Despite massive declines, Whiting Petroleum [stock_market_widget type="inline" template="generic" color="default" assets="WLL" markup="(NYSE: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] stock continues to suffer. A substantial earnings miss sent the equity tumbling in late July, and it trades near a 52-week low. However, with Whiting Petroleum down by more than 80% from its 52-week high, and the company maintaining an annual profit, is it time for investors to dip their toe in WLL stock or wait?
The Steep Decline of Whiting Stock
Few words can describe the beleaguered state of WLL stock over the last year. Before the October swoon in the stock market, WLL traded at over $55 per share. Like most stocks, Whiting fell in the fourth quarter of last year. However, this equity never saw a turnaround after Christmas like most equities. Instead, the drop continued.
It had traded at over $18 per share as late as July 30. However, on July 31, Whiting reported a second-quarter loss of 28 cents per share. Analysts had expected a profit of 25 cents per share. Likewise, revenues of $426.26 million missed estimates by $25.76 million. Infrastructure constraints in the Williston Basin hurt production, and low natural gas prices hurt revenues as well. WLL stock lost almost 39% of its value in a single day as a result. Today, it trades at about $9.75 per share.
In fairness, this pain has spread to most other upstream oil companies. This has hurt not only WLL stock, but other oil and gas stocks such as Occidental Petroleum [stock_market_widget type="inline" template="generic" color="default" assets="OXY" markup="(NYSE: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"], Encana [stock_market_widget type="inline" template="generic" color="default" assets="ECA" markup="(NYSE: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] [stock_market_widget type="inline" template="generic" color="default" assets="ECA.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"], and Chesapeake Energy [stock_market_widget type="inline" template="generic" color="default" assets="CHK" markup="(NYSE: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"]. Moreover, most of Whiting’s activity takes place in the Bakken region of North Dakota and Montana. As a result, the infrastructure constraints there have further hurt revenue.
Should Traders Buy WLL Stock?
This leaves traders to determine whether WLL stock has become oversold, or if they should expect more declines? Only time will answer that question, but whatever happens, investors should treat WLL stock as a speculative play given the risks. The company’s market cap has fallen to $891 million, well below the stockholders’ equity of $4.2 billion.
Moreover, the company holds $2.84 billion in both short and long-term debt, a heavy burden considering its market cap. Furthermore, current liabilities of $1.09 billion greatly exceed current assets of $340 million. Such a differential calls into question the company’s ability to meet current expenses.
However, despite the enormous earnings miss, analysts predict annual earnings of 36 cents per share this year. That represents a drop of almost 80% from 2018 levels. Still, Wall Street believes earnings will recover to $1.10 per share next year as more infrastructure comes online in the Bakken region. Despite this volatility, Wall Street forecasts average annual growth of 5.59% per year over the next five years.
Debt levels remain dangerous, and with current assets dwarfing current liabilities, the risks of owning WLL stock significantly increase. Consequently, I could see the company’s financial troubles pushing Whiting stock price further down. Given the current conditions, I would wait until WLL has found a bottom before opening a position.
The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.
