Whiting USA Trust II
For more information regarding Whiting USA Trust II
The Bank of New York Mellon Trust Company, N.A., as Trustee
Mary Jo Davis
919 Congress Avenue
Austin, TX 78701
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Whiting USA Trust II was formed in December 2011 by Whiting Petroleum Corporation to own a term net profits interest in certain long-lived, predominantly producing properties located primarily in the Rocky Mountain, Permian Basin, Gulf Coast and Mid-Continent regions of the United States. The net profits interest will entitle the trust to receive 90% of the net proceeds from Whiting’s interests in the underlying properties. The trust will make quarterly cash distributions of substantially all of its quarterly cash receipts of net proceeds attributable to the trust, after deduction of fees and expenses for administration of the trust, to holders of its trust units during the term of the net profits interest.
The net profits interest will terminate on the later to occur of (1) December 31, 2021, or (2) the time when 11.79 million barrels of oil equivalent (MMBOE) have been produced from the underlying properties and sold (which is the equivalent of 10.61 MMBOE in respect to the trust’s 90% net profits interest). As of December 31, 2011, the total estimated proved reserves attributable to the underlying properties were 18.28 MMBOE. The net profits interest would entitle the trust to receive net proceeds from the sale of production of an estimated 10.61 MMBOE of proved reserves during the term of the net profits interest, calculated as 90% of the proved reserves attributable to the underlying properties expected to be produced during the term of the net profits interest. The exact rate of production attributable to the underlying properties cannot be predicted. However, because the term of the trust continues until the later of December 31, 2021, or the time when the terminal production amount has been produced and sold, trust unitholders will have the right to participate in additional proceeds attributable to the underlying properties in excess of 10.61 MMBOE in the event such amount is produced and sold prior to December 31, 2021.
The underlying properties include interests in 1,300 gross (390.3 net) producing wells located in 49 predominantly mature fields with established production profiles in 10 states. As of December 31, 2011, approximately 96.4% of estimated proved reserves attributable to the underlying properties during the estimated term of the net profits interest were classified as proved developed producing reserves, 2.3% were classified as proved developed non-producing reserves and 1.3% were classified as proved undeveloped reserves. The proved reserves associated with the 90% net profits interest were comprised of approximately 78% oil and natural gas liquids and 22% natural gas.
Based on the reserve report, production attributable to the underlying properties is expected to decline at an average year-over-year rate of approximately 8.4% between 2012 and 2021, assuming no additional development drilling or other development expenditures are made on the underlying properties after 2014. Whiting operates approximately 59% of the estimated proved reserve volumes of these properties.
Whiting has entered into hedge contracts, which are structured as costless collar arrangements, to hedge approximately 50% of the anticipated oil production from the reserves attributable to the underlying properties through December 31, 2014.
Price (Per Bbl)
|4/1/12 – 12/31/12||429||$80.00||$122.50|
|1/1/13 – 12/31/13||537||$80.00||$122.50|
|1/1/14 – 12/31/14||493||$80.00||$122.50|