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Why Whiting is set to become the largest Bakken producer

Kshitija Bhandaru

Overview: A guide to the Whiting-Kodiak transaction (Part 2 of 9)

(Continued from Part 1)

Whiting-Kodiak scale and scope

An enlarged Whiting Petroleum (WLL) will become the largest Bakken producer with over 107,000 barrels of oil equivalent per day (or boe/d) in 1Q14, an acreage of 855,000 combined net acres, and an inventory of 3,460 net future drilling locations.

What the combined company will have to offer

By buying Kodiak’s (KOG) 170,000 net acres, WLL has gained access to KOG’s high-return drilling locations in Dunn, McKenzie, Mountrail, and Williams counties in the Bakken region.

Another contribution that KOG will be making to the new company is transferring its knowledge about “downspacing” to WLL. “Downspacing”—drilling more wells per number of acres—has been a major growth objective for KOG in 2014. It has managed to complete the “downspacing” of 12 wells in the Polar and Smokey regions. Downspacing helps save costs. Acquisition of this process should be a positive for WLL.

WLL has made significant advancements in fracking techniques, through which it has been able to increase oil production. Possession of this kind of intellectual property is another positive for the new company.

Through complimentary acreage positions, WLL’s technical know-how, and KOG’s downspacing initiatives, the combined company can derive positive synergies to achieve efficient and strong production growth.

James Volker, chairman, CEO, and president of Whiting Petroleum announced that “Total 2014 production of 152 thousand barrels of oil equivalent per day, and proved reserves of 606 million barrels of oil equivalent (80% oil), provides a leading platform for future oil-driven growth.”

Comparison with CLR

Despite the addition of KOG’s acreage, the WLL-KOG combination is still far from Continental Resources’ (CLR) acreage position, which is ~1.2 million net acres. Also, CLR’s proved reserves as of December 31, 2014, was 1.08 billion boe. The combined proved reserves for WLL-KOG is only ~606 million boe.

Although the WLL-KOG combination will be the largest producer in the Bakken, CLR’s acreage and proved reserves might give it the necessary edge to take back its former title as the largest Bakken producer.

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).

The following part of the series talks about how the Bakken formation fits into WLL’s larger growth story.

Continue to Part 3

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