Whiting Petroleum Corporation Receives Non-Compliance Notice from NYSE
Whiting (WLL) secures restructuring support agreement from certain senior noteholders and files Chapter 11 plan of reorganization amid global oil market collapse.
A proposed rule in Texas could force production cuts for U.S. oil producers—a prospect that could dramatically change the oil market in the U.S.
Chesapeake Energy Corp said it would prepay a total of $25 million in incentive compensation to 21 top executives to ensure they are motivated, even as it prepares to file for bankruptcy protection to tackle its nearly $9 billion debt pile. The move comes as investors are closely monitoring executive pay at struggling energy firms after Whiting Petroleum Corp and Diamond Offshore Drilling changed incentive programs for their senior management teams in the days before filing for Chapter 11 last month to award them cash sums. "The board and compensation committee, with the advice of their independent compensation consultant and legal advisors, determined that the historic compensation structure and performance metrics would not be effective in motivating and incentivizing the company's workforce," Chesapeake said in a regulatory filing published on Friday.
The U.S. energy industry has asked the Federal Reserve to change the terms of a $600 billion lending facility so that oil and gas companies can use the funds to repay their ballooning debts, according to a letter seen by Reuters. The effort comes at a time of intensifying pain for the sector as U.S. crude oil futures traded in negative territory on Monday for the first time in history on worries of massive oversupply. The Fed has been deluged with roughly 2,000 letters seeking changes to the rules of the program, under which the Fed will purchase 95% of eligible bank loans to small- and medium-sized businesses.
The Pandemic Anti-Monopoly Act aims to suspend “risky” mergers and acquisitions during the coronavirus pandemic.
Just like the street hustler turned commodities broker in the 1980s comedy "Trading Places" for which he named his twitter account, @WillRayValentin (BRV) is an outsider making waves in the world of energy stocks trading. A petroleum engineer by background, BRV is a member of the 'Energy Fintwit' (EFT) community on Twitter made of oil industry insiders - engineers, geologists and former traders - who have gained notoriety and thousands of followers for their unabashed bearish tweets about the U.S. shale industry. As U.S. crude oil prices halved in March under the weight of recession fears and a price war, many of the group's members had a field day as their 'shorts' on U.S. shale companies - bets that their stock prices would fall - paid off.
(Bloomberg Opinion) -- Someone should tell Treasury Secretary Steven Mnuchin about the United States Oil Fund LP. This is the ETF making all the headlines for all the wrong reasons of late. A nominally cheap and easy way to speculate on oil, its use of rolling futures positions made for dreadful returns and, most recently, almost certainly contributed to oil’s plunge into negative pricing. It seems likely more than one retail wannabe wildcatter is mystified as to why they ended up effectively paying others to take their “barrels.”Knowing what you’re actually getting is important with any investment, of course. Which brings us to Mnuchin’s musings about extending government loans to struggling oil and gas producers, as reported by Bloomberg News on Thursday evening. Like USO owners, the lenders here — hello taxpayers — may find their collateral somewhat slippery. Also like the USO, their mere presence could make things worse.Details are scant; there is talk of investment-grade firms maybe tapping a Federal Reserve lending program while “alternative structures” are considered for the riskier sort. But I was struck most by this line in the article:The administration is also considering taking financial stakes in exchange for some loans, and some firms might be asked to reduce production, the person said.Hmm. “Loans” that grant you a stake and a say in critical operational decisions. That almost sounds like equity.There’s a reason for that. It is common for the riskiest exploration and production companies to only have one slug of secured financing in the form of reserve-based lending. This is a credit line from a consortium of banks secured against the value of the company’s oil and gas reserves. The value is typically reappraised twice a year, and energy prices are obviously a huge variable. You can imagine even one day of negative oil prices doesn’t make for a warm and fuzzy meeting with your account manager. The vast majority of respondents to a sector survey conducted by the law firm Haynes and Boone LLP expected borrowing bases to be cut by at least 20%. And that survey was conducted last month.After a decade of applying the WeWork growth model to oil and gas, the industry has very little wiggle room. A wall of debt maturities is imminent, kicking in just as most production hedges roll off. So those credit lines may well be needed to cover repayments. Even a small cut could leave E&P firms exposed or in outright breach of covenants. Such considerations lay behind Whiting Petroleum Corp.’s decision to file for bankruptcy at the beginning of the month, as analysts at CreditSights laid out in a recent report.For many firms, once you get beyond reserve-based lending, there’s precious little else to lend against. The