In July this year, Kodiak Oil & Gas Corp announced a public offering of about 27.6 million shares at the rate of $6.10 per share. The net proceeds of $159.4 million were to be used to “repay debt outstanding under its revolving credit facility, to fund capital expenditures related to drilling, development and infrastructure, principally in the Bakken play located in North Dakota, and for general corporate purposes, including financing the potential acquisition of oil and gas properties in certain core areas, such as the Bakken play.”
Let's look at the second quarter report to verify if the fund raising did help in the charts. Equivalent sales volumes hit 238,000 BOE mark, a whopping 149% QOQ increase. Operating income improved to $8.95 million, up from $461,000 same quarter last year. Total revenue increased by over $15 million, shooting to $22.1 million this quarter. But there has been no significant reduction in the debt section, so it definitely shows up in the assets section, more specifically in the increased number of oil and gas properties. So, the company is making an effort to better production output in the Bakken shale play?
And the saga follows, with the acquisition of Williston Basin oil and gas producing properties, along with the undeveloped leasehold. The assets were worth $245 million, increasing the total net acres of Kodiak to over 110,000 acres. With oil and gas being the two most important energy resources, the more oil and gas assets, the better. Check the projected US energy requirements in the coming few years in the image below.
In November this year, the company released its third quarter report. Sales volumes shot up, recorded at 363,703 BOE, to twice the previous year's 126,767 BOE. Total revenue surged to $29.5 million, $8.13 million over last year's quarter. If we look at the cash flow statement, it seems pretty clear that most of the company's cash is going into oil drilling and construction, and property acquisition, which sounds viable to me. Now, the company seems to be in needs of external funds once again. Kodiak announced the private offering of $650 million (notched up from $550 million as decided earlier) worth of senior notes due 2019, with annual interest rate of 8.125%. Not only that, the company announced 42 million shares (notched up from 34.5 million as decided earlier) of common stock at a public offering price of $7.75 per share.
The total net proceeds, going well over $1 billion including the $633.8 million from the private senior note offering, is to be used...
... to finance the previously announced proposed acquisition of interests in approximately 50,000 net acres of oil and gas properties and related assets in the Williston Basin, North Dakota, (ii) to repay all of the outstanding debt under Kodiak's first lien credit agreement, to repay all of the outstanding debt under its second lien credit agreement and to pay related fees, premiums and expenses, (iii) to fund capital expenditures for drilling, development and infrastructure, principally in the Bakken play located in North Dakota and (iv) for general corporate purposes, including financing the potential acquisition of oil and gas properties in certain core areas, such as the Bakken play. The net proceeds of the offering, together with other amounts, will go into escrow pending the consummation of the proposed acquisition, at which time all amounts will be released to Kodiak. (from press release)
It must be remembered that Bakken play is not for the weak-hearted. Many companies had to retreat back in the Bakken territory. For example, Newfield Exploration (NYSE:NFX) had to limit production to cut costs. In fact, when major oil giants such as Statoil (NYSE:STO) is moving in through acquisitions, along with the presence of established players such as Continental Resources (NYSE:CLR) and EOG Resources (NYSE:EOG), it's not surprising that Kodiak's management is gradually making its move in the Bakken field. With the handful of cash, increased production and better operating margin, Kodiak's future looks good to me.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.