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Whiting Petroleum Announces First Quarter 2006 Operating and Financial Results

Posted on: Thursday, 27 April 2006, 18:00 CDT

DENVER, April 27 /PRNewswire-FirstCall/ -- Whiting Petroleum Corporation today reported first quarter 2006 net income of $33.0 million, or $0.90 per basic and diluted share, on total revenues of $180.6 million. This compares to first quarter 2005 net income of $26.1 million, or $0.88 per basic and diluted share, on total revenues of $103.5 million. The increase in first quarter 2006 net income versus the comparable 2005 period was primarily the result of greater production volumes and higher commodity prices. Discretionary cash flow in the first quarter of 2006 totaled $96.4 million, representing a 49% increase over the $64.6 million reported for the same period in 2005. (A reconciliation of discretionary cash flow to net cash provided by operating activities is included at the end of this news release.)

First quarter 2006 earnings were reduced by an exploratory dry hole cost of $2.8 million, or a charge of $0.05 per share. The Company also incurred a hedging loss of $9.5 million in the first quarter which reduced earnings $0.16 per share. The hedges that caused the loss expired at the end of the first quarter.

First Quarter Production

Production in the first quarter of 2006 totaled 3.67 million barrels of oil equivalent (MMBOE), of which 2.37 million barrels was crude oil (65%) and 1.30 MMBOE was natural gas (35%). The Company's first quarter guidance was 3.55 MMBOE to 3.75 MMBOE. The first quarter 2006 production total equates to a daily average production rate of 40,790 barrels of oil equivalent (BOE), representing a 35% increase over the 30,213 BOE per day average rate in 2005's first quarter. Production in March averaged approximately 40,900 BOE per day. The primary contributors to the quarter-over-quarter increase were the acquisitions of the Postle field in the Oklahoma Panhandle and the North Ward Estes field in the Permian Basin of West Texas.

"Our first quarter 2006 capital expenditures were approximately $118.4 million. We expect to realize the benefits of these investments in the form of increased production during the remainder of the year," commented James J. Volker, Whiting's Chairman, President and CEO. "Currently, we are operating 10 drilling rigs and 31 workover rigs on our properties, and we are participating in the drilling of five non-operated wells. Seventeen of these workover rigs are currently operating in the North Ward Estes field and six are working in the Postle field. We are directing our current capital expenditures at Postle and North Ward Estes fields toward secondary and tertiary recovery projects."

Mr. Volker continued, "We now expect our $360 million drilling budget for 2006 to be allocated approximately 65% to develop proved undeveloped reserves and 35% to develop non-proved reserves."

First Quarter 2006 Operating Highlights

* Whiting completed a natural gas discovery in the Billings County, North Dakota portion of the Williston Basin. The BR 12-29 well, in which Whiting holds a 50% working interest and is operator, was completed flowing 2.2 million cubic feet (MMcf) of gas and 25 barrels of oil per day through an 18/64-inch choke with a flowing tubing pressure of 1,100 pounds per square inch (psi). The well produces from the Red River formation at a depth of approximately 13,000 feet. The well, which was placed on production February 15, 2006, was drilled based on the results of a Whiting-operated 3-D seismic shoot. Proved developed reserves have been assigned to this well.

* Whiting also completed the Kordon 11-32 well in Billings County, North Dakota in the Red River formation at a depth of approximately 13,000 feet flowing 3.7 MMcf of gas and 110 barrels of condensate per day through an 11/64-inch choke with a flowing tubing pressure of 4,100 psi. Whiting owns a 50% working interest in the well and is operator. Initial production from the well, which will add proved developed reserves, came on March 23, 2006.

* In the Kawitt field in South Texas, Whiting completed the Straube #1H well flowing 3.2 MMcf of gas and 13 barrels of oil per day through a 10/64-inch choke with a flowing tubing pressure of 4,400 psi. This well was horizontally drilled in the Edwards Lime formation at a depth of approximately 14,000 feet. Whiting holds a 100% working interest in the well, which is located in Karnes County. Sales from the well began on April 4, 2006. Proved developed reserves for this well will be booked in the second quarter.

* During the first three weeks of April 2006, production from the Postle field, North Ward Estes field and ancillary Permian Basin properties averaged approximately 12,440 BOE per day. This average daily rate represents a 56% increase over the properties' 7,960 BOE average daily rate in the first quarter of 2005.

