14 july 2014
Whiting Petroleum Corp. (WLL:US)’s $3.8 billion purchase of Kodiak Oil & Gas Corp. (KOG:US) will create the dominant crude-oil producer in the richest U.S. shale region as energy explorers seek access to future drilling opportunities.
Kodiak stockholders will receive 0.177 of a Whiting share for each Kodiak share they own, which is the equivalent of $13.90 based on the acquirer’s July 11 price, the Denver-based companies said in a statement yesterday. Including $2.2 billion in debt, the total transaction is valued at about $6 billion.
The agreement will vault Whiting ahead of Oklahoma billionaire Harold Hamm’s Continental Resources Inc. as the premier oil supplier in the Bakken shale formation in the northern Great Plains. Whiting is buying a company that more than doubled production last year while Whiting’s own output growth slowed as costs to bring new wells online surged.
Competition for Bakken assets is fierce because the geologic formation beneath North Dakota and Montana is the most prolific U.S. shale region, on a barrels-per-well basis, according to data compiled by Bloomberg. Because most drilling rights on privately owned land in the area have already been snapped up by corporations, explorers can only expand through acquisitions.
“This is the right deal, at the right time,” James Volker, Whiting’s chairman and chief executive officer, said in a telephone interview today. “It massively enhances the scale of the two companies combined.”
The Bakken region of North Dakota and Montana has been a hotbed of U.S. oil exploration after innovations in sideways drilling and hydraulic fracturing, or fracking, enabled access to previously impenetrable rock layers.