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WHITING USA TRUST II (WHZ)

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Whiting USA Trust II

Whiting USA Trust II (WHZ) scheduled a $320 million IPO with a market capitalization of $368 million at a price range mid-point of $20 for Friday, March 23, 2012.


Summary

Whiting USA Trust II was formed by Whiting Petroleum Corporation to own a term net profits interest in certain long-lived, predominantly producing properties located primarily in the Rocky Mountains, Permian Basin, Gulf Coast and Mid-Continent regions of the United States.

The parent Whiting Petroleum (WLL) has a market capitalization of $6.7 billion. You can see the organization chart here. WHZ has an interest in a declining asset. See the chart here.


Because payments to the trust will be generated by depleting assets, and the trust has a finite life with the production from the underlying properties diminishing over time, a portion of each distribution will represent a return of the original investment (and the return amount is not clearly specified in the S-1).

Based on the reserve report, production attributable to the underlying properties is expected to decline at an average year-over-year rate of approximately 8.4% between 2012 and 2021. Furthermore, the trust is precluded from acquiring other oil and natural gas properties or net profits interests to replace the depleting assets and production.

Also from the S-1, "Based on the reserve report, the total estimated proved reserves attributable to the net profits interest had a pre-tax PV10% value of $323.6 million as of December 31, 2011," but the proposed market capitalization of WHZ is $368 million.

However, because the term of the trust continues until the later of December 31, 2021, or the time when the terminal production amount has been produced and sold, trust unitholders will have the right to participate in additional proceeds attributable to the underlying properties in excess of 10.61 MMBOE in the event such amount is produced and sold prior to December 31, 2021. [S-1]


The initial projected return for 2012 is $4.02 per unit, or 20% payout in the first year. However, part of the payout is return of capital, and that amount is not clearly specified in the filing.

Whiting USA Trust II was formed in December 2011 by Whiting Petroleum Corporation to own a term net profits interest in certain long-lived, predominantly producing properties located primarily in the Rocky Mountains, Permian Basin, Gulf Coast and Mid-Continent regions of the United States.

The net profits interest will entitle the trust to receive 90% of the net proceeds from Whiting's interests in the underlying properties after the effective date of the conveyance of the net profits interest to the trust.

The trust will make quarterly cash distributions of substantially all of its quarterly cash receipts of net proceeds attributable to the trust, after deduction of fees and expenses for administration of the trust, to holders of its trust units during the term of the net profits interest.

Termination

The net profits interest will terminate on the latter of (1) December 31, 2021, or (2) the time when 11.79 MMBOE have been produced from the underlying properties and sold (which is the equivalent of 10.61 MMBOE in respect of the trust's right to receive 90% of the net proceeds from such reserves, pursuant to the net profits interest), and subject to certain specified exceptions.

As of December 31, 2011, the estimated proved reserves attributable to the underlying properties for the full economic life of the underlying properties, as estimated in the reserve report, were 18.28 MMBOE with a pre-tax PV10% value of $408.5 million. (For an explanation of pre-tax PV10% value and a comparison of pre-tax PV10% value to the standardized measure of oil and gas, please read "- Major producing areas" beginning on page 3 in the S-1.)

Based on the reserve report, the net profits interest would entitle the trust to receive net proceeds from the sale of production of an estimated 10.61 MMBOE of proved reserves during the term of the net profits interest, calculated as 90% of the proved reserves attributable to the underlying properties expected to be produced during the term of the net profits interest.

Based on the report, the total estimated proved reserves attributable to the net profits interest had a pre-tax PV10% value of $323.6 million as of December 31, 2011. The exact rate of production attributable to the underlying properties cannot be predicted.

However, because the term of the trust continues until the later of December 31, 2021, or the time when the terminal production amount has been produced and sold, trust unitholders will have the right to participate in additional proceeds attributable to the underlying properties in excess of 10.61 MMBOE in the event such amount is produced and sold prior to December 31, 2021.

As of December 31, 2011, and assuming its continued ownership of the underlying properties, the total estimated proved reserves attributable to Whiting's remaining interest in the underlying properties at the termination of the net profits interest, as estimated in the reserve report, are expected to be 6.49 MMBOE, or approximately 35.5% of total estimated proved reserves attributable to the underlying properties.

Underlying Properties

The underlying properties include interests in 1,300 gross (390.3 net) producing wells located in 49 predominantly mature fields with established production profiles in 10 states. As of December 31, 2011, approximately 96.4% of estimated proved reserves attributable to the underlying properties during the estimated term of the net profits interest were classified as proved, developed, producing reserves; 2.3% were classified as proved, developed non-producing reserves; and 1.3% were classified as proved, undeveloped reserves.

For the three months ended December 31, 2011, the average daily net production from the underlying properties was approximately 4,988 BOE/d (or 4,489 BOE/d attributable to the net profits interest) and comprised approximately 72% oil, 25% natural gas and 3% natural gas liquids. Based on the reserve report, production attributable to the underlying properties is expected to decline at an average year-over-year rate of approximately 8.4% between 2012 and 2021, assuming no additional development drilling or other development expenditures are made on the underlying properties after 2014.

