Kodiak Completes Williston Basin Acquisition

Kodiak has closed the previously announced acquisition of Williston Basin oil and gas producing properties and undeveloped leasehold on November 30, 2010.

Included in the transaction are 23,133 gross and 14,494 net acres and production of approximately 500 net barrels of oil equivalent per day (BOE/d). The acreage provides Kodiak with the opportunity to develop over 60 net Bakken / Three Forks drilling locations. Kodiak paid $110 million in cash and received closing adjustments of approximately $1,350,000 from the August 1, 2010 effective date to closing. Kodiak funded the transaction through cash balances and through borrowings under credit facilities including its expanded reserve-based, revolving line of credit and a second-lien term loan. No common shares or other securities of Kodiak were issued in consideration of the acquired properties.

In connection with the acquisition, Kodiak and its lender, Wells Fargo Bank, N.A., entered into an amendment to and expansion of the Company's existing credit facility. The amendment increases the Company's committed capacity under its $200 million senior secured revolving line of credit facility from $20 million to $50 million. In addition, the Company entered into a loan agreement with Wells Fargo Energy Capital, Inc. which provides for a $75 million senior secured second-lien term loan facility with an initial commitment of $40 million. The expansion of the credit facilities is based primarily on Kodiak's drilling results to date and in part on production and reserves added through the acquisition.

Operations Update

Kodiak has commenced completion operations on its four-well pad in Dunn County, N.D. It is anticipated that all wells on this pad will be completed during December, at which time each of the wells will be simultaneously flowed back and turned to production facilities. Kodiak operates the four-well pad with a 50% working interest (WI) and a 41% net revenue interest (NRI). Oil, gas and water pipelines are being constructed and Kodiak expects that the wells will be connected to the pipeline infrastructure in early January 2011.

In McKenzie County, N.D., the Company has just completed drilling two wells, one a Bakken test and the other a Three Forks test. Completion work on the wells, which were drilled from a single pad, is expected to commence during the latter part of December and into January, with first production projected for the first quarter of 2011. Kodiak operates the two-well pad with a 95% WI and a 78% NRI.

As of November 30, 2010, and including the production associated with the acquisition, Kodiak was producing approximately 2,000 BOE/d Company-wide from its core Williston Basin properties. The Company forecasts a 2010 production exit rate range of 2,700 to 3,200 BOE/d and expects average daily production for fourth quarter 2010 to be approximately 2,100 BOE/d. The Company intends to furnish detailed guidance on expected production volumes for 2011 and to announce its 2011 capital expenditure budget in the coming weeks.

Including today's acquisition, Kodiak's acreage position in the Williston Basin now exceeds 72,000 net acres.


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