Think about this: If KOG's cost of production at around $100- per barrel is $40- (See website), what is it $80-? Or $40?
Is it still $40-?
No it isn't!
Because the 18% royalty interest decreases with the price of oil.
At $100- Oil, the $40- cost of production has $18- built into it.
At $50- Oil that 18% royalty interest is $9- instead of $18- and the cost of production is just $31-.
At $75- Oil, it's $35.50 everything else being equal.
The point being that the KOG/WLL combination coupled with the expected economies and advancements in the "spiral fracking" area will soon become apparent to the market. (We'll have to wait until next year to find out about the Red River).
CLR's Hamm gutsy lead of selling all of his forward contracts and going ahead with Billions of future production at spot market prices speaks loudly as to where Harold believes oil prices are headed. (I think he's right!)
Fundamentally this looks very much like a buying opportunity instead of a dead-end stock. After all, every share that has been sold since $16+ was bought by somebody.
In fact if some bought at well above $10-, they should sell it for a loss and immediately buy Whiting back to avoid the "Wash Sale" tax rules that state that one has to wait 30-days to buy a stock back.
After all. KOG is not WLL just yet, but soon will be come next week. (Like having your cake and eating it too!)
Even a blind squirrel finds a nut once in a while, a stopped clock is exactly right twice a day, and Chad's ramblings now has Obama looking like a genius, does it get a richer than that?
Watch out for those squirrels Chad, the next one might recognize you!
Yes, I think following Hamm's lead is a prudent strategy in predicting oil prices over the next year.
Certainly he can afford it now that his divorce settlement is known, and the fact that he owns 70% of Continental, let's him use his "gut instincts" honed over 50-years in the oil business to follow such a "gutsy strategy".
I'll take it!
If this winter turns out to be as cold as it appears right now, oil is going to recover by next spring's driving season. Meanwhile there will be consolidations in the oil patch and this merger will certainly help with that.
With Hamm's divorce in his rear-view mirror, Continental will be on the prowl as well.
And what better time to get a 3D siezmic survey done on the Red River as well? Prices will come down on all oil service company's services.
Peterson & Co decided that the best deal for us was to structure this deal like a merger for tax reasons and for fairness to BOTH entities.
E.g.If Whiting would've offered a premium price of say $20-, and oil prices skyrocketed UP, I can only imagine the cat calls from the peanut gallery.
On the other hand if oil prices would've collapsed down to say $78-, Whiting would've probably written a "bail-out" provision in the contract and the deal would've been off and the peanut gallery would've said Peterson was a Dufus.
I think Peterson and Volker made exactly the right deal at the right time and fair to BOTH sides.
This way, oil prices going either way is a neutral and the lawyers waiting to pounce on any "P" or "Q" will not have a case.
In a few weeks this combination of two complimentary entities will begin to show the market;
1-the efficiencies of this deal.
2-the huge increase in production and and eventually reserve values as oil prices stop dropping and start rebounding back to around $90- bbl.
3-Determination of the size and scope of the Red River Formation underneath the Three Forks.
Don't be so sure about the costs of comparing KOG with WLL drilling operations.
A couple of things, KOG's wells are of a higher pressure nature and require more expense, plus KOG uses ceramics on almost all of their wells because they are in high pressure areas that crush sand.
KOG's acreage is the best for a reason, but drilling cheap wells is not possible. That said, WLL will get better prices for drilling but the figures you're quoting are for two very different kinds of wells.
This merger is for the best for BOTH sides as one has what the other side lacks in all areas. Together the whole is greater than the sum of its parts.
As soon as all of the parts are functioning as a unit it will become apparent to the markets.
Yes, that's right. But every time our free enterprise system shows what it can do, somebody on the left starts screaming about some getting more than others and the unequal distribution of wealth. Has anybody ever had any wealth "distributed" to them? Unless you've inherited it, you probably earned it, so why do we have all of this talk about "giving it back"?
When will we stand-up and start educating our kids as to what economic systems are about and what they do?
Which leads me to this simple example of the different economic models:
Socialism: You have two cows and you give your neighbor one. (Fairness- I?)
Communism: You have two cows, you give them to the government and then the government gives you some milk (Fairness -II?).
Fascism: If have two cows, you keep the cows, give the milk to the government and then the government sells you some milk. (Fairness - III aka Extortion?)
New Dealism: You have two cows, you shoot one, milk the other and pour the milk down the drain.
