UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant x
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¨ | Definitive Proxy Statement | |
¨ | Definitive Additional Materials | |
x | Soliciting Material Pursuant to Section 240.14a-12 |
Whiting Petroleum Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x | No fee required | |||
¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. | |||
(1) | Title of each class of securities to which transaction applies:
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(2) | Aggregate number of securities to which transaction applies:
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On July 14, 2014, Whiting Petroleum Corporation made the following presentation available on its website.
This Highly
Strategic Combination
Creates Largest Bakken / Three Forks Producer
Drives Higher Growth
Drives Better Metrics
July 2014
ENERGY + TECHNOLOGY = GROWTH |
2
Forward-Looking Statements This
communication contains statements that Whiting Petroleum Corporation (Whiting) and Kodiak Oil &
Gas Corp. (Kodiak) believe to be forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934. All statements other
than historical facts, including statements regarding the expected benefits of the
proposed transaction to Whiting and Kodiak and their shareholders, the anticipated
completion of the proposed transaction or the timing thereof, the expected future reserves,
production, financial position, business strategy, revenues, earnings, costs, capital
expenditures and debt levels of the combined company, and plans and objectives of
management for future operations, are forward-looking statements. Such
forward-looking statements are subject to risks and uncertainties that could cause
actual results to differ materially from those expressed in, or implied by, such statements.
These risks and uncertainties include, but are not limited to: the ability to obtain
shareholder, court and regulatory approvals of the proposed transaction; the ability to
complete the proposed transaction on anticipated terms and timetable; Whitings
and Kodiaks ability to integrate successfully after the transaction and achieve
anticipated benefits from the proposed transaction; the possibility that various closing
conditions for the transaction may not be satisfied or waived; risks relating to any
unforeseen liabilities of Whiting or Kodiak; oil and natural gas prices; level of
success in exploration, development and production activities; the impacts of federal
and state laws; the impacts of hedging on results of operations; uncertainty regarding
future operating results and plans, objectives and expectations; and other risks described under
the caption Risk Factors in Whitings and Kodiaks Annual Reports
on Form 10-K for the period ended December 31, 2013. Whiting and Kodiak assume no
obligation, and disclaim any duty, to update the forward-looking statements in this
communication.
Energy + Technology =
Growth
Growth
|
Transaction
overview 3
Consideration
Whiting Petroleum Corporation (Whiting) to acquire Kodiak Oil & Gas Corp.
(Kodiak) for 0.177x
shares of Whiting per Kodiak share, implying $13.90 per
Kodiak share based on Whitings closing price as of July 11, 2014
Transaction value,
enterprise value
& key metrics
Transaction equity value of $3.8bn, implying Equity Value / 2014E Cash Flow
multiple of 4.8x
Transaction enterprise value of $6.0bn, implying Enterprise Value / 2014E
EBITDAX
multiple
of
6.9x
and
Enterprise
Value
/
2014E
Production
multiple
of
~$149,000
/
Boepd
1
Pro forma ownership
& corporate
governance
Whiting shareholders will own ~71% and Kodiak shareholders will own ~29% of
the combined company
Whiting will add 2 Kodiak directors to its Board
Combined company will be led by current Whiting senior management team
Key conditions
& timing
Whiting shareholder approval and Kodiak securityholder approval
Customary regulatory approvals
Closing expected in Q4 2014
1
Based on mid-point of Kodiak public guidance
Energy + Technology =
Growth
Growth |
Strategic
rationale 4
Creates leading Williston
Basin operator
Combined
company
will
become
the
#1
Bakken/Three
Forks
producer:
over
107,000
Boepd
in
Q114
Combined
855k
net
acres,
inventory
of
~3,460
net
future
drilling
locations,
and
370
Mmboe
of
proved
reserves in the Williston Basin
Materially enhanced scale
to support growth
Combined
company
expected
to
have
an
initial
enterprise
value
of
approximately
$17.8bn¹
and
LQA
EBITDAX of $2.8bn
Combined proved reserves of 606 Mmboe, 3P reserves of 1,220 Mmboe as of 12/31/13 and
Q114 production of 134 Mboepd (80% in Bakken/Three Forks)
Stronger credit profile &
financial flexibility
All-stock transaction structure is credit enhancing
Strong
balance
sheet,
with
combined
company
at
1.6x
debt
/
2014E
EBITDAX
Combined company has a borrowing base of $4.5bn with $3.5bn of commitments
Significant financial
benefits to shareholders
All-stock transaction structure allows both Whiting and Kodiak shareholders to
participate in substantial combined company upside
