Scott Hanold - RBC Capital Markets Wayne Andrews - Raymond James Jeff Robertson - Lehman Brothers Jim Busoni - Northern Webster

Good day, ladies and gentlemen, and welcome to the fourth quarter 2007 Whiting Petroleum Corporation Earnings Call. My name is Heather and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's conference. (Operator Instructions). I would now turn the presentation over to your host for today's conference, Mr. John Kelso, Director of Investor Relations. Please proceed, sir.

Thanks a lot, Heather. Good morning and welcome to Whiting Petroleum Corporation's fourth quarter 2007 earnings conference call. On the call for Whiting this morning is Jim Volker, our President and CEO; Mike Stevens, our CFO; Jim Brown, Senior Vice President; Doug Lang, VP of Acquisitions and Reservoir Engineering; Mark Williams; Vice President of Exploration, Dave Seery, VP of Land; and Bruce DeBoer, Vice President, General Counsel and Secretary. During this call, we'll review our results for the fourth quarter and full year 2007, and then discuss the outlook for 2008. This conference call is being recorded and will be available for replay approximately one hour after its completion. Both the conference call with an accompanying slide presentation and our fourth quarter 2007 earnings release can be found on our website at www.whiting.com. To access the call on the website, please click on the Investor Relations box on the menu and then click on the webcast link. Please be advised that our following remarks, including answers to your questions, include statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated. Those risks include, among others, matters that we have described in our earnings release, as well as in our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31st, 2007, which will be filed today. We disclaim any obligation to update these forward-looking statements. In this call, we use the terms probable and possible reserves, which are unproved reserves that we do not include in our SEC filings. Please refer to the news release or our website slides for more information on probable and possible reserves. During this conference call, we will also make references to discretionary cash flow, which is a non-GAAP financial measure. A reconciliation of this non-GAAP measure to the applicable GAAP measure can be found in our earnings release and on our webcast slides. We will also make references to our pre-tax PV10 which may be considered a non-GAAP financial measures as defined by the SEC and it is derived from the standardized measure of discounted future net cash flows, which is the most directly comparable GAAP financial measure. Pre-tax PV10 is computed on the same basis as the standardized measure of discounted future net cash flow, but without deducting the future income taxes. Pre-tax PV10 is not a substitute for the standardized measure of discounted future net cash flows, and neither of these calculations purports to present the fair value of our oil and natural gas reserves. With that I'll turn the call over Jim Volker.

Thanks John. Good morning and welcome everyone to Whiting Petroleum's fourth quarter 2007 conference call. As you can imagine, we are very pleased with our fourth quarter results and our 2008 plans, which we look forward to discussing with you on this call. We'll also answer any questions you may have following this presentation. This is an exciting time for Whiting and its shareholders as the value of the company grew significantly from yearend 2006 to yearend 2007. As of December 31, 2007, our pre-tax PV10 value totaled $5.86 billion and our standardized measure of discounted future net after-tax cash flows totaled $4 billion. At year end 2006, these values were $3.35 billion and $3.4 billion respectively, so pre-tax PV10 value rose 75%, primarily as a result of yearend over yearend price rises. The year end NYMEX oil price rose from $61.05 in 2006 to $96 per barrel in 2007, and the NYMEX gas price rose from $5.52 per MMBtu to $7.10, so in 2007, and so far in 2008, it’s been good to be oily. At year end 2007, our proved reserves were $250.8 million BOEs, of which 78% was oil. Our proved developed reserves rose to 67% of proved reserves, up from 65% in 2006 and 59% in 2005, thereby continuing the important de-risking of our reserve base. Proved developed producing reserves increased by $10 million BOEs from year end 2006. With only 27% of our 2007 capital budget directed toward adding new reserves, we increased our total reserves to $250.8 million BOEs, from $248.2 million BOEs at year end 2006. During 2007 we produced $14.8 million BOEs, and had $2.9 million BOEs of divestitures. Offsetting this $17.6 million BOEs of production and property sales, $20.2 million BOEs of proved reserves were added. Of this $20.2 million BOEs…

