Whiting Petroleum becomes first victim of oil crisis

Whiting Petroleum has become the first U.S. oil company to file for bankruptcy protection amid a price and demand slump.

Arathy S Nair reported the news for Reuters:

Whiting Petroleum Corp filed for Chapter 11 bankruptcy, the U.S. shale producer said on Wednesday, the first publicly traded casualty of crashing crude oil prices that are expected to bite into record U.S. output.

Whiting was once the largest oil producer in North Dakota, now the second-biggest oil-producing state in the country. It has agreed with creditors to cut its debt by about $2.2 billion through an exchange of some of its notes for 97% of new equity. Existing shareholders will own 3% of the reorganized company.

Notably, Whiting said in a regulatory filing that on March 26, in response to the circumstances affecting the oil industry, it revised its compensation program to pay out more than $13 million bonuses to several executives, including $6.4 million to CEO Brad Holly.

Forbes’ Gaurav Sharma wrote:

In a statement, Whiting said its board had concluded that given a severe downturn in oil and gas prices resulting from the Saudi Arabia-Russia oil price war and coronavirus-related impact on demand, a financial restructuring was the “best path forward” for the company.

Overnight, oil benchmarks Brent and West Texas Intermediate posted their worst ever quarter, ending around 66% lower at the end of the three-month period.  

Providing details on the way forward, Whiting said it had more than $585 million of cash on its balance sheet and will continue to operate its business in line with commercial commitments. The company also said it would honor financial obligations during the restructuring without any “need for additional financing.”

Judith Kohler from the Denver Post reported:

Whiting listed $3.6 billion in debt and $7.6 billion worth of assets in the bankruptcy filing. The company said it will exchange 97% of the new equity of the reorganized company for erasure of more than $2.2 billion in debt.

Last week, Whiting’s board approved about $14.6 million in bonuses and incentives to the top executives, including roughly $6.4 million for Holly.

Whiting said it has $585 million in cash and will continue to operate “in the normal course without material disruption to its vendors, partners or employees.”

The company didn’t respond Wednesday to questions about any layoffs or the payments to the executives.

The oil and gas industry’s troubles have prompted DMC Global Inc. to cut 264 positions, about a third of its workforce. The Broomfield-based company said Wednesday that the reductions, 97 of which are temporary, are being made because of sharply lower oil and gas activity.