DEFA14A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

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Securities Exchange Act of 1934 (Amendment No.     )

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Whiting Petroleum Corporation

 

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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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; Whiting’s and Kodiak’s 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 Whiting’s and Kodiak’s  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 Whiting’s 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
Q1’14
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 Q1’14
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 Kodiak’s rig fleet from 7 to 12 operated rigs by Q4’15
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 Kodiak’s rig fleet from 7 to 12 operated rigs by Q4’15
Substantial present value benefit from acceleration
Materially increased scale enhances relative positioning of company vs. peers and strengthens
Whiting’s 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 Kodiak’s 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 Kodiak’s completed well costs
~ $700,000 per well
Present value acceleration
Expect to increase Kodiak’s rig fleet from 7 to 12 operated rigs by Q4’15
By Q4’15, 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 Q4’15 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
Q1’14
annualized
EBITDAX
3,6
$2,802
Proved
reserves
(Mmboe)
4
606
Proved developed reserves (Mmboe)
4
330
Debt
/
Q1’14
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 Q1’14
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 Q1’14
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 Kodiak’s rig fleet from 7 to 12 operated rigs by Q4’15
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 SEC’s 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 Whiting’s common stock beneficially owned by such persons is set
forth in the proxy statement for Whitings’s 2014 Annual Meeting of Stockholders which was filed with the SEC on
March 23, 2014, and Whiting’s 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 Kodiak’s ordinary shares beneficially owned by
such persons is set forth in the proxy statement for Kodiak’s 2014 Annual Meeting of Shareholders which was filed with
the SEC on May 9, 2014, and Kodiak’s 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