* Expansion of the Dry Trail Gas Plant in the Postle field continues on track. During March 2006, new equipment was installed and repairs were made to improve the plant's efficiency. Whiting is now using produced natural gas from the Postle field to help fuel the Dry Trail Gas Plant, thus reducing third-party gas purchases and lowering future lease operating costs beginning in the second quarter of 2006. These improvements will add approximately $1 million of cash flow during the final nine months of 2006. Capacity at the plant, which is currently capable of processing approximately 43 MMcf of gas per day, is being expanded to more than 60 MMcf of gas per day. This project is part of the plan to expand the existing water and CO2 flood from the eastern half of the Postle field to the western half of the field.

The following table summarizes the Company's net production and commodity price realizations for the 2006 and 2005 quarters ended March 31:

Three Months Ended Production 3/31/06 3/31/05 Change Oil and condensate (MMBls) 2.37 1.46 62% Natural gas (Bcf) 7.80 7.53 4% Equivalent (MMBOE) 3.67 2.72 35% Average Sales Price Oil and condensate (per Bbl): Price received $55.02 $44.37 24% Effect of crude oil hedging (3.79) (1.40) Realized price $51.23 $42.97 19% Average NYMEX price $63.53 $49.90 Natural gas (per Mcf): Price received $7.62 $5.38 42% Effect of natural gas hedging (0.07) -- Realized price $7.55 $5.38 40% Average NYMEX price $9.01 $6.27

As a result of higher realized commodity prices, Whiting incurred a hedging loss of $9.5 million during the first quarter of 2006, as compared to a hedging loss of $2.1 million in the first quarter of 2005. A summary of Whiting's outstanding crude oil and natural gas hedges is included later in this news release.

First Quarter Costs and Margins

A summary of cash revenues and cash costs on a per BOE basis is as follows:

Per BOE Three Months Ended March 31, 2006 2005 Sales price, net of hedging $49.13 $38.03 Lease operating expense $12.09 $7.66 Production tax $3.25 $2.41 General & administrative $2.62 $2.26 Exploration $1.89 $0.48 Cash interest expense $4.12 $1.45 Cash income tax expense $0.55 $0.60 $24.61 $23.17

All of the Company's financial and operating statistics for the first quarter were in line with the Company's guidance except for lease operating expense and depreciation, depletion and amortization. Our lease operating expenses were 6% greater than the high end of our first quarter 2006 guidance. Most of this increase was related to the continuing effects of higher energy prices and industry-wide demand on the cost of oil field goods and services. We estimate that as much as 40% of our lease operating expense is directly or indirectly related to energy prices. The secondary and tertiary projects at Postle and North Ward Estes fields require large amounts of energy and lease operating expenses in these fields have increased from $12.72 per BOE in the fourth quarter of 2005 to $13.20 per BOE in the first quarter of 2006. As previously discussed, we installed equipment and made repairs at the Dry Trail Gas Plant in the Postle field in late March that will lower future lease operating expenses. We also incurred an unusually high level of workovers in the first quarter at $2.1 million as opposed to our normal level of quarterly workover activity of $1.0 million. The additional workover activity was primarily focused on returning the ancillary properties acquired with the Postle and North Ward Estes fields back to production. We expect the workovers on the ancillary properties to be substantially completed in the second quarter of 2006.

Our depreciation, depletion and amortization rate per BOE sold was $9.62 in the first quarter which was $0.02 above the high end of our guidance range and $0.59 higher than our fourth quarter 2005 rate per BOE. The increase was caused by higher drilling expenditures in the first quarter than originally anticipated. Under successful efforts accounting, the costs to develop proved undeveloped reserves are not considered for DD&A purposes until incurred.

During the first quarter of 2006, our company-wide basis differential for crude oil compared to NYMEX increased to $8.51 from $7.06 in the fourth quarter of 2005. We expect this differential to increase to between $9.50 and $10.00 during the second quarter of 2006. The increasing basis differential is primarily related to refining capacity and the entrance of Canadian crude within our Rocky Mountain region, which composes 20% of our crude oil production. This situation is most prevalent in North Dakota. As a result of increasing production from successful development by all operators in this region and the entrance of Canadian crude, the pipelines and other infrastructure used to transport oil to markets are at or near capacity. These factors have caused an increase in our basis differential over those experienced in the past. While some operators have had production shut-in, we did not experience any significant shut-in production during the first quarter. We are actively marketing our crude oil production to limit any disruptions caused by the current situation.

