Shale Daily / NGI All News Access

Kodiak Shares Plummet Briefly Over Possible Liquidity Fears

Shares of Kodiak Oil & Gas Corp. took a nosedive on Tuesday, allegedly over concerns that the Denver-based independent energy company may be facing liquidity concerns.

Kodiak opened at $4.35/share on the New York Stock Exchange on Tuesday, but the stock lost more than 17% of its value and fell to $3.60/share at one point before rebounding and closing at $4.29/share. The stock closed at $4.83/share on Thursday.

Tuesday's low was the company's lowest since October 2010, when the stock fell to $3.37/share. Kodiak's stock hit a high of $7.77/share during trading last March. In comparing that high point with Tuesday's low, the stock had lost more than 53% of its value.

Kodiak said last week it had agreed to purchase 13,500 net acres in the Bakken Shale from an undisclosed private oil and gas company for about $235 million in cash (see Shale Daily, Oct. 3). It also agreed to assume the terms of a contract for its sixth drilling rig.

"[The] recent announcement [that Kodiak was] buying additional acreage and producing wells is weighing on the stock, considering [the amount of] capital needed to fund the transaction and drilling plans through 2012," Northland Capital Markets analyst Marty Beskow told Reuters.

Scott Hanold, an analyst at RBC Capital Markets, also told the news service that Wall Street is typically concerned "when an exploration and production company has perceived liquidity issues." He added that he didn't think the company had liquidity concerns.

Kodiak said it will pay for the transaction through two separate agreements for expanded credit: $225 million from Wells Fargo Bank NA and $75 million from Wells Fargo Capital Inc.

The acquired acreage in question is expected to expand Kodiak's position in the Williston Basin to about 110,000 net acres. The deal is expected to close in late October with an effective date of Aug. 1, 2011. The latest transaction is the company's second expansion into the Bakken this year after it agreed to acquire 25,000 net acres in McKenzie County from a private seller for $85.5 million in May (see Shale Daily, May 24).

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