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Whiting shares plunge 38% on Q2 earnings miss, ongoing production constraints

Whiting Petroleum Corp.'s stock price took a beating Aug. 1, just hours after the company reported a surprise loss in the second quarter, scaled back its production guidance for the rest of the year and cut 33% of its workforce.

The North Dakota-focused oil producer's stock price on the New York Stock Exchange plunged soon after the opening bell and never recovered, ending the session more than 38% lower on the day at $10.84 per share.

In its second-quarter earnings released after the market close July 31, the company reported an adjusted net loss of $25.7 million, or 28 cents per share, on revenue of $426.3 million, both down year over year. The S&P Global Market consensus estimate for the quarter was for net income of 25 cents per share.

Whiting produced an average of 81,980 barrels of oil per day in the second quarter, down by 3,000 bbl/d quarter over quarter, which the company attributed to infrastructure constraints and associated operating delays.

"Second-quarter oil production was impacted by a very tight situation for gas processing across the basin," Whiting President, Chairman and CEO Bradley Holly said during the company's second-quarter earnings call. "In summary, infrastructure constraints were more severe than anticipated, and we did not have enough cushion for associated operating delays. These factors lowered oil production."

Analysts with UBS said the results for the quarter "were driven by weaker oil volumes as well as weaker commodity realizations, specifically NGL and [natural gas]; these were partially offset by higher than anticipated NGL volumes." The quarterly results showed oil prices in the second quarter were down 12% year over year while natural gas prices were down 7%.

Despite adopting a revised program "with a higher risk factor for unplanned downtime," Holly said he expects the constraints to persist for the rest of the year, so Whiting is implementing a modified plan to account for constraints, which will "result in a more stable production rate and more consistent results."

The company also announced agreements to sell $53 million of nonoperated properties, which cover 6,800 net acres and produced 703 barrels of oil equivalent per day in April. Those divestitures are expected to close in the third quarter.

"The nonoperated properties we have elected to participate in are highly economic. By participating, we create a value option to either retain or sell the associated properties," Holly said. "This is evident in our sale of $53 million of nonoperated properties at attractive prices."

Raymond James highlighted Whiting's revision to its full-year production guidance, from a range of 127,900 boe/d to 130,700 boe/d to a range of 123,300 to 127,400 boe/d, "largely due to the aforementioned constraints, as well as non-core asset sales with associated production of 703 Boe/d."

Analysts at Tudor Pickering Holt & Co. said the second quarter was actually the "third poor quarter in a row," and the "Strategic positives [will] be outweighed by operational negatives."

Holly said the company remains committed to capital discipline and paying down debt, and it is maintaining its capital budget for the year at $800 million to $840 million. The company reduced spending in other areas such as exploration.

The company on July 31 also announced a restructuring that resulted in a cut of 33% of its workforce, or 254 employees, of which 94 are executive and corporate positions.

"We redesigned the company's organization to improve costs and enhanced execution. Streamlined operations to expedite the delivery of peer-leading returns and free cash flow," Holly said. "We're implementing new technologies and processes in the field to enhance operational efficiency."

Holly said the reorganization is projected to generate $50 million of annual cost savings and should improve corporate capital efficiency.