Must-know: An overview of Kodiak Oil and Gas

Market Realist

Overview: A guide to the Whiting-Kodiak transaction (Part 5 of 9)

(Continued from Part 4)

Kodiak Oil and Gas Corporation

Kodiak Oil and Gas Corporation (KOG) is a pure-play Bakken producer. The Bakken accounts for all of its operations, where KOG holds a net acreage of 170,000 net acres.

Financial summary

KOG has a market cap of $4.18 billion and an enterprise value of $6.42 billion as of July 28. The last 12 months, the earnings before interest, taxes, depreciation, and amortization (or EBITDA) is ~$1.7 billion and revenue is $996.58 million. In its 1Q14 earnings release, the company announced an adjusted EBITDA of $179.9 and reported a net income of $29.1 million, or $0.11 earnings per share (or EPS).

Operational summary

In its first quarter earnings report, KOG reported a production of ~39,000 barrels of equivalent per day (or boe/d). For KOG’s production, ~87.43% was oil. The company also reported that it had proved reserves of 167.3 million barrels of oil equivalent (or MMBoe).

KOG’s challenge

Producers in the Bakken region have been looking to bring down costs and improve production even as they compete for assets there. This is a challenge for smaller companies like KOG, who have lower bargaining power with oilfield companies compared to bigger companies like Whiting (WLL).

Buying KOG gives WLL access to high-quality acreage regions, which have had high success rates in the past. The new company has already identified 3,460 net future drilling locations and plans to operate 26 rigs, 12 of which will run in KOG’s current acreage.

Currently, KOG has seven operating rigs. KOG couldn’t have increased this number to 12 without WLL’s support. Lynn Peterson, CEO of Kodiak Oil and Gas announced in the release that “Whiting’s plan of increasing operating rigs from seven to 12 on our acreage wasn’t something we felt comfortable doing on our own with our financial profile.”

Key stocks and exchange-traded funds (or ETFs)

Both WLL and KOG are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the Energy Select Sector SPDR ETF (XLE), and the iShares U.S. Energy ETF (IYE).

The following sections in this series will compare the individual companies, their closest competitors, and the combined company.

 

Continue to Part 6

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