Bakken Shale independents Whiting Petroleum Corp. and Oasis Petroleum Inc. have agreed to join forces in a “merger of equals” transaction, the companies said Monday.
“The combined company will have a premier Williston Basin position with top tier assets across approximately 972,000 net acres, combined production of 167,800 boe/d, significant scale and enhanced free cash flow generation to return capital to shareholders,” the companies said.
Whiting CEO Lynn Peterson will serve as executive chair of the new company’s board, while Oasis CEO Danny Brown will be its CEO.
“The combination will bring together two excellent operators with complementary and high-quality assets to create a leader in the Williston Basin, poised for significant and resilient cash flow generation,” said Brown.
Peterson said the transaction brings together “two like-minded companies” with assets in North Dakota and Montana. He added, “We look forward to unlocking the enormous potential of our assets and organizations for the benefit of our stakeholders.”
The management teams highlighted each company’s environmental, social and governance (ESG) efforts, including what they called a “top tier gas capture track record in North Dakota.”
Brown added, “Over the last year, both companies have executed a series of deliberate strategic transactions, reducing costs and establishing a leading framework for ESG and return of capital.
“The combination of the two companies, together with the ongoing momentum from these strategic actions, will accelerate our efforts and ideally position the combined company to generate strong free cash flow, execute a focused strategy and enhance the return of capital.”
Upon closing, which is expected in the second half of 2022, Whiting and Oasis shareholders will own about 53% and 47% of the combined company, respectively.
The transaction will combine “high quality assets with low breakeven pricing,” the firms said, with expected production of 164,000-169,000 boe/d in 2022.
“The combined company is expected to generate significant free cash flow from its high-quality assets and disciplined capital spending across a wide range of commodity price scenarios,” the management teams said.
The firms are projecting about $1.2 billion of free cash flow with a reinvestment rate below 40% in 2022, assuming an $85/bbl West Texas Intermediate oil price and $3.50/MMBtu New York Mercantile Exchange natural gas.
“Shareholder returns will be central to the strategy of the combined company,” the firms said. “During the second half of 2022, the combined company will target a return of capital program representing 60% of free cash flow.”
Oasis is headquartered in Houston, while Whiting is based in Denver. The new company, whose new name and NASDAQ ticker will be announced prior to closing, will be based in Houston, but it will retain a Denver office for the foreseeable future.
The combined company will have an enterprise value of about $6 billion based on the exchange ratio and the closing share prices for Whiting and Oasis as of March 4.
Private equity firm Kimmeridge, which owns a 4.9% stake in Oasis, is “highly supportive” of the merger, managing partner Mark Viviano said in a statement emailed to NGI’s Shale Daily. “We have advocated for industry consolidation as there are too many undersized and irrelevant companies drilling shale wells. This merger of equals amongst offsetting operators will help the combined company gain operational scale, with synergies accruing to both sets of shareholders.”
The companies have identified annual administrative and operational cost synergies totaling about $65 million that they expect to achieve by the second half of 2023.
Oasis last year divested its Permian Basin acreage in order to focus efforts on the Bakken.
Viviano added, “Following bankruptcy, the new Oasis management team and board has executed a shareholder friendly strategy, consistent with Kimmeridge’s vision for the company. They should be applauded for taking swift action.”
© 2022 Natural Gas Intelligence. All rights reserved.
ISSN © 2577-9877 | ISSN © 1532-1266 | ISSN © 2158-8023 |