Oil-Focused Energy Stocks Continue Capital Spree

Investors can't get enough of exploration and production companies levered to oil and other liquid hydrocarbons, as many companies recently raised capital to help fund development programs planned for 2011.

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Kodiak Oil and Gas (NYSE:KOG) issued common stock in a secondary offering in December 2010. The company was originally planning to offer 20 million shares but due to strong interest from investors, increased the offering to 25 million shares at $5.50 per share. The underwriters exercised the full overallotment on the offering of an additional 3.75 million shares, yielding net proceeds to Kodiak Oil and Gas of $149.4 million.

Kodiak Oil and Gas is pursuing oil development on its acreage in the Williston Basin, where the company is developing the Bakken and Three Forks formations.

Linn Energy (Nasdaq:LINE) closed on the sale of 10 million limited liability company interests at a price of $35.92 per unit. The company received approximately $344 million in proceeds from the offering.

Linn Energy announced a $480 million capital budget for 2011 and will focus that capital on the Granite Wash and Permian Basin. Wells from these areas produce mostly oil or natural gas, with significant amounts of natural gas liquids.

Linn Energy has successfully accessed the capital markets all through 2010, and raised $2.3 billion from the sale of bonds and $431 million in equity, not including the most recent offering.

Carrizo Oil & Gas Inc. (Nasdaq:CRZO) also announced an offering of common stock and will sell 3.5 million shares to the public. Although the company is primarily a natural gas company with core operations in the Barnett Shale, the company will increase the amount of capital in 2011 spent in the Eagle Ford Shale and Niobrara Shale, two plays with oil and liquids reserves.

Concho Resources (NYSE:CXO) is already primarily an oil focused exploration and production company and recently raised both equity and debt to help fund the continuation of that focus in 2011. The company raised $600 million in a senior note issue due in 2021, and also raised approximately $227.4 million in net proceeds from a common stock offering. The company issued 2.875 million shares, including over allotments, at $82.50 per share.

Concho Resources announced its capital budget in November 2011, and has allocated $1.1 billion in capital for the year. This will be enough for the company to operate an average of 29 rigs in 2011 on its acreage in Texas and New Mexico, and most of the budget is dedicated to properties that produce oil.

The Bottom Line
Exploration and production companies that focus on oil and other liquid hydrocarbons have easy access to capital in the equity and bond markets, as investors continue to favor these commodities over natural gas. (For more, check out our Oil & Gas Industry Primer.)

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