Transaction
is
expected
to
be
accretive
to
Whiting
discretionary
cash
flow
per
share,
earnings
per
share and production per share
Opportunity for
meaningful production &
operational synergies
Complementary acreage positions allows for more efficient operations
Application of Whiting technological expertise to Kodiak asset base expected to enhance
recoveries and reduce costs
Maintains leading oil-
weighted platform
Combined
company
will
offer
leading
oil-driven
growth
profile
(88%
liquids/84%
oil,
2014E
production)
Continue to expect consistently strong EBITDAX margins from oil focus
1
Combined Whiting & Kodiak enterprise values based on transaction value as of July 11,
2014 Drives higher growth
Accelerated development of Kodiak resource base to drive production and cash flow
growth
Expect to increase Kodiaks rig fleet from 7 to 12 operated rigs by Q415
Energy + Technology =
Growth
Growth
|
Expected benefits to
Whiting
Increases weighting of production from Bakken/TFS
80% of pro forma Q1 2014 production from Bakken/TFS
855,000 combined net acres, with an inventory of 3,460 net Williston Basin drilling
locations
Addition
of
complementary
acreage
position
in
area
Whiting
knows
very
well
Significantly enhanced growth potential from accelerated development of Kodiak resource
base
Expect to increase Kodiaks rig fleet from 7 to 12 operated rigs by Q415
Substantial present value benefit from acceleration
Materially increased scale enhances relative positioning of company vs. peers and strengthens
Whitings credit profile and financial flexibility
All-stock transaction structure is credit enhancing
Expected to be accretive in 2015 and increasingly accretive thereafter across all
metrics
Discretionary cash flow per share
Earnings per share
Production per share
5
Energy + Technology =
Growth
Growth |
Expected benefits to
Kodiak
Kodiak shareholders will retain upside to Bakken/TFS development
through ~29%
ownership of the combined company
Kodiak shareholders will own shares in a significantly larger company with a more
diverse set of reserves and production, with complementary assets
Exposure to leading positions in two of the fastest-growing oil-rich plays in the US:
the Bakken and the Niobrara
Significantly increases size and scale with greater access to capital for accelerated
development
Kodiak shareholders will participate in the benefit of operational and cost
improvements provided by the combined asset base and operations
Transaction expected to be tax-free to Kodiaks US shareholders
6
Energy + Technology =
Growth
Growth |
Leading Williston
Basin operator 7
Source: Company presentations, filings and press releases
1
As of December 31, 2013
2
Rigs currently drilling on July 13, 2014 per NDIC
3
As of July 13, 2014, Whiting had two additional rigs moving and
Kodiak had one additional rig moving, for a combined operated 21
rigs in the Williston Basin
Acreage Overview (855,000 net acres)
Rigs drilling in the Williston Basin
(as of 7/13/14)
2,3
Q1'14 Bakken / Three Forks Net Production
(Mboepd)
Energy + Technology =
Growth
Growth |
Larger location
inventory with significant opportunity to accelerate Williston Basin drilling
program 8
Pro Forma Williston Basin Drilling Locations (Net)
3,460
Potential Williston Basin
net drilling locations
increase by 158%
1,339
1
Includes 2,639 Whiting and Kodiak locations at 12/31/2013, plus an additional 821 combined
Whiting and Kodiak identified locations as of 06/30/2014
Energy + Technology =
Growth
Growth |
Continued production
and reserve growth with oil- driven focus and strong margins
9
Reserves (Mmboe)
Production (Mboepd)
YE 2013
88% liquids / 80% oil
64
88
119
152
2014E
88% liquids / 84% oil
385
474
606
Energy + Technology =
Growth
Growth |
Driving value from
complementary acreage positions Central and Eastern Williston Basin
10
Combined 855,000 net
acres in the core of
Williston Basin
Footprint in the sweet-spot
of the Central and Eastern
Williston Basin is
strategically positioned to
accelerate development of
the combined acreage
position
Ability to drive production,
reserve growth and
operational efficiency
across the position
Energy + Technology =
Growth
Growth |
Value creation via
application of Whiting expertise and financial strength
11
Reduction in Kodiaks completed well costs
~ $700,000 per well
Present value acceleration
Expect to increase Kodiaks rig fleet from 7 to 12 operated rigs by Q415
By Q415, combined 26 operated rigs, largest fleet in the Basin
Completion efficiency
New technologies and improved techniques
Operational efficiency
Economies of scale to drive reduced LOE
Infrastructure
Marketing scale
Midstream expertise
Energy + Technology =
Growth
Growth |
Accelerated
development plan to drive net asset value accretion
12
Kodiak Standalone
Kodiak Pro Forma
Expect to increase Kodiak operated rig fleet from 7 to 12 rigs by Q415 driving
substantial present value benefit
Energy + Technology =
Growth
Growth |
Enhances size and
scale relative to oil-weighted peers 13
