Upstream energy firm Whiting Petroleum Corp. WLL has decided not to look for buyers anymore and will instead issue shares and notes to combat its huge debt level amid unfavorable crude pricing. Following the announcement, the stock fell almost 20% on the NYSE on Mar 24.
Last December, Whiting Petroleum acquired Kodiak Oil & Gas Corp., thus becoming the largest Bakken/Three Forks producer. With the acquisition, Whiting Petroleum assumed over $2 billion of Kodiak’s debt, which weighed on its financials. Additionally, the operating environment has not been favorable with the free fall in crude prices. Consequently, Whiting Petroleum was seeking potential buyers to bail it out from the troubles.
The energy firms that showed interest in buying Whiting Petroleum, as per Bloomberg, are Exxon Mobil Corporation XOM, Continental Resources, Inc. CLR, Hess Corporation HES and Statoil ASA.
However, instead of seeking buyers, Whiting Petroleum is now planning to raise funds from the equity and debt markets to finance its huge debt. The company decided to issue 35 million shares at $30 each before the opening bell on Tuesday; almost 22% below its closing price on Monday. Whiting Petroleum will also issue nearly $2 billion worth senior notes.
With the proceeds, Whiting Petroleum will be able to counter its weak financials and finance its operations amid plummeting oil prices.
The investors, however, have not taken the company’s decision positively. This is because with the issuance of senior notes, Whiting Petroleum’s debt level will rise further. Moreover, the company is selling shares at much below the market price.
Denver, CO-based Whiting Petroleum currently carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report HESS CORP (HES): Free Stock Analysis Report EXXON MOBIL CRP (XOM): Free Stock Analysis Report WHITING PETROLM (WLL): Free Stock Analysis Report CONTL RESOURCES (CLR): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research