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Tuesday, February 28, 2012

KOG's Earnings Are Out

Updates

February 29, 2012: Motley Fool's first note after the 4Q11 KOG earnings debacle
Talk about your fast growth rates. Kodiak Oil & Gas generated 10 times the revenue in 2011 that it did just two years ago, buoyed by rising oil prices and a hard-charging expansion strategy that's starting to pay off. Although it missed analyst estimates, Kodiak has been growing so quickly that it should be expected to keep smashing through prior high-water marks throughout 2012 and beyond.
Let's look at the reported numbers, including future estimates, to figure out just how much potential is left for a stock that's jumped more than 3,000% since the end of 2008.
Tale of the tape 
Kodiak's grown tremendously since those dark days, and a lot of it's been fueled by stock issuance, as shares outstanding almost have doubled over that time frame. That's something to keep an eye on as the company continues to drill new wells in the Bakken, but growth has a great way of making dilutive offerings seem less important.
Click on the link to see the numbers that impress Motley Fool.

Later, later: just before earnings were released, The Street picked KOG as one of five companies to "soar" after earnings release. Very, very interesting. 

Later, same evening: for investors only -- Reuters is reporting that most analysts expected a 9-cent profit; instead the company reports a 15-cent loss.  If folks see this as "seed corn" -- growing fast; additional rigs, fine, but a basic tenet on Wall Street is not to surprise the analysts. If KOG had an idea that their report would be significantly different than what analysts were expecting, the company needed to provide more information to the analysts.

Original Post

Press release here.

Some data points:
  • 2011 sales, $120 million vs $31 million in 2010
  • 2011 avg production of 3,922 boepd vs 1,259 ave boepd in 2010
  • 2011 net income, 2 cents/share identical to previous calendar year
  • And again, the derivative loss resulted in a loss of 8 cents/share
Of note:
The largest component of lease operating expense (LOE) in the Williston Basin operations is the disposal of water used in the well completion operations, the majority of which has been transported by truck to third-party disposal facilities.  The Company is actively addressing water disposal costs by connecting wells to third-party pipelines, drilling water disposal wells in producing areas and constructing water gathering systems where appropriate.  As existing and future wells are connected to water gathering systems, LOE is projected to decrease on a per-unit basis.
Earnings conference call tomorrow.

5 comments:

  1. Bruce:

    Another point I found incredibly interesting in the KOG press release was this: "Kodiak has an approximate 10-year inventory of Bakken and Three Forks development drilling locations based upon its current rig count and estimated well bore density." Can you imagine the BOPD they will be producing with the number of additional wells they can drill on their current holdings over the next ten years?

    ReplyDelete
    Replies
    1. You are absolutely correct.

      Most of the pure Bakken players have a 10-year inventory based on their corporate presentations.

      The University of North Dakota basic analysis of the Bakken suggested 20 years of drilling (2010 to 2030) and then continued production through the year 2100. That was just the Bakken Pool. (The "basic analysis" is linked at the sidebar at the right.)

      So, a 10-year inventory at this point is about right.

      However, this is based on 2 to 4 wells per spacing unit. There will be double that many wells in some areas of the Bakken, and thus the drilling inventory will increase over time.

      In addition, if KOG were to buy additional acreage, which I'm sure they will, or they themselves will be bought, that will add more inventory. This entire boom is just beginning.

      Delete
  2. KOG createred in after hours trading after the revenue and earnings miss was announced.
    2012 will be a key