Stock pick: Whiting Petroleum (WLL) is Bakken’s emerging big shot

US$3.8 billion purchase of Kodiak Oil & Gas makes it number one in the region

Chart showing trailing 12-month stock performance of Whiting Petroleum Corp

If you’re thinking about adding some U.S. energy exposure to your portfolio, then take a look at Denver’s Whiting Petroleum Corp. (NYSE: WLL).

The $10 billion market-cap company is an independent oil and gas producer that has operations in the Rocky Mountains, the Permian Basin, Gulf Coast and other areas across the U.S. Until just a few days ago, it was also the second largest oil producer in North Dakota.

On Sunday, July 13 the company announced that it was buying Kodiak Oil & Gas Corp. for $3.8 billion in stock. Once that purchase is complete, Whiting will become the largest player in North Dakota’s Bakken region.

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Analysts, who were already bullish on the business, are excited about the acquisition. John Freeman, an analyst at Raymond James and who has an outperform rating on the company, likes the deal because it adds a lot of “high-quality’ inventory at a reasonable price and he thinks that Kodiak’s assets will be more valuable under Whiting’s control.

The deal shouldn’t add to much pressure to Whiting’s balance sheet either. It currently trading at 1 times net debt-to-trailing twelve month EBITDA and that should only increase to 1.6 times post-purchase in Q4 2014, he wrote in a July 14 report.

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Once the deal is done, Whiting has said that it will increase Kodiak’s rig count from seven to 12 and that it will be able to reduce well costs on Kodiak’s inventory by about $700,000 per well.

With Kodiak’s wells now added to Whiting’s production numbers, Philip Jungwirth, an analyst with BMO Capital Markets, thinks that the company can produce about 52% more oil in 2015 and 62% more in 2016. Earnings per share should also grow by 30% between 2014 and 2015.

This company looked attractive to beging with, but it’s even better after the Kodiak purchase. It’s currently trading at $84 a share, but Jungwirth thinks it can hit $90 over the next 12 months, while Freeman expects it to be at $106 by this time next year.