Whiting Petroleum (WLL)'s Gas Plant Partnership Highlights Hidden Midstream Value: Analyst

Brean Murray, Carret & Co. (BMC) remains bullish on shares of Whiting Petroleum Corp. (NYSE:WLL) despite the recent pullback in the energy sector, and the brokerage foresees upcoming catalysts in continued crude oil production growth from the Pronghorn field in the Williston Basin.

"De-risking of the company's Permian Basin properties and overlooked value in the company's midstream assets make us positive," BMC analyst Raymond Deacon wrote in a note.

"We like Whiting's line of sight on incremental de-risking in its liquids-rich Permian prospect during 2012, which we see as a catalyst with up to $5/share of risked NAV upside, as well as more consistent results at Pronghorn, where we think this year's drilling activity could add $3/share to our risked NAV," the analyst said.

The Denver, Colorado-based oil and gas explorer had last month announced a partnership for its Belfield gas plant in Stark County, North Dakota.

Whiting sold a 50 percent interest in its Belfield gas plant, which serves the Pronghorn Field, to Bitter Creek Pipelines a subsidiary of MDU Resources Group (NYSE: MDU) for $66 million in cash up-front and a 60 percent carry-on the remaining capital expenditures associated with the plant, estimated at $80 million.

"Applying the same 7.3x 2013E net income multiple to Whiting's remaining interests in both its Belfield and Robinson Lake gas plants values these assets at $358 million ($3/share) versus no value included in our risked NAV, giving us more confidence in our $67/share target price," the analyst wrote.

Whiting is in the process of completing its first two horizontal Wolfcamp wells on the northern part of the company's Big Tex prospect, which would bracket the play's potential on the entire prospect if successful, Deacon said.

Deacon lowered target price on the stock to $67 from $70 primarily due to a reduction in his mid-cycle oil price to $85/Bbl from $90/Bbl.

The stock rose 2.54 percent to trade at $41.10 on Tuesday. Over the past year, shares have been trading between $28.87 and $64.68. Providing quality reviews, articles and writings on crude oil, energy and gas online.