Kodiak Oil & Gas Races Ahead

Talk about your fast growth rates. Kodiak Oil & Gas (NYSE: KOG  ) generated 10 times the revenue in 2011 that it did just two years ago, buoyed by rising oil prices and a hard-charging expansion strategy that's starting to pay off. Although it missed analyst estimates, Kodiak has been growing so quickly that it should be expected to keep smashing through prior high-water marks throughout 2012 and beyond.

Let's look at the reported numbers, including future estimates, to figure out just how much potential is left for a stock that's jumped more than 3,000% since the end of 2008.

Tale of the tape
Kodiak's grown tremendously since those dark days, and a lot of it's been fueled by stock issuance, as shares outstanding almost have doubled over that time frame. That's something to keep an eye on as the company continues to drill new wells in the Bakken, but growth has a great way of making dilutive offerings seem less important. Here are some key figures from the company's latest report, and how they track its growth over the past three years:

Statistic

2011 Annual Result

Annualized Growth Rate From 2009 (Two Years)

Revenue $120 million 226%
Operating Income $42 million NM*
Net Income $4 million NM*
Oil Production 1,343,761 barrels 171%
Total Costs Incurred $606,000 370%

Source: Kodiak Oil & Gas Annual Report.
*NM = not meaningful; Kodiak posted a loss in 2009.

Other notable gains include increasing proven oil reserves 255% in the latest year to 35.6 million barrels, drilling 25 net new wells and completing 16, and an acquisition of 88,000 new acres that included 25 net productive wells and six more awaiting completion. Kodiak plans to double total costs incurred in 2012, which includes capital expenditures as well as acquisitions.

Kodiak is still a small player in the Bakken compared with early entrant Continental Resources (NYSE: CLR  ) , which claims 1,578 net productive wells, although its oil production is now ahead of Samson Oil & Gas (AMEX: SSN  ) , which managed to produce only 64,000 barrels of oil in its last fiscal year. Both companies also have significant natural gas assets, which Kodiak's largely ignored or flared off as it ramps up oil production.

Kodiak's plans for the upcoming year may very well result in double the oil extracted, if not more. That should be music to shareholders' ears, and with such sky-high growth rates, Kodiak could be a worthwhile buy for new investors as well.

Add Kodiak Oil & Gas to your Watchlist to get all the information we Fools can find on its continuing progress. Interested in broadening your oil-stock horizons with some other well positioned companies? Pick up your copy of The Motley Fool's free report on three more stocks for $100 oil. The price of oil is already past that threshold, so don't miss out on these opportunities. Find out more.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter, where he goes by @TMFBiggles, for more news and insights. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.


Read/Post Comments (3) | Recommend This Article (9)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 29, 2012, at 6:24 PM, TruffelPig wrote:

    Good article. I just didn't get the comparison to SSN. SSN is much smaller, maybe comparable to LEI. Also, KOG is an operator though while SSN and, e.g., NOG are not.

  • Report this Comment On March 01, 2012, at 10:08 AM, hanover67 wrote:

    While KOG's stock price has risen over the past two years, what could it have done without the hedging activities and massive stock issuance it has engaged in?

    In 2011 the company reported a "loss" of $20 million from its collar/hedging strategy, resulting in a reported net profit of $3.8 million, or 2 cents a share. Without that loss earnings would have been $23.8 million, or $.12 cents per share, 600% higher. And, if KOG had financed its acquisitions with (cheap) debt, it would not have issued a dilutive 73 million shares and earnings would have been $.18 per share, 900% higher.

    When does their hedging approach result in earnings for the shareholder?

  • Report this Comment On March 01, 2012, at 11:55 AM, birge1 wrote:

    oil cos have become "futures" dealers and "options" investors with hedges, something they are not much experienced with and obviously not much good at doing since they all "lose money" based on quirky accntg rules. and it comes from "debt" which forces them to make hedges protecting their estimated cash flow and thus debt service payments. when did the "tail start wagging the dog" ? more importantly, why do the cos allow it to continue ?

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