Monday, May 23, 2011

KOG To Acquire Private O&G E&P CO in ND -- 25,000 Net Acres in Williston Basin; 400 Net Drilling Locations; One Rig; 200 BOED; and a Partridge in a Pear Tree

Just kidding about that last part: I am not aware of any partridge in any pear tree being part of the deal.

Link here.
KOG announced that it has entered into a definitive purchase and sale agreement with a private oil and gas company to acquire Bakken/Three Forks leasehold and producing properties in the Williston Basin.

The purchase price for the leasehold interests and associated assets is approximately $85.5 million, which will be paid through the issuance of 2.5 million common shares of Kodiak and cash.  Kodiak will also assume the Seller's contract for a new build drilling rig and will reimburse the Seller for Seller's $2.5 million cash deposit on the rig.  Kodiak expects to fund the cash portion of the of the purchase price with available cash balances and borrowings under its credit facilities.
Other data points:
  • 25,000 net acres
  • 200 boep currently
  • 400 net, largely de-risked, undrilled locations
  • 1 new rig ($2.5 million cash deposit on the rig)
Back-of-the-envelope calculations:
  • $85,500,000 / 25,000 net acres --> $3,420/acre and that's without the current production and a new rig. Maybe someone will correct me if my calculations are wrong
  • The price/acre is full price for Bakken, but not extravagant; remember, the bonuses paid to the state of core Bakken acreage is $3,000 - $6,000/acre
  • The acreage is in McKenzie County, one of the four core Bakken counties: Williams, McKenzie, Dunn, Mountrail 
  • Almost no stock dilution: only 2.5 million more shares to be issued; currently 180 million outstanding
Other data points:
  • KOG will have 5 rigs by end of the year
  • New rig is built to "Bakken pad" specifications -- with skid package tailored for pad drilling
  • KOG to add ~ $10 million to 2011 CAPEX 
  • Total 2011 CAPEX: $230 million

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