.

So, weak oil pricing proved to be Whiting’s Achilles Heel during the quarter and the depressing oil price scenario looks all set to continue in the U.S., which will hamper the turnaround of shale oil players such as Whiting Petroleum.

U.S. Oil Inventories are Rising

The total stockpile of crude oil in the U.S. is now at 483.3 million barrels, which is 6% higher than the five-year average for this period of the year.

According to the Energy Information Administration’s (EIA) latest weekly production report, inventories of commercial crude oil in the U.S. rose 6.8 million barrels for the week that ended on May 31 as compared to the previous week.

The total stockpile of crude oil in the U.S. is now at 483.3 million barrels, which is 6% higher than the five-year average for this period of the year. What’s more, gasoline inventories rose to the tune of 3.2 million barrels, which is again 2% higher than the five-year average seen during this period of the year.

The inventory build of crude oil in the U.S. comes as a surprise for market watchers who were originally expecting a drawdown. Now, the U.S.-China trade war could lead to further inventory build-up in the U.S. and create more pressure on oil prices. As such, there’s a good chance that Whiting Petroleum’s bad times will continue in the coming months as weak oil pricing will knock the wind out of its sails.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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