No deal for shale driller Whiting as company sells shares

MATTHEW MONKS and BRADLEY OLSON

DENVER, Colorado (Bloomberg) -- Whiting Petroleum Corp. has given up finding a buyer, saying instead it will sell as much as 40.3 million shares and raise $1.9 billion in debt to clean up its balance sheet.

The Denver-based company is tapping capital markets after shopping itself to Exxon Mobil Corp. and at least three other companies, according to people familiar with the matter, who asked not to be identified because the discussions weren’t public. Shares fell 12% to $33.70 at 7:51 p.m. in after hours New York trading Monday.

Whiting, which had been preparing an equity offering for months, reached out to a handful of buyers to see if it could sell at a high price rather than diluting shareholders in a stock offering, the people said. Bids, which were due last week, weren’t high enough, they said.

“We are more or less near the bottom of the cycle in oil prices, so it wouldn’t make sense for them to sell at this point,” Daniel Katzenberg, an analyst at Robert W. Baird & Co. in Wisconsin, said in a telephone interview.

Whiting had attracted interest from Exxon, Continental Resources Inc., Hess Corp. and Statoil ASA, people familiar with the matter said earlier this month.

Its new debt will be used to repay short-term revolving credit Whiting used in order to finance some of its $3.8 billion acquisition of Kodiak Oil & Gas Corp., which closed in December, Katzenberg said.

As oil prices have fallen by more than half since June, Whiting joins other shale producers that have issued more than $8 billion in additional shares this quarter to shore up their finances as the downturn persists, according to data compiled by Bloomberg.

Investor Enthusiasm

Investors have shown enthusiasm for some of the recent share offerings, placing bets on a rebound in the oil market. Many companies view selling shares as the best option compared to expensive borrowing or selling assets at reduced prices, according to Troy Eckard, whose Eckard Global LLC owns stakes in more than 260 North Dakota wells.

Whiting didn’t disclose a price for its shares in Monday’s announcement. In the last five major deals, companies including Encana Corp. and Carrizo Oil & Gas Inc. sold shares at an average discount of 3.3% to the price on the day the plans were announced. For Whiting, a comparable discount based on Monday’s closing price would provide it almost $1.5 billion in funds, according to data compiled by Bloomberg.

To raise $1.5 billion in June, before oil prices began their slide and before the Kodiak transaction, Whiting would have needed to sell only about 19 million shares, half the total possible in the current offering.

Few Options

More stock has been issued in the first three months of 2015 than in any quarter in the previous decade. Some producers have seen their decisions to raise funds embraced by investors, while for others the move seemed to be a last resort. If the pace continues, sales of new equity would surpass the total of 2008 and 2009 combined, the last time oil prices crashed.

Whiting will sell as much as $1.15 billion in convertible senior notes due in 2020 and $750 million in senior notes due 2023, according to its statement. Whiting had drawn down $1.4 billion of its $3.5 billion revolving credit line as of Dec. 31, according to data compiled by Bloomberg.