Why Kodiak Oil & Gas can Make You Rich
Anmol is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Kodiak Oil & Gas (NYSE: KOG) is an independent energy exploration and development company focused on exploring, developing ,acquiring and producing oil and natural gas in the Williston and Greater Green River Basins in the U.S. Rocky Mountains. Its Headquarters are located in Denver. The primary function of the board of directors is therefore oversight - defining and enforcing standards of accountability that enable the CEO and senior management to execute their responsibilities fully and in the interests of the Company's shareholders. Kodiak has an asset base of proven reserves as well as high potential rigs . Kodiak has 169,000 net acres under lease which includes 157,000 net acres in the Bakken region of the Williston basin of North Dakota and Montana.
Alright enough about the company, now let me tell you why this stock can double or even triple by the end of 2013 thus making you very rich in the process. If you invested $100,000 since the company's inception it would now fetch you just around $246,000. Kodiak traded at around $3.33 in may of 2006 and made its 52 week high of $10.75 on Feb. 24,2012, but even if you take today's closing price of $8.21 , that’s a gain of roughly 146% and I think it still has potential to double from here.
Kodiak has grown its sales at an average rate of 83% in the last 5 years and have grown this year alone at a rate of 287% as sales surged from $11 million in 2009 to $120 million in 2011. Kodiak also has 66% institutional ownership which shows that the big money is still in it. In fact Louis Moore Bacon of Moore Capital Management, has been upping its stake in KOG recently . KOG projected growth rates are 250% and 68% for 2012/2013 and has an estimated 3-5 year EPS growth rate of about 50%.
Kodiak's net income in 2009 was at a loss of $3 million but in 2011 it has improved significantly to a profit of $4 million in 2011, Cash flow per share also has improved from $0.01 in 2009 to $0.32 in 2011. The company has an EPS growth rate of 205.75% with a operating profit margin of 36%.
By 2013 I expect Oil to be trading around $100 which would vastly improve KOG's bottom line.
Other Reasons to be Bullish
Kodiak estimates that its acreage holds 817 potential drilling locations in the Williston Basin, which includes the Bakken and the Three Forks formation.
The company, last month, priced a private offering of $50 million in principal amount of senior notes due 2019 in a private placement to investors. This move by KOG gave Kodiak leverage to move forward using the net proceeds of the offering to repay all of the outstanding debt under the company's first line credit agreement, to fund capital expenditure for development and infrastructure.
The company also mentioned that the progress of its wells is better than expected in its interim report.
And for the speculators out there, KOG's net acreage makes it a very high potential buyout candidate. Statoil (NYSE: STO) bought Brigham Exploration last year and KOG might be bought out as well considering the value of it assets and net acreage.
Bottom Line : KOG makes for a great investment and is also a great trading stock , It has been hit lately due to the lower oil prices, but once Oil rallies , KOG will rally with it and would probably go even higher. Its high beta of 3.35 means that if the market rallies, KOG would go 3x higher if the beta holds, but perhaps that’s what's holding people back since it would also mean that it is likely to get hit 3x more when the market goes down. But if you can sit tight and not get worried about the volatile ride, I think you will be very happy in the long run.
Anmolsc owns shares of Kodiak Oil & Gas. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Statoil (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.