Oasis and Whiting announce ~$6.0b merger of equals

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As rumored Sunday, Oasis Petroleum (NASDAQ:OAS) and Whiting Petroleum (NYSE:WLL) have announced plans to combine in a $6.0b merger of equals. The transaction will create one of the largest operators in the Bakken, and allow the pro-forma entity to reduce overhead costs:

• Consideration - Whiting (WLL) shareholders will receive 0.5774 shares of Oasis (OAS) common stock plus $6.25 in cash, representing a 7.4% premium at Friday's closing prices; Oasis (OAS) shareholders will receive a $15.00/s special dividend ahead of merger close.
• Synergies - the transaction is expected to result in $65m of annual SG&A synergies, or ~1.0% of the pro-forma market capitalization.
• Debt - post payment of cash considerations and payment of the special dividend, the pro-forma entity will carry a net-debt balance of ~0.2x EBITDA.

In addition to both companies recently emerging from bankruptcy, both companies have announced a similar low-growth, high dividend strategy alongside Q4 results. Whiting (WLL) is up ~29% ytd, while Oasis (OAS) has risen by ~15% since January 1.

The two companies will host an investor call at 8:30am ET, though no slide deck has been released ahead of the call. During the call, analysts are likely to focus on the ability for management to exceed synergy estimates, as well as the go-forward strategy. With Whiting (WLL) taking partial payment in cash, and Oasis (OAS) taking a special dividend, it would seem the combined entity will stick to a low-growth, high dividend strategy.

Comments

[Trader611]

Ohhhhhh wonder if this will end in disaster eventually. I’ll wait for the headlines out of the Bakken “biggest production of all time” in ND or something like that. Think it was 100mb/d or something can’t recall. But OAS went bust not long after. Does lightning strike twice? Why yes, I believe it does. But this time it will be double lightning ⚡️

[parity]

@Trader611 If they went out on a shopping spree and bought XOM's? Bakken acreage with debt, then maybe. They essentially have zero debt by the time they merge.

[Simon Chatham]

The tax issues may be significant for share owners. Lots of cash changing hands.

[sparky590]

This will just mean massive bonuses to management. Same old same old.

[Unexceptional]

What happens to the OAS stake in CEQP?

Will the merged company keep that stake, or sell it?

Looks like selling it, to support all the payouts proposed by the merged entity.

[parity]

@Unexceptional I missed the call. Did they say that they were selling CEQP on the call? On open market or negotiated sales back to CEQP?

[Pentacoff Investments]

@parity If you look at the last slide in their merger presentation, the implication is that they are retaining their interest in CEQP - which is the desirable outcome. It is a good investment.

[rj4103]

@Pentacoff Investments . would make sense since the distribution yield to OAM is around 9% and the combined new company should be using CEQP pipes and services which benefits both