capital stack is highly encumbered already. At almost 80%, energy high-yield issuers tracked by CreditSights have the highest proportion of net debt in their enterprise value of any major sector.You may notice things looked much better in 2016. Oil crashed that year, too, but investors still had hope then of oil prices coming back. E&P companies took full advantage with a banner year for equity issuance. Fast forward, and investors have been backing away from the sector, especially its most indebted members, way before Covid-19 went global and Saudi Arabia and Russia went postal. A fresh source of capital must be found.So it makes perfect sense that the government “loans” being touted around Washington look more like equity, because that’s what they would be, in practical terms. And the feds would be taking a position in E&P companies at a particularly bracing juncture, with oil prices in the tank and debt maturities rolling in. Exactly what they — I mean, we — would be taking on is something of a mystery, given the lack of clarity about oil demand, prices and production even six months out.Moreover, loans to the weakest E&P firms would perpetuate the underlying condition afflicting the sector before Covid-19 hit: too much production and too little risk management. If there’s too much oil, it’s less than optimal to put more money into the business of producing more oil. How about a government debtor-in-possession facility instead?At such times, we are lucky to have Continental Resources Inc. to exemplify the industry chutzpah of which, unlike cash, there is seemingly never a shortage. Having not bothered with boring stuff like hedging, founder Harold Hamm has alleged manipulation on the part of everyone from Saudi Arabia to “a flawed new computer model.” In the latest twist, Continental has reportedly invoked force majeure on a delivery contract for its oil — and honestly, caught on the wrong side of a price move, who hasn’t blamed God on occasion?Similarly, President Donald Trump’s administration has been throwing fistfuls of spaghetti at the wall to bail out oil and gas producers, ranging from threats of tariffs on foreign barrels to the notion of paying E&P firms to keep oil in the ground and rebranding it as a strategic reserve. Equity dressed up as loans would represent a further step down this path. God knows if it will actually happen, especially if House Democrats have a say. But like the hapless ETF investor, you may soon be the (proud?) quasi-owner of something to do with oil.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Whiting Petroleum Corporation Enters into Restructuring Support Agreement With Certain of its Senior Noteholders
BP (NYSE:BP) stock has been hit pretty hard in the past year. It is down 45% from the 52-week peak. In the past month, though, the stock has actually risen 34% from its low on March 18. Right now BP stock has a very attractive dividend yield of more than 10%. But will this last?That's in question because the company's debt situation seems to be getting worse. That could prevent the stock from rising further if BP cannot raise cash. The company wants to reduce its gearing ratio to below 30%. Gearing measures the company's financial leverage compared to its equity.Source: TK Kurikawa / Shutterstock.com Asset Sales Delay Will Hurt GearingBanks are balking at financing the buyer for some of BP's asset sales, The Wall Street Journal reported last week. BP announced the deal in August 2019 to sell all of its Alaska assets for $5.6 billion. This includes its Prudhoe Bay oil field and its interests in the Trans-Alaska Pipeline system. Hilcorp Energy, the largest privately held energy company in the U.S. was to finance the acquisition with banks.InvestorPlace - Stock Market News, Stock Advice & Trading TipsBut now these lenders are wondering how the deal will be worthwhile since the oil prices have dropped 60% since August.But the problem is BP needs to reduce its leverage. So if this sale does not go through, BP stock could suffer.For example, the company's gearing ratio right now is over 35%. Gearing is the ratio of net debt divided by net debt plus equity.Here are the numbers, according to the company's recent 20-F annual report (note 27, page 201): Net debt, including leases, is $55 billion. But BP's equity, as of December, is $100.7 billion. So the gearing ratio, $55 billion divided by $155.7 billion tops 35%. * 7 Industrial Stocks to Buy for the Market Rebound So, we can estimate how much debt it needs to reduce in order to get down to 30% gearing. For example, if net debt plus leases drop to $43 billion, then the ratio falls to 30% (i.e., $43 billion divided by $143.7 equals 30%).So that means net debt must decline by $12 billion, or 21.7%, from $55 billion. So you can see that this $5.6 billion asset sale needs to go through. That is less than half of the $12 billion in asset sales that BP needs to complete. Is the Fat Dividend at Risk?One thing to take into consideration, is whether BP can still afford the dividend without any sales. For example, right now BP stock has a 10.31% dividend yield. In fact, the company just raised the quarterly payout in February.The chart below shows that, with asset sales, BP has had enough free cash flow to cover the dividend over the past 12 months. The dollar amount of asset sales in the last year was just $500 million. So BP was able to finance the dividend with its adjusted free cash flow.Source: Mark