Photo credit: Kodiak Oil & Gas

Bakken Shale focused Kodiak Oil & Gas Corp. (NYSE: KOG) is out with its 2014 capital-spending plans. The company sees 2014 as the start of a new chapter as it's moving away from the company's foundation with a new focus that will see Kodiak develop resources with an eye toward maximizing returns. Let's take a closer look at what investors can expect from Kodiak Oil & Gas in the future.

The details
Kodiak Oil & Gas anticipates spending $940 million in the Williston Basin in 2014. That's about $60 million less than it spent in 2013. But the company sees these funds fueling a 45% increase in its production for the year. While that's below the 182% compound annual growth rate the company had enjoyed since 2010, that rate couldn't go on forever as it was off a very low base.

Kodiak expects to drill about 100 net wells in 2014, which is about the same number it drilled in 2013. The company can achieve that as its well costs will average about $8.9 million per well next year. That's very good progress for a company that had spent an average of $12 million per well in August 2012. That said, Kodiak Oil & Gas isn't drilling its wells as cheaply as peers Continental Resources (CLR) or Oasis Petroleum (OAS), which expect 2014 well costs of $7.5 million and $7.5 million, respectively. But the reason Kodiak's wells cost more is because it has chosen to use more expensive ceramic proppants, which boosts its initial production and estimated ultimate recoveries.

The new chapter
What's also different about this year's capital-spending plan is how the company will pay for it. Previously, Kodiak had used its access to the capital markets to pay for its spending plans since the company typically funded its capex through its credit facility. This year, however, Kodiak Oil & Gas believes its operating cash flows should closely align with its capital-spending plan.

Basically, what this means is that Kodiak Oil & Gas can afford to pay for its growth out of its cash flow, instead of using debt to fuel its growth. That switch really makes investing in Kodiak a whole lot less risky going forward.

Is the Bakken story changing?
We are starting to see an interesting shift in the Bakken as falling well costs are enabling producers to spend less money to drill the same amount of wells. Oasis Petroleum is a great example of this change. In 2012 the company spent just over a billion dollars to drill 105.6 net wells. This past year Oasis Petroleum expects to drill 105.8 net wells, but only spend $897 million. That's the same number of wells for $111 million less.

These efficiencies also enable a company like Continental Resources to drill 22% more total net wells in 2014 while growing its development-drilling budget by just 12%. So, while it might appear that Kodiak Oil & Gas is becoming less aggressive, that's only because falling well costs allow the company and its peers to do more with less.

Investor takeaway
The move from building the company to focusing on returns should be what fuels Kodiak's stock price in the year ahead. The company has built a solid foundation, and by maximizing the potential of these assets it will earn better returns for its investors. While a lot can change as the year progresses, Kodiak looks solid as it heads into 2014.