Whiting Petroleum Acquires Kodiak Oil & Gas - $3.8 Billion

July 16, 2014 Kirk Eggleston

Whiting Petroleum announced on July 13, 2014, that it would acquire Kodiak Oil & Gas, in an all stock transaction, for $3.8 billion. The deal makes the combined company the largest Bakken/Three Forks producer, unseating Harold Hamm's Continental Resources from the top spot.

Next to the Eagle Ford Shale in South Texas, the Bakken Shale is the most prolific shale play in the world, with daily oil production exceeding 1-million b/d. With Whiting's acquisition of Kodiak, the company is positioning itself to be an even more formidable force in the Bakken.

In the first-quarter of 2014, Whiting and Kodiak had combined production of 107,000 boe/d, and officials indicate total 2014 production will be 152,000 boe/d. The combined company has 855,000 net acres and an inventory of 3,460 net drilling locations.

“The addition of Kodiak’s complementary acreage position (approx. 173,000 net acres) 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,” said Whiting CEO James Voulkner.”

Whiting officials said the deal is valued at $6 billion when Kodiak's net debt of $2.2 billion is absorbed.

Kodiak shareholders will receive 0.177 share of Whiting stock in exchange for each of Kodiak common stock they hold, representing a value of $13.90 per share based on the closing price of Whiting shares on July 11, 2014.

The transaction is expected to close in the fourth quarter of 2014.

U.S. Leads World-Wide Oil Production

July 11, 2014 Kirk Eggleston

The U.S. is now the world's largest producer of oil, surpassing Russia and Saudi Arabia, according to Bank of America Corp. (BAC), as reported in Bloomberg.

U.S. crude oil output in the first quarter surpassed 11-million b/d, which was the highest volume produced by the country in 24 years. The U.S. is expected to hold the top spot through the end of the year, BAC officials said.

Most of that production is coming from North Dakota and Texas, which produced nearly half (48%) of all U.S. oil in April of 2014, according to the Energy Information Administration (EIA). Recently, the state of North Dakota hit the 1-million b/d mark for oil, nearly tripling its production over a three year period. The increase in production is directly related to the development of the Bakken Shale. Since April of 2011, production from the Bakken increased 19,000 b/d on average each month, according to the EIA.

According to the International Energy Agency (IEA), U.S. oil output will increase to 13.1 million b/d in 2019 and plateau. Most analysts agree the Bakken and Eagle Ford Shale plays, which are largely responsible for production in Texas and North Dakota, will peak around this time, and begin to decline.

Baytex Energy May Sell Bakken Assets

July 9, 2014 Kirk Eggleston

Calgary-based Baytex Energy appears to be on the verge of divesting some of its assets, and the company's Bakken assets may soon be on the auction block.

Recently, Baytex added 22,200 net contiguous acres in South Texas' Eagle Ford Shale through its $2.8 billion acquisition of Aurora Oil & Gas, which closed in June of 2014. Baytex officials say the company conducted a portfolio review of assets late in the second quarter in response to the Eagle Ford acquisition. During that process certain assets were earmarked for divestment, which officials say would be used to pay down debt.

Baytex has not disclosed any official word as to which assets, if any, may be divested from its portfolio. However, the Bakken assets may be a good candidate considering they make up only ~4% of the company's current production. According to analyst commentary in a recent Bloomberg article, Baytex could generate $375 million from the sale of its Bakken assets.

At the end of 2013, the company commissioned contingent resource assessments for some of its assets, including the Bakken. The results revealed the Bakken had the lowest number of contingent resources compared to some of the company's other assets.

Baytex's Bakeen assets are located mostly in Divide County. By the end of 2014, the company plans to drill 15 (9.6 net) wells in the area.

Russian Hackers Mount Attacks on Western Oil & Gas Industry

July 4, 2014 Kirk Eggleston

The newest threat to the oil & gas industry could be hiding on one of your favorite web pages! According to The New York Times, Russian hackers are using the web to gain access to the computer networks of hundreds of Western oil and gas companies to conduct industrial espionage. Attacks, which can come in the form of mass emails containing malicious links, are also hidden on web pages an employee views often. It's called a "watering hole attack." What happens is hackers infect a site with malicious software, and employees unknowingly download the malware when visiting the site, allowing hackers to gain access to the company's computer network.

According to Symantec, a cyber security firm based in the U.S., the attackers known as "Dragonfly" or "Energetic Bear" have been around since 2011, and exhibit the hallmarks of a state-sponsored operation. In one of their attacks, the hackers hit a number of industrial control system (ICS) equipment providers, infecting their software with a remote access-type Trojan. This gave the hackers the means to mount sabotage operations against infected ICS computers, and even though no such action was taken, it represents a very real threat. For now, the primary goal of the hackers appears to be industrial espionage.

Russia's Oil & Gas Industry

Russia's industrial espionage campaign on the West is providing the country with valuable intelligence to further exploit their resources. According to the U.S. Energy Information Administration (EIA), Russia is the second-largest producer of dry natural gas and third-largest liquid fuels producer in the world. Russia's economy is also highly dependent on its hydrocarbons, and oil and gas revenues, which account for more than 50% of the federal budget revenues.

Companies with operations in the Bakken Shale in North Dakota and the Eagle Ford Shale in South Texas could make excellent targets for Russian hackers. Over the past several years, technological advancements have abounded since development began in these plays began. It makes sense that the Russians would want to target these companies to gain access to privileged information.

What are your thoughts on this issue? Please share your comments below.

North Dakota & Texas Make Up Half of U.S. Oil Production

July 2, 2014 Kirk Eggleston

Combined production from North Dakota and Texas made up nearly half of U.S. oil production according to the Energy Information Administration (EIA) in April of 2013.

Recently, the state of North Dakota hit the 1-million b/d mark for oil, nearly tripling its production over a three year period. The increase in production is directly related to the development of the Bakken Shale. Since April of 2011, production from the Bakken increased 19,000 b/d on average each month, according to the EIA.

In July of 2014, the EIA predicts the Bakken will produce nearly 1.1-million b/d of oil. June production was 1,074,000 b/d.

Bakken is Major Contributor to U.S. Oil Production Growth

The tight oil and shale gas revolution has changed the face of the energy industry in the U.S., and by 2015, the U.S. is predicted to be the top oil producer in the world, according to the International Energy Agency (IEA). As the country re-asserts itself as a world-wide oil producer, the state of North Dakota is expected to remain in a leading role for oil production.

Texas Leads the Way

The Eagle Ford Shale in South Texas is the only other shale play in the country that can top the Bakken for oil production. State-wide production in Texas was 3-million b/d in April of 2014 according to the EIA. Current production estimates place Texas above the second rated OPEC producing country of Iraq.