Buy Kodiak Oil & Gas Corp (USA) (KOG) Now And Ride It Higher By 2014: Continental Resources, Inc. (CLR), Phillips 66 (PSX)

Harold Hamm, Continental Resources, Inc. (NYSE:CLR)’ CEO, founder and Chairman, felt that crude oil would be more profitable than natural gas. He shifted the company’s resources to shale deposits that were suited to crude oil production, and the Bakken was a natural fit. Continental Resources, Inc. (NYSE:CLR)’ management continues to be bullish in the Bakken and believes that there is potential for over 24 BBoe recoverable. Even if this figure is over-optimistic, there is still plenty of oil to be produced from this play. I believe Continental Resources, Inc. (NYSE:CLR) is an excellent trade-off between  risk and reward in this sector.

Phillips 66 (NYSE:PSX) recently signed a 5-year contract with Global Partners LP, which will improve transportation infrastructure. “Global has established a ‘virtual pipeline’ for the reliable transportation of Bakken crude,” said Tim Taylor, Executive Vice President, Commercial, Marketing, Transportation & Business Development of Phillips 66 (NYSE:PSX). “Our five-year agreement with Global assures us long-term access to advantaged crude for our Bayway refinery through what we believe is a cost competitive origin-to-destination supply system to the East Coast.” Phillips 66 (NYSE:PSX) has a debt-to-equity ratio that is slightly higher than the industry average, but compensates with a strong operating cash flow of $4.3 billion. Refineries in the United States have been performing well by processing cheap U.S. oil, then selling at higher prices globally. The company could be affected by an economic downturn and a reduction in demand. However, I believe that U.S. crude will continue to be cheap, thus preserving operating margins, and I recommend the stock as a buy.

Kodiak has a simple business strategy that consists of drilling for oil in the Bakken and drilling for natural gas in the Green River Basin. However, despite the growth in revenue, earnings have not risen proportionately. But, to be fair, there were significant expenses that were outside of management’s control. Of the 10 analysts covering the stock, three have a buy rating, three have an out-perform rating, two are recommending accumulate, and only one analyst is neutral. I believe earnings growth will catch up with revenue growth. I recommend buying Kodiak Oil & Gas today.

The article Buy This Oil & Gas Stock Now And Ride It Higher By 2014 originally appeared on Fool.com and is written by Jordo Bivona.

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