By RTT News,
July 13, 2014, 10:31:00 PM EDT
Whiting Petroleum To Buy Kodiak Oil & Gas In $6 Bln Deal
(RTTNews.com) - Independent oil and natural gas company Whiting Petroleum Corp. ( WLL ) agreed Sunday to acquire smaller rival Kodiak Oil & Gas Corp. ( KOG ) in an all-stock deal valued at $6.0 billion, including net debt of $2.2 billion. The deal will create the largest Bakken shale and Three forks producer.
The deal, which has the unanimous approval of the boards of directors of both companies, is expected to close in the fourth quarter of 2014.
"We believe this transaction represents a significant opportunity for both Whiting and Kodiak shareholders to benefit from the strength of our combined company. The addition of Kodiak's complementary acreage position and substantial inventory of high return drilling locations will provide the opportunity to drive significant value growth for both Whiting and Kodiak shareholders through an acceleration in drilling and increase in operational efficiencies," Whiting's Chairman, President and CEO James Volker said in a statement.
The deal between the two Denver-based companies will create a dominant crude producer in North Dakota's Bakken shale of the U.S. Great Plains, with over 107,000 barrels of oil equivalent per day of production in the first quarter of 2014, 855,000 combined net acres and an inventory of 3,460 net future drilling locations.
The deal will see Kodiak shareholders receive 0.177 of a share of Whiting share in exchange for each share of Kodiak common stock they hold, representing a consideration of $13.90 per share, based on the closing price of Whiting common stock of $78.54 on Friday.
However, the offer price represents a 2.3 percent discount over Kodiak's closing stock price of $14.23 on Friday, but represents a premium of about 5.1 percent to the volume weighted average price of Kodiak for the last 60 trading days.
Whiting said it has secured underwritten financing to increase its borrowing base to $4.5 billion with commitments totaling $3.5 billion. This amount is sufficient to provide for all current drawings under Kodiak's credit facility and fund the combined company's ongoing liquidity needs.
Following the closure of the deal, Whiting shareholders are expected to own about 71 percent of the combined entity, while Kodiak shareholders are expected to own the remaining about 29 percent.
The completion of the deal is primarily subject to the approval of both Whiting and Kodiak shareholders. However, the boards of directors of both companies will recommend its shareholders to approve the deal.
The Whiting senior management team will lead the combined company, with Kodiak Chairman, President and CEO Lynn Peterson as well as Kodiak Co-Founder and Director James Catlin joining the board of the combined company at closing.
"We expect that the transaction will be accretive to Whiting's cash flow per share, earnings per share and production per share for 2015 and increasingly accretive thereafter. Furthermore, the combined company is expected to have significant financing flexibility, with a ratio of debt to 2014E EBITDA of approximately 1.6x. Additionally, we believe the all-stock transaction structure is credit enhancing," Volker added.
WLL closed Friday's regular trading session at $78.54, down $1.42 or 1.78% on a volume of 1.05 million shares, and KOG closed at $14.23, down $0.34 or 2.33% on a volume of 4.36 million shares.
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