Whiting Petroleum Corporation’s (NYSE:WLL): Whiting Petroleum Corporation engages in the acquisition, exploration, development, and production of crude oil, natural gas liquids, and natural gas primarily in the Rocky Mountains region of the United States. The US$4.84b market-cap company’s loss lessens since it announced a -US$1.24b bottom-line in the full financial year, compared to the latest trailing-twelve-month loss of -US$1.14b, as it approaches breakeven. Many investors are wondering the rate at which WLL will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for WLL, its year of breakeven and its implied growth rate.See our latest analysis for Whiting Petroleum
According to the industry analysts covering WLL, breakeven is near. They expect the company to post a final loss in 2017, before turning a profit of US$196.73m in 2018. Therefore, WLL is expected to breakeven roughly a couple of months from now! What rate will WLL have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 23.66%, which is rather optimistic! If this rate turns out to be too aggressive, WLL may become profitable much later than analysts predict.
I’m not going to go through company-specific developments for WLL given that this is a high-level summary, though, take into account that by and large oil and gas companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. So, a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before I wrap up, there’s one issue worth mentioning. WLL currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in WLL’s case is 72.71%. Note that a higher debt obligation increases the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on WLL, so if you are interested in understanding the company at a deeper level, take a look at WLL’s company page on Simply Wall St. I’ve also compiled a list of pertinent aspects you should further research:
- Valuation: What is WLL worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether WLL is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Whiting Petroleum’s board and the CEO’s back ground.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.