Whiting Oil and Gas will lay off 254 employees, including 94 executive and corporate positions, which represents 33 percent of its workforce.
“The decision to reduce headcount is always a difficult one, as it impacts talented colleagues and friends,” Whiting President, Chairman and CEO Brad Holly said during its second quarter earnings call. “However, this action will better align our business unit with the operating environment and drive long-term value.”
Company officials would not tell the Williston Herald how many jobs were lost in the Bakken, but Williston Job ServicesND office manager Paula Hickel estimated that 100 in the New Town-Williston area received layoff notices.
Hickel is working on a program to help the employees navigate obtaining both benefits and new employment.
“More details to come about dates/times for these events (they will be next week), but employees who were laid off are encouraged to come see us at Job Service ND – Williston,” she said in an email to the Williston Herald.
Whiting operates 473,781 net acres in the Bakken, and about 87,000 in Colorado. Its headquarters is in Denver. It has 1,500 operating wells in North Dakota.
In its second quarter earnings call, Whiting cited both constrained infrastructure, unanticipated downtime, and the need to maintain capital discipline and pay down debts as factors in its decision.
The cuts will produce $15 million in savings for 2019, and $50 million on an annualized basis. The cuts will add $2.40 per barrel and another $1.21 cents per share of cash flow, company officials said.
Whiting in 2014 purchased Kodiak Oil & Gas for $3.8 billion, which made it the state’s largest producer at the time. It also purchased 55,000 net acres from Oasis Petroleum last year for $130 million, the Foreman Butte in McKenzie County.
Wells drilled in the Foreman Butte have performed well, Holly said.
“The reduction of old guidance is a function of above-ground constraints,” he said.
North Dakota’s Department of Mineral Resources reported an 81 percent gas capture rate in May, but the target was 88 percent, Holly pointed out.
To stay within that, Whiting officials estimated self-restriction of production totaling about 2,000 barrels per day.
In that region, a gas plant was expected to come online last November but did not make it by then, Department of Mineral Resources Director Lynn Helms said. The plant, Little Missouri 4, is still not fully operational, and won’t be until the Elk Creek NGL line that ONEOK is constructing is completed.
Whiting officials also said during the company’s second quarter earnings call that they lost 1,000 barrels per day due to unexpected downtime. That included spring flooding on the east bank of the Yellowstone, which caused some wells to be shut in temporarily and incurred unanticipated expense.
While success in the newly acquired Foreman Butte was touted during Whiting’s earnings call and will add 100 high-quality drilling locations to Whiting’s inventory, the constraints in that region of McKenzie County will mean further development of the acreage must wait.
The company said it would shift more of its activity to the Sanish, in Mountrail County, where it has more takeaway capacity to help meet year-end guidance.
Whiting last month dropped a rig, and said it will be dropping one hydraulic fracturing crew toward the end of the quarter. It was not clear from the earnings call if the quarter referred to is the second or third. A public relations employee for the company said they would not provide any details beyond those provided in the press release and earnings call.
Whiting officials also said they will finish this year with 10 more than their usual 40 drilled but uncompleted wells.
While 2,000 barrels per day of self-restricted production doesn’t seem like a large amount, Helms pointed out it is still a constraint on growth. That, in general, can hinder a company’s ability to meet its financial targets.
But whether the layoffs herald a trend due to constrained infrastructure in the Bakken is unclear.
“We could (see more layoffs),” he said. “I don’t know with regards to infrastructure constraints, because we are getting so close to all this stuff coming online. But capital is definitely constrained because of lower oil prices.”
Helms said Whiting had told him in earlier conversations that new efficiencies will allow them to reduce its rig and its hydraulic fracturing crews by one each and still drill and complete the same number of wells.
“That would indicate there will be other companies doing some of this,” Helms said.
The midstream, meanwhile, seems to be on schedule as far as a 2020 rollout of nearly a billion cubic feet per day of natural gas processing capacity.
“We have met with three of the major midstream companies, and we have more of those meetings to come this month,” Helms said. “It looks like the midstream projects are on track. If that is the case, we should be out of this constraint problem by the first of the year.”
That will create a window of about two and one-half years with adequate gas processing and NGL takeaway, Helms added.
After that, the state will need about 1.275 billion more cfd — three times what has so far been announced, which totals 425 million cfd. Those newly announced projects include Hess-Tioga, XTO Nesson, and ONEOk’s Bear Creek expansion.
“That’s what we’ll need to really stay ahead of the curve and continue at 91 percent capture with the production growth we anticipate,” Helms said.