Whiting Petroleum's (NYSE:WLL) announcement that it had reached an agreement to acquire Kodiak Oil & Gas (NYSE:KOG)
was surprising on several levels. First, Whiting isn't offering much of
a premium to Kodiak's standalone net asset value. Second, a lot of
investors have been assuming (or perhaps hoping) that consolidation in
the Bakken would take the form of large energy companies coming in to
buy large operators like Continental Resources (NYSE:CLR), Whiting, and Oasis (NYSE:OAS),
not peer-to-peer consolidation. Third, this is a deal that is more
about execution and efficiency than exploration growth, perhaps marking a
recognition of real change.
All told, assuming the deal gets done
on the announced terms, it's a good deal for Whiting and not a bad deal
for Kodiak. Whereas Whiting has generally gotten good marks for its
execution and operating performance (albeit with some concerns about
capital efficiency), execution has been a recurrent issue and concern
for Kodiak. In buying Kodiak, Whiting has an opportunity to address
concerns about its drilling inventory, an opportunity to improve
Kodiak's costs, and an opportunity to leverage its newly enlarged
position to drive further efficiencies and optimization across a large
acreage position.
Read the full article here:
Whiting's Buy Shows How The Bakken Is Changing
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