Major Fourth-Quarter Developments for Kodiak Oil & Gas Corp (USA) (KOG)

With respect to its hedging strategy, the company continues to hedge production from new wells as they come online. For the remainder of the year, Kodiak has hedged 15,000 barrels, mainly through swaps, at an average price slightly less than $95 per barrel. The company has also hedged 5,000 barrels into 2014 at an average price of $92.

Final thoughts
While Kodiak may have missed Wall Street’s estimates, its fourth-quarter results show significant progress in several key areas. The company continues to see improvement in cutting costs, having reduced well costs by 15%-20% over the year and lease operating expenses by 30%.

While future expense reductions are expected to be smaller in magnitude, the company’s extensive technical knowledge of the Middle Bakken and Three Forks formations should serve it well in achieving further field-level efficiency improvements.

Going forward, Kodiak has an ambitious production target for this year, aiming to double average daily production from last year’s levels to 29,000-31,000 barrels per day. Having consistently increased both production and reserves over the past couple of years, Kodiak’s large inventory of roughly 950 net drilling locations should provide plenty of room for the company to ramp up production further.

With takeaway capacity from the Williston set to improve further and its drilling programs enjoying strong cash margins, Kodiak’s future looks promising. In the coming months, investors should closely watch the results of the company’s two new pilot programs, which will help shape the company’s future development strategy in the Williston Basin.

The article Major Fourth-Quarter Developments for Kodiak originally appeared on Fool.com.

Fool contributor Arjun Sreekumar has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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