April 1 is known as April Fool’s Day, but there’s no fooling around here as Whiting Petroleum (NYSE:WLL) officially commenced Chapter 11 proceedings on that day this year. A sensible outlook would assume that WLL stock should go straight down after bankruptcy filing. Right?
Well, that’s not how it turned out in this upside-down world. Along with Hertz (NYSE:HTZ) and J.C. Penney (OTCMKTS:JCPNQ), former shale-oil leader Whiting Petroleum represented what I have termed the “bankruptcy trade.”
Clearly, this isn’t the market that your parents and grandparents used to invest in. Nowadays, overzealous retail traders are known to bid up the prices of stocks after the companies have declared bankruptcy. Indeed, the Whiting stock price has had two major share-price spikes after Whiting Petroleum filed for Chapter 11 protections.
Perhaps you’d like to catch one of those price spikes, and if so, then I’d say it’s not advisable to bet your hard-earned capital on this. Whiting Petroleum won’t likely beat the odds, and neither will you if you invest in this company.
A Closer Look at WLL Stock
Looking back through the history of Whiting stock is worthwhile as it reveals something important. Namely, the stock was already tanking before Whiting Petroleum filed for Chapter 11.
What this means is that the company and its investors were already struggling prior to 2020. It’s heartbreaking to consider that the Whiting stock price resided above $300 during the summer of 2014. A year later, the share price would plummet to the $17 level.
The carnage didn’t stop there, either. At the beginning of this year, Whiting stock traded at $7 and change. Then came Covid-19 and the breathtaking price drop in oil during 2020’s first half.
Yet, even after the Chapter 11 filing, there were two significant share-price pops. The first one was from 34 cents to $1.68 in mid-April, which the other melt-up was from 85 cents to $3.48 in early June.
Only extremely nimble traders, it turns out, were really able to capitalize on those price moves. By Aug. 28, the WLL share price had returned to 84 cents.
Playing the Corporate Shuffle
Could a shakeup at the executive level bring some fresh hope to current and prospective Whiting stock holders? Sometimes new leadership can be the spark that catalyzes much-needed changes at a struggling company.
Thus, some Whiting stock traders might applaud the departure of CEO Bradley J. Holly and the imminent installation of Lynn Peterson to that position at Whiting Petroleum.
The changeover is slated to occur on Sept. 1. Incoming Whiting Petroleum Chairman Kevin McCarthy makes it sound as if Peterson is the oil-patch messiah:
“We believe that Lynn brings strong leadership, extensive industry knowledge and unique perspective to Whiting’s business in the Williston and DJ basins… Lynn’s strategic and operating experience will allow us to enhance and capitalize on the Company’s attractive portfolio as we look to create value for our shareholders.”
New Chief, Same Problems
This corporate-level shakeup tactic might have worked for as General Electric (NYSE:GE), but don’t expect it to work for Whiting Petroleum. After all, Whiting doesn’t have the cash flow that General Electric does.
A better comparison would be to Luckin Coffee (OTCMKTS:LKNCY), another company that’s in deep trouble. It’s also similar to Whiting because both companies’ shares were briefly bid up by zealous speculators.
And, both companies have recently replaced at least one individual at the corporate level in a feeble attempt at a turnaround. WLL stock has trailing 12-month earnings per share of -$47.827, and that’s on a stock trading under $1.
In other words, the company’s not earning enough money to justify its share price, low as it is. A rock-bottom stock price doesn’t necessarily make the shares a bargain, and a new CEO doesn’t mean that Whiting Petroleum will be profitable anytime soon.
The Bottom Line
It will be interesting to find out how Peterson leads Whiting Petroleum. This is something that’s meant to be observed from the sidelines, though. As far as WLL stock is concerned, the best policy is to avoid exposure to it as much as possible.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.