U.S.-based hydrocarbon exploration companies Oasis Petroleum, Inc. (NASDAQ: OAS) and Whiting Petroleum Corp. (NYSE: WLL) have signed an agreement to merge in a transaction of equals.
The merged company will have an enterprise value of approximately $6 billion, production of 167,800 barrels of oil equivalent per day, and top-tier assets spread across nearly 972,000 net acres.
As per the terms of the agreement, for each common share of Whiting, its shareholders will get $6.25 in cash and 0.5774 common shares of Oasis. Meanwhile, shareholders of Oasis will receive $15 per share as a special dividend.
Once the transaction concludes, shareholders of Oasis will hold around 47% of the merged company and Whiting shareholders will own the remaining 53%. Further, the combined firm will get a new name and a new ticker for trading on the NASDAQ. It will be based out of Houston with an office in Denver.
Following the completion of the merger, Lynn Peterson, the President and CEO of Whiting, will become the Executive Chair of the Board of the combined company. Moreover, the CEO of Oasis, Danny Brown, will become the President and CEO as well as a Board member.
Brown said, “Over the last year, both companies have executed a series of deliberate strategic transactions, reducing costs and establishing a leading framework for ESG and return of capital. The combination of the two companies, together with the ongoing momentum from these strategic actions, will accelerate our efforts and ideally position the combined company to generate strong free cash flow, execute a focused strategy and enhance the return of capital.”
The merger, which is expected to close in the second half of this year, is likely to generate a free cash flow of almost $1.2 billion this year and annual operational and administrative cost synergies of $65 million by the second half of next year.
Delaware-based Whiting is an oil and gas company engaged in the development, production and acquisition of crude oil, natural gas liquids and natural gas primarily in the Rocky Mountains region of the U.S.
Based out of Texas, Oasis is an exploration and production company focused on the acquisition and development of unconventional onshore oil and natural gas resources. Its projects are located primarily in the Williston Basin and the Delaware Basin in West Texas.
Following the announcement on Monday, OAS stock gained 5.5% to close at $152.45. However, it lost 0.3% in after-hours trading to end the day at $152.
Wall Street’s Take
Following the merger announcement, Truist Securities analyst Neal Dingmann maintained a Buy rating on the stock and lowered the price target to $180 from $207 (18.1% upside potential).
Additionally, John Gerdes of MKM Partners reiterated a Buy rating on Oasis and raised the price target from $170 to $178 (16.8% upside potential).
Overall, the stock has a Strong Buy consensus rating based on 5 Buys and 1 Hold. The average OAS price target of $172.17 implies 13% upside potential. Shares have gained 172.5% over the past year.
TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on Oasis, as 32% of investors on TipRanks increased their exposure to the stock over the past 30 days.
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