The company will acquire the leasehold interests and associated assets for about $85.5m that will be paid through the issuance of 2.5 million common shares of Kodiak and cash.

Kodiak will also assume the seller’s contract for a new build drilling rig and will reimburse the seller for its $2.5m cash deposit on the rig.

The company now expands its acreage position in the Williston Basin to about 95,000 net acres.

The acquisition includes operated working interest in two wells currently producing approximately 200 net barrels of oil equivalent per day.

Also included in the transaction are certain surface equipment and pipeline connection facilities that tie into a regional third-party natural gas gathering system.

Kodiak will be the operator of a majority of the drilling units on the leasehold to be acquired.

Including the acquisition, the company will have over 400 net, largely de-risked, undrilled locations in the Bakken and Three Forks formations across all of its Williston Basin leasehold.

The transaction, which is expected to be closed on or before 1 July 2011, is subject to the completion of customary due diligence and closing conditions, including the approval of the NYSE Amex.

Upon completion of the transaction, Kodiak will buy about 25,000 net mineral acres in McKenzie County, North Dakota, adjacent to and proximate to its core Koala, Smokey and Grizzly Project areas.