(Democratic Party leading to socialism, leading to Communism). (Fairness -IV)
Nazism: You have two cows, the government shoots you and keeps the cows. (Absolute power corrupts absolutely!) (The evil twin of Fairness carried to the extreme when everything else fails!)
Capitalism: You have two cows, you sell one and buy a bull. (Unequal "distribution" of wealth earned by "Common Sense") Input equals output IS FAIRNESS!
Whiting, which agreed in July to shell out $3.8 billion for shale explorer Kodiak Oil & Gas Corp. (KOG), has tumbled 31 percent in that period. The Kodiak deal will make Whiting the biggest crude producer in North Dakota's Bakken shale formation and boost Whiting's output by 50 percent next year.
For the best operators, the downturn could prove to be a boon if cash-strapped companies are forced to sell assets, giving them the chance to reinforce their drilling portfolios.
Whiting's Volker, 68, told analysts and investors during an Oct. 30 conference call that falling prices aren't all bad for the industry.
"That particular downturn that we're existing in here -- and I might say that yours truly has lived through six of these in my 40-year career -- and I can tell you that they all provide opportunities as well as pain."
So far, there's no evidence that shale drillers have been discouraged by the price plunge. U.S. crude production has risen for 11 straight weeks, topping 8.9 million barrels a day in the week ended Oct. 24, according to data compiled by Bloomberg.
"This is not a boom here in America," Harold Hamm, the billionaire CEO of Continental Resources Inc said in an interview. "It's a renaissance. It's going to be here for 50 years. It's not something that's going to come and go."
Yes, prove it! I
think the deal was made on percentages because it allowed for changes in oil prices and perceived values for both sides. It would also protect both sides from successful lawsuits filed be either party.
If a fixed price was set, this would be taxed as a "buy-out" whereas a merger is tax-free.
The merger will go through because both sides benefit from it, even though with the drop in oil prices not necessarily equally.
I think the scale has tipped slightly toward KOG because of the differences in debt to equity ratios.
Now that we will have a more friendly business environment in Washington DC, all of this will enjoy better times ahead, the market just hasn't figured out yet by whom or how much.
That all said, where's the PROXY?
Yes, I was wrong:
1-Not to sell at $16-
2-Not to go short at $16.30
3-Not to sell Calls at $15.70
4-Not to buy Puts at $15-
But I was right to buy 50,000 shares of KOG at 17.5 cents in March 2009 which makes all of the difference!
Did any of you girly men do that?
Of course not, you never heard of KOG until a year ago.
Unless oil goes down to $38- again, I should be OK.
And if it does go down that far, I will again be a very big buyer.
Meanwhile I am buying 2016 Calls and waiting for the Republicans to build the pipeline so the Bakken players can use their oil as an additive for the Canadian Tar Sands crude and export it for fun and profit. .
It looks your man got "shellacked" again tonight, so we'll be alright.
Finally a breath of fresh air in the midst of a !@#$% storm of self-serving missiles from the peanut gallery of miscreants masquerading as investors!
Chatter goes UP, anybody know of anybody buying?
Anybody hear of a stock going down WITHOUT anybody BUYING?
What happened to BUY LOW?
Or is it: "I sold yesterday "BEFORE IT DROPPED"!
And tomorrow it will be: "I BOUGHT BACK YESTERDAY BEFORE IT WENT UP!"
Me? I just buy whenever it's cheaper that what it's worth.
So my answer is I will sell after the KOG/WLL combination gets absorbed into a blue chip oil company like Exxon-Mobil, OR IF THE FUNDAMENTALS OF THE COMPANY CHANGES.
That "CHANGE" would probably mean a change in management to one that I had little faith in....., which is not necessarily related to the stock price.
You ask a common question, but my answer will not be what you want to hear.
I don't have target prices as to where I will sell anything, but rather I will make every effort to understand thoroughly the business I'm investing in and then follow as close as I can to what the company is doing and how they do it.
E.g. What attracted me to KOG initially was the extreme drop in oil prices from $144- down to just $38- in 2008. I looked for a small company that had no debt as I understood that small companies get hammered more than big companies in a downturn.
When I looked at KOG, I noticed that they had secured the best part of the field (the anticline) and their management seemed very "experienced" in both the oil business and more particularly in the Bakken area.
There have been a number of times that oil has fluctuated and affected the value of KOG, and every time that's happened the market has over-reacted to those changes and went on a selling rampage assisted no doubt by those that frequent this board hoping to affect the price toward their agenda.
Every time I have taken advantage of their actions by loading-up on what I thought were cheap shares.
