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By Robert Baillieul

On Thursday, July 19th, Citadel Advisors LLC, a unit of the Citadel Investment Group, announced that it had doubled the size of its stake in Kodiak Oil and Gas (NYSE:KOG). Based on the SEC 13G filing, Ken Griffin, manager of the Citadel Investment Group, now owns 15.1 million shares valued at $136 million. This represents 5.4% of all outstanding shares in the Kodiak.

This isn't Ken Griffin's only position in the energy sector. As previously covered on the Insider Monkey blog, Citadel owns several other names in the energy space, including Anadarko Petroleum (NYSE:APC), EOG Resources (NYSE:EOG), Exxon Mobil (NYSE:XOM) and Goodrich Petroleum (NYSE:GDP).

Other big investors have been betting on the independent oil and gas company. During the 1st quarter of 2012, Louis Bacon at Moore Global Investments increased his stake in Kodiak by 230% to 5.5 million shares valued at $54.5 million. Eric Sprott at Sprott Asset Management and Richard Chilton at Chilton Investment Company each own a $10.3 million and $2.7 million stake respectively.

Kodiak Oil & Gas Corp. is an independent energy company based in Denver, Colorado. The company is involved in the exploration, development, and production of oil and natural gas, with operations in the U.S. Rocky Mountains and North Dakota.

Kodiak shares have been hit hard in recent months, with the stock is down over 30% from its all-time high in February, due to lower energy prices. Back on June 19th, Raymond James downgraded Kodiak, along with a dozen of other oil companies, to a "market performance" rating based on lower forecasted oil and gas prices. Analysts are also concerned that increased competition in the Bakken region will push up production costs.

Despite a challenging macro environment, Kodiak represents a compelling growth story. On Thursday, the company announced its 2nd quarter results and reported a 385% production increase over the 2nd quarter 2011. The strong performance was driven by the company's aggressive acquisition program and rapid production growth at legacy wells.

Analysts also speculate that Kodiak is a likely takeover candidate. Kodiak owns about 155,000 acres in the Bakken region, many of which are directly adjacent to leases held by ExxonMobil . Exxon has been expanding aggressively into the area with its recent takeover of XTO Energy. A mid-size firm like Kodiak would make a logical addition to Exxon's portfolio. Kodiak also has attractive assets in the Green River Basin in northern Colorado.

Kodiak is valued at a substantial premium compared to other mid-size players in the Bakken space such as Northern Oil & Gas (NYSEMKT:NOG) and Triangle Petroleum (NYSEMKT:TPLM). The stock trades at almost 22x EV/EBITDA, well above the industry average of 10x EV/EBITDA. Kodiak's closest comparable company, Oasis Petroleum (NYSE:OAS), only trades at 11x EV/EBITDA.

However, the stock's premium valuation reflects the Kodiak's substantially better growth potential. Kodiak's EBITDA is projected to increase by 385% over the next year, compared to Oasis's 125% EBITDA growth rate.

Kodiak Oil and Gas is a compelling investment story, due to the company's successful acquisition strategy and rapid production growth. While the stock trades at a substantial premium compared to its peers, we believe this is justified, due to the company's growth prospects and takeover potential. With big Wall Street players like Ken Griffin, Eric Sprott and Louis Bacon backing the company, Kodiak looks like an attractive investment candidate.

Source: Billionaire Ken Griffin Doubles Down On This Takeover Candidate