Whiting To Acquire KOG For $3.8 Billion; $162,000 / BOEPD; $19,000/Acre

Updates

December 4, 2014: Whiting shareholders overwhelmingly approve acquisition of KOG; deal slated to close next week. This is a $6 billion deal ($3.8 billion in stock; assuming $2.2 billion in debt); will make Whiting the largest producer in the Great Plains.

August 5, 2014: deal moves forward; an update. 

Original Post

Whiting to acquire KOG for $3.8 billion. Folks may want to save PDF presentations at the KOG website -- they will be gone by the end of the year. June, 2014, corporate presentation.

KOG, COB Friday:

• Market cap: $3.8 billion. How coincidental.
• Debt: $2.25 billion
• Cash: $16 million
• Enterprise value: $6.02 billion

WLL, COB Friday:

• Market cap: $9.34 billion. 
• Debt: $2.65 billion
• Cash: $406 million
• Enterprise value: $11.59 billion

Valuation (boepd) from Don:

• 1Q14: 34,025 boepd
• 2014e: 39,000 to 42,000 boepd
• using,  37,000 boepd and a $6 billion enterprise value, this works out to $162,000 / boepd

KOG: about 200,000 acres

• $3.8 billion / 200,000 acres = $19,000 / acre
  

KOG is a darling of Wall Street. It will be interesting to see how this plays out. This should be the top story over at Jim Cramer tomorrow. 

Bloomberg is reporting:

Kodiak stockholders will receive 0.177 of share in Whiting for each share they own, which is the equivalent of $13.90 based on the acquirer’s July 11 price, the Denver-based companies said today in a statement. Including $2.2 billion in debt, the total transaction is valued at about $6 billion.

When the deal is complete, Whiting shareholders will own about 71 percent of the combined company, which will be led by Whiting’s senior managers. Together, the two companies produced the equivalent of more than 107,000 barrels of daily oil output from the Bakken formation in the first quarter. That exceeded the region’s current top producer, billionaire Harold Hamm’s Continental Resources Inc., by almost 10 percent.

Yahoo!Finance / AP is reporting:

Whiting Petroleum Corp. said Sunday it is buying Kodiak Oil & Gas Corp. for $6 billion in stock, worth $13.90 per share, in a deal that will make it the largest producer in the booming Bakken region of North Dakota and Montana.

Largest producer, not necessarily largest leaseholder.

Seeking Alpha:

Whiting to acquire Kodiak

• Whiting Petroleum will acquire Kodiak Oil & Gas creating North Dakota's largest Bakken shale producer. During the first quarter, total combined output of the two companies was more than 107k barrels of oil per day from the Bakken/Three Forks formations
• The deal is valued at $6B, including $3.8B in stock and $2.2B in net debt, and is expected to close in Q4. Kodiak shareholders will receive 0.177 share of Whiting stock for each share of Kodiak common stock they own
• "It's going to allow our production at the combined company to grow faster than Whiting standalone did before," says Whiting CEO James Volker. "The combined company will have greater access to capital which will accelerate development of oil production."

Bret Jensen, July 14, 2014, over at Seeking Alpha: who's next in the Bakken to be acquired? Emerald Oil and Oasis. Comment: I had sort of forgotten Oasis as a potential take-over target; I think of Oasis as a a company yet to grow. I'm probably wrong; just a bias. But Emerald -- that has been a big surprise. It has come out of nowhere -- not really -- it's just easy to forget all that has happened in the Bakken in the last five years. For the history of Emerald, go to "Snapshot."

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or anything you think you might have read here. 

Posted at Seeking Alpha, July 14, 2014:

Focus is on Bakken buyout candidates after Kodiak's $6B takeout

• Whiting Petroleum's (WLL +7.4%) $6B buyout of Kodiak Oil & Gas (KOG +5.1%) is renewing investor attention on independent energy firms with operations in the Bakken Shale, especially those significantly owned by hedge funds; Paulson & Co. is the single biggest owner of KOG stock, with just under 10% of shares outstanding as of the last filing date.
• While many of the largest Bakken producers are huge companies or parts of huge companies - Hess, EOG, Statoil, Marathon Oil, XTO Energy - a few small and mid-cap independent players show hedge fund interest, CNBC's Brian Sullivan writes.
• The single biggest holder of Oasis Petroleum  also is John Paulson's hedge fund, which owns 9.9M shares (~9.8% of shares outstanding), Jana Partners owns 16M-plus shares in QEP Resources, and WPX Energy has substantial hedge fund.

