Bakken-focused exploration and production company, Kodiak Oil & Gas Corp (USA) (NYSE:KOG) announced deal to acquire 42,000 additional acres in the Williston Basin of North Dakota. The deal will significantly boost the company’s position in the Bakken, and will not only boost its drilling inventory, but will also increase its current production. Let’s drill down into the deal and see what it means for investors.
Kodiak Oil & Gas Corp (USA) (NYSE:KOG) is paying $660 million to privately held Liberty Resources to add 42,000 net acres to the company’s position in the Bakken, which will boost Kodiak’s total position in the play to 196,000 net acres. That’s a substantial increase as the deal boosts Kodiak’s acreage by more than 30%. While Kodiak is still about a million acres behind top Bakken leaseholder Continental Resources, Inc. (NYSE:CLR), the deal really does vault Kodiak’s presence in the play. Even better, as you can see from the map below, these acres are close to Kodiak’s current operations:
Also of substantial importance is that this deal adds to Kodiak Oil & Gas Corp (USA) (NYSE:KOG)’s current production by 5,700 barrels of oil equivalent per day. For a company that averaged 14,400 barrels of oil equivalent per day last year, that’s a very big boost. In fact, when combined with the production that the company has already added this year, it puts the company’s pro forma production at about 30,000 barrels of oil equivalent per day.
Kodiak Oil & Gas Corp (USA) (NYSE:KOG) has been growing its production very significantly over the past few years. Just last December it was ranked tenth in total Bakken production at 20,423 barrels of oil per day. At the time, the company was producing less than a third of the oil that the top producers in the play where producing. That month Whiting Petroleum Corp (NYSE:WLL) topped production at 65,156 barrels of oil per day while Continental Resources, Inc. (NYSE:CLR) was second at 65,141 and Hess Corp. (NYSE:HES) was third at 64,657 barrels of oil per day. While this deal won’t leapfrog it to the top, when combined with its organic growth it’s helping to turn Kodiak into a significant Bakken producer.
Kodiak Oil & Gas Corp (USA) (NYSE:KOG)’s plan to begin this year was to drill 75 wells to boost its average production to about 29,000-31,000 barrels of oil equivalent per day. The deal with Liberty boosts its production to that point meaning the company’s production could top an average of 37,000 barrels of oil equivalent per day. That’s nearly a tenfold increase from the 3,900 barrels of oil equivalent per day that Kodiak produced in 2011. With a substantial growth runway from its current acreage, plus the additional growth from the acquired acres, Kodiak has an impressive inventory of future drilling locations.