Watch List: KOG
Posted: Sun Jun 12, 2011 1:37 pm
I have updated the Kodiak Net Income and Cash Flow Forecast which can be found under the Watch List Tab.
Kodiak will probably report somewhat disappointing 2nd quarter results. I do not see them hitting the current First Call earnings per share estimate of 6 cents unless oil prices are lower on June 30, causing them to report a large gain on their hedges. < Very confusing accounting rules aren't they.
KOG's 4 cent loss in Q1 was all caused by the non-cash mark-to-market loss on their hedges. Cash flow was over 4 cents per share. Earning are meaningless for an E&P company in the early stages of a large drilling program. I know this is very hard to grasp but it is true. Add in the ridiculous "post-Enron" accounting rules for dirivatives and the income statement become even more confusing.
Kodiak is all about reserve grow (real value) at this stage but impressive earnings are not far off. See the 2012 forecast. It looks like KOG could report $1.00 earnings per share next year.
It was extremely wet in North Dakota during April and May so lots of well completions were pushed back. It is impossible for me to know how much this affected KOG but I bet it did. Well completions will catch up in the 3rd quarter.
Take a hard look at the forecast model attached and you will see that production is going to ramp up sharply in Q3 and Q4 as they catch up on well completions. This will be the same for all of our Bakken companies.
In my opinion, KOG is worth $8.00/share today.
> They have very good acreage blocks with over 300 low risk Bakken / Three Forks locations
> Ramping up to four operated rigs + one non-operated rig by the end of June
> KOG expecting to complete 23 net new wells this year that should all come on-line at high rates but decline rapidly. Each new well should aff about 500,000 boe of proven reserves.
> They are telling the market that production will average 5,500 boepd this year but I think it will be more like 4,500 boepd. 1st quarter production came in under guidance and so will 2nd quarter. It will ramp up sharply in Q3 so hang tough.
> If they do manage to hit their production target and oil prices stay high, the share price should be over $10 within 8 months.
> KOG should book a very impressive reserve addition at year-end.
> Very strong balance sheet so they should not have to issue more shares.
We should be posting an updated company profile for KOG next week, so watch for it.
Kodiak will probably report somewhat disappointing 2nd quarter results. I do not see them hitting the current First Call earnings per share estimate of 6 cents unless oil prices are lower on June 30, causing them to report a large gain on their hedges. < Very confusing accounting rules aren't they.
KOG's 4 cent loss in Q1 was all caused by the non-cash mark-to-market loss on their hedges. Cash flow was over 4 cents per share. Earning are meaningless for an E&P company in the early stages of a large drilling program. I know this is very hard to grasp but it is true. Add in the ridiculous "post-Enron" accounting rules for dirivatives and the income statement become even more confusing.
Kodiak is all about reserve grow (real value) at this stage but impressive earnings are not far off. See the 2012 forecast. It looks like KOG could report $1.00 earnings per share next year.
It was extremely wet in North Dakota during April and May so lots of well completions were pushed back. It is impossible for me to know how much this affected KOG but I bet it did. Well completions will catch up in the 3rd quarter.
Take a hard look at the forecast model attached and you will see that production is going to ramp up sharply in Q3 and Q4 as they catch up on well completions. This will be the same for all of our Bakken companies.
In my opinion, KOG is worth $8.00/share today.
> They have very good acreage blocks with over 300 low risk Bakken / Three Forks locations
> Ramping up to four operated rigs + one non-operated rig by the end of June
> KOG expecting to complete 23 net new wells this year that should all come on-line at high rates but decline rapidly. Each new well should aff about 500,000 boe of proven reserves.
> They are telling the market that production will average 5,500 boepd this year but I think it will be more like 4,500 boepd. 1st quarter production came in under guidance and so will 2nd quarter. It will ramp up sharply in Q3 so hang tough.
> If they do manage to hit their production target and oil prices stay high, the share price should be over $10 within 8 months.
> KOG should book a very impressive reserve addition at year-end.
> Very strong balance sheet so they should not have to issue more shares.
We should be posting an updated company profile for KOG next week, so watch for it.