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Posted at Seeking Alpha, July 14, 2014, by Richard Zeits: price received disappoints.

The acquisition of Kodiak Oil & Gas  by Whiting Petroleum will probably come as a disappointment to many Kodiak stockholders. One might argue that the announced transaction, which was struck at an implied ~2.3% discount to Kodiak's last closing price, is a value-neutral event because it represents a stock-for-stock exchange with Whiting which has traded at multiples of key financial and valuation metrics comparable to Kodiak's. However, it is obvious that Kodiak's Board has not been able to deliver a cash transaction at a meaningful premium, the big prize that investors most likely have hoped for.
The truth of the matter, Kodiak has been rumored for quite some time to be receptive to overtures from potential acquirers. The announcement indicates that no stronger bids materialized and the merger of equals with Whiting was the best transaction Kodiak could secure.

Note: I said the same thing in an earlier post: KOG probably figured this was going to be as good as it got.

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Posted at Seeking Alpha, July 14, 2014:

Whiting gets an amazing deal for Kodiak - too good to be true?

• Shares of Whiting Petroleum surge to a new all-time high as analysts agree that WLL pulled off a great deal for Kodiak Oil & Gas, paying ~2% less than KOG's Friday close and just 5% above the 60-day average (earlier).
• WLL’s story grows even more compelling with an accretive deal that gives it a premier position in both the Bakken and Niobrara that should boost growth dramatically, likely with improved metrics across the board that already are at compelling levels vs. peers, Wunderlich says in reiterating its Buy rating.
• In raising its price target to $102, Brean Capital says it would not be surprised to see a competing bid for KOG, but assuming the deal closes as currently constituted, its opinion of WLL is only enhanced as the most attractive opportunity in its coverage universe (Briefing.com).
• Meanwhile, KOG’s decision to sell now is “curious,” according to Sterne Agee's Tim Rezvan, with a Q2 earnings miss possibly explaining the move; KOG has not set a date to release Q2 results.

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Posted at Seeking Alpha, July 14, 2014. Whiting-KOG deal could be good deal for both companies -- David White:

• The WLL and KOG combination will have the greatest oil production level in the Bakken, although CLR will be a close second.
• KOG shareholders will get 0.177 shares of WLL for each share of KOG. KOG shareholders will end up owning 29% of the combined company.
• When you compare a number of relevant KOG+WLL statistics with competitor CLR's statistics, you realize the combination company should be a great one. 

Personally I think it's a huge positive for both companies. Some could argue that WLL paid a premium price for KOG, especially if KOG misses earnings in the 2Q14 as it is being rumored. 

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Posted at Seeking Alpha, July 15, 2014.

Shared shareholders should smooth approval of Kodiak-Whiting merger • 12:46 PM

• Whiting Petroleum and Kodiak Oil & Gas don't just share prolific Williston Basin oil fields; they also share many of the same investors - with five of WLL's top 10 shareholders also among KOG's top 10 - which should help them win shareholder approval for their proposed merger despite WLL’s $3.8B bid valuing KOG at a discount to Friday’s closing stock price, SunTrust analysts say.
• Wells Fargo analysts add that KOG CEO Lynn Peterson has much of his net worth in wrapped up in the company, and that Peterson and his team have tried unsuccessfully for years to sell the company.
• KOG is upgraded to Buy with a $17.70 price target at Wunderlich, believing the stock should trade in tandem with WLL, on which the firm has a $100 price target (0.177 * 100 = $17.70 vs the current $14).

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Posted at Seeking Alpha, July 16, 2014: Whiting deal shows how the Bakken is changing.

• Whiting's acquisition of Kodiak isn't about adding value through exploration, it's about adding value through operating scale and more efficient operation.
• Kodiak's downspacing tests have been positive on balance (albeit not perfect), but Whiting should be able to drive better well completion and operating costs.
• If everything works out, Whiting may be acquiring Kodiak for $6/share less than its underlying NAV, but the Kodiak-specific downside seems rather low.