Whiting Petroleum Corporation

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Whiting Petroleum Corporation

1700 Broadway, Suite 2300
Denver, Colorado 80290
U.S.A.
Telephone: (303) 837-1661
Fax: (303) 861-4023
Web site: http://www.whiting.com

Public Company
Incorporated: 1983 as Whiting Oil and Gas Corporation
Employees: 309
Sales: Sales: $540.4 million (2005)
Stock Exchanges: New York
Ticker Symbol: WLL
NAIC: 211111 Crude Petroleum and Natural Gas Extraction

Whiting Petroleum Corporation is an oil and natural gas company involved in the acquisition, exploration, and production of properties in the Rocky Mountain, Permian Basin, Gulf Coast, Michigan, and Mid-Continent regions of the United States. The company has proved reserves of 199.2 million barrels of oil (MMBbl) and 386.4 billion cubic feet of natural gas (Bcf) for total proved reserves of 236.6 million barrels of oil equivalent (MMBOE), a figure calculated by converting natural gas volumes to equivalent oil barrels; six thousand cubic feet of natural gas is equal to one barrel of oil. On a daily basis, Whiting Petroleum produces 40,700 barrels of oil equivalent. Of the company's five operating regions, the Permian Basin stands as the most important area, accounting for slightly more than half of its total proved reserves. Known for its aggressive stance on the acquisition front, Whiting Petroleum more than quintupled its revenue volume and its reserves between 2001 and 2005.

ORIGINS

During its first quarter-century of business, Whiting Oil and Gas rose from a start-up in the oil and gas industry into a prominent member of the community. The company, originally named Whiting Oil and Gas Corporation, was formed by two industry veterans, J. B. "Bert" Ladd and Kenneth R. Whiting, who remained, serving under various capacities, with Whiting Petroleum through its silver anniversary year. The company operated both as an independent exploration and production firm and as a subsidiary of a larger corporation, displaying a penchant for acquiring properties while pursuing its own agenda and adhering to the direction of a parent company.

From the start, Whiting Oil and Gas gained legitimacy in the industry through the reputations of its founders. Both were seasoned executives well versed in the nuances of the business, having established themselves as adept managers well before founding Whiting Oil and Gas in 1980. Of the two, Ladd was the more experienced, beginning his career in the oil and gas industry after earning an undergraduate degree in petroleum engineering from the University of Kansas in 1949. After college, Ladd joined The Texas Co., a company that became better known as Texaco Inc. He spent nearly a decade at The Texas Co., leaving in 1957 to join Consolidated Oil & Gas, where he served as vice-president of operations. After his stay at Consolidated Oil, Ladd formed his own company in 1968, a company named Ladd Petroleum Corporation that at one point counted Kenneth Whiting as its executive vice-president. Whiting, who earned an undergraduate degree in business from the University of Colorado and a law degree from the University of Denver, joined Webb Resources, Inc., after leaving Ladd Petroleum, serving as the company's president from 1978 to 1979, ending his stay at Webb Resources the same year Ladd retired as president and chairman of Ladd Petroleum.

Ladd and Whiting based their entrepreneurial creation in Colorado, where Whiting Oil and Gas would remain despite being acquired later by another corporation. "We've always seen ourselves as a Colorado-based company," a company executive said in a December 9, 2003 interview with the Rocky Mountain News. The company began operating with less than $3 million in assets, a total that would grow exponentially as the years passed. Whiting Oil and Gas's ability to expand its asset base was increased substantially once the company converted to public ownership, a step the company took in 1983. The year Whiting Oil and Gas completed its initial public offering (IPO) also marked the arrival of an executive who would lead the company 20 years later. James J. Volker, who attended the same schools as Whiting attended (the University of Denver and the University of Colorado) joined Whiting Oil and Gas in August 1983 as the company's vice-president of corporate development.

ACQUISITION BY ALLIANT ENERGY: 1992

On its own as a public company, Whiting Oil and Gas spent the remainder of the 1980s building up its assets, fashioning itself into a company coveted by others. After nearly a decade operating in the public arena, the company drew the attention of a Madison, Wisconsin-based utility named Alliant Energy Corp. Alliant, an energy services provider involved in both regulated and non-regulated businesses, acquired Whiting Oil and Gas in 1992. Whiting Oil and Gas, with $30 million in assets at the time of its acquisition, became an indirect, wholly owned subsidiary of Alliant once the deal was completed, but it retained its key personnel and its affiliation with the state of Colorado. Volker became a contract consultant for Whiting Oil and Gas after the Alliant acquisition. Whiting traded his posts as president and chief executive officer for a seat on the company's board of directors, where he sat alongside Ladd.

Whiting Oil and Gas entered a new era of existence once within the Alliant fold. Although the company remained active on the acquisition front, its retreat from the public market reduced its visibility in the oil and gas industry, engendering a quiet period in its history. As it was later revealed, Whiting Oil and Gas's efforts to expand ratcheted up during the company's 20th anniversary, an event, perhaps not coincidentally, that also marked the appointment of Volker to a managerial position. Vice-president of corporate development during Whiting Oil and Gas's first decade of business and a contract consultant following the Alliant merger, Volker was given the titles of executive vice-president and chief operating officer in August 2000. The year became the starting point of an expansion campaign that would be revealed after Alliant's management made an important decision in late 2002. In November, the company announced it intended to divest all of its non-regulated subsidiaries to focus its efforts on its core, regulated utility business. Executives at headquarters in Madison mulled over different ways to monetize their investment in Whiting Oil and Gas, whittling their options down to three choices: sell the company's assets, either in whole or in parts; sell the company to another company; or take it public. Management chose the last option, setting the stage for the company's return to independence and the public sector.