Enterprise
Value
($bn)
LQA
EBITDAX
($bn)
Reserves
(Mmboe)
Source: Company filings, equity research, Bloomberg, FactSet as of July 11, 2014
¹
Combined Whiting & Kodiak enterprise values based on transaction value as of July 11,
2014 2
Please see appendix for reconciliation of non-GAAP financial measures
3
Based on mid-point of Whiting and Kodiak public guidance, and Bloomberg Consensus estimates
for peers 2014E
Production
(Mboepd)
Energy + Technology =
Growth
Growth
% liquids
% liquids
3
2 |
Substantial
production and reserves, with increased Bakken/TFS weighting
14
Production (as of 3/31/14)
439 Mmboe
89% liquids
606 Mmboe
88% liquids
Whiting
Pro forma
167 Mmboe
83% liquids
Kodiak
Proved Reserves (as of 12/31/13)
1
Northern Rockies production for Whiting includes 2.4 Mboepd of production outside of the
Bakken/Three Forks 1
100 Mboepd
88% liquids
134 Mboepd
88% liquids
34 Mboepd
87% liquids
Energy + Technology =
Growth
Growth
Northern Rockies
Central Rockies
North Ward Estes
Permian
Mid-Con / Gulf Coast
Northern Rockies
Central Rockies
North Ward Estes
Permian
Mid-Con / Gulf Coast |
Strong combined
balance sheet 15
Pro Forma Capitalization at 3/31/14 ($mm)
1
Assumes cash on balance sheet as of 3/31/2014
2
Reflects $700mm of revolver drawings at Kodiak as of 3/31/2014 and $58mm of anticipated
transaction expenses 3
As of 3/31/2014
4
As of 12/31/2013
5
Based on transaction value as of July 11,2014
6
Please see appendix for reconciliation of non-GAAP financial measures
7
2014E EBITDAX based on Wall Street consensus estimates
Energy + Technology =
Growth
Growth
Cash¹
$422
RC Borrowings²
$758
Whiting notes
6.500% sr nts due 2018
350
5.000% sr nts due 2019
1,100
5.750% sr nts due 2021
1,200
Unamortized premium on Whiting's 2021 notes
4
Kodiak notes
8.125% sr nts due 2019
800
Unamortized premium on Kodiak's 2019 notes
5
5.500% sr nts due 2021
350
5.500% sr nts due 2022
400
Total debt
$4,966
Market
capitalization
5
$13,262
Total capitalization
$18,228
Net capitalization (excludes cash)
$17,806
Q114
annualized
EBITDAX
3,6
$2,802
Proved
reserves
(Mmboe)
4
606
Proved developed reserves (Mmboe)
4
330
Debt
/
Q114
annualized
EBITDAX
6
1.8x
Debt
/
2014E
EBITDAX
7
1.6x
Debt / Total capitalization
27%
Debt / Proved reserves (Mmboe)²
$8.20
Debt / Proved developed reserves (Mmboe)²
$15.07 |
Significant pro
forma liquidity 16
Total Liquidity ($mm)
$3,164
$1,606
1
Reflects $3,500mm of commitments minus $700mm of revolver drawings at Kodiak as of 3/31/2014
and $58mm of anticipated transaction expenses + $422mm cash = $3,164mm 1
Energy + Technology =
Growth
Growth
$406
$422
$1,200
$2,742
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
Whiting at 3/31/14
Pro forma
Revolver availability
Cash |
Strategic
rationale 17
Creates leading Williston
Basin operator
Combined company will become the #1 Bakken/Three Forks producer:
over 107,000 Boepd in Q114
Combined
855k
net
acres,
inventory
of
~3,460
net
future
drilling
locations,
and
370
Mmboe
of
proved
reserves in the Williston Basin
Materially enhanced scale
to support growth
Combined
company
expected
to
have
an
initial
enterprise
value
of
approximately
$17.8bn
1
and
LQA
EBITDAX of $2.8bn
Combined proved reserves of 606 Mmboe, 3P reserves of 1,220 Mmboe as of 12/31/13 and
Q114 production of 134 Mboepd (80% in Bakken/Three Forks)
Stronger credit profile &
financial flexibility
All-stock transaction structure is credit enhancing
Strong
balance
sheet,
with
combined
company
at
1.6x
debt
/
2014E
EBITDAX
Combined company has a borrowing base of $4.5bn with $3.5bn of commitments
Significant financial
benefits to shareholders
All-stock transaction structure allows both Whiting and Kodiak shareholders to
participate in substantial combined company upside
Transaction
is
expected
to
be
accretive
to
Whiting
discretionary
cash
flow
per
share,
earnings
per
share and production per share
Opportunity for
meaningful production &
operational synergies
Complementary acreage positions allows for more efficient operations
Application of Whiting technological expertise to Kodiak asset base expected to enhance
recoveries and reduce costs
Maintains leading oil-
weighted platform
Combined
company
will
offer
leading
oil-driven
growth
profile
(88%
liquids/84%
oil,
2014E
production)
Continue to expect consistently strong EBITDAX margins from oil focus
1
Combined Whiting & Kodiak enterprise values based on transaction value as of July 11,
2014 Drives higher growth
Accelerated development of Kodiak resource base to drive production and cash flow
growth
Expect to increase Kodiaks rig fleet from 7 to 12 operated rigs by Q415
Energy + Technology =
Growth
Growth
|
18
Important Additional Information and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy
any securities or a solicitation of a vote or proxy. The proposed transaction
anticipates that the Whiting shares will be exempt from registration under the United
States Securities Act of 1933, as amended (the "Securities Act"), pursuant to Section
3(a)(10)
of
the
Securities
Act.
