Will Kodiak Oil & Gas Beat Out Continental Resources and Statoil in the Bakken?

Kodiak Oil & Gas (NYSE: KOG  ) will release its quarterly report on Thursday, and shareholders have been pleased to see the energy company trading at all-time highs recently. Yet as much as Kodiak earnings have benefited from its key position in the lucrative Bakken shale play, rivals Continental Resources (NYSE: CLR  ) and Statoil (NYSE: STO  ) have built up substantial positions in the Bakken as well.

Kodiak is a highly focused play on the Bakken, with the small player having just a fraction of the market capitalization of Continental Resources and its much more diversified portfolio of energy assets. Statoil and Continental have operations in other high-growth areas like Oklahoma's SCOOP formation and the Eagle Ford area of Texas. Yet for those who believe the Bakken is the best place to be, Kodiak offers just about the purest play you can find. Let's take an early look at what's been happening with Kodiak Oil & Gas over the past quarter and what we're likely to see in its report.

Stats on Kodiak Oil & Gas

Analyst EPS Estimate

$0.23

Change From Year-Ago EPS

77%

Revenue Estimate

$279.69 million

Change From Year-Ago Revenue

149%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will Kodiak earnings make investors happy this quarter?
In recent months, analysts have boosted their views on Kodiak earnings, raising third-quarter estimates by $0.03 per share and full-year 2014 projections by a dime per share. The stock has kept moving higher, rising more than 40% since late July.

Kodiak has already given investors an idea of what they can expect from its third-quarter results. Last week, it gave preliminary figures that indicated a jump in production of 54%, with expectations that it will end the year at a level almost 19% higher than that. Over the past three years, the company's production has risen almost 30-fold. Equally importantly, Kodiak has learned how to keep its costs down, and improved access to outside markets has helped it boost the price it gets for the oil it extracts from the region.

But like all oil plays, the Bakken has a finite lifespan, and some investors worry that the play might run its course sooner than others expect. With the natural rate of decline on shale oil plays being faster than that of shale gas, the current emphasis on liquids could lead to Bakken depletion on an accelerated basis. That has led Continental, Statoil, and Whiting Petroleum (NYSE: WLL  ) not to concentrate all their efforts on the Bakken, and eventually, it could force Kodiak to follow suit if it wants to survive after the region gets tapped out.

One huge advantage for Kodiak has come from its use of ceramic proppants over sand. Despite higher up-front costs, ceramics help it get more production from its hydraulic fracturing. Moreover, part of the reason its acquisition of Liberty Resources earlier this year made as much sense as it did is that Liberty had used ceramics in its original fracking operations.

Kodiak has also joined Continental in moving to multi-well pad drilling, and the results have allowed Kodiak to boost its completed-well counts while reducing the number of drilling days to complete them. Smart efficiency plays like this will become increasingly vital when production levels in the Bakken start to plateau and eventually fall.

In the Kodiak earnings report, watch to see whether the company gives any surprises after its early guidance. For longtime Bakken investors, Kodiak is still firmly on the upswing, and it'll be interesting to see if Kodiak keeps its pure-play status or starts to follow Continential, Statoil, and other players by building up a more diversified portfolio of assets.

Look beyond the Bakken
The Bakken isn't the only place where record oil and natural gas production has changed the landscape of the energy industry. The Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the oil patch. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Click here to add Kodiak Oil & Gas to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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