First Quarter 2006 Drilling Summary

The table below summarizes Whiting's drilling activity and capital spending incurred for the three months ended March 31, 2006:

Gross/Net Wells Drilled Capital Total New % Success Spending Producers Unsuccessful Drilling Rate (in millions) Q106 143 / 105.6 7 / 4.7 150 / 110.4 95% / 96% $118.4 Outlook for Second Quarter and Full-year 2006

The following statements provide a summary of certain estimates for the second quarter and full-year 2006 based on current forecasts. Whiting expects its full-year 2006 drilling budget to be approximately $360 million (excluding any acquisition costs). Whiting expects cash flow from operations during 2006 to exceed this amount and provide for some reduction in bank debt.

Guidance for the second quarter of 2006 and full-year 2006 is as follows: Guidance Second Quarter Full-Year 2006 2006 Production (MMBOE) 3.70 - 3.90 15.00 - 15.35 Lease operating expense per BOE $12.00 - $12.20 $12.00 - $12.20 General and administrative expense per BOE $2.50 - $2.65 $2.50 - $2.65 Interest expense per BOE $4.70 - $4.90 $4.45 - $4.75 Depr., depletion and amort. per BOE $10.00 - $10.60 $10.10 - $10.40 Production taxes (% of production revenue) 6.0% - 6.5% 6.0% - 6.5% Oil Price Differentials to NYMEX per Bbl $9.50 - $10.00 $9.25 - $9.75 Gas Price Differentials to NYMEX per Mcf $0.50 - $0.75 $0.75 - $1.00 Oil and Gas Hedges

Whiting's outstanding hedges and fixed price contracts as of April 17, 2006 are summarized below:

NYMEX Price Collar Range As a Percentage of Contracted Volume March 2006 Natural Gas Oil Production MMBtu per Bbls per for Hedges Month Month Gas (per MMBtu) Oil (per Bbl) (Gas/Oil) 2006 Q2 600,000 125,000 $6.00 - $10.10 $45.00 - $82.80 22%/15% Q2 1,000,000 215,000 $6.00 - $10.12 $50.00 - $73.80 36%/26% Q2 -- 110,000 -- $50.00 - $76.20 --/13% Q3 600,000 125,000 $6.00 - $10.28 $45.00 - $81.90 22%/15% Q3 1,000,000 215,000 $6.00 - $10.38 $50.00 - $72.90 36%/26% Q3 -- 110,000 -- $50.00 - $75.25 --/13% Q4 600,000 125,000 $6.00 - $12.28 $45.00 - $81.10 22%/15% Q4 1,000,000 215,000 $6.00 - $12.18 $50.00 - $72.05 36%/26% Q4 -- 110,000 -- $50.00 - $74.30 --/13% 2007 Q1 600,000 125,000 $6.00 - $15.20 $45.00 - $81.00 22%/15% Q1 1,000,000 215,000 $6.00 - $15.52 $50.00 - $70.90 36%/26% Q1 -- 110,000 -- $50.00 - $73.15 --/13% Q2 -- 110,000 -- $50.00 - $72.00 --/13% Q2 -- 300,000 -- $50.00 - $78.50 --/37% Q3 -- 110,000 -- $50.00 - $70.90 --/13% Q3 -- 300,000 -- $50.00 - $77.55 --/37% Q4 -- 110,000 -- $49.00 - $71.50 --/13% Q4 -- 300,000 -- $50.00 - $76.50 --/37% 2008 Q1 -- 110,000 -- $49.00 - $70.65 --/13% Q2 -- 110,000 -- $48.00 - $71.60 --/13% Q3 -- 110,000 -- $48.00 - $70.85 --/13% Q4 -- 110,000 -- $48.00 - $70.20 --/13% Natural Gas 2006 Contract As a Percentage Volumes in Price(1) of March 2005 Fixed Price Contracts MMBtu per Month (per MMBtu) Gas Production Jan. 2002 - Dec. 2011 51,000 $4.57 2% Jan. 2002 - Dec. 2012 60,000 $4.05 2% (1) Annual 4% price escalation on fixed price contracts. Selected Operating and Financial Statistics Three Months Ended March 31, 2006 2005 Selected operating statistics Production Oil and condensate, MBbl 2,371 1,464 Natural gas, MMcf 7,800 7,531 Oil equivalents, MBOE 3,671 2,719 Average Prices Oil, Bbl (excludes hedging) $55.02 $44.37 Natural gas, Mcf (excludes hedging) $7.62 $5.38 Per BOE Data Sales price (including hedging) $49.13 $38.03 Lease operating $12.09 $7.66 Production taxes $3.25 $2.41 Depreciation, depletion and amortization $9.62 $7.48 General and administrative $2.62 $2.26 Selected Financial Data (In thousands, except per share data) Total revenues and other income $180,630 $103,541 Total costs and expenses $127,333 $61,099 Net income $32,990 $26,055 Net income per common share, basic and diluted $0.90 $0.88 Average shares outstanding, basic 36,726 29,674 Average shares outstanding, diluted 36,743 29,707 Net cash provided by operating activities $111,655 $70,189 Net cash used in investing activities $(134,561) $(95,512) Net cash provided by financing activities $19,893 $40,000 Conference Call

