Whiting Petroleum (NYSE: WLL) Bakken Buyout

Keith Kohl

Written By Keith Kohl

Posted July 14, 2014

On Sunday, Whiting Petroleum (NYSE: WLL) announced that it would buy Kodiak Oil and Gas (NYSE: KOG) for $3.8 billion in stock. Whiting will also assume $2.2 billion in Kodiak’s debt, bringing the total value of the deal to $6 billion.

With the purchase, Whiting will add 173,000 acres in the Bakken Three Forks formation to its already substantial portfolio of land. This means that the company is now the largest producer in North Dakota, surpassing Harold Hamm’s Continental Resources (NYSE: CLR).

Although Continental, with over 1 million acres, still has more land than Whiting, the combined production of Kodiak and Whiting – 107,000 barrels of oil per day in the first quarter – gives the new company a healthy production boost.

And Kodiak is offering some prime Bakken acreage…

chart 1 blog 714

Of course the real story here isn’t the buyout.

Truth is, the buyout frenzy we’ve been seeing in the shale formations hasn’t slowed down. And now that most of the prime acreage has been bought up, two things will happen.

First, buyouts in prolific formations like the Bakken, Eagle Ford, and Permian Basin will continue – at ever higher premiums. With most of the acreage gone the big fish will be scooping up the smaller players operating in the sweet spots of these plays.

Second and more importantly, we could start seeing land grabs and investments in the lesser known shale formations, and the Tuscaloosa Marine Shale comes immediately to mind.

With a similar geological age to the prolific Eagle Ford, the Tuscaloosa has potential resources of roughly 7 billion barrels, yet has only seen minimal development.

And although most of those oil resources are locked tight in rock, some drillers are becoming incredibly efficient at extracting crude oil from the ground there.

Of course, one of the major hurdles has been that operators have to drill anywhere from 11,000 to 15,000 feet deep to tap into formation. Drilling that deep has made these wells slightly more more expensive than other plays, but it’s only a matter of time before certain players crack the shale code.

The formation stretches across about 8 million acres in Louisiana and Mississippi, and is one of the few shale plays left that is still flying under Wall Street’s radar.


Then again, now that the Bakken produces more than a million barrels per day, you can bet that any play worth billions of dollars – like the Tuscaloosa – will start to get a lot more attention going forward… especially if the U.S. has any hope of reaching the 10 million barrels per day production benchmark.

Until next time,

Keith Kohl

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