The Bakken Shale area in western North Dakota has been an instrumental part of the renaissance in U.S. energy production, and Kodiak Oil & Gas Corp (USA) (NYSE:KOG) has been at the epicenter of the frenzied production activity going on in the play. Let’s take an early look at what’s been happening with Kodiak Oil & Gas Corp (USA) (NYSE:KOG) over the past quarter and what we’re likely to see in its quarterly report.
Stats on Kodiak Oil & Gas
| Analyst EPS Estimate | $0.14 |
| Change From Year-Ago EPS | 75% |
| Revenue Estimate | $176.28 million |
| Change From Year-Ago Revenue | 121% |
| Earnings Beats in Past 4 Quarters | 2 |
Source: Yahoo! Finance.
Will Kodiak Oil & Gas strike it rich this quarter?
In recent months, analysts have largely held their ground on Kodiak’s earnings prospects, holding their first-quarter estimates unchanged but boosting their full-year 2013 consensus by a penny per share. The stock, though, has reflected far less optimism among investors, falling more than 12% since late January.
We’ve already gotten a strong idea of what Kodiak Oil & Gas Corp (USA) (NYSE:KOG)’s first-quarter numbers will look like from its preliminary sales update. The company said that it more than doubled production from last year’s first quarter to 21,700 barrels per day. That leaves Kodiak well behind regional leader Continental Resources, Inc. (NYSE:CLR) and its levels of roughly triple Kodiak’s output, but with 18 net wells completed and expectations for 75 net wells for the year, Kodiak Oil & Gas Corp (USA) (NYSE:KOG) expects another 35%-45% of production growth by the end of the year.
Kodiak’s operational characteristics give investors a good idea of both its strengths and its weaknesses. It drills wells very quickly but without the same regard for cost that Continental Resources, Inc. (NYSE:CLR) and Whiting Petroleum Corp (NYSE:WLL) have. If Kodiak could cut its costs by 20% to get into the same $8 million per well league as Continental Resources, Inc. (NYSE:CLR) and Whiting, it could cut $150 million of its capital expenditures for drilling activity in 2013 alone.
One smart move that Kodiak Oil & Gas Corp (USA) (NYSE:KOG) has pursued is making improvements to its wastewater treatment infrastructure, especially by adding saltwater disposal injection wells of its own. Heckmann Corporation (NYSE:HEK) and other outside providers have had great success providing water services to drilling companies, but by moving more of those services in-house, Kodiak has the potential to produce substantial savings.
In Kodiak’s report, pay close attention to any hints the company gives about potential merger and acquisition activity. Whether Kodiak is a buyer or a target, consolidation in the Bakken seems inevitable and could have a big impact on your investment returns.
The article Can the Boom Continue for Kodiak Oil & Gas? originally appeared on Fool.com and is written by Dan Caplinger.
Motley Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool owns shares of Heckmann and has the following options: Long Jan 2014 $4 Calls on Heckmann and Short Jan 2014 $3 Puts on Heckmann.
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