Whiting operates approximately 59% and 56% of the estimated proved reserve volumes and pre-tax PV10% value, respectively, of these properties, based on the reserve report.

Whiting believes that its retained interest in the underlying properties, which entitles it to 10% of the net proceeds from the sale of production attributable to the underlying properties during the term of the net profits interest and all of the net proceeds thereafter, together with its ownership of trust units, if any, will provide incentive for it to operate (or cause to be operated) the underlying properties in an efficient and cost-effective manner.

In addition, Whiting has agreed to operate the properties for which it is the operator as a reasonably prudent operator in the same manner that it would operate if these properties were not burdened by the net profits interest. Furthermore, for those properties that it is not the operator, Whiting has agreed to use commercially reasonable efforts to cause the operator to operate the property in the same manner; however, Whiting's ability to cause other operators to take certain actions is limited. Whiting has limited control over activities on the underlying properties that Whiting does not operate, which could reduce production from the underlying properties, increase capital expenditures and reduce cash available for distribution to trust unitholders".

Marketing and Sales

Whiting principally sells its oil and natural gas production to end users, marketers and other purchasers that have access to nearby pipeline facilities. In areas where there is no practical access to pipelines, oil is trucked to storage facilities.

During 2009, sales to Chevron USA (CVX), ConocoPhillips (COP), Plains Marketing LP and Marathon Oil (MRO) Corporation accounted for 13%, 13%, 11% and 11%, respectively, of total oil and natural gas sales related to the underlying properties.

During 2010, sales to Plains Marketing LP, Chevron USA, ConocoPhillips and Marathon Oil Corporation accounted for 14%, 13%, 13%, and 11%, respectively, of total oil and natural gas sales related to the underlying properties.

During 2011, sales to Plains Marketing LP, Chevron USA, ConocoPhillips and Marathon Oil Corporation accounted for 16%, 14%, 13% and 11%, respectively, of total oil and gas sales related to the underlying properties.

Whiting believes that the loss of any of the 10% customers does not present a material risk because there is significant competition among purchasers of crude oil and natural gas in the areas of the underlying properties and, if Whiting were to lose any of their largest purchasers, several entities could purchase crude oil and natural gas produced from the underlying properties with little or no interruption.

Selling Trust Unitholder

Prior to the closing of this offering, Whiting Petroleum Corporation's wholly-owned subsidiary, Whiting Oil and Gas Corporation, will convey the net profits interest to the trust in consideration for the issuance by the trust of 18,400,000 units, which will be distributed as a dividend to Whiting Petroleum Corporation. Of those trust units, 16,000,000 are being offered hereby and 2,400,000 will be subject to purchase by the underwriters pursuant to its over-allotment option. Whiting may from time to time sell any trust units it has retained.

Whiting has agreed, however, not to sell any of such trust units for a period of 180 days after the date of this prospectus without the consent of Raymond James & Associates, Inc. and Morgan Stanley & Co. LLC acting as representatives of the several underwriters.

Use of Proceeds

Prior to the closing of this offering, Whiting Petroleum Corporation's wholly owned subsidiary, Whiting Oil and Gas Corporation, will convey the term net profits interest to the trust in consideration for the issuance by the trust of 18,400,000 trust units, which will be distributed as a dividend to Whiting Petroleum Corporation.

Whiting will pay underwriting discounts, the structuring fee and estimated expenses of approximately $23.2 million, assuming the underwriters do not exercise their over-allotment option and an assumed initial public offering price of $20.00 per trust unit, associated with this offering and will receive all net proceeds from the offering.

The estimated net proceeds to Whiting, assuming an initial public offering price of $20.00 per trust unit, will be approximately $296.8 million, and will increase to approximately $341.6 million if the underwriters exercise their over-allotment option in full.

Whiting intends to use the net proceeds from this offering to repay a portion of the debt outstanding under its credit agreement. Borrowings under its credit agreement had a weighted average interest rate of 2.4% as of December 31, 2011, and mature in April 2016.

