Whiting Snaps Up Kodiak, Touts Biggest in the Bakken

Anirvan Ghosh
July 14, 2014

Whiting Petroleum Corporation on Sunday said it would buy Kodiak Oil & Gas Corporation for $3.8 billion in stock, and assume $2.2 billion of Kodiak’s debt. The deal will dethrone Continental Resources Inc, and become the biggest crude-oil producer in the North Dakota and Montana region, considered the most oil and gas rich area in the U.S.

Shareholders loved the $6 billion deal, as Kodiak shares rose 4.7 percent in midday trading in New York. Even before the announcement, the stock has already advanced 27 percent for the year. Whiting climbed more than 7 percent on the announcement.

Investors on Stocktwits think this deal is beneficial for both companies. Whiting’s own output growth slowed last year while Kodiak’s surged.

Kodiak shareholders will receive .177 of a share of Whiting stock for each share of Kodiak common stock they own, or about $13.90 a share based on the closing price of Whiting shares on July 11. That would be a 5.1 percent premium to the volume weighted average price of Kodiak shares during the last 60 trading days.

The combined entity will dominate North Dakota and Montana, where over 1 million barrels of oil are extracted daily. There is fierce competition to own assets in the Bakken, estimated as America’s richest shale region, after exploration spiked following innovations in sideways drilling and hydraulic fracturing, or fracking. North Dakota’s crude output exceeded 1 million barrels in April, an all time high, making it a bigger producer than some OPEC nations such as Ecuador or Qatar.

Most drilling rights on privately owned land in the region have already been bought by corporations, so acquisitions have become the only way to expand operations. Whiting’s purchase might be a sign of more deals to come.

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