Whiting Petroleum Corp. Reports Operating Results (10-K)
Whiting Petrolm has a market cap of $6.47 billion; its shares were traded at around $59.93 with a P/E ratio of 15.1 and P/S ratio of 4.3. Whiting Petrolm had an annual average earning growth of 3.5% over the past 5 years.
Highlight of Business Operations:“pre-tax PV10%” The present value of estimated future revenues to be generated from the production of proved reserves calculated in accordance with the guidelines of the Securities and Exchange Commission (“SEC”), net of estimated lease operating expense, production taxes and future development costs, using costs as of the date of estimation without future escalation and using an average of the first-day-of-the month price for each of the 12 months within the fiscal year, without giving effect to non-property related expenses such as general and administrative expenses, debt service and depreciation, depletion and amortization, or Federal income taxes and discounted using an annual discount rate of 10%. Pre-tax PV10% may be considered a non-GAAP financial measure as defined by the SEC. See footnote (1) to the Proved Reserves table in Item 1. “Business” of this Annual Report on Form 10-K for more information.
We principally sell our oil and gas production to end users, marketers and other purchasers that have access to nearby pipeline facilities. In areas where there is no practical access to pipelines, oil is trucked to storage facilities. During 2011, sales to Plains Marketing LP and Shell Trading Company accounted for 27% and 13%, respectively, of our total oil and natural gas sales. During 2010, sales to Shell Western E&P, Inc., Plains Marketing LP and Nexen Pipeline USA, Inc. accounted for 17%, 16% and 13%, respectively, of our total oil and natural gas sales. During 2009, sales to Shell Western E&P, Inc., Plains Marketing LP and EOG Resources, Inc. accounted for 18%, 15% and 13%, respectively, of our total oil and natural gas sales. We believe that the loss of any individual purchaser would not have a long-term material adverse impact on our financial position or results of operations.
You should not assume that the present value of future net revenues from our proved reserves, as referred to in this report, is the current market value of our estimated proved oil and natural gas reserves. In accordance with SEC requirements, we base the estimated discounted future net cash flows from our proved reserves on 12-month average prices and current costs as of the date of the estimate. Actual future prices and costs may differ materially from those used in the estimate. If natural gas prices decline by $0.10 per Mcf, then the standardized measure of discounted future net cash flows of our estimated proved reserves as of December 31, 2011 would have decreased from $5,272.5 million to $5,266.7 million. If oil prices decline by $1.00 per Bbl, then the standardized measure of discounted future net cash flows of our estimated proved reserves as of December 31, 2011 would have decreased from $5,272.5 million to $5,189.5 million.
Our production sales agreements contain customary terms and conditions for the oil and natural gas industry, generally provide for sales based on prevailing market prices in the area, and generally have terms of one year or less. We have also entered into physical delivery contracts which require us to deliver fixed volumes of natural gas. As of December 31, 2011, we had delivery commitments of 5.7 Bcf (or 22% of total 2011 natural gas production), 4.4 Bcf (17%) and 4.0 Bcf (15%) for the years ended December 31, 2012, 2013 and 2014, respectively. These contracts relate to production at our Boies Ranch field in Rio Blanco County, Colorado, our Antrim Shale wells in Michigan and our Flat Rock field in Uintah County, Utah. We believe our production and reserves are adequate to meet these delivery commitments. See “Quantitative and Qualitative Disclosure about Market Risk” in Item 7A of this Annual Report on Form 10-K for more information about these contracts.
Oil and Natural Gas Sales. Our oil and natural gas sales revenue increased $384.8 million to $1,860.1 million in 2011 compared to 2010. Sales are a function of oil and gas volumes sold and average commodity prices realized. Our oil sales volumes increased 7% between periods, while our natural gas sales volumes decreased 3%. The oil volume increase resulted primarily from drilling success at our Lewis & Clark field and our Hidden Bench prospect, as well as increased production attributable to our CO2 project at North Ward Estes. Oil production from our Lewis & Clark field increased 1,045 MBbl, while oil production from our Hidden Bench prospect increased 240 MBbl, and oil production at our North Ward Estes field increased 300 MBbl over the same period in 2010. These production increases were partially offset by a decrease in oil production volumes of 400 MBbl at our Postle field primarily due to normal oil and gas production decline at this field. Gas production volumes decreased between periods primarily due to normal field production decline across many of our areas. Additionally, gas production at our Sanish and Parshall fields decreased 450 MMcf due to a large number of shut-in wells in this area during the second half of 2011. These gas volume decreases were largely offset by increased gas production of 1,755 MMcf at our Flat Rock field due to new wells drilled and completed in the area during the last twelve months.
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