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Whiting Petroleum Files For Prepackaged Bankruptcy
Whiting Petroleum Files For Prepackaged Bankruptcy
Talk about a coincidence: just as we were discussing why April would be “apocalyptic” for the oil industry, as Saudi Arabia just unleashed an unprecedented record amount of oil to buyers in a scramble to put its high-priced competitors out of business, warning that “countless oil producers would file for bankruptcy”, former shale darling Whiting Petroleum did just that, filing a pre-packaged Chapter 11 deal in the Southern District of Texas Bankruptcy Court after reaching an agreement with certain note holders to pursue a “comprehensive” and “consensual” financial restructuring.
Whiting, which in Q4 pumped 123,000 bpd of which 80,000 bpd was nat gas, said it concluded that given a “severe downturn” in oil and gas prices resulting from the Saudi Arabia-Russia oil price war and COVID-19-related impact on demand a financial restructuring was the “best path forward.” Creditors may disagree: the company’s bonds due March 2021 were trading at par as recently as mid-January, even though we warned as far back as 2015 that it would be the first company to go under: truly a testament to how idiotic the junk bond market has been for the past 4 years.
The company said that the plan provides for de-leveraging of capital structure by more than $2.2 billion, and listed $1-$10 billion in debt and more than $585 million of cash on its balance sheet, noting that it expects to have sufficient liquidity to meet its financial obligations during the restructuring without the need for additional financing.
More importantly, it will continue to operate its business and pump oil for the duration of the Chapter 11 proceedings, meaning that oil production won’t decline by even one drop.
The bankruptcy press release is below:
…click on the above link to read the rest of the article…
SHALE STOCK LOSES 99% OF ITS VALUE: Investor Warning For The Future Of The Industry?
SHALE STOCK LOSES 99% OF ITS VALUE: Investor Warning For The Future Of The Industry?
If you think the carnage taking place in the shale oil companies is nearly over, you couldn’t be more wrong. I believe the bloodbath in the shale oil stocks has only just begun. Once we see the majority of shale stocks trading on the pink sheets as penny stocks will we finally close the book on the Greatest Energy Ponzi Scheme in history.
I first wrote about the “Disconnect” between the major oil companies share prices versus the shale stocks in my article, THE BLOODBATH IN U.S. SHALE STOCKS CONTINUES: Worst Is Yet To Come. In that article, I showed how several of the major oil companies’ stock prices had corrected back close to their highs set in October 2018. However, the shale stocks never really recovered and are still considerably lower than their peaks set last year.
Here is the chart from that article linked above:
Even though many of the shale stocks shown in this chart have seen their prices move higher since I posted it in the middle of March, they are still well off their highs. For example, Whiting Petroleum peaked at $55 in October and is currently trading at $27. Thus, it is still 50% off its peak last year. Furthermore, Oasis trading at $6.60 is still 53% off its high of $14.
However, there are some outliers like Pioneer. Pioneer hit $190 back in October 2018 and was only trading at $140 in mid-March. So, it was still well off its October peak. Although over the past month, Pioneer is now trading at $175, so it’s not too far from its previous high. While Pioneer’s share price is behaving much better than Whiting, Continental, Oasis, and Callon, I believe there is a huge “PERMIAN PREMIUM” being paid by investors who have more money than sense.
…click on the above link to read the rest of the article…
The Liquidity Endgame Begins: Whiting’s Revolver Cut By $1.2 Billion As Banks Start Slashing Credit Lines
The Liquidity Endgame Begins: Whiting’s Revolver Cut By $1.2 Billion As Banks Start Slashing Credit Lines
Earlier today we reminded readers about the circular (and why note fraudulent conveyance) scheme hatched by JPMorgan to reduce its secured loan exposure to Weatherford, when just two weeks ago none other than JPM underwrote an WFT equity offering in which it sold equity in the company, and which proceeds were promptly used by the company to repay the JPMorgan revolver.
We then showed that it wasn’t just Weatherford: most of the “uses of funds” from the recent record surge in oil and gas equity offerings, have been used to repay the secured debt/revolver facilities, thereby eliminating funded and unfunded balance sheet exposure of major US banks.
But while lender banks are all too eager to take advantage of the brief surge in equity prices just so they can “help” their clients dilute their shareholder base so to repay the very same lender banks, they know quite well that the equity offering window is rapidly closing; in fact it will slam shut as soon as the price of oil resumes its downward trajectory.
That does not mean they are out of options to reduce their exposure to US shale, however. Quite the contrary, and in fact the “exposure reduction” is about to begin in earnest. We hinted at what it would look like in early January when we reported that already some 25 of the most distressed shale companies have seen their revolving bases slashed by as much as 50%.
These were just the beginning. As Bloomberg wrote earlier, U.S. exploration and production companies must brace for further cuts to their borrowing-base credit lines this spring, as part of the spring 2016 borrowing base redeterminations.
…click on the above link to read the rest of the article…
How Shale Is Becoming The .COM Bubble Of The 21st Century
How Shale Is Becoming The .COM Bubble Of The 21st Century
As I review the financials of one of the largest shale producers in the United States, Whiting Petroleum (WLL), I can’t help but notice the parallels to the .COM era of 1999 which, to some extent, has already returned to the technology and biotech sectors of today. Back then, the faster you burned cash to capture customers regardless of earnings to drive your topline, the higher your valuation. The theory was that after capturing the customers (in energy today, it is the wells) spending would slow and so would customer additions allowing companies to generate cash. By the way, a classic recent case is none other than Netflix (NFLX) which, in the past was exposed for accounting gimmicks that continue even today. It is still following this path of burning cash for the sake of customer additions, while never generating any cash in its entire existence.
Cash was plentiful in 1999 so it could always be raised as the Federal Reserve began its easy money era creating a series of bubbles for the next 15 years. Does this sound familiar to what is occurring now? It will end the same way and that process has already started as currency wars heat up and our economy grinds to a halt proving QE does not, in fact, create wealth (temporary yes for the 1%, short term, until POP) but instead it destroys it by distorting asset prices, misallocating investments, and ultimately creating an equity crash.
…click on the above link to read the rest of the article…
