Kodiak Oil & Gas (KOG) is one oil and gas stock that has been on the rise ever since the huge drop in crude oil prices in October 2011 that so negatively affected the business as a whole. With many great things going for Kodiak, it is no wonder the company has been doing comparatively well when placed next to other companies for analysis. Kodiak increased both profit and production exponentially over the course of two years. Yet, I believe Kodiak has seen its rise and will begin to slow down. The opportunities it offers investors going forward will fall short of its peers.
With Kodiak's recent growth and profits, I think we will possibly see some incremental short-term gains as long as the bottom does not fall out. Overall, the stock has begun to settle. In the case of these smaller oil companies, bad times can be totally detrimental. So keep that in mind that if you are considering a new position in the stock, as it can backfire greatly. Competition is fierce in the markets in which Kodiak completes, but the company has a stellar management team led by Lynn Peterson, who has successfully helped lead other entities through oil and gas booms and busts in the 1980s and 1990s. The company has been developing its reserves at this point, but I believe Kodiak has already run its course and will flatten out.
SandRidge Energy (SD) has had quite a different past two years, as it took a major dip in August 2011 and just cannot see light at the end of the low stock price tunnel. One of the problems associated with SandRidge is that it is widely ignored among many investors, but others find it a quality investment. The biggest problem that SandRidge seems to be facing is the same as many other natural gas/ oil companies: It is just too tied up in the natural gas aspect of the business. Of course, right now, companies are set to lose money and stock value as long as they are overly invested in the natural gas industry. Now, this is definitely a short-term hurt that is not going to be a good stock choice over the next few months, or even years. With that said, expect this to be a great long-term stock.
As I stated earlier, eventually natural gas is going to come back, and this time will only be accelerated as more and more companies forgo the product in favor of other resources. Some investors see this as an opportunity. Part of their strategy is to take advantage of companies leaving natural gas by investing in the companies that are still highly invested in it. So I would definitely suggest following the example of some famous investors such as Jeff Gundlach, and as natural gas prices rise so will the stocks for the companies that produce natural gas. CEO Tom Ward is a veteran from Chesapeake Energy (CHK), who led the company as COO through its ascent in the late 1990s through 2006. He is using Sandridge as a vehicle for similar, explosive growth. The company's $200 million in cash should be sufficient for capital requirements on deck, including its acquisition of Dynamic Offshore.
Halcon Resources (HK) is another great example of a company that has a hand in both natural gas and crude oil, but should you consider it as a viable investment? As of now, the company is seeing a price that it has not seen since 2007. It is poised to continue its growth, and there is one primary reason for this surge. The company, like many others, is focusing its effects on location with the recent major decrease in natural gas prices. This of course seems to be pretty standard across the board with companies that are into both, but as far as investing in all of them, I definitely do not suggest this. Even politicians are saying the same thing that the companies are, and of course, they are being backed by said companies. In reality, though, the real long-term cash is going to be in companies that stick with natural gas and continue to expand their operations as every other company leaves in droves.
I know that I have said it time and time again, but if you fully give up on natural gas right now, you will regret it later because now is the absolute perfect time to buy. Of course, there are some other developments that are going to make the price of natural gas rise, such as General Motor's (GM) new natural gas truck. This is just the first step to a major overhaul that I see coming when the people get tired of paying $4 or more per gallon of gasoline, and they move onto something else. What side of the fence will you be on when this occurs? The company's CEO, Floyd Wilson, has an engineering background that is somewhat unusual but very valuable for field operations, and he also led Hugoton (before it merged with Chesapeake) and PetroHawk.
A company that investors should focus on as being a potential in for short-term gain is Triangle Petroleum (TPLM). As of now, its stock is way up compared to the last few months, and for good reason. The company is investing in drilling in the Bakken shale and attaining some decent gains from the drilling. I definitely anticipate a rise in its stock because the company is working on creating more wells to get that precious oil out of the ground. This enhanced production through use of more wells will allow the company to boost its next-quarter ratings to encourage more investors. To put it plainly, Triangle has the opportunity here to ride the Bakken oil all the way to the bank. As far as the long run for the company, I could see the stock rising over the next year due to natural gas and WTI (and localized oil) prices, even if there will be less consumption. CEO Dr. Peter Hill has a strong background in operations and exploration with a multiyear background at BP (BP) and Harvest Natural. Thus, get into the company while crude prices are high and you will see high returns.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.