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Michael Filloon
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Co-Founder and Managing Director at Hartstreet LLC
Oil Expert Contributor 6:30 Point Of View w/ Chris Berg 
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Bakken Update
  • Great Opportunity to Buy Kodiak Oil 5 comments
    Jan 21, 2011 1:31 AM | about stocks: KOG, STO, SSN, OAS, NOG

    The first time I checked out the Kodiak Oil and Gas website I was a little skeptical.  Looking at a stock that has doubled since December, can make an invester wary.  The PE ratio sitting at 453.  Granted those numbers only mean something when converted to a PEG ratio, but still that is a big number to lay an investment on.  When I looked a little further I saw a forward PE of 14.37.  I had to admit to myself that I really liked any oil exploration and production company with Bakken exposure only trading at 14 times twelve months out.  If there was anything that stood out about this company was their position in the Bakken formation.  They have 113000 gross acres in the Bakken,Three Forks/Sanish.  Kodiak has approximately 300 locations in this area and they seem to be developing the area quickly.  Once I started looking into their production I could see why the PE ratio was such a large number.  From the second quarter of 2010 to the end of the year they had increase production by approximately 270%.  Better yet, there production is mostly oil.  The 2011 capital expenditures are expected to be at 190 MM drilling and completion.  This includes three operated rigs and one non-operated rig.  Twenty eight operated wells and ten non-operated wells is what they estimate they will complete this year.  Almost as important is the 10 MM to be spent on pipeline infrastructure.  Currently, oil exploration companies in the Bakken could run into near term problems to get the oil out.  Oil is being sent out by train and by truck, creating extra expense.  Kodiak seems to be proactive with respect to cap ex spending as they spent 27 MM in 2009 and 75 MM in 2010.  These numbers do not include any additional acreage they are planning to add.  This with their intent to spend even more in 2011 leads me to believe they could be a big winner in the near term.  Kodiak(NYSE:KOG) estimates they could have up to 350 possible well locations.  Kodiak (KOG) has gotten good results.  They are using an increased number of frac stages and larger amounts of proppant.  They are planning that over 90% of their 2011 cap ex will be done on long laterals.  This should further increase their production results.  Going forward Kodiak (KOG) should be able to maintain adequate liquidity with the recent 150 MM equity capital raise.  Borrowing base has been increased to $50 MM.  A second lein facility of $40 MM is now available.  They have also done some hedging to protect to the downside, just in case oil does go down in the short term.  Kodiak Oil and Gas (KOG) has a very large and valuable land position with in the Bakken.  They are heavily levered to oil.  They have two rigs running with a third on the way at the end of the first quarter.  There is one non-operated rig currently drilling.  They are rapidly increasing crude production.  2010 exit rate of approximately 2700.  They will have five well completions by the end of this quarter.  In 2010 they drilled 21 gross wells and will do 38 more this year.  To give an idea of what all of this has done to the companies balance sheet, they made six cents per share in 2010, that number will increase to 41 cents a share in 2011.  In 2011, they are estimated to grow by 583.3% for the year.  Kodiak(KOG) has been getting 90 day well completions.  Lastly, they are making infrastructure improvements to help get their oil out.  In summary, I like Kodiak Oil and Gas(KOG).  That isn't much of a surprise as I like alot of names in this space like Brigham(BEXP), Northern Oil and Gas (NYSEMKT:NOG), Oasis (NYSE:OAS), and Samson (NYSEMKT:SSN).  I am still an oil bull.  Even if oil pulls back in the short term, it will give and opportunity to buy some of these names cheaper than a few weeks ago.  Last month OPEC stated they thought $100/barrel of oil was a fair price and would not increase production.  The last time oil spiked to $100, OPEC did not increase production until well after that mark.  I think on those words we can guess that oil is moving up.  Most of the other Bakken plays have a forward PE in the mid-twenties.  So as a longer term pick, this stock is a value and a great opportunity.  Watch the price action here.  Looks like $5.70 is where Kodiak(KOG) has support, I would watch this level closely.  I will be buying shares soon. Disclosure: I am long SSN.Additional disclosure: I may take a long position on BEXP, NOG, KOG sometime in the next 24-48 hours.

    Disclosure: I am long KOG, SSN.

    Stocks: KOG, STO, SSN, OAS, NOG
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Comments (5)
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  • robert motes
    , contributor
    Comment (1) | Send Message
    I am a 100% Dav With 22years honorable military service I maintained and flew on a B-25 aircraft for 9 years. served in vietnam in 1966-67 and served as first 1sgt on my return to state side duty. retired in 1973 after my ture of duty at hq. NORAD I be came a gentleman Farmer and a christian in 1979. serving my god is most honorable and self satisfying duty.
    20 Feb 2011, 06:28 PM Reply Like
  • Michael Filloon
    , contributor
    Comments (4988) | Send Message
    Author’s reply » Thank you for serving our country. GOD bless you.
    21 Feb 2011, 02:40 AM Reply Like
  • doubleguns
    , contributor
    Comments (9711) | Send Message
    Thank-you Mike. Vietnam vets got no thank-you's when they came back and in fact it was quite the opposite. Thank-you's are long over due. Robert thank-you for your service.
    21 Feb 2011, 08:31 PM Reply Like
  • geoflying
    , contributor
    Comments (131) | Send Message
    .OK finviz.com, the futures are down for now, so market can go down but a lot of the times by the time market opens I have seen the futures go into green indicating the market well open up. If you go to Marketwatch.com and look up DEJ it well show yesterdays close price of 39cents per share...But if you open a porfolio in click the top tab on the quote page in put DEJ into your watched portfolio it well give you the pre market open price for DEJ, and it is up 40.49% and the pre market open price is 55 cents for DEJ. this happened with DEJ couple days ago before the market turn down, it is my beleif from the prices if the market has a up day DEJ is ready to break out like crazy. I am open for your ideas and comments on what I wrote.
    11 Mar 2011, 07:52 AM Reply Like
  • Michael Filloon
    , contributor
    Comments (4988) | Send Message
    Author’s reply » Today could be another bad day for the oil drillers, many of these names have pulled back considerably and could be another good time to buy some.
    11 Mar 2011, 09:32 AM Reply Like
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