Kodiak O&G Closes Acquisition of Williston Properties

Kodiak O&G announced the closing of the previously announced acquisition of Williston Basin oil and gas producing properties and undeveloped leasehold.

Included in the acquisition are approximately 13,400 net mineral acres located primarily in Williams County, N.D. Kodiak assumes operatorship of 15 drilling units on the contiguous leasehold acquired. The purchase price for the asset package, which was paid in cash, was $245 million, including $10 million of post-closing adjustments to reflect the August 1, 2011 effective date of the acquisition. Kodiak funded the transaction through available cash balances and through borrowings under credit facilities, including an expanded borrowing base revolving credit facility and an expanded second-lien term loan.

The transaction includes a working interest in seven gross (5.1 net) operated producing wells; four gross (2.2 net) wells that are waiting on completion or drilling; and four permitted and built locations. Two of the four wells waiting on completion are scheduled for completion work in November 2011. Once the four permitted wells are drilled, nearly all of the acquired leasehold will be held by production. Third party gas pipelines have been laid into the properties and natural gas is being processed and sold. One salt water disposal well is included in the acquisition along with gathering lines to the individual wells that is nearly complete. This infrastructure is expected to improve lease operating expense in this field by eliminating water hauling expenses.

The Company has opted not to assume the previously announced option to extend the Seller's drilling rig contract. Kodiak currently operates five drilling rigs and anticipates that the five rigs are sufficient to hold all of its acreage within the primary term. The Company expects to announce its 2012 capital expenditure program later in the fourth quarter of 2011.

Including Friday's acquisition, Kodiak's acreage position in the Williston Basin now approximates 110,000 net acres.

Expanded Credit Facilities

In connection with the acquisition, Kodiak and its lending group, consisting of Wells Fargo Bank, N.A., BMO Harris Financing, Inc., KeyBank NA, Royal Bank of Canada, and Credit Suisse AG entered into an amended and restated credit agreement to expand the Company's existing senior secured revolving line of credit facility. The amendment increases Kodiak's senior secured revolving line of credit facility to $750 million, with an initial borrowing base of $225 million. This compares to the prior-level borrowing base of $110 million.

In addition, the Company entered into an amended and restated loan agreement with Wells Fargo Energy Capital, Inc. and Prudential Insurance Company of America for an expansion of its senior secured second-lien term loan facility to a commitment of $100 million, an increase of $45 million from the previous commitment. The expansion of these credit facilities is based primarily on Kodiak's drilling results to date and in part on production and reserves added through the acquisition.

"We are pleased to have closed on another package of Williston Basin oil and gas properties," said Kodiak's CFO James Henderson. "We continue to adhere to our strategy of assimilating high-quality, concentrated leasehold located in and around our existing core areas which we can operate with a meaningful working interest. We welcome the new institutions who now form the syndicated lending group for our expanded credit facilities and will work with the group closely to grow the facility together as we manage our liquidity."