Must-know: Details of Whiting’s Kodiak acquisition

Market Realist

Overview: A guide to the Whiting-Kodiak transaction (Part 1 of 9)

Transaction details

On July 13, Whiting Petroleum (WLL) and Kodiak Oil & Gas (KOG), two of the major companies operating out of the Bakken Shale, jointly announced that KOG would be acquired by WLL in an all-stock transaction.

Consideration for the deal includes $3.8 billion in KOG stock, through a stock swap based on the closing price of WLL stock on July 11, and assumption of $2.2 billion KOG debt, as of March 31. The total cost of the transaction is valued at $6 billion.

Under the agreement terms, KOG shareholders will receive 0.177 shares of WLL stock, per KOG share. This represents a consideration of $13.90 to each KOG shareholder—a premium of 5.1% to Kodiak’s average price for the last 60 trading days.

At the close of the deal, WLL shareholders are expected to own ~71% in the newly formed venture. KOG shareholders are expected to own ~29%.

Largest Bakken producer

According to WLL’s press release, the newly formed company will surpass Continental Resources (CLR) to form the largest Bakken producer, with over 107,000 barrels of oil equivalent per day (or boe/d) of production.

For context, CLR’s oil production in the Bakken in 1Q14 was 97,500. However, CLR’s acreage of 1.2 million net acres is still higher than the combined acreage of 855,000 acres that the acquisition would create. So, CLR will likely continue to have an edge, even over an enlarged WLL.

Key stocks and exchange-traded funds (or ETFs)

It’s important to note that CLR, WLL, and KOG are all components of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the iShares U.S. Energy ETF (IYE).

This series will focus on how the deal will affect WLL and KOG shareholders.

Continue to Part 2

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