Thanks, Jim. Our net income in the fourth quarter 2007 was $45.8 million, or $1.8 per basic and diluted share, and total revenues of $232.4 million. In the fourth quarter of 2006, net income totaled $28 million, or $0.76 per basic and diluted share, and total revenues of $186.6 million. Discretionary cash flow in the fourth quarter of 2007 totaled $139.9 million, compared to the $83.3 million reported for the same period in 2006. The increase in fourth quarter 2007 net income and discretionary cash flow, compared to the fourth quarter of 2006 was primarily the result of a 48% increase in our realized oil price, which was $74.66 per barrel after adjusting for hedging settlements. For the year ended December 31st 2007, Whiting reported net income of $130.6 million, or $3.31 per basic share and $3.29 per diluted share, and total revenues of $818.7 million. This compares to net income of $156.4 million, or $4.26 per basic share and $4.25 per diluted share, on total revenues of $778.8 million. Discretionary cash flow during 2007 totaled $422.2 million, which is almost equal to the $426.2 generated during last year. Our lease operating expense during the fourth quarter of 2007 was $14.67 per BOE. Although part of our ongoing development plan, a portion of the continuing wellbore work at company's North Ward Estes and Postle CO2 projects must be expensed for the accounting purposes. We expect this type of work to continue through 2008. Our general and administrative expenses of $2.99 per BOE in the fourth quarter of 2008 exceeded our guidance due primarily to higher net revenues and sale proceeds, which caused additional payments due under our Production Participation Plan. The company's fourth quarter DD&A rate per BOE was below previously announced guidance. This was primarily the result of positive reserve adjustments and an increase in the pricing assumptions used in our reserve report, which had the effect of extending the economic life of many of our wells. This created additional economic reserve volumes and a correspondently lower DD&A rate. During the fourth quarter, our company-wide basis differential for crude oil compared to NYMEX was $8.25 per barrel, which compared to $9.65 per barrel in the fourth quarter of 2006 and $7.52 per barrel in the third quarter of 2007. The increase from the third quarter of 2007 was due to increase in differentials in our Rocky Mountain and Permian regions. We expect our oil price differential to continue at approximately $8.00 to $8.50 in 2008. During the fourth quarter, our company-wide basis differential for natural gas compared to NYMEX was $0.60 per Mcf, which is lower than our third quarter differential of $1.10 per Mcf. The smaller differential was the result of narrowing price differentials for all of our regions. We expect our gas price differential to remain at $0.50 to $0.70 in 2008. I will turn the call back over to Jim Volker for some additional comments on our operational activity.

Thanks, Mike, and I'd now like to address our production guidance. The 54.6 million BOE midpoint of our 2008 guidance would be a 6% increase over 2007. With all of our drilling activity scheduled for 2008, we will of course revisit this estimate quarterly and be prepared to makes changes reflective of our results. I'd now like to review the slides on our webcast, which will provide some more color and detail on our primary operating areas. First, I'd like to call your attention to the forward-looking statement disclosure reserve information and non-GAAP measures page; page one. Please give that special attention, especially the risk factors seen in the companies Form-10K for the year ended December 31, 2007. On the second page you can see that our market cap is currently $2.5 billion, long-term debt down as a result of our capital raised to $868 million, fully diluted shares rounds to 42.5 million shares outstanding. And our debt to total cap is under our target of 46.8%, we're very pleased with that. As well as our 40, I am sorry, 36.8%, as well as the increase in our reserves to 250.8 million BOEs, 78% of which is oil giving us an RP ratio based on our current production of 40,300 barrels per day of 17.1 years. Moving to page 3, as you can see the PV10 pre-tax of our 250.8 million BOEs of reserves has grown significantly as a result of price increases from last year. Again it's up 75% to $5.858 billion. This page 4, is somewhat of a change from what we've been showing before. Certainly Whiting continues to have a diversified long life reserve base and we have been a disciplined acquirer with the, I think, strong record of accretive and low cost acquisitions including the Postle…