The Company's management will host a conference call with investors, analysts and other interested parties on Friday, April 28, 2006 at 11:00 a.m. EDT (10:00 a.m. CDT, 9:00 a.m. MDT) to discuss Whiting's first quarter 2006 financial and operating results. Please call (800) 847-4038 (U.S./Canada) or (706) 634-7593 (International) to be connected to the call. Access to a live Internet broadcast will be available at http://www.whiting.com/ by clicking on the link titled "Webcasts." Slides for the conference call will be available on this website beginning at 11:00 a.m. (EDT) on April 28, 2006.

A telephonic replay will be available beginning approximately two hours after the call on Friday, April 28, 2006 and continuing through Friday, May 5, 2006. You may access this replay at (800) 642-1687 (U.S./Canada) or (706) 645-9291 (International) and entering the conference ID #8245191. You may also access a web archive at http://www.whiting.com/ beginning approximately one hour after the conference call.

About Whiting Petroleum Corporation

Whiting Petroleum Corporation is a growing energy company based in Denver, Colorado. Whiting Petroleum Corporation is a holding company engaged in oil and natural gas acquisition, exploitation, exploration and production activities primarily in the Permian Basin, Rocky Mountains, Mid-Continent, Gulf Coast and Michigan regions of the United States. The Company trades publicly under the symbol WLL on the New York Stock Exchange. For further information, please visit http://www.whiting.com/.

Forward-Looking Statements

This press release contains statements that Whiting believes to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than historical facts, including, without limitation, statements regarding Whiting's future business strategy, projected production, reserves, production expenses, net profit margins, cash flows from operations and capital expenditures, and plans and objectives of management for future operations, are forward-looking statements. When used in this press release, words such as "expect,""intend,""plan,""estimate,""anticipate,""believe" or "should" or the negative thereof or variations thereon or similar terminology are generally intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements. Some, but not all, of the risks and uncertainties include: our level of success in exploitation, exploration, development and production activities; the timing of our exploration and development expenditures, including our ability to obtain drilling rigs; our ability to identify and complete acquisitions and to successfully integrate acquired businesses and properties; unforeseen underperformance of or liabilities associated with acquired properties; inaccuracies of our reserve estimates or our assumptions underlying them; failure of our properties to yield oil or natural gas in commercially viable quantities; our inability to access oil and natural gas markets due to market conditions or operational impediments; and our ability to replace our oil and natural gas reserves. Whiting assumes no obligation, and disclaims any duty, to update the forward-looking statements in this press release.

SELECTED FINANCIAL DATA

For further information and discussion on the selected financial data below, please refer to Whiting Petroleum Corporation's First Quarter Form 10-Q for the thee months ended March 31, 2006, to be filed with the Securities and Exchange Commission.