Affiliates of Raymond James & Associates, Inc.; Morgan Stanley & Co., LLC; J.P. Morgan Securities, LLC; and RBC Capital Markets, LLC are lenders under Whiting Oil and Gas Corporation's bank credit facility, and each will receive its proportionate share of the net proceeds of the offering used to repay a portion of the outstanding balance under the credit facility.



http://phx.corporate-ir.net/phoenix.zhtml?c=147759&p=irol-irhome
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WHZ News: Quarterly Report (10-q) 11/07/2016 05:39:27 PM
WHZ News: Current Report Filing (8-k) 11/04/2016 05:19:38 PM
WHZ News: Quarterly Report (10-q) 08/12/2016 12:41:49 PM
PostSubject
#90   I wonder if when oil goes back up Lucid_NH 02/05/16 02:05:13 PM
#89   Down to .10 in early trading cjmeyer 01/07/16 10:28:27 AM
#88   Off to the pinksheets as WHZT cjmeyer 01/06/16 11:12:47 PM
#87   Whiting USA Trust II (WHZ -8.5%) plunges after reporting Timothy Smith 05/11/15 06:57:05 PM
#86   Did I read that distribution correctly..01? What the Davnet01 05/10/15 05:34:26 PM
#85   Hope it goes up so I can get bobbytx1 05/08/15 12:06:27 AM
#84   I guess I have to buy more but bobbytx1 05/08/15 12:05:46 AM
#83   I'd say this drops to 2.50 to 3.50 range. PICKALITTLE 05/07/15 06:36:06 PM
#82   .012 WTF I'm screwed bobbytx1 05/07/15 04:39:12 PM
#81   I've read anywhere between zero and .15 cent. PICKALITTLE 05/04/15 11:44:14 AM
#80   Don't know about the next 12 months but Flobewan 01/08/15 03:54:45 PM
#79   Does anyone have any ideal what the projected Davnet01 01/08/15 03:45:28 PM
#78   POS cycle MtnManMike 06/18/14 11:20:07 AM
#77   I think I may have found the cause. lesgetrich 06/04/14 09:13:58 PM
#76   Prob because of divy pay Flobewan 06/04/14 07:05:56 PM
#75   Anyone here have any idea why this stock lesgetrich 06/04/14 07:01:18 PM
#74   Hmn... Well my spreadsheet's pretty rudimentary, and the pricing ModerateMan 12/21/13 10:48:11 PM
#73   Some people do a automatic DRIP program reinvesting 10times7 12/19/13 10:34:03 PM
#72   Sorry to bug ya again: ModerateMan 12/18/13 12:35:54 PM
#71   Thanks. I understand the concept of them ending ModerateMan 12/13/13 10:52:24 AM
#70   WHX as a trust ends once the quarters 10times7 12/13/13 10:41:26 AM
#69   I've been tracking WHX but, again, my point ModerateMan 12/13/13 10:37:10 AM
#68   Lovin it! Skiball 10times7 12/13/13 12:37:21 AM
#67   a good example of how a O&G trust 10times7 12/13/13 12:35:55 AM
#66   Question about price stability... ModerateMan 12/11/13 12:41:27 AM
#65   WHX short time n buy this one back bobbytx1 11/15/13 10:49:43 AM
#64   @SKE - Average around $12.50 and may average Timothy Smith 11/11/13 12:05:43 AM
#63   BACK on it's Highs, 10-X .. !! SleighRidin'Larry 11/08/13 01:02:27 PM
#62   Unitholders of record on November 19, 2013 will 10times7 11/08/13 10:12:07 AM
#61   divvy up 25% oh yeah 14.50 here we come bobbytx1 11/08/13 09:07:30 AM
#60   AUSTIN, Texas, Nov 07, 2013 (BUSINESS WIRE) -- SleighRidin'Larry 11/07/13 04:06:23 PM
#59   another .30 tom would be BANK bobbytx1 11/04/13 11:18:35 PM
#58   $WHZ - $$$$$ Timothy Smith 11/04/13 10:13:54 PM
#57   I don't think it will be close to Flobewan 11/04/13 09:10:16 PM
#56   1.095 is what the analysts are saying for 10times7 11/04/13 08:43:13 PM
#55   I think the 9th bobbytx1 11/04/13 03:00:13 PM
#54   Should be hearing about divy pretty soon Flobewan 11/04/13 02:53:53 PM
#53   Look at it go 13.86 20 cents a bobbytx1 11/04/13 02:43:06 PM
#52   14.50 this week $$$$$$ bobbytx1 11/04/13 09:30:27 AM
#51   14.50 this week $$$$$$ bobbytx1 11/04/13 09:30:17 AM
#50   .95 is good! I like that number for 10times7 10/30/13 11:29:12 PM
#49   The kind of dividends I like. Timothy Smith 10/30/13 10:55:44 PM
#48   watch how this trades eow and next week bobbytx1 10/30/13 10:04:01 AM
#47   The next divvy should be above .95 and bobbytx1 10/30/13 10:02:17 AM
#46   Whiting USA Trust II (NYSE: WHZ) has been Timothy Smith 10/30/13 02:41:41 AM
#45   The annualized dividend paid by Whiting USA Trust Timothy Smith 10/30/13 02:40:56 AM
#44   Oct 23 (Reuters) - Whiting Petroleum Corp, which 10times7 10/24/13 12:31:17 AM
#43   The 52 week range is from 12.29 to 10times7 10/17/13 11:22:05 PM
#42   we might get this to 15.00 the way bobbytx1 10/17/13 10:43:36 PM
#41   Only a month to go before the next 10times7 10/15/13 10:22:38 AM
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