S&P Rates Whiting's (WLL) Senior, Convertible Notes; Outlook Remains Negative

Standard & Poor's Ratings Services said it assigned its 'BB' issue-level rating and '5' recovery rating to Whiting's (NYSE: WLL) proposed $750 million senior unsecured notes due 2023 and its proposed $1 billion convertible notes due 2020. At the same time, we lowered our ratings on Whiting's existing senior unsecured notes to 'BB' from 'BB+' and removed them from CreditWatch, where we placed them with negative implications on July 16, 2014. All of Whiting's unsecured debt, including the assumed Kodiak Oil & Gas notes, has a recovery rating of '5', indicating our expectation of modest (the high end of the 10% to 30% range) recovery in the event of a payment default.

At the same time, we affirmed our 'BB+' corporate credit rating on Whiting, our 'BBB' issue-level and '1' recovery ratings on the company's senior secured debt, and our 'BB-' issue-level and '6' recovery rating on its subordinated notes. The rating outlook remains negative.

Whiting Petroleum announced a registered 35 million share offering, which we estimate could raise net proceeds of about $1.25 billion. The company also announced a proposed $750 million senior unsecured notes offering and a $1 billion convertible notes offering. Whiting plans to us proceeds from all three issues to repay outstanding borrowings under its credit facility.

"Although the proposed transactions will significantly boost near-term liquidity and modestly improve credit ratios, we expect Whiting's leverage will remain high for the rating over the next one to two years as the company outspends our estimate of operating cash flows," said Standard & Poor's credit analyst Stephen Scovotti.

We based our ratings on our assessment of Whiting's "satisfactory" business risk, "significant" financial risk, and "adequate" liquidity.

The negative outlook reflects our view that credit measures will be weak for the rating over the next one to two years, but improve in 2017 as oil prices recover under our price deck assumptions.

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