HDR/NorthDakota, Bakken

Kodiak Keeps Charging Forward $KOG

What can you say about this company that hasn’t already been said.  They have consistently impressed the market and show no signs of slowing down.  If after the company has a good run its still a good buy then everyone is jumping on board.

Kodiak Oil and Gas (KOG) can be considered a buy based on two factors: an investor’s view of future Bakken oil prices and KOG’s ability to continue to both increase its production and reduce its well costs as CEO Lynn Peterson has said it will do, and as the company has been doing.

KOG has achieved a hockey-stick increase in Bakken oil production from 3,953 BOE/D in the third quarter of 2011 to 15,855 BOE/D in the third quarter of 2012. Operating income increased similarly, from $11.3 million in 3rd quarter of 2011 to $36.3 million in the third quarter of 2012. Although the stock has a steep trailing price-earnings ratio of 37, its forward price-earnings ratio is 12.5. Discounted in its current share price is KOG’s solid position as one of the leading drillers in a prime US oil basin. Lagniappe is its status as a potential takeover target. Owning KOG is as close as an investor can get to owning oil without possessing the physical barrels.

KOG has a robust 53% ratio of liabilities to assets, 155,000 net Bakken acres, and expects to exit 2012 producing 27,000 BOE/D. Its current production is about 20,000 BOE/D, and 86% of its reserves are oil.

Bakken/Three Forks Reserves & KOG Position

In just a year, North Dakota has grown from the fourth largest oil-producing state to the second-largest, following only Texas, ahead of Alaska and California, and larger than OPEC member Ecuador. The driver behind all this activity is a sevenfold, and growing, increase in crude oil production, to 700,000 barrels per day (August 2012). If oil prices stay strong, industry estimates are that Bakken production will grow to over a million barrels per day (BPD) and ultimately could be sustained for several years at two million BPD. Crude oil is 86% of KOG’s reserve mix and was 95% of its revenue in the first nine months of 2012.

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