Thank you, Jim. I'll just mention what our CapEx budget is for the rest of this year or for the full year. Essentially we have a fairly even distribution of capital spending through the year with 24% in the first quarter, 28% in the second quarter, 25% in the third quarter and 23% in the fourth quarter. What's really happening there is, as we wind down our investment capital at North Ward Estes primarily, this slack is being taken up by increasing capital in our Robinson Lake and partial development projects of the North Dakota. If you look at it by region, 4% of our capital is directed towards the projects in the Gulf Coast, 15% is directed towards the projects in the Mid-Continent including the Postle field., 62% of our capital is going up to the Rockies, of that I'll just say that 260 million is directed towards Bakken drilling of our total of 640%, that represents 41% of our capital drilling in the Bakken. And then finally, in the Permian, 19% of our capital budget is going to be directed mostly towards development in North Ward Estes field. In terms of the number of wells, the Gulf Coast has 10 wells, the Mid-Continent will have 50 wells and of those 50, 37 are in the Postle field. The Rockies will have a 170 wells drilled, these are gross numbers, 170 wells drilled this year of which 102 will be Bakken wells this is what we are estimating right now and then in the Permian, we are projecting 36 total wells.

Great, thanks Mark. Moving on to page 12, our 2007 versus 2008 exploration and development expenditures by core area again shows a big increase in the amount of money as Mark has just described going into the Rockies as it will increase from 35% to 62% of our total budget. We'll be going to page 13, as you can tell our debt to total cap was 36.8%. Moving to page 14, we continue to have strong EBITDA margins thanks to increasing oil prices, where we're now netting $31.29 out of each BOE after lease operating expenses, production taxes, G&A and exploration expense. Here is a new slide for you on page 15. Thanks to Dave Seery, for working this up for us. This shows Whiting's gross and net acreage by core area and total in the lower right hand corner. You can see our company gross acres 1.750 million, net acres 883,000 net acres and the big portion of both the gross and net, there in the Rocky's that is 1.1 million gross and 517,000 net acres. Moving to page 16, we break it out for you here between developed and undeveloped acres, and of course if you look at the lower right hand corner, the company totals here 45% of our net acres are undeveloped, that's the 401,571, of net undeveloped acres and the big portion of that undeveloped portion is in the Rockies as you can tell, 308,949 net undeveloped acres in the Rockies. We'll be testing some of those new acreage positions in 2008. Slide 17, summarizes for you the activity that is going on for us in the Bakken exploration area, we estimate the EURs here of between 400,000 and 900,000 barrels of oil per well, that’s BOEs per well. As you can tell, we brought…

(Operator Instructions) Your first question comes from line of Scott Hanold from RBC Capital Markets. Please proceed sir.

Thanks, good morning guys.

Hi, Scott.

Good quarter. I had a couple of questions particularly on the Williston Basin and the Sanish and Parshall field. I guess you indicated in some of your final comments that talked about exploration potential in those fields is that referring to the sands below the lower Bakken interval?

No, we're just talking about the Bakken there.

Okay. Can you say anything about the sands that are below it? Are you guys looking at that right now or have you tested that much?

We're along with other operators testing all perspective reservoir intervals including what's called the Sanish sand beneath the Bakken. The designation of Sanish field really refers to that's the name it was given to this field by the [NDAC], which is not specifically refer to that reservoir interval, we're producing it from the middle Bakken, but we're looking at all other perspective intervals.

Okay, okay. And is there any color you can lend us as far as what you found so far is it some we could expect here on the coming quarters?

Well, as we learn more, you can expect to find we'll certainly disclose it. But right now all of our production is from middle Bakken.

Okay, got it. And you also indicated that you've the 3D survey issue that you're looking at covered some of the area. What kind of things did you see in that 3D issue that you can kind of talk about it lends you to drill certain locations before others has it is shown through the areas sort of in the eastern edge of your fields a bit more highly fractured or can you just kind of give us a sense of what you saw there?

I can just say that we've 3D seismic over all of our acreage, as to our partners out here essentially everything that's on the map and is covered with 3D .And we use it in multiple different ways to help us to refine our drilling. But we're really trying to integrate that with all of the results from the drilling to optimize the locations that we're going through first. You know, really, it's a very integrated project and so there is a lot of different information we're getting out of that. But there is not one specific thing that I can point to that's says that -- that we're using indifference to anything else that helps us to prioritize our locations.

Okay. And obviously you're moving a little bit more to those single lateral wells. Does that -- I mean, with the sense of if you look at your inventory, I think you've indicated of a 170 wells and you map those out. How -- would there still be a handful of tri-lateral wells or do you think the single laterals will work off across the vast majority of your position?

