Whiting Sells Shares | Russell T. Rudy Energy LLC
In what appears to be an emerging trend among shale operators, Whiting Petroleum Corp. announced its intention to sell up to 40.3 million shares in order to raise $1.9 billion, according to a recent article in “World Oil”. The proceeds would be used to reduce short term revolving debt, much of which was incurred to acquire Kodiak Oil and Gas Corporation last year for $3.8 billion.
The Kodiak acquisition catapulted Whiting past Continental Resources Inc. to become the largest operator in the Bakken shale in North Dakota. However, with the collapse of crude oil prices, Whiting has been forced to reduce expensive short term debt. Rather than issue additional stock that would dilute the value of existing shareholders, Whiting tried to sell itself to ExxonMobil Corp., Continental Resources, Hess Corp., and Statoil ASA. However, Whiting valued itself at more than potential suitors were willing to pay. Consequently, it now has to issue shares to raise capital.
Selling shares seems to be an emerging trend. In the first quarter of 2015 shale operators have issued $8 billion in additional equity to shore up finances. This would seem to make sense when the other options are expensive borrowing or selling assets at bargain basement prices. At this rate, sales of new stock will surpass the total for 2008 and 2009 combined, the last time crude prices crashed.
To read the article in its entirety, please go to http://www.worldoil.com/news/2015/3/24/no-deal-for-shale-driller-whiting-as-company-sells-shares .
