Oil Price Crash Pushes Whiting Petroleum To Bankruptcy As Stock Slumps 91%

Whiting Petroleum Corporation
WLL
has become the first oil and gas sector casualty of the current slump in crude demand in the wake of the coronavirus or Covid-19 global pandemic, and the crude price war between producers triggered by Saudi Arabia and Russia.

Early on Wednesday (April 1), Denver, Colorado, U.S.–headquartered Whiting announced it had filed for filed for Chapter 11 bankruptcy protection in the Bankruptcy Court for the Southern District of Texas, prompting a suspension of its shares (NYSE:WLL) on the New York Stock Exchange.

In a statement, Whiting said its board had concluded that given a severe downturn in oil and gas prices resulting from the Saudi Arabia-Russia oil price war and coronavirus-related impact on demand, a financial restructuring was the “best path forward” for the company.

Overnight, oil benchmarks Brent and West Texas Intermediate posted their worst ever quarter, ending around 66% lower over the three month period.  

Giving details, the company says it has more than $585 million of cash on its balance sheet and will continue to operate its business in line with commercial commitments. Whiting also said it would meet financial obligations during the restructuring without any “need for additional financing.”

It is understood, the bankruptcy will provide for a deleveraging of the company’s capital structure by over $2.2 billion, payment or refinancing of its revolving credit facility, payment of all other secured lenders and employees.

Under current restructuring plans, Whiting’s existing equity holders would receive 3% of the new equity of the reorganized company. The company added that it had reached an agreement in principle with certain note-holders on its “comprehensive” and consensual restructuring.

Whiting’s stock was down 12% in pre-market trading to fresh lows, prior to the suspension in the trading of its shares. Over the last three months through to Tuesday (March 31), the company stock had shed 91% of its value.

Founded in 1980, Whiting largely operated in Bakken and Three Forks Shale, along with substantial operations in its home-patch – the Denver-Julesburg Basin. As of December 31, 2019, the company had 485.4 million barrels of oil equivalent of estimated proved reserves, of which 55% was petroleum, 21% was natural gas liquids, and 24% was natural gas.

It is feared Whiting, while being the first oil and gas company to file for bankruptcy, certainly won’t be the last with many producers large and small writing off 2020 expecting oil benchmarks to trade between $10-20 for much of the second quarter.