Consequently,
the
Whiting
shares
will
not
be
registered
under
the
Securities
Act
or
any
state securities laws. In connection with the proposed transaction, Whiting and Kodiak
intend to file relevant materials with the SEC and other governmental or regulatory
authorities, including a joint proxy statement and circular.
INVESTORS
ARE
URGED
TO
READ
THE
JOINT
PROXY
STATEMENT
AND
CIRCULAR
AND
ANY
OTHER RELEVANT
MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT
Whiting,
Kodiak
AND
THE
PROPOSED
TRANSACTION.
The
joint
proxy
statement
and
circular
and
certain other
relevant materials (when they become available) and other documents filed by Whiting or
Kodiak with the SEC may be obtained free of charge at the SECs website at
http://www.sec.gov. In addition, investors may obtain copies of these documents (when
they become available) free of charge by written request to Whiting Investor Relations,
1700 Broadway, Suite 2300, Denver, CO 80290-2300 or calling (303) 390-4051
or by written request to Kodiak Investor Relations, 1625 Broadway, Suite 250,
Denver, CO 80202-2300 or calling (303) 592-8030. Participants in the
Solicitation Whiting, Kodiak and their respective executive officers and directors may
be deemed to be participants in the solicitation of proxies in connection with the
proposed transaction. Information about the executive officers and directors of Whiting
and the number of shares of Whitings common stock beneficially owned by such persons is set
forth in the proxy statement for Whitingss 2014 Annual Meeting of Stockholders which was
filed with the SEC on March 23, 2014, and Whitings Annual Report on Form 10-K
for the period ended December 31, 2013. Information about the executive officers and
directors of Kodiak and the number of Kodiaks ordinary shares beneficially owned by
such persons is set forth in the proxy statement for Kodiaks 2014 Annual Meeting of
Shareholders which was filed with the SEC on May 9, 2014, and Kodiaks Annual
Report on Form 10-K for the period ended December 31, 2013. Investors may obtain
additional information regarding the direct and indirect interests of Whiting, Kodiak and their respective
executive officers and directors in the transaction by reading the joint proxy statement and
circular regarding the transaction when it becomes available.
Energy + Technology =
Growth
Growth |
Reconciliation of
Net Income to EBITDAX EBITDAX
($ in Thousands)
19
EBITDAX Reconciliation:
2011
2012
2013
Q1 2014
Net Income
(Loss)
.
$ 491,628
$ 414,099
$ 366,003
$ 109,051
Amortization of Deferred Gain.
.
(13,937)
(29,458)
(31,737)
(7,744)
Gain on Sale of Properties......
.
(16,313)
(3,423)
(128,648)
(10,559)
Interest
Income
..
(208)
(283)
(1,134)
(302)
Depreciation, Depletion & Amortization
.
468,203
684,724
891,516
235,265
Exploration
.
45,861
59,117
94,755
24,122
Impairment
...
38,783
107,855
358,455
17,985
Stock
Compensation
13,509
18,190
22,436
6,732
Interest Expense...............................................
62,516
75,210
112,936
42,144
Change in LT PPP..............................................
(865)
13,824
(6,980)
3,636
Noncash (Gain) Loss on MTM Derivatives........
(63,093)
(115,733)
(20,830)
23,793
Income Taxes (Benefit).....................................
288,691
247,912
205,868
76,361
EBITDAX Total....................................
$ 1,314,775
$ 1,472,034
$ 1,862,640
$ 520,484
Year Ended December 31,
Energy + Technology =
Growth
Growth
|