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Rating Action:

Moody's upgrades Whiting Petroleum's ratings

21 Sep 2010

Approximately $600 million of rated debt securities affected

New York, September 21, 2010 -- Moody's Investors Service assigned a Ba3 (LGD 5, 78%) rating to Whiting Petroleum Corporation's proposed $350 million senior subordinated notes due 2018. At the same time, Moody's upgraded Whiting's Corporate Family Rating to Ba2 from Ba3, its Probability of Default Rating to Ba2 from Ba3 and its senior subordinated note rating due 2014 to Ba3 (LGD 5, 78%) from B1 (LGD 5, 90%). Moody's also affirmed Whiting's SGL-2 Speculative Grade Liquidity rating. Proceeds from the proposed note issuance will be used to repay debt outstanding under the company's credit agreement, a portion of which was incurred to redeem its $150 million senior subordinate notes due 2012 and $220 million senior subordinated notes due 2013. The rating outlook is stable.

Upgrades:

..Issuer: Whiting Petroleum Corporation

....Probability of Default Rating, Upgraded to Ba2 from Ba3

....Corporate Family Rating, Upgraded to Ba2 from Ba3

....Senior Subordinated Regular Bond/Debenture, Upgraded to Ba3, LGD5, 78% from B1, LGD5, 79%

Assignments:

..Issuer: Whiting Petroleum Corporation

....Senior Subordinated Regular Bond/Debenture, Assigned Ba3 LGD5, 78%

RATINGS RATIONALE

"The ratings upgrade reflects Whiting's strong production growth trends and improving financial leverage metrics," commented Gretchen French, Moody's Assistant Vice President. "While Whiting has a high cost structure and heavy capital spending program, the company has demonstrated a willingness to issue equity and reduce capital spending during periods of weak commodity prices."

After pursuing a strategy of growing its asset base through acquisitions for several years, Whiting has more recently been focused on organic growth, primarily in the Bakken Shale and two CO2 tertiary recovery projects in the Permian and Anadarko basins. The company's production has grown approximately 37% since 2008, and management is targeting production growth of 15-17% in 2010, all of which is expected to be achieved organically. Production growth has been most rapid in the Bakken Shale, where Whiting first began drilling in 2006. Whiting's Bakken production has grown to approximately 42% of the company's production (as of the second quarter of 2010), as compared to less than 10% in 2008.

Whiting's production growth, as well as growth in proved developed (PD) reserves, have benefited the company's financial leverage metrics. Moreover, leverage metrics have declined due to lower debt levels, which have declined from peak levels of approximately $1.3 billion in 2008 to pro forma June 30, 2010 levels of approximately $732 million. Whiting's pro forma debt to PD reserves as of June 30, 2010 was $4.19/Boe and its debt/average daily production was $11,284 for the quarter ending June 30, 2010, as compared to debt/PD reserves of $5.56/Boe and debt/average daily production of $17,468 in 2009 and $7.87 and $26,106 in 2008.

Whiting's Ba2 Corporate Family Rating remains restrained by the company's high cost structure, which has pressured returns during periods of weak commodity prices. In addition, the Bakken Shale and the CO2 projects entail heavy capital needs and in the case of CO2 operations, long lead times.

Given the recent upgrade, an upgrade in the near term is unlikely. Over the longer term positive rating action could be considered if Whiting continues to grow in size and scale while maintaining reasonable reserve replacement costs and low financial leverage.

A downgrade is possible if Whiting were to experience weaker than expected production levels on its Bakken drilling program and CO2 projects, high F&D costs, or materially increased leverage (debt to PD reserves in excess of $6/Boe).

Whiting Petroleum Corporation is headquartered in Denver, Colorado.

The principal methodologies used in rating Whiting Petroleum Corporation were Independent Exploration and Production (E&P) Industry published in December 2008, and Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

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Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
Gretchen French
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Steven Wood
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

Moody's upgrades Whiting Petroleum's ratings
No Related Data.
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