The single laterals are the way -- we've done a lot of work here recently with this Locken and Liffrig wells and we've really, we believe strongly now that's the key to success. We can frac all of those, all of the length of Locken and Liffrig wells, whereas with the tri-lateral design, we're really aren't unable to do one leg. The cost is significantly lower and I think the results speak for themselves. So, we're sticking with the single lateral design.

Okay, got it. And one last question. Jim, you sort of indicated, I guess that you would have rather not been hedged with some of those who have positioned you had to put in place because of the acquisitions. Can you kind of speak of what your thoughts going forward, obviously oil at $100, is this something that you would rather leave open at this point of time or considering where commodities are, would you opportunistically lock-in some hedges on some of your later '08, '09 quarters?

We'd rather be open and unhedged especially with our debt below 40% debt to total cap and Sherwin Artus, who preceded me here as President says he likes to drive down once a week and smack me on the back of the head for having these hedges on. So, all I can say is, I think the direction of myself and our Board is to have fewer hedges as long as our debt's down.

Fair enough, thanks a lot guys.

Thanks.

Your next question comes from the line of Wayne Andrews with Raymond James. Please proceed sir.

Good morning gentlemen, congratulations on a nice year end. I've a couple of questions just sort of regarding what's -- and may be I'm not sure how much detail you'll be able to give us, what's booked as far as number of locations in your current Bakken wells for the future versus how many wells you're drilling? And then, I've a couple of follow-ups. But first if you could discuss; you haven't drilled many wells there yet, but how many did you book at year end and when might we see some nice reserve additions through your drilling program this year?

Hey, Wayne, this is Doug. At year end, you're right; we're just starting our Sanish development project there. We only had five wells that were PDP. And actually that's high and we only booked seven PUDs.

Yeah.

That's reflective of a couple of things I guess, one is just the vicinity of the wells to each other that's a limiting factor. And also we just want to be careful, as we go forward in our bookings, so we've been fairly conservative. We only have seven PUDs that would leave another 163 wells that are in our probable and possible categories.

Right.

Essentially those shown on the map there that's kind of to fully develop our program. But those right now are in the probable and possible category. So, a lot of those will definitely be moving in as we drill more wells.

Great. As we're waiting for the gas plant to be in place are there any oil sales that are held up waiting on that plant?

No. We're permitted to [vent] the gas up there, but we're hustling to get that gas plant in obviously and also to strip the liquids.

Very good. One last question with a large portion of your entire reserve base now both in Postle and North Ward Estes on a growth trend and the program that you've planed for the Bakken, it seems like you're being pretty conservative on your estimates for volume growth during the course of the year, any comments on that?

Yes. We're being somewhat conservative I think. Keep in mind that what we’re doing here however is ramping up in the Bakken. We expect to be at five rigs in April, six rigs in June, seven rigs probably by September, eight rigs in November and nine rigs in December. So, we're going to watch our results here and if they continue to merit development-wide we will continue to press the accelerator down and accelerate our drilling phase. If, however things would go the other way, why will we pull back? I think group of us here in this room would tell you that we think it's all good. By that I mean everything we have there in the Bakken, we think will be productive. We don't know whether it will all be as good as where we have been drilling right now as we move to the West and the North and the South. However, I would say in our recent results of our wells and I'm not going to make announcements for other people here, but there's all sorts of data coming out, both publicly filed data at the NDAC and then the normal rumor mails and blogs that you can hear about. And in general everything that we have heard is positive, so we feel that at least within this roughly 120,000 acre, acreage position that we have, it will all be productive. It may be productive to vary in degrees, but we think the well design we have come up with will allow us to tap the potential of the four corners of our acreage position.

Excellent. Well, we are looking forward for additional good results there. I've one last question also on just booking procedures in North Ward Estes and Postle, what do you need to see and what are you waiting for before we see additional reserve bookings in those fields for the probables and possibles that you have mentioned?

Generally, what you've got to see, we've got a curve that the independent engineers have come up with. And, so you need to see in my opinion as I said earlier, you may not have caught it, but I said I think, it probably be around 30 to 36 months before we have enough production in order to say whether we are over that estimated proved that combines the various proved categories, to see if we can then start adding some of the probables and possibles. And I'll let Doug comment on that, but in general, I think its going to be somewhere out there around 30 months or so.

