Whiting Petroleum Craters in Worst-Ever Rout After Surprise Loss

(Bloomberg) -- Whiting Petroleum Corp. plunged 35% for its biggest-ever drop after the oil explorer fired one-third of its workforce, scaled back its full-year production target and posted a surprise quarterly loss.

The Denver-based oil explorer's decline extended the 12-month loss to 74%. Fellow shale explorer Concho Resources Inc. also was hammered by investors, losing 23% of its market value, after disclosing botched results from an experimental drilling project. Pioneer Natural Resources Corp., Diamondback Energy Inc. and Cimarex Energy Inc. also fell.

For Whiting, the elimination of 254 jobs will result in $50 million in annual cost savings, according to figures released on Wednesday.

“We aim to be as efficient as possible and that is why we made the difficult decision to reduce our workforce in order to realize significant annualized cost savings,” Chief Executive Officer Brad Holly said in a statement Wednesday.

Whiting joins industry peers Pioneer Natural, Laredo Petroleum Inc. and Devon Energy Corp. in cutting headcount as investors increasingly focus on general and administrative budgets.

At many oil producers, executive compensation can amount to as much as 20% of general and administrative costs, Evan Lederman, a partner at New York-based Fir Tree Partners, said in an interview earlier this year. The Whiting job cuts included 94 executive and corporate-level positions.

Weak Pricing

The company posted a second-quarter loss of 28 cents per share, while the average of analysts' estimates compiled by Bloomberg was for a 27-cent profit. The miss was due to a combination of weak natural gas liquids pricing, higher-than-expected operating costs, and disappointing oil volumes, analysts at Raymond James said in a note.

Whiting was down 34% to $11.71 at 10:05 a.m. in New York trading, after earlier reaching $11.47.

After making a one-time severance payment to fired workers, Whiting said it expects to wring $15 million in cost savings from the job cuts through the rest of this year. Half of the savings this year will come from general and administrative costs and the rest from areas such as exploration activities.

"We reorganized from a corporate model to an asset-based model," Holly told analysts and investors Thursday on a conference call. "Everybody is about creating value now."

--With assistance from Ryan Collins.

To contact the reporters on this story: David Wethe in Houston at dwethe@bloomberg.net;Rachel Adams-Heard in Houston at radamsheard@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Joe Carroll, Mike Jeffers

©2019 Bloomberg L.P.