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Text: This is Brandon Day, Whiting's investor relations Manager.
Also available to answer questions during the Q&A session will be our CFO, Jimmy Henderson; COO, Chip Rimer; and VP Commercial, Jo Ann Stockton.
Those include risks relating to commodity prices, competition, technology, environmental and regulatory compliance, midstream availability and others described in our filings with the Securities and Exchange Commission, which are incorporated by reference.
I believe you have all thoroughly read and enjoyed our 10-Q we filed last evening as well as our news release and reconciliations to non-GAAP measures and you can refer to them for detailed information.
Over the past year, the macroenvironment has changed dramatically.
However, we have remained disciplined in our approach and continue to execute on our plan.
We find ourselves in an enviable financial position, whereby we expect to have no debt and be cash positive before the end of 2021.
We're working through the 2022 capital plans now and I'll give some high-level thoughts after briefly discussing some of the quarterly financial numbers.
Starting with our financial results for the third quarter of 2021, we had net income, on a GAAP basis, of $198 million or $5 per diluted share during the quarter as compared to a loss of $61 million or $1.57 per share for the previous quarter.
Adjusting for certain items, primarily the mark-to-market of hedging instruments and the gain on sale properties in the previously announced divestiture, we had adjusted net income of $142 million or $3.57 per diluted share as compared to $118 million or $3.01 per share for the previous quarter.
Adjusted EBITDAX was $201 million compared to $176 million in the previous quarter, primarily due to better commodity prices.
Our company's production on a barrels of oil equivalent remained relatively flat quarter over quarter, averaging 92,100 boe compared to second quarter production of 92,600 boe.
Oil production for the third quarter averaged 51,800 barrels of oil, which was down from the second quarter of 53.4 million barrels of oil -- 53,400 barrels of oil.
Most of the wells turned in line during the quarter were in our Sanish field, which typically come on with lower initial production rates, but experienced a shallow overall decline, particularly in the first year.
Additionally, some of our third-party midstream providers have continued to increase ethane recoveries as illustrated by our NGL yield for the quarter.
Oil differentials have continued to narrow given an overall basin production level that remains significantly behind total takeaway capacity of which increased during the quarter as expansion capacity was placed into service.
On an activity basis, our oil differential was similar to what we realized in the second quarter.
However, revisions primarily from third-party providers recognized in the third quarter resulted in a wider differential reflected in our financials.
We expect our full year oil differentials to land within the low end of our stated guidance.
Additionally, with the majority of our G&P agreements structured on a fixed fee, we've seen a more pronounced benefit to our net realized price from the increase in both residue gas and purity product benchmark prices.
The company invested capex of $67 million during the third quarter to bring 17 gross 9.1 net wells on to production and we drilled 10 gross 5.6 net operated wells.
We ended the quarter with 25 gross 14.3 net drilled uncompleted wells.
The company currently has a rig running in the Sanish Field and a second rig in our Cassandra area, that commenced drilling operations at the end of September.
We have just released a completion crew this week and we expect them to return in mid-December.
Lease operating expenses were $57 million or $6.68 per boe for the third quarter of 2021.
LOE benefited from less operating expense workovers during the quarter.
General and administrative expenses of $12 million or $1.41 per boe was similar quarter over quarter.
In September, we completed the previously announced acquisition of assets in North Dakota and divested our Redtail assets located in Colorado.
The assets in the Williston Basin overlap our Sanish field and expand our inventory by over 60 gross locations.
The acquisition also included five drilled uncompleted wells.
The acquired assets will allow us to maximize lateral length across several DSUs, allow us to develop stranded resources and eliminate costs for frac protect as acreage is developed.
We plan to issue our 2020 sustainability report later this quarter.
I'm pleased with the progress the company has made and how we continue to improve on the goals we've set for the safety of our employees, the environmental controls for our operations and the ongoing governance improvements.
Gas capture remains to be an area of focus for the company and we continue to make improvements in that area.
I would now like to spend a little time thinking about 2022.
We expect the company's reinvestment rate in 2022 to be similar to what we saw here in 2021 where we will have invested roughly 35% of our EBITDA.
Let me highlight a few items that we think will impact our 2022 outlook.
First, we are budgeting for some additional activity in '22, both from an operating standpoint, as shown from our second drilling rig that we brought in during September, but also non-operated properties and we've seen our peers increase activity during the year.
2021 has been somewhat of an anomaly for us and that the company shut down operations during its restructuring in '20 and therefore, '21 has been a rebuilding year.
Our corporate decline rate increased during '21 as we brought on new wells and therefore, we will need some additional activity level to replace that production.
Second, we do believe we will be dealing with some inflationary costs and we are estimating this to be in a range of high single-digit to low double-digit percentages.
To address price inflation, the team has been aggressively securing contracts and lining up equipment through the first half of '22.
We are hoping to see some relief with supply chain issues and perhaps some rollover with steel prices in the back half of '22.
And finally, we have some infrastructure to build out next year, particularly in the Sanish field for new well connections and to alleviate flaring and/or curtailment of production.
Some of these costs were deferred in '21 due to the lower commodity price environment at the beginning of the year.
Most importantly, the company is in a desirable financial position as we exit 2021 and move into 2022.
Many of the derivatives that were linked to much lower prices rolled off during 2021 and we now have a much more attractive hedge portfolio and commodity prices continue to benefit the bottom line, increasing our free cash flow.
With the free cash flow we expect to generate from operations, we will continue to pursue acquisitions which enhance Whiting's competitive position in the Williston Basin including bolt-on opportunities that create synergies with Whiting's existing asset base.
While we continue to believe that we will have attractive opportunities to create value through investments in our operations, Management and the board also understands important to returning capital to shareholders.
Now that we have the company in a solid financial position, we expect to initiate a return of capital to shareholders in some form commencing in the first quarter of 2022 at a level that is competitive with our peers.

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q3 adjusted non-gaap earnings per share $3.57.
expects to continue to fund its operations fully within operating cash flow.
forecasts to be in a positive net cash position with no outstanding balance on its credit facility by end of 2021.

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