Galbraith Issues Letter to Board of Whiting Petroleum Corporation (WLL) Recommending Sale of Whiting USA Trust I (WHX) Units

Fri Sep 20, 2013 9:07am EDT

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Galbraith Issues Letter to Board of Whiting Petroleum Corporation (WLL) Recommending Sale of Whiting USA Trust I (WHX) Units

Galbraith Believes Whiting Petroleum Corporation Should Divest its Interests in Overvalued Whiting USA Trust I

PR Newswire

NEW YORK, Sept. 20, 2013 /PRNewswire/ -- Galbraith Global Investment Management, LP ("Galbraith") announced that it has delivered a letter to the Board of Directors (the "Board") of Whiting Petroleum Corporation ("WLL")(NYSE: WLL) that strongly urges the Board to divest WLL's holdings in Whiting USA Trust I ("WHX")(NYSE: WHX).

In the letter, Galbraith reiterates its belief that WHX is grossly overvalued at a current market price near $5.00 per unit and that remaining distributions to WHX unit holders will likely be less than $3.00 per unit.

The full text of the letter follows:

September 19, 2013                

Board of Directors
Whiting Petroleum Corporation
1700 Broadway, Suite 2300
Denver, Colorado 80290-2300

Dear Sirs,

We write as concerned shareholders to warn you of a significant downside risk associated with Whiting Petroleum Corporation's ("WLL") holdings in Whiting USA Trust I ("WHX" or the "Trust").  As of the date hereof, WLL holds 2,186,389 units of WHX, which equates to 15.77% of WHX's outstanding units and nearly $11 million in market value. As we have previously and publicly disclosed1, we believe that WHX's current unit price remains divorced from the inherent value of the Trust. As the Board of Directors of WLL, we believe that you must divest WLL's interest in WHX and protect the significant value that we and fellow shareholders are at risk of losing as a result of WLL's investment in the Trust.

By virtue of the fact that WHX is a royalty trust created by WLL, we believe that you, more than anyone, should be aware of how drastically the market is overvaluing WHX's future distributions. We believe that the value of WHX's remaining distributions to unit holders is likely to be less than $3.00 per unit. As of the date hereof, WHX is trading close to $5.00 per unit, which is an astonishing 67% premium over what we believe is the Trust's real value. We strongly urge you to liquidate your holdings in WHX and honor your fiduciary duties to your shareholders by protecting the over $4 million in value that shareholders stand to lose as a result of WLL's position in the Trust.

You have had many opportunities to protect your shareholders' investment in WHX and could have saved your shareholders more than $20 million had you divested your holdings in WHX at an earlier date. Although the $4 million in value that is currently at stake is a far cry from the $20 million in value that should have been protected, you must act now before WLL's investment in WHX erodes further.

We believe that divesting WLL's position in WHX is not only in line with your fiduciary duties, but will also enable WLL to dedicate its capital more prudently, such as by investing in wells in the Red River region, where the value of this savings could result in revenues of over $28 million.2

We welcome the opportunity to discuss our beliefs about WHX's real value. We urge you to act promptly if you wish to protect your shareholders' investment in the Trust.

Sincerely,

Galbraith Global Investment Management, LP

Forward Looking Statements

This press release contains "forward-looking statements."  Generally, the words "anticipate," "believe," "estimate," "expect," "intend," "may," "predict," "project," "plan," and similar expressions identify forward-looking statements.  These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to differ materially from any future results, performance, or achievements expressed or implied by such forward-looking statement.  Consequently, no reliance should be placed on any forward-looking statements contained herein and the reader should consider any such forward-looking statements only as Galbraith's current beliefs as of the date of this press release.  Even if these beliefs change because of future events or circumstances, Galbraith declines any obligation to publicly update or revise any such forward-looking statements.


1 See Press Releases issued by Galbraith Global Investment Management, LP on April 30, 2013 (available here: http://ow.ly/oZfSH) and May 29, 2013 (available here: http://ow.ly/oZfYl).

2 Based on well cost of $3-3.5 million and output of 200-300 MMBOE (numbers taken from WLL presentation, p.23, dated 9/11/13),  and BOE price of $76.69 derived from current 8-K filed on 9/9/13.

SOURCE Galbraith Global Investment Management, LP

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