quick look at Bakken debt

The world of high yield debt has been shaky recently.  This is partly due to the prevalence of low credit quality energy issues, which I believe make up about 15% of the high yield market.  The other factor may be the anticipation of rising interest rates.    I decided to go through some of the Bakken names first, just to be aware of how their credit is trading.  The purpose of this is not a credit analysis, but just a check-up.  What is interesting is that in all cases, the sell-off really started in earnest with the OPEC decision to maintain output.  Most of these companies have some hedges in place, and generally they should be OK when it comes to servicing their debt unless the price of oil falls further, which is certainly a possibility.

Continental Resources-

Formerly the biggest Bakken player prior to the WLL/KOG deal, it is trading 50% lower than where it was this summer.  With about $6b of net debt they are a bit less leveraged, at 1.7x 2014 ebitda estimates, than some of the others like WLL.  They went from about $4.55 b of 2014 capex to 2.7b of projected 2015 capex.  They recently cut their capex outlook for 2015, and notably their Bakken capex went from 2.6b down to 874mm while their drilling in Oklahoma was only curtailed by 20% or so.  This  indicates that their best returns are not in the Bakken, although it might also have to do with holding onto acreage.

This is a benchmark bond for CLR 5% due 2022 callable 2017, with $2b outstanding.

Whiting Petroleum

After the Kodiak acquisition, which closed earlier this month, Whiting is now the largest Bakken company when measuring by production.  Whiting assumed $2.2b of Kodiak debt when they bought the company this December for about $2b.  The transaction was all stock, so the price was substantially lower than what had been initially announced because the shares of WLL were worth far less than when the acquisition was announced earlier this year.  Whiting had about $2.75b of gross long term debt prior to the acquisition, and $4.95b after.  Net debt to ebitda is about 2.5x. The stock is 60% off its summer highs.  WLL has not announced 2015 capex, but certainly we would expect big cuts when they do.

2019 5% notes.

Oasis Petroleum

These guys are now trading at $16 per share, up off the lows of $11, and down from $55 this summer.   With about $2.7b in net debt they are leveraged to about 3x 2014 EBITDA.  Their B+ rating from S&P is vulnerable to put it mildly.   Their 2019 notes have recently traded at 85, for a nominal yield of 11.7%.  They have $400mm due 2019, $400mm due 2021, $1,000mm due 2022, and 400mm due 2023.  I would expect them to get picked up by someone if oil prices stay weak, though I can hardly see CLR or WLL stretching their balance sheets further.  They had been running 16 rigs, but have already started to drop them down to 6 by the end of March and they say they can do 5-10% production growth.

6.875% 2022 notes.

Northern Oil and Gas-

This is a rather shaky company that does not operate any drill rigs, but takes a non-operating stake in other companies drilling.  It was originally the subject of some controversy in the 2009-2010 timeframe because some of the founders had a history of fraud.  Today it has $500mm of bonds due in 2020, with a YTM of 12.5% or so.  Their S&P rating is B-, but given where there bonds are trading you would think further downgrades are in the cards.  The equity is trading at about $6 compared to a 2014 peak of $16.  Net debt of $900mm is about 3x 2014 ebitda.