Whiting Petroleum touts recent debt exchange deals, says liquidity ‘strong,’ maturities far off

By Paul Deckelman

New York, June 28 –Whiting Petroleum Corp. has what its president and chief executive officer terms a “very strong” liquidity position, with some $1.5 billion of borrowing availability under its revolving credit agreement.

James J. Volker also notes that the company has recently cleaned up its balance sheet with a series of debt exchange transactions that have “significantly” brought down the amounts of its outstanding bond debt, as well as the fact that the Denver-based oil and natural gas exploration and production company does not have any debt maturities before 2018 and no sizable maturities before 2019.

Volker told participants at the J.P. Morgan Energy Equity Conference on Tuesday in New York that “we’ve been able to do those two exchange agreements,” referring to a two-step transaction that was finally completed last month, and a separate transaction set to officially close on Wednesday.

“We’re very pleased with that – it brings our total amount [of outstanding debt] exchanged to about $1.5 billion. I think those are great transactions to bring our debt levels down to areas in what I would say are a more appropriate level, given where oil and gas prices are today.”

The deals involved some exchange of existing convertible notes and junk bonds for new convertible debt, later converted to equity, and so, he said, “recognizes that there are folks out there, debt holders, who were very interested in Whiting’s assets and pleased to become equity owners as a result of these exchanges.”

The first transaction took out some $477 million principal amount of existing paper. In March, Whiting exchanged $49 million of its 6½% senior subordinated notes due 2018, $97 million of its 5% senior notes due 2019, $152 million of its 5¾% senior notes due 2021 and $179 million of its 6¼% senior notes due 2023 for a like principal amount of new convertible debt – $49 million of new 6.5% convertible senior subordinated notes due 2018, $97 million of new 5% convertible senior notes due 2019, $152 million of new 5.75% convertible senior notes due 2021 and $179 million of new 6.25% convertible senior notes due 2023.

Then, in early May, it announced the mandatory conversion of the four new convertible issues into Whiting common stock at mid-month, giving the holders 41.8 million shares plus early conversion payments of $41.9 million, plus accrued interest to the conversion date.

Then, earlier this month, Whiting followed that up with the announcement of an even bigger transaction, telling holders that it will exchange nearly $1,065,000,000 of new mandatory convertible notes for a like amount of existing paper – $23,597,000 of the 6½% senior subordinated notes due 2018, $22.68 million of the 5% senior notes due 2019, $687,925,000 of its 1.25% senior convertible notes due 2020, $172,731,000 of the 5¾% senior notes due 2021 $157.97 million of the 6¼% senior notes due 2023.

The company will issue a like amount of mandatory convertible notes with the same coupon and maturity as the existing notes, with settlement set for Wednesday.

“It’s another very strong deleveraging transaction which, along with the first one, brings us to over $1.5 billion of de-levering that Whiting has done in the past months,” Volker proclaimed.

Volker noted that Whiting’s first maturity is the 2018 bond issue and its first really sizable maturity is the 2019 notes.

On the bank debt front, Whiting recently negotiated with its banks, keeping its commitment level at $2.5 billion on a $4 billion total credit facility. He said it has used around $1 billion, keeping liquidity around $1.5 billion.

Whiting, he said, “is certainly within all of its bank covenants and all of its bond covenants.”

He said that the revolver requires a ratio of total senior secured debt to EBITDAX of less than 3-to-1. It stood at was 0.79-to-1 on March 31, 2016.

The total EBITDAX-to-interest expense ratio had to be a minimum of 2.25-to-1; this stood at 5.45-to-1 as of March 31.

The company was also required to maintain a current ratio greater than 1-to-1 and reported a ratio of 3.66-to-1.

Volker said the company’s only bond covenant is a ratio of consolidated cash flows to fixed charges, i.e., interest expense. “It must be greater than 2-to-1 – and it was actually 3.54-to-1 as of March 31.

“So, financially, [we have] a strong balance sheet, especially with these deleveraging transactions now totaling about $1.5 billion.”

© 2015 Prospect News.
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