Part I: KOG To Acquire 50,000 Net Acres in Heart of The Bakken; Issue $550 Million in Senior Notes; Will Issue 40 Million More Shares -- Moves To New Level In The Bakken -- The Bakken, North Dakota, USA

Some numbers in this post are rounded. Scroll to bottom to see results of some wells in the area in discussion; in the south unit, there are some huge wells.

If you have opportunity for two screens, you may want to pull up KOG's most recent corporate presentation, go to slides 18 and 19, and review those slides while reading the rest of the post.

KOG made three major announcements, Monday, November 14, 2011 (I often get the details wrong when I report financial notes, so you may want to go to the original press releases for what I am about to summarize):

• KOG will acquire approximately 50,000 net acres in the Bakken to include some producing properties as well as undeveloped leaseholds; the purchase price is $540 million in cash and $50 million in KOG common shares
• KOG announced it will offer $500 million in senior notes due 2019
• KOG announced it will issue approximately 43 million more shares of its common stock

Back of envelope calculations:

• 45 million shares @ $7 --> $315 million
• Senior notes --> $550 million
• Total cash raised: $865 million
• KOG's market cap: $1.6 billion
• Shares outstanding: 210 million
• Percent new shares represent: 43 million / 210 million --> 20 percent

This was done quickly and very roughly. Mike Filloon will give us his thoughtful, insightful reaction later this week, I would assume.

Location of the newly acquired acreage, two areas:

• East of Williston, on the Williams/McKenzie county line; some under water; much in T154N-R97/98W
• Second area directly north of of the first area, but about 30 miles north; on the Williams County / Divide County line, mostly in Williams County; it's hard to tell from the map, but I think it's mostly T159N-R98/97W, including part of Corinth oil field on the east side of the acquisition

Data points of the assets

• 50,000 net acres
• 21 operated wells drilled: 17 are producing; 4 are waiting completion

Back of envelope calculations, cont'd:

• 21 x $7 million --> $150 million.  $600 million - $150 million = $450 million/50,000 acres --> <$9,000/acre

Based on everything I see, it looks like the seller was North Plains Energy, LLC. The data fits almost perfectly. The most recent data suggested North Plains Energy, LLC, had approximately 40,000 net acres in the Williston Basin.

Newly acquired north unit, along Divide County line, some Corinth field wells:

• 20056, DRL, North Plains Energy, A. Cvancara 9-7H, Wildcat, producing, waiting to be fracked
• 19878, DRL, North Plains Energy, Holland 9-19H, waiting to be fracked
• 19546, 197, North Plains Energy, Collyer 9-8H, s11/10; t3/11; cumulative 15K
• 21798, 197, North Plains Energy, Collyer 9-8H, s11/10; t3/11; cumulative 15K
• 8039, PNA, Hunt Energy, Olaf Sevre 1, s9/80; t4/81; cumulative 273; Madison (essentially dry)
• 6745, PNA, Hunt Energy, Halverson-FLB 1, s10/78; t3/79; Madison/Red River (essentially dry)
• 21615, Rig on site, Continental Resources, Sevre 1-22H
• 9323, SWD, North Plains Energy (was a Texaco well back in 1982); Dahlke 11-25SWD
• 20684, DRL, Baytex Energy, Bragg 32-29-160-98H 1NC, wildcat

Newly acquired south unit, straddling Williams/McKenzie County line, east of Williston, much in T154N-R97/98W; Truax and Banks oil fields; Truax is north of the river; Banks is south of the river; some wells

• 18644, 1,148, OXY USA/Anschutz, State 1-25-36H-144-97X, s1/10; t4/10; cum  229,444 bbls
• 19970, 502, North Plains Energy, Nelson 5-18H, s4/11; t8/11; cum 15K
• 19468, 866, North Plains Energy, Wold 16-7H, s11/10; t3/11; cum 95K
• 19533, 1,342, North Plains Energy, Hellandsaas 16-8H, s1/11; t7/11; cum 46K
• 20068, 929, North Plains Energy, Flatland 9-9H, s2/11; t9/11; cum 3K