We Live In A Kodiak Eat Kodiak World $KOG
We’ve said it once (actually more then once) and we will said it again, actually many more times; Kodiak Oil & Gas is a buy. Featuring it August 2011 and again several times since the stock has advanced from the mid-$5’s to nearly $11 in February on to dip and rebound over $9 currently. We feel it is only a matter of time and this high will be tested again. Digest this research if your not already convinced.
Kodiak Oil & Gas (KOG) put in a strong second quarter, with earnings per share of $0.10 in line with analyst expectations and a slight improvement over the first quarter of this year, when Kodiak reported earnings per share of $0.09, slightly below analyst expectations, again at $0.10. Kodiak’s revenues are tracking upward steadily, but its total proved reserves are increasing by leaps as the company drills its inventory and is able to report major successes on its leaseholds.
The trend in its proved reserves also owes much to Kodiak’s acquisitions strategy, which contributed to 40% gains in total acreage in each of the last two years. These acquisitions came at a good time, well before recent spikes in lease prices, and will allow Kodiak room for strong growth on its current position.
Kodiak is currently trading around $9, with a price to book of 2.4 and a forward price to earnings of 9.1, as compared to its closest competitor, Northern, which is trading around $18 with a price to book of 2.0 and a forward price to earnings of 14.1. For reference, SandRidge is trading around $7, with a price to book of 1.2 and a forward price to earnings of 15.2. Chesapeake is trading around $19 with a price to book of 0.9 and a forward price to earnings of 10.0, showing that the stock is sliding along with Chesapeake’s revenues.
On the healthy side of the balance sheet, Continental is trading around $74 with a price to book of 4.8 and a forward price to earnings of 16.0. While Continental is a strong company and investors are rewarding it for another quarter of strong earnings, I believe this reflects an overvaluation on Continental given its segmented strategy and consistent but relatively low growth rate.
Kodiak’s early entry on the Williston allowed it to begin accumulating significant acreage at reasonable prices, but as more players pour into this basin I think Kodiak’s chances for significant growth on the play outside its current acreage are slim. Fortunately, Kodiak has an expansive drilling inventory with its leasehold, and can fuel near term growth from what it already has. Along with this, I think that once Kodiak really starts the ball rolling on its drilling schedule, an expansion outside of the Williston is more than possible. At current prices Kodiak is a great buy.
Photo Credit: http://kbeacon.com/2011/10/be-very-afraid.html
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