Wunderlich Weighs In On Whiting Conversion

Jason Wangler of Wunderlich maintained a Hold rating on shares of Whiting Petroleum Corp WLL, but boosted his price target to $13 from $9 after the company announced a conversion of $721 million of mandatory convertible notes into Whiting's stock.

Wangler noted that on Friday, the stock traded above the $8.75 mark for 20 of 30 days, which forced the conversion of debt into 77.6 million shares of common stock. The analyst added that although this outcome was expected, at some point the fact that it has now happened reduces an overhang on the stock.

Wangler added that another benefit of the conversation is the fact that the reduction of debt and interest reduction obviously contributes to the improvement of the company's balance sheet.

Wangler said that while Whiting's stock could see short-term pressure given the newly-issued shares, it's expected to be a near-term phenomenon given the liquidity in the stock.

The analyst also suggested the debt conversion also signifies the completion of multiple initiatives the company has undertaken over the past two years to improve its balance sheet.

Finally, Wangler's price target is derived on a similar valuation versus its peers at 6x 2017E P/CFPS, which contributes to a Hold rating.

Most oil related stocks were trading higher on Monday as crude oil is trading at its highest level in 17 months.