Whiting to buy Kodiak for $3.8 billion, create No. 1 Bakken producer

Sun Jul 13, 2014 6:25pm EDT
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By Ernest Scheyder and Liana B. Baker

(Reuters) - Whiting Petroleum Corp (WLL.N: Quote) said on Sunday it would acquire Kodiak Oil & Gas Corp KOG.N for $3.8 billion in stock, to become the largest producer in North Dakota's Bakken shale oil formations, eclipsing Harold Hamm's Continental Resources Inc (CLR.N: Quote).

By surpassing Continental, Whiting is signaling its desire to become the preeminent player in what is considered one of North America's most-prolific shale formations, where more than 1 million barrels of oil are extracted daily.

"It's going to allow our production at the combined company to grow faster than Whiting standalone did before," Whiting Chief Executive James Volker said in an interview.

Whiting said the deal, valued at $6 billion when Kodiak's net debt of $2.2 billion is included, is expected to close in the fourth quarter. Kodiak shareholders will receive 0.177 share of Whiting stock for each share of Kodiak common stock they hold, representing a value of $13.90 per 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.

Whiting's Volker added that the combined company will have greater access to capital which will accelerate development of oil production. The deal is expected to be accretive to the combined shareholders for cash flow, earnings per share and production per share for 2015 and beyond.

The companies' combined output from the Bakken/Three Forks formations in the first quarter was more than 107,000 barrels of oil equivalent per day, with 855,000 combined net acres and almost 3,500 net future drilling locations.

To compete with Continental, which has gobbled up more that 1 million acres of land, Whiting had to acquire a smaller North Dakota rival. The CEOs said in a joint interview that the merger of the two Denver-based companies had been considered for years but came together in the past few months.   Continued...

James Volker, chairman of the board and chief executive officer of Whiting Petroleum Corporation, speaks to guest and investors during an OGIS' conference for mid- and small-tier oil and gas companies in New York, April 7, 2014.  REUTERS/Eduardo Munoz