COMPANY PERSPECTIVES

Whiting's growth strategy is focused on increasing reserves and production per share through producing property acquisitions, exploitation and exploration. Whiting strives to increase reserves and daily production through complementary acquisitions, efficiently exploiting our undeveloped oil and natural gas reserves and drilling a number of exploratory wells in our core regions.

WHITING PETROLEUM SPINOFF: 2003

As the company prepared to embark on its new era of freedom. Volker was promoted to president and chief executive officer in January 2002. Under Volker's command, Whiting Oil and Gas assumed an aggressive posture towards acquisitions, but the company already was feverishly acquiring oil and gas properties before Volker's promotion. Between 2000 and 2002, Whiting Oil and Gas completed 41 separate acquisitions, adding 369.6 billion cubic feet equivalent (Bcfe). The acquisitions doubled the company's reserves, bolstering its asset base spread across Michigan, the Rockies, the Gulf Coast, the Permian Basin in western Texas, and the Mid-Continent region. In the coming years, as it set out on its own for the second time in its history, Whiting Oil and Gas would add properties to its existing geographic base and venture into new territories, recording enviable financial growth as it did so.

In the months following Alliant's decision to shed its non-regulated assets, anticipation of the spinoff of Whiting Oil and Gas and its implications for the company's future grew both at headquarters in Denver and within the industry. Industry analysts predicted a more expansion-minded company, and Volker's management team in Denver was ready to fulfill such expectations. "It will make Whiting more independent," one pundit said in a November 18, 2003 interview with the Denver Post. "By going out and being independent of Alliant, it will free Whiting to do things that might not have been available to them as a subsidiary." To complete the spinoff, Whiting Petroleum Corporation was formed as holding company for Whiting Oil and Gas, one of the final steps taken as Volker eyed what he hoped would be a $240 million IPO. The IPO was completed in November 2003, raising $230 million in an offering that set the subsidiary free from its parent. Volker, armed with capital and expressing a desire to acquire, wasted little time before pressing ahead with his company's expansion program.

Whiting Petroleum's board of directors, which included Ladd and Whiting, believed Volker to be the ideal executive to lead the company forward after its separation from Alliant. Volker was appointed to the additional post of chairman in January 2004, giving him the three most powerful positions in the company, and he quickly responded by adding to Whiting Petroleum's reserves by brokering an important deal. In February 2004, less than 90 days after becoming a public company, Whiting Petroleum announced the acquisition of Equity Oil Co. for approximately $72 million. An independent oil and gas exploration and production company for more than 80 years, Equity owned properties in California, Colorado, North Dakota, and Wyoming. The acquisition set the tone for what was to follow. "We're not done," Volker declared in a February 9, 2004 interview with Corporate Financing Week. "It's a good first step for us. We will be doing other things," he promised. The acquisition of Equity, which was completed in July 2004, was part of Volker's broader strategy for growth. In the same interview, he related his intention to "acquire good properties, exploit the underdeveloped reserves of those properties, and explore—meaning take higher risks and look for a bigger rate of return than you get from acquisitions."

Volker made good on his promise of further acquisitions in the months leading up to Whiting Petroleum's 25th anniversary. In the wake of the Equity deal, the company completed a series of acquisitions, concentrating its efforts on adding to its oil reserves. There were notable exceptions, however, including the purchase of fields in Colorado, Wyoming, Louisiana, and Texas in August 2004 for $63.5 million that contained primarily natural gas reserves. In March 2005, the company completed the purchase of additional natural gas properties, paying $65 million for five producing fields in the Green River Basin of Wyoming, but more than 80 percent of the reserves added in 2004 and 2005 bolstered the company's oil holdings. By far the largest of the acquisitions completed during the two-year period was a deal brokered with Midland, Texas-based Celero Energy LP in July 2005. The acquisition was completed in two stages for a total of roughly $800 million, the largest deal in Whiting Petroleum's history. The first part of the transaction to close was the Postle Field in Oklahoma, a property comprising five producing fields stretched across more than 25,000 acres. The Postle Field part of the Celero Energy purchase closed in August 2005, two months before the North Ward Estes Field officially became part of Whiting Petroleum's portfolio. The largest asset owned by the company, the North Ward Estes Field covered 58,000 acres containing six fields with 636 producing wells.

KEY DATES

1980:: Whiting Petroleum is founded as Whiting Oil and Gas Corporation.
1983:: The company completes its initial public offering of stock.
1992:: Alliant Energy acquires Whiting Oil and Gas.
2003:: Whiting Petroleum Corporation is spun off as a separate, publicly traded company.
2004:: Whiting Petroleum acquires Equity Oil Co.
2005:: Whiting Petroleum pays roughly $800 million for oil and gas properties owned by Celero Energy LP.

As Volker plotted Whiting Petroleum's future course, further acquisitions appeared likely. Within two years of its separation from Alliant, the company acquired 206.3 MMBOE, paying nearly $1.5 billion for the enormous increase to its reserves. The outlay delivered robust financial growth, as annual revenues nearly doubled. Perhaps most important, Volker and his management team achieved such growth without sacrificing profitability. Net income during the two-year period swelled from $70 million to $121.9 million. The glowing financial results, recorded at a time of record-setting profits in the oil and gas industry, confirmed the value of the company's acquisition strategy, providing Volker with all the encouragement he needed to continue expanding in the years ahead.