Yes, I understand that selling near peaks and buying in the valleys can make you more money IF you can identify with certainty where those peaks and valleys are, but I've considered that little more than gambling.
Which brings us to today.
This merger with another well-run oil company with wider latitudes in financing and more diversification in area, albeit in very "hot" areas, makes much sense to me and I believe magnifies the values of both companies.
We've just gone through a "quiet period" mandated by law on mergers, and now we are approaching a time where the combined entities will (must!) disseminate much information favorable to the case of merging.
Yes, oil prices are still depressed, but at the end of the day whatever KOG/WLL was worth before, they will be worth more after the merger IMO.
I stopped trying to figure why psychotic people make their decisions long ago.
Let's just say that I made a significant "contribution" (a little Al Gore Lingo there) to the latest "stimulus" that our friends in Washington are taking credit for.
In fact I just saw one of those items on the news this morning when I was watching ISIS driving a brand new Navistar truck with guns aboard near Bagdad!
(A little something fully paid for that the "great one" left behind when he bugged out of Iraq!)
I expect my next contribution will be for the Czar that "the great one" has just hired to put the Ebola Bug back in the Proverbial Bottle.
And to think that we have nearly 2 1/2 years more of this Amateur Hour!
I've been busy on other matters for about a week and not checking in here. Now that I have returned, what kind of garbage do I find?
1-The merger is never going to happen!
2-Lower oil prices are going to cause KOG to default on their debt!
3-Oil will never recover and settle down to $50-60 per barrel or even lower.
4-Or my favorite admonition: "If you idiots would've just listened to me, you would've sold when I did and made a fortune!"
Now for a little fresh air:
1-Lower oil prices have had little affect on KOG's bottom line so far because 3/4 of KOG's expected 2014 production has been contracted for $95- through the end of the year. (Wells Fargo Futures Unit is taking it in the shorts.
2-KOG's cost of production per barrel is only $40-.
3-All of KOG's Halliburton Drilling units are on a 2-year staggered lease terms and could be vacated in just 2-years if oil stayed too low for drilling activities.
4-Except for the bank senior credit line, the long-term non-callable bond debt has 5-years to go before principal is due.
5-The SEC has approved this merger and the proxy should be in the mail momentarily if the deal is expected to close on December 3rd.
6-The bondholders have approved the change in debtor from KOG to WLL and the bonds are expected to be upgraded by the rating agencies.
And now my 2-cents: I expect to hear soon that the stock has been "oversold" and is an "Attractive" bargain.
I'd like to say that bought some more at under $9- but Uncle Sam intruded on my IRS Extension and for the first time, I didn't buy any on this dip.
Looking for better days ahead!
Spoken like a good "short".
But I will speak like a cooler head.
KOG's costs for extraction is $40.
As far as my recent gains, they were short-lived.
And like Buffet, I don't care because this is a longer term investment than just 3-months.
If you make your money consistently doing short-term trading, fine, I never have.
I've made plenty of money on KOG, paid no taxes or commissions beyond initial buying and have had a "ten-bagger compounded" nearly twice on over 70% of my shares.
And finally KOG has been getting $95 for 3/4 of their oil when it was $105 per oil and $95 for 75% of its oil today!
But why do I argue with you?
Only to report to the small investors that can be misled by your antics.
US Oil will make the US money, and that means KOG/WLL will do just fine.
Warren Buffet once said: If you can't watch your holdings drop by 50% you shouldn't be in the stock market.
But what does he know, he can afford to lose 50%!
On the other hand, he looks at how much he can buy on these painful "dips" because he knows that many investors have a "herd mentality", and it takes these dips to dramatically increase one's holdings for the long pull.
I'm surprised that oil has dipped as much as it has, but it sure has hit all of the OILS hard not just KOG.
One wonders if some of this oil price drop is due to any withdrawals from the Strategic Oil Reserves (SOR) to hurt Putin.
He depends on oil for much of his currency.
With our newly found energy independence, the SOR is as critical as when we were importing nearly 2/3 of our energy needs, but might be handy right now for political purposes.
Meanwhile, the dollar is strengthening mainly because of a world of cripples, while we are probably the least crippled!
With winter coming to the Northern Hemisphere, and ISIS moving on the Middle East oil countries, can an abrupt turn-around in oil prices be far away?
These are the times when real wealth is created by others who are either scared or do not recognize value.
It is also a time that a few have bragging rights to claim that they saw this coming, sold-out at above $16, bought PUTS and shorted the stock, all at the same time.
How do they do it?