Wayne, it's graphically represented I guess in that slide 31 and its not strict engineering that we put that, the Michigan's curved along with our reserves and so forth, but essentially, we have to see how the process works in the North Ward Estes -- we had some history from the project that they had on six sections back in the late 80s, early 90s, but really we need to get our project implemented and do it the way we want to do it, which is as kind of accelerated, use more CO2 upfront. But essentially we have to kind of see how the production response to the CO2 injection and how efficient the process is, how fast did the reservoir takes in the CO2 and how fast it processes it and what kind of oil response you get. So you got to kind of walk up that curve as shown on slide 31 and essentially show that you are going to be on -- you see that blue curve, you have to show that well -- no, we are going to get better efficiency and we are going to get more recovery and then we are on that kind of light green curve or maybe possibly on the green curve. So, it's going to take some time to demonstrate that and actually we'll be doing that kind of analysis on a section-by-section basis. So, some of the parts of the field maybe -- may process more efficiently and get better recovery than others. So, it will be a section-by-section look and as we demonstrate that we are on a different curve and we can start to move some of that probably into proved, but it's just going to take some time and some history to demonstrate that.

Very good. We'll be looking forward to those results as well. Thanks for your time.

Thanks, Wayne. In answer to Wayne's final question I would like to say that, nothing that we have seen so far is negative about that and frankly, we wouldn't talking about it, if the results to-date hadn't given us optimism about those probable and possible reserves. And that's solely based upon the initial response we have seen in the start-up area. It seems to be processing the CO2, the whole thing seems to be processing pretty fast. So, we are getting what we think are excellent responses in that area.

Thanks.

(Operator Instructions). And your next question is from the line of Jeff Robertson with Lehman Brothers. Please proceed Sir.

Thanks, Jim. I guess this is partially answered by the previous question. But on the probable and possibles, are those concentrated in any one of the phases that you all have planned or is it just a spread from increased recovery off of all of them?

It will be increased recovery essentially on all areas. And again it's just relative to what kind of percent of oil in place we will recover as we move from the kind of 5% average over the core area that were flooding up to potentially 12%, at the top end with all the proved probable and possible. So, it's throughout all the areas.

Okay. I want to follow-up on the expected production growth for 2012 and '14 at North Ward Estes. Does that include a contribution from the probable and possible or is that just converting the PUDs and bringing them into proved?

That just proved.

Okay. Thank you.

Thank you, Jeff.

And your next question is from the line of [Jim Busoni with Northern Webster]. Please proceed, sir.

Good morning folks. Just a quick question, could you just give an update and status of where you are on the MLP and also in the filing that you did, in your recent TV [tenders], just put out now, are the proved reserves are they excluded from the properties that are identified in the MLP?

Well, all I can say as we've -- you seen the initial filing, we're in the process of the responding to the SEC's comment latter and just stay tuned you'll see, when and whether in fact we file our response, which would be amendment number one and we are working on that. And then, the reserves that we have just disclosed the $250 million BOEs include reserves that would be in this trust, it's not an MLP, it's a trust that we would sell.

Okay. I apologize for misidentifying that. Thank you.

You're welcome.

(Operator Instructions) As there are no further questions. I'd like to turn the call back over to Jim Volker for closing remarks.

Great. Thank you very much, Heather. In closing, I'd very much like to underscore the excitement, all of us waiting are feeling about executing on our drilling and CO2 projects in 2008. We believe 2008, maybe a breakout year for organic production and reserve growth. I'd also like to mention, several events that Whiting will be participating in over the next several weeks that may allow us the opportunity to meet personally with you. We'll be presenting at the Raymond James 29th Annual Institutional Investor's Conference at the Hyatt Regency in Orlando, Florida on March 3rd at 2:15 PM Eastern Time. We'll also present at the IPAA, Oil and Gas Investment Symposium at the Sheraton, New York Hotel & Towers on Wednesday, April 9th, at 11:20 AM, Eastern Time. Both of these presentations will be available on the Internet and on our website. And we look forward to seeing you at those events. In closing, I'd like to thank all of you on this call for your new or continuing interest in Whiting Petroleum Corporation. And I want to express my personal thanks to all Whiting employees and our Directors for their contributions to Whiting's success in 2007 and our plans for significant growth in 2008. Again, all the best and we look forward to seeing and speaking with you soon.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.