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In a report published Monday, Canaccord Genuity analyst Stephen Berman upgraded his rating on Whiting Petroleum Corp. (NYSE: WLL) from Hold to Buy, while maintaining the price target at $38. The analyst believes that the stock is compelling at its current levels, given the quality of the company’s asset base and its significant quantity of dry powder.

Asset Quality & Performance

According to the Canaccord Genuity report, “WLL has a very sizable ~737K net acre position in the core of the Williston Basin, bolstered by last year's acquisition of Kodiak Oil & Gas. The company is also a leader in employing enhanced completion techniques in the play.”

The analysts expect these factors to help Whiting Petroleum ramp activity at a rapid pace and start to increase production once more, as soon as commodity prices recover.

“WLL announced it is lowering its rig count to 8 from 11 starting in H2/15. With an 8-rig program in 2016, the company anticipates it can maintain production at ~147 MBoe/ d on ~$1.0B of capex,” he reported.

Although this implies a 10 percent year on year production decline, the analyst expects the company to generate FCF based on that production level and capex. Also, the analyst believes that Whiting Petroleum’s guidance only partially reflects the impact of enhanced completions.

Financially “Very Strong”

In addition, the company’s financial position continues to be “very strong,” with liquidity at $3.6 billion at the end of 2Q. “Even if the borrowing base is reduced in the coming quarters, liquidity should remain ample given the low level of spending,” he added.

Whiting Petroleum is expected to generate FCF of $140 million in 2016 and another $100 million in 2017. The company also intends to sell additional midstream and upstream assets.

Other Are Bullish Too

In a report published July 20, Susquehanna analyst Biju Perincheril upgraded the rating on Whiting Petroleum from Neutral to Positive, while lowering the price target from $37 to $33. The analyst had predicted upside potential of 25 percent to the stock valuation from the current levels.

“[T]he company’s exposure to the core of the Bakken and the developing Niobrara should provide a much longer runway for reserve growth,” he stated.

Analyst Perincheril also believed that although capex was disappointing in 1H15, the company would be able to improve its capital efficiency as it transitioned to a greater mix of enhanced completions in future.

“We estimate the company can maintain production, and slowly de-lever consequently, in a $60-65/bbl oil price environment,” the Susquehanna reported had said, adding, “The company is better positioned for the downturn in near-term commodity prices following the recapitalization earlier this year.”

Latest Ratings for WLL

Dec 2017RF LaffertyDowngradesBuyHold
Dec 2017Credit SuisseInitiates Coverage OnNeutral
Nov 2017BarclaysMaintainsEqual-Weight

View More Analyst Ratings for WLL
View the Latest Analyst Ratings

Posted-In: Canaccord Genuity Susquehanna Financial GroupAnalyst Color Upgrades Commodities Markets Analyst Ratings


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