R. Hake, CFAHowever, in the months ahead, free cash flow will be significantly lower given the reduced oil prices. Some of its production is hedged, so the drop in free cash flow will slowly feed in.For example, assuming that FCF is 30% lower over the next 12 months, it will be just $7.6 billion. But that includes $500 million in asset sales. So the net number with no asset sales is $7.1 billion. * 7 Bank Stocks to Watch as Earnings Season Heats Up With a dividend of $2.52 per share and 3.373 billion ADR equivalent shares outstanding, management needs $8.5 billion to keep paying investors. However, current FCF falls short by $1.4 billion. If BP has a downdraft of more than 30% in FCF, this gap will be wider. What to do With BP Stock?So you can see that the company needs to sell assets to cover this deficit. Otherwise, it may have to borrow more.On the other hand, BP has already announced cuts in its forward capex spending. The bottom line is that the company expects to shave $2.1 billion from spending by the end of 2021.So, it looks like even without asset sales, BP stock can hold up that recently expanded dividend, even at its present 10.31% yield.I believe that knowing this, BP management will likely wait. They will see if the banks warm up to financing the $5.6 billion Hilcorp purchase of its Alaskan asset sales.After all, this is the largest deal in the oil and gas sector right now -- in fact, it's looking like the only deals are going to be bankruptcies, such as Whiting Petroleum (NYSE:WLL) and its ilk.Can the banks really afford to pass this up? I suspect all they want is a lower price tag. BP is likely to accommodate this in order to get the deal done.The bottom line on BP stock is that this looks like a good time to pick up a great oil and gas name with an affordable, but high dividend yield.As of this writing, Mark Hake, CFA does not hold a position in any of the aforementioned securities. Mark Hake runs the Total Yield Value Guide which you can review here. More From InvestorPlace * America's 1 Stock Picker Reveals Next 1,000% Winner * 25 Stocks You Should Sell Immediately * 1 Under-the-Radar 5G Stock to Buy Now * The 1 Stock All Retirees Must Own The post BP Needs to Cut Debt to Protect Its Attractive 10%-plus Dividend Yield appeared first on InvestorPlace.
Regular 25% swings in crude? Negative oil? Here's how to tackle this chaotic period for energy commodities.
Chapparal Energy Inc, a small oil and gas producer whose share price has plummeted 82% this year, plans to award $2.15 million in retention bonuses to five senior executives instead of granting long-term stock awards. Retention awards have become a red flag in the hard-hit energy sector, as boards of directors work to keep their executive teams in place amid unprecedented ructions in the oil market. Chaparral Chief Executive Charles Duginski would receive $725,000, the most among the group, if he stays with the Oklahoma City-based company for the next 12 months.
Whiting (WLL) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.
Companies are finding it hard to service or pay their debt, which puts them in a stressed situation and presents an opportunity for distressed funds to invest.
“I’m not sure what it is I want to be when I grow up. I just know I really can’t wait to learn more.”
The Zacks Analyst Blog Highlights: ExxonMobil, Diamondback Energy, Concho Resources, Occidental and Whiting Petroleum
The U.S. energy industry has asked the Federal Reserve to change the terms of a $600 billion lending facility so that oil and gas companies can use the funds to repay their ballooning debts, according to a letter seen by Reuters. The effort comes at a time of intensifying pain for the sector as U.S. crude oil futures traded in negative territory on Monday for the first time in history on worries of massive oversupply. The Fed has been deluged with roughly 2,000 letters seeking changes to the rules of the program, under which the Fed will purchase 95% of eligible bank loans to small- and medium-sized businesses.
Just like the street hustler turned commodities broker in the 1980s comedy "Trading Places" for which he named his twitter account, @WillRayValentin (BRV) is an outsider making waves in the world of energy stocks trading. A petroleum engineer by background, BRV is a member of the 'Energy Fintwit' (EFT) community on Twitter made of oil industry insiders - engineers, geologists and former traders - who have gained notoriety and thousands of followers for their unabashed bearish tweets about the U.S. shale industry. As U.S. crude oil prices halved in March under the weight of recession fears and a price war, many of the group's members had a field day as their 'shorts' on U.S. shale companies - bets that their stock prices would fall - paid off.
KlaymanToskes ("KT"), www.klaymantoskes.com, announced today that it is investigating the damages sustained during the Coronavirus ("COVID-19") pandemic by employees and investors who held large positions in Whiting Petroleum (NYSE:WLL) stock at full-service brokerage firms. Investment portfolios holding large positions can carry significant downside risks. The investigation focuses on full-service brokerage firms’ negligence and mismanagement of large positions that resulted in employees and investors suffering substantial losses.
U.S. crude’s unprecedented rout on Monday was a harbinger for prices that will likely continue to “fall off a cliff” as the coronavirus suppresses global demand.