3 Market Crushing Energy Stocks From This Week

This Week in Energy

• US Refining runs for week averaged 16.6 mmb/d, highest in 25 years• US enforces sanctions on Rosneft & Novatek• Obama Admin. considering allowing seismic testing in Atlantic

Energy sector up 0.59% as US Refining processes most crude since 1989

3 Companies Destroying the Market

NASDAQ: WLB up 9.78%

NYSE: WLL up 6.65%

NYSE: KOG up 5.49%

Westmoreland Coal Co.Why is it up this Week?

• Company issued 1.46 million new shares 4% below market value

Huh?!?

Westmoreland Coal Co.Who is it?Westmoreland Coal is a coal producer with a majority of its production in the Northern United States, in April it completed the purchase of 7 mines in Canada

Pros: • 1 of 2 major US coal producers

growing revenue and EBITDA • No exposure to weakest coal market

(Central Appalachia)

Cons: • Coal is a really rough market• Extremely high debt load

Westmoreland Coal Co.Does this week matter in the big picture?

By issuing new shares, company was able to raise about $52 million that can be used to pay down debt

If the company could reduce its debt payments, it could potentially turn a profit

Whiting Petroleum

Why is it up this Week?• Whiting Agreed to Purchase Bakken-centric

producer Kodiak Oil & Gas for $6 billion– Each share of Kodiak will be worth 0.177 shares of

Whiting– Whiting will assume all of Kodiak’s debt

Whiting PetroleumWho is it?Thanks to deal with Kodiak, Whiting is the largest producer of oil & gas in the Bakken shale formation

Pros: • Overlapping acreage positions could create

operational synergies• Bakken is one of the best tight oil drilling

locations in the coutnry

Cons: • New regulations on natural gas flaring

could increase costs• Neither company is generating free cash

flow

Whiting PetroleumDoes this week matter in the big picture?

Not only did Whiting buy Kodiak for less than market price for its shares, but it also bought it for 8.5x EBITDA, less than the 11.5x average for deals of this size in recent years

Purchase more than doubles Whiting’s future drilling locations

Kodiak Oil & Gas

Why is it up this Week?• Despite the fact that that the implied price

for Kodiak under the purchase agreement with Whiting is $13.90, investors pushed shares of Kodiak all the way to $16.01– Someone must be excited about the two joining

forces

Kodiak Oil & GasWho is (or in this case was) it?Oil and gas producer with 100% of its operations in the Bakken shale formation and future exploration in Green River Basin

Pros: • Combined company can dedicate more capital to

Kodiak’s development program• Whiting has tech advantage that could increase

output & recovery at Kodiak wells• Kodiak benefits from Whiting’s credit rating,

lowering the cost of capital

Cons:• Purchase was made at a slight discount to

market price

Kodiak Oil & GasDoes this week matter in the big picture?

There was probably a reason that Kodiak sold for the price that it did. Perhaps it’s debt was becoming onerous or the new North Dakota flaring regulations would take too much of a toll on its operations

By joining forces with Whiting, it will help better address these issues and provide a more stable long term outlook

How You Can Profit from America’s Energy Tax

“Loophole”…