WHITING PETROLEUM CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) March 31, December 31, 2006 2005 ASSETS CURRENT ASSETS: Cash and cash equivalents $7,369 $10,382 Accounts receivable trade, net 92,200 101,066 Deferred income taxes 9,322 15,121 Prepaid expenses and other 10,250 5,595 Total current assets 119,141 132,164 PROPERTY AND EQUIPMENT: Oil and gas properties, successful efforts method: Proved properties 2,477,120 2,353,372 Unproved properties 25,439 21,671 Other property and equipment 32,825 26,235 Total property and equipment 2,535,384 2,401,278 Less accumulated depreciation, depletion and amortization (373,171) (338,420) Total property and equipment-net 2,162,213 2,062,858 DEBT ISSUANCE COSTS 22,498 23,660 OTHER LONG-TERM ASSETS 18,088 16,514 TOTAL $2,321,940 $2,235,196 WHITING PETROLEUM CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands except share and per share data) March 31, December 31, 2006 2005 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $88,501 $68,033 Accrued interest 19,666 11,894 Oil and gas sales payable 19,820 21,154 Accrued employee compensation and benefits 6,692 15,351 Production taxes payable 12,698 13,259 Current portion of tax sharing liability 4,254 4,254 Current portion of derivative liability 19,547 34,569 Total current liabilities 171,178 168,514 ASSET RETIREMENT OBLIGATIONS 32,426 32,246 PRODUCTION PARTICIPATION PLAN LIABILITY 21,361 19,287 TAX SHARING LIABILITY 25,101 24,576 LONG-TERM DEBT 893,979 875,098 DEFERRED INCOME TAXES 110,468 91,577 LONG-TERM DERIVATIVE LIABILITY 20,313 21,817 OTHER LONG-TERM LIABILITIES 5,535 4,219 COMMITMENTS AND CONTINGENCIES -- -- STOCKHOLDERS' EQUITY: Common stock, $.001 par value; 75,000,000 shares authorized, 36,956,830 and 36,841,823 shares issued and outstanding as of March 31, 2006 and December 31, 2005, respectively 37 37 Additional paid-in capital 751,643 753,093 Accumulated other comprehensive loss (24,474) (34,620) Deferred compensation -- (2,031) Retained earnings 314,373 281,383 Total stockholders' equity 1,041,579 997,862 TOTAL $2,321,940 $2,235,196 WHITING PETROLEUM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data) Three Months Ended March 31, 2006 2005 REVENUES: Oil and gas sales $189,865 $105,465 Loss on oil and gas hedging activities (9,524) (2,055) Interest income and other 289 131 Total revenues and other income 180,630 103,541 COSTS AND EXPENSES: Lease operating 44,398 20,830 Production taxes 11,935 6,540 Depreciation, depletion and amortization 35,300 20,347 Exploration and impairment 7,042 1,298 General and administrative 9,611 6,142 Change in Production Participation Plan Liability 2,074 686 Interest expense 16,973 5,256 Total costs and expenses 127,333 61,099 INCOME BEFORE INCOME TAXES 53,297 42,442 INCOME TAX EXPENSE: Current 2,031 1,638 Deferred 18,276 14,749 Total income tax expense 20,307 16,387 NET INCOME $32,990 $26,055 NET INCOME PER COMMON SHARE, BASIC AND DILUTED $0.90 $0.88 WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC 36,726 29,674 WEIGHTED AVERAGE SHARES OUTSTANDING, DILUTED 36,743 29,707 WHITING PETROLEUM CORPORATION AND SUBSIDIARIES

Reconciliation of Net Cash Provided by Operating Activities to Discretionary

Cash Flow (In Thousands) Three Months Ended March 31, 2006 2005 Net cash provided by operating activities $111,655 $70,189 Exploration and impairment 7,042 1,298 Changes in working capital (22,301) (6,874) Discretionary cash flow (1) $96,396 $64,613 (1) Discretionary cash flow is computed as net income plus exploration costs, depreciation, depletion and amortization, deferred income taxes, non-cash interest costs, non-cash compensation plan charges, and impairment of oil and gas properties less the gain on sale of properties and marketable securities. The non-GAAP measure of discretionary cash flow is presented because management believes it provides useful information to investors for analysis of the Company's ability to internally fund acquisitions, exploration and development. Discretionary cash flow should not be considered in isolation or as a substitute for net income, income from operations, net cash provided by operating activities or other income, cash flow or liquidity measures under GAAP and may not be comparable to other similarly titled measures of other companies.

Whiting Petroleum Corporation

CONTACT: John B. Kelso, Director of Investor Relations of WhitingPetroleum Corporation, +1-303-837-1661, john.kelso@whiting.com

Web site: http://www.whiting.com/

Source: PRNewswire-FirstCall

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