Whiting Becomes Biggest Bakken Shale Player With Buyout of Kodiak

Energy

Published: July 14, 2014 7:30 am

Last Updated: July 14, 2014 7:57 am

Savings and scale appear to be the primary reasons behind the impending merger of Kodiak Oil & Gas Corp. (NYSE: KOG) and Whiting Petroleum Corp. (NYSE: WLL). The two exploration and production companies announced Sunday that Whiting will acquire Kodiak for $3.8 billion in stock and assume $2.2 billion of Kodiak’s debt.

The companies have competed for many years, but both are based in Denver, with headquarter “across the street” from each other. They each have a strong presence in the Bakken and Three Forks formations, and combined they will be the biggest producer in the region, producing more than 107,000 barrels of oil equivalent per day. “That was the real reason we came together,” said Whiting CEO James J. Volker.

The combined company will overtake Continental Resources Inc. (NYSE: CLR) as the preeminent player in the oil-rich shale region of North Dakota. Continental produces about 97,500 barrels of oil equivalent a day in the region.

Next year, the companies expect to produce 152,000 barrels of oil equivalent per day, and the merger should increase earnings per share starting in 2015.

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Whiting and Kodiak also hope to take advantage of cost savings through technological expertise, complementary drilling areas and better access to capital, as well as by combining their workforces. “The savings can be a billion dollars to us over time, most of that over the next five years,” Volker said.

Kodiak shareholders will receive 0.177 of a share of Whiting stock for each share of Kodiak common stock they own. The value is about 5% above the average price over the past 60 trading days. When the transaction is completed, Whiting shareholders will own approximately 71% of the company, while Kodiak shareholders will hold around 29%. The deal is expected to close in the fourth quarter.

Whiting shares were inactive in premarket trading Monday, after closing at $78.54 Friday, in a 52-week range of $48.05 to $82.35. Kodiak shares were up about 1.2% to $14.40, and they have traded in a range of $8.34 to $14.89 over the past year.

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