Kodiak Oil & Gas (NYSE: KOG ) has found a much-needed cash infusion, and the timing is perfect.
The upstream company, which operates in the Bakken shale play, is raising $650 million through a private offering of senior unsecured notes. It's also offering 42 million shares of its common stock, which should raise approximately $326 million. With nearly $1 billion more cash in hand, the company's growth prospects look exciting.
On the operational front, Kodiak intends to use the proceeds to primarily fund its acquisition of a whopping 50,000 net acres in the fertile Williston Basin, as well as finance its capital expenditure programs. That's the kind of thing I'd look forward to as an investor, especially given the company's progress so far.
Among the small caps operating in the Bakken, Kodiak has indeed been among the best. Keep in mind that the Bakken doesn't come cheap. Many a company had to wind down operations in this hot play because of rising costs. Newfield Exploration (NYSE: NFX ) had to "intentionally limit production" to cut costs. Decisions like that can have a telling effect in the long run.
With oil giants like Statoil (NYSE: STO ) entering the Bakken through acquisitions, not to mention the presence of established players like Continental Resources (NYSE: CLR ) and EOG Resources (NYSE: EOG ) , Kodiak's move shouldn't be surprising. The timing to raise cash after a fantastic third quarter is nothing less than perfect.
Management intends to increase production and exit this year with a daily production of 9,000 barrels of oil equivalent. And that's just the tip of the iceberg. Given the current rate of development and ample cash reserves, next year should be vital in the company's growth plans. Higher drilling activity should also be beneficial in the form of improved lease operating expenses.
Foolish bottom line
It looks like a win-win situation for management and investors alike. Fools should take note of this fundamentally strong company. If you'd like to keep track of Kodiak's latest news and analysis, add it to your watchlist. It's a free service of The Motley Fool.