Whiting Petroleum Earnings Call Insights: Postle and Resource Potential

Whiting Petroleum Corporation (NYSE:WLL) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.


John Freeman – Raymond James: The first question I had, Jim, you alluded to the fact that any projected outspend you have that the asset monetizations would well more than offset that. Along those lines, if you could get maybe some update on where we stand on Postle?

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James T. Brown – President and COO: Well, what I can say now today, John, is that, we are fielding strong interest in that both from, I would say, people who would like to buy and make an outright purchase there, people who want to us to continue to operate it for them, but where they would own a large interest in the property, perhaps 90% or so, and of course we continue to evaluate and have strong interest on a number of underwriters in a royalty trust there. So, we’re evaluating all of those. We have a number of excellent opportunities that we can capitalize on there. I don’t have anything to announce at this point. I would say, we’re getting down to the decision point sometime in the near future, but the asset itself, I would like to say, continues to outperform all of the original projections that we made for it and we love that asset so if we’re going to monetize it in some way, I can assure you we’re going to get a great value and that it’s going to make a great asset for someone either that we sell it to, someone that we bring in as a partner or for investors through a royalty trust. We certainly intend to make sure that that asset if it’s not owned by is it’s owned by somebody else who truly understands it and will do very well with it. If it continues to be owned by us in part after some sort of monetization I can assure that we’ll continue to do the great job that we have with it so far having more than double the production from when we acquired it.

John Freeman – Raymond James: Then moving to Tarpon obviously another huge well there and as you move to pad drilling I’m wondering if you could give some color on in your 2013 budget of the wells that you’ve got for the Northern Rockies, what percentage or ballpark number on the wells you’re expecting to drill at Tarpon this year in your budget?

James J. Volker – CEO: Well, currently I think I’d refer you to Page 12 in our presentation, there you can see what’s happened at Tarpon we’re continuing to infill on what we’ve already recognized as opportunities there. That’s a prolific reservoir. We feel like we’re doing an effective job in Middle Bakken with three wells per spacing units. We have four operated spacing units and we plan to essentially drill that out during 2013. We also have opportunity in the Three Forks there which we will be pursuing probably in following year. What’s really interesting at Tarpon is that we have identified both there, as well as Cassandra another drilling opportunity. We believe that the second bench of the Three Forks has received a good charge from the Bakken Shale area and we are seeing good saturations from core data that we’ve collected there at Tarpon and so we think we got an additional objective there to pursue and that’s probably going to be either late this year or 2014. And we think we can get up to three wells per spacing unit in there. The thing to recognize about Tarpon is that it is heavily fractured, that explains the high rates that we got and so that’s the – the well density there is somewhat less in some of the other areas that we are drilling.

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Resource Potential

Jack Aydin – KeyBanc Capital Markets: I am just looking at your inventory in the way that primary and prospective location is more than double what you had before. Then I am looking at your reserve in a sense resource base is up about 3% or so. What is the disconnect and why the resource potential did not increase or almost doubled in a way. Could somebody explain it to me?

Eric K. Hagen – VP, IR: I can explain it to you, Jack, it is Eric Hagen. I think you are comparing apples and oranges. I mean, our 3P numbers were fairly constant year-over-year and typically within the 3P we are just promoting reserves from possible into probable to proved and then we are replenishing with what are actually termed resource location. So, the big increase really was in that resource category which is largely reflected in the prospective locations we identified and to some extent in the primary locations.

James J. Volker – CEO: Jack, to help clarify that I would say that we don’t have in our current reserve base the locations that you see they are under the identified prospective locations. So, we haven’t added those in yet. It’s basically something that’s occurred over the last six months of 2012, as we have seen the potential for everything on them there, meaning three additional wells in the upper Three Forks/1280, four Bakken Silk Wells and four Middle Bakken Wells/1280, four lower Three Forks/1280, three lower Three Forks/1280, so these are all additional locations that can be drilled as a result of the results that we’ve seen so far and the reservoir engineering that we have done and the core that we have taken. So, those are basically new objectives then we go into the higher density locations, Pronghorn Sand higher density that’s three more additional Pronghorn Sand. The higher density at Sanish, that’s three additional Middle Bakken I was pleased to remind, those friends that we have on the call here that, Sanish has the highest OOIP of any place in the Williston Basin. I hope you’ll pardon me for to reminding everyone about that and that’s why we have the ability to drill another 191 wells there. So, it’s a great opportunity and we’ll be adding those into a resource base here in the first half of 2013.

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Jack Aydin – KeyBanc Capital Markets: One more question for me. Could you update us on the new venture area that you involved in anything, when we might hear something about what you all are doing?

James J. Volker – CEO: Well, we do have a couple of self-plays where frankly we’ve drilled a couple of tests and we’re encouraged by the results. Some of our acreage money that you see in our budget is going into picking up more acreage in those two areas. I’d estimate that we’ll have something definitive to tell you by the end of the second quarter when we’ve got some test results for you on at least – some extended tests on at least one of those areas.

A Closer Look: Whiting Petroleum Earnings Cheat Sheet>>