Whiting Petroleum Corp WLL has exhibited poor execution over the past several quarters and has much higher financial leverage than peers, according to KeyBanc Capital Markets.
The Analyst
KeyBanc’s Leo Mariani downgraded Whiting Petroleum from Overweight to Sector Weight.
The Thesis
Whiting Petroleum has struggled with execution over the past several quarters and this is unlikely to change in the near term, Mariani said in a note.
He explained that much of the execution issues arise from weaker-than-expected well results in the Bakken, high declines at Redtail and much softer commodity price realizations on in oil and natural gas liquid (NGL).
The analyst reduced the estimates for cash flows per share (CFPS) for the fourth quarter, full-year 2019 and 2020 from $2.10 to $1.93, from $8.68 to $8.51 and from $9.03 to $8.40, respectively.
Since Whiting Petroleum plans to focus on maximizing free cash flows over expanding its production, production growth is unlikely in 2020, Mariani mentioned. He added that despite its cut cutting initiatives, the company could have limited success boosting free cash flows.
Whiting Petroleum’s financial leverage is well above that of its peers. The company plans to pay down debt with asset sales, “which may be tough right now,” the analyst said.
Price Action
Shares of Whiting Petroleum were down 3.56% to $4.87 at the time of publishing on Thursday.
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