Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Kodiak Oil & Gas Corp (1322866) 10-Q published on Nov 06, 2014 at 4:04 pm
Reporting Period: Sep 29, 2014
In August 2014, the Financial Accounting Standards Board issued ASU 2014-15, which sets forth authoritative guidance that requires management to evaluate whether there are conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the entity’s financial statements are issued, or within one year after the date that the entity’s financial statements are available to be issued, and to provide disclosures when certain criteria are met. This guidance is effective for the annual period ending after December 15, 2016, early adoption is permitted. We are currently evaluating the impact of this new standard, however, we do not expect adoption to have a material impact on our consolidated financial statements.
Subsequent to the announcement of the Arrangement, seven purported class action lawsuits have been filed on behalf of the Company's shareholders in the United States District Court for the District of Colorado: Quigley and Koelling v.Whiting Petroleum Corporation, et al., Case No. 1:14-cv-02023, filed July 22, 2014 (the plaintiffs voluntarily dismissed this lawsuit on September 24, 2014); Fioravanti v. Krysiak, et al., Case No. 1:14-cv-02037, filed July 23, 2014 (the plaintiffs voluntarily dismissed this lawsuit October 24, 2014); Wilkinson v.Whiting Petroleum Corporation, et al., Case No. 1:14-cv-2074, filed July 25, 2014 (the plaintiffs voluntarily dismissed this lawsuit on October 23, 2014); Goldsmith v. Krysiak, et al., Case No. 1:14-cv-2098, filed July 29, 2014 (the plaintiffs voluntarily dismissed this lawsuit on October 31, 2014); Rogowski v.Whiting Petroleum Corporation, et al., Case No. 1:14-cv-2136, filed July 31, 2014 (the plaintiffs voluntarily dismissed this lawsuit on October 20, 2014); Reiter v. Peterson, et al., Case No. 1:14-cv-02176, filed August 6, 2014; Sohler v. Whiting Petroleum Corporation, et al., Case No. 1:14-cv-02863, filed October 20, 2014 (the “Sohler Case”); and one purported class action lawsuit has been filed on behalf of the Company's shareholders in Denver District Court, State of Colorado: The Booth Family Trust v. Kodiak Oil & Gas Corp., et al., Case No. 14-cv-32947, filed July 25, 2014. This last case was removed to the United States District Court for the District of Colorado on September 4, 2014 and is pending in that court now as Case No. 1:14-cv-2457. It is possible that other related or amended suits could subsequently be filed. The defendants have filed motions to dismiss with prejudice in the all remaining cases other than the Sohler Case. The allegations in the three remaining lawsuits are similar. They purport to be brought as class actions on behalf of all shareholders of the Company. The complaints name as defendants the individual members of the Company's board of directors, Whiting and Whiting Canadian Sub and list the Company as a nominal party or a defendant. The complaints allege that the Company's board of directors breached its fiduciary duties to the Company's shareholders by, among other things, failing to engage in a fair sale process before approving the Arrangement and to maximize shareholder value in connection with the Arrangement. Additionally, the Sohler Case alleges violations under Sections 14(a) and 20(a) of the Exchange Act and SEC Rule 14a-9 promulgated thereunder. Specifically, the complaints allege that the Company's board of directors undervalued the Company in connection with the Arrangement and that the Company's board of directors agreed to certain deal protection mechanisms that precluded the Company from obtaining competing offers. The complaints also allege that Whiting and Whiting Canadian Sub aided and abetted the Company's board of directors’ alleged breaches of fiduciary duties. The Sohler Case alleges additionally that in issuing the preliminary joint proxy statement/circular the Company's board of directors violated the cited sections of and rule promulgated under the Exchange Act. The complaints seek, among other things, injunctive relief preventing the closing of the Arrangement, rescission of the Arrangement or an award of rescissory damages to the purported class in the event that the Arrangement is consummated, and damages, including counsel fees and expenses. Whiting and the Company believe each lawsuit is without merit.
On July 13, 2014, we entered into the Arrangement Agreement with Whiting and Whiting Canadian Sub whereby Whiting Canadian Sub would acquire all of the outstanding Kodiak Common Shares as part of a plan of arrangement. In connection with the Arrangement, Whiting solicited and received the required consents through its Consent Solicitations of the holders of our Senior Notes, to adopt certain amendments to the Indentures under which the Senior Notes were issued. In connection with the Consent Solicitations, Whiting offered to (i) issue an unconditional and irrevocable Whiting Guarantee of the prompt payment, when due, of any amount owed to the holders of the Senior Notes under the Senior Notes and the Indentures and any other amounts due pursuant to the Indentures and (ii) make a cash payment in respect of consents delivered in the Consent Solicitations (the “Consent Solicitations and Offers to Guarantee”). The Consent Solicitations and Offers to Guarantee expired at 5:00 p.m., New York City time, on October 17, 2014 and all required consents were received.
On October 17, 2014, the Company, Whiting, the Company’s subsidiary guarantors, U.S. Bank National Association, as trustee, and Computershare Trust Company of Canada, as Canadian trustee, entered into a supplemental indenture to each Indenture that includes the amendments to the Indenture and the Whiting Guarantee. These supplemental indentures became effective on October 17, 2014, but the amendments will not become operative and the Whiting Guarantee will not be issued until the completion of the Arrangement.
On a per unit basis, LOE increased from $6.28 per barrel sold in the third quarter of 2013 to $10.50 per barrel sold in the third quarter of 2014. The increase in LOE per barrel is partially a result of the normal decline in production, as our portfolio of producing wells ages, without a corresponding decrease in the ongoing fixed costs to operate these wells. Our LOE during the third quarter was also impacted by an increase in oil field service costs, particularly with respect to workover operations, and costs associated with winterization. As our well spacing declines, our LOE per barrel will also be negatively impacted by frac protection work, due to the need to shut in wells to avoid damage caused by completion work on adjacent wells. As a result of these protective measures, we temporarily reduce production from shut-in wells and then incur additional costs to bring the wells back onto production. As a result of these factors, LOE fluctuates between quarters as a result of the timing of expenses and realization of the corresponding production.
On a per unit basis, LOE increased from $6.46 per barrel sold in the first nine months of 2013 to $9.17 per barrel sold in the first nine months of 2014. The increase in LOE per barrel is partially a result of the normal decline in production, as our portfolio of producing wells ages, without a corresponding decrease in the ongoing fixed costs to operate these wells. Our LOE during the third quarter was also impacted by an increase in oil field service costs, particularly with respect to workover operations, and costs associated with winterization. As our well spacing declines, our LOE per barrel will also be negatively impacted by frac protection work, due to the need to shut in wells to avoid damage caused by completion work on adjacent wells. As a result of these protective measures, we temporarily reduce production from shut-in wells and then incur additional costs to bring the wells back onto production. As a result of these factors, LOE fluctuates between quarters as a result of the timing of expenses and realization of the corresponding production.