Can Higher Oil Drive Whiting Petroleum’s (WLL) Q3 Earnings? – October 20, 2017


Domestic oil and gas explorer Whiting Petroleum Corporation (WLL Free Report) is slated to release third-quarter 2017 results after the closing bell on Wednesday, Oct 25.

In the trailing four quarters, the Denver, CO-based company had outperformed the Zacks Consensus Estimate by an average of 7.14%.

In the preceding quarter, Whiting Petroleum beat the consensus mark by 5.3% on robust output and cost control.


The question lingering in investors’ minds now is whether Whiting Petroleum will be able to post positive earnings surprise in the third quarter. Let’s see how things are shaping up prior to this announcement.

Factors at Play

Oil Price Improvement: The U.S. oil benchmark wrapped up a strong quarter amid continued declines in domestic inventories and an improving supply-demand narrative.

The rapid decline of oil inventories in recent months has helped the U.S. crude market shift from year-over-year storage surplus to a deficit. Moreover, energy bodies OPEC and IEA both recently raised global oil demand forecasts for this year. Also, supply from the 14-member OPEC cartel is set to remain constraint for at least the next six months, helping to tighten the market significantly. Adding to the positive momentum, OPEC and Russia claimed to be on the right track in clearing the global oil glut with half the job done.

With fundamentals pointing to a tighter market, oil ended the third quarter at $51.67 per barrel, up about 10.5% sequentially. A year ago, crude futures hovered around the $45 per barrel mark.

Whiting Petroleum stands to benefit from recovering commodity prices as it will be able to extract more value for their products.

Asset Sale: In August, the Bakken-focused upstream operator inked a $500 million deal to divest its Fort Berthold assets in North Dakota to a private explorer RimRock Oil & Gas Williston, LLC. While the agreement will help Whiting Petroleum to reduce debt and streamline its portfolio, it is also likely to lower its third-quarter production.

What to Expect?

Management had earlier guided third-quarter total production in the band of 10.5-11.1 million barrels of oil equivalent (MMBOE). We note that the current Zacks Consensus Estimate for the quarterly output is 10.8 MMBOE, at the midpoint of the company’s forecast range but below the 11 MMBOE reported in the year-ago quarter. In particular, we anticipate oil production at 7.4 million barrels (MMBbl), down from the prior year quarter volume of 7.8 MMBbl.

Meanwhile, analysts polled by Zacks expect average realized oil price to rise 7.2% from the year-ago quarter to $39.20 per barrel, while average natural gas price realization will be up 6.7% to $1.91 per thousand cubic feet.  

What Does Our Model Say?

Our proven model too does not conclusively show that Whiting Petroleum will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -0.34%.

Zacks Rank: Whiting Petroleum is #2 Ranked. Though a Zacks Rank of 2 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

While earnings beat looks uncertain for Whiting Petroleum, here are some firms from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:

National Oilwell Varco Inc. (NOV Free Report) has an Earnings ESP of +10.91% and a Zacks Rank #2. The company is expected to release earnings results on Oct 26. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Suncor Energy Inc. (SU Free Report) has an Earnings ESP of +9.09% and a Zacks Rank #2. The partnership is anticipated to release earnings on Oct 25.

PBF Energy Inc. (PBF Free Report) has an Earnings ESP of +6.04% and a Zacks Rank #2. The company is likely to release earnings on Nov 2.

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