Prior to the open of U.S. markets today, two leading U.S. independent exploration and production (E&P) companies, Oasis Petroleum Inc. (OAS:NYSE) and Whiting Petroleum (WLL:NYSE), announced that they have entered into a definitive agreement to combine operations in what was described as a merger of equals transaction. When the merger is completed, the combined company is projected to have total enterprise value of approximately $6.0 billion.
The agreement provides that Whiting common shareholders will each receive 0.5774 shares of Oasis common stock plus $6.25 per share in cash for each share of Whiting common stock owned and Oasis shareholders are to receive a special $15.00 per share dividend. When the merger is finalized, current Oasis shareholders will own approximately 47% and Whiting shareholders will own roughly 53% of the combined company on a fully diluted basis.
The report stated that "the combined company will have a premier Williston Basin position with top tier assets across approximately 972K net acres, combined production of 167.8 Kboe/d, significant scale and enhanced free cash flow generation to return capital to shareholders."
When the merger of the two equals concludes, it is anticipated that the combined company will be headquartered in Houston and will begin operating under a new corporate name with its shares trading under a new ticker symbol on the NASDAQ. The report mentioned that after closing, Oasis' Chief Executive Officer Danny Brown will serve as president, chief executive officer and board member and Whiting's President and Chief Executive Officer Lynn Peterson will be appointed as executive board chair of the combined company.
Brown commented, "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. … 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 cashflow, execute a focused strategy and enhance the return of capital."
Peterson remarked, "We are bringing together two like-minded companies and cultures through a merger-of-equals transaction. Both organizations have outstanding talent and operational practices that we are excited to integrate to create an even stronger combined company. This is also an exciting and very positive development for the communities in which we operate and the great states of North Dakota and Montana. We look forward to unlocking the enormous potential of our assets and organizations for the benefit of our stakeholders."
The firms stated in the joint news release that the combined company will be well positioned for success in the current dynamic E&P environment by establishing a premier position in the Williston Basin with enhanced scale and high-quality assets. According to the announcement, the combined firm will be capable of producing 164-169 Mboe/d in 2022. The companies expect that the merger will deliver significant cost savings of about $65 million annually beginning in H2/23.
The report noted that the transaction has already been unanimously approved by each company's respective Board of Directors and is expected to close in H2/22, but remains subject to approval by both Whiting and Oasis shareholders along with ordinary customary closing conditions.
Whiting Petroleum is a Delaware registered company with operations based in Denver, Colo. The firm, which has a market cap of around $3.3 billion, is an independent oil and gas company that develops, produces, and acquires crude oil, NGLs and natural gas mostly in the U.S. Rocky Mountain area. The report listed that Whiting's largest producing properties are located in North Dakota and Montana within the Bakken and Three Forks shale plays.
Oasis Petroleum is also an independent exploration and production (E&P) company. The firm is headquartered in Houston and has significant high quality and sustainable long-lived assets in the Williston Basin. Oasis is focused on acquiring and developing U.S. onshore, unconventional crude oil and natural gas resources.
Oasis Petroleum started the day with a market cap of around $2.8 billion with approximately 19.38 million shares outstanding and a short interest of about 4.9%. OAS shares opened a little over 2% higher today at $147.83 (+$3.34, +2.31%) over Friday's $144.49 closing price and reached a new 52-week high price this morning of $157.6056. The stock has traded today between $145.46 and $157.6056 per share and is currently trading at $150.21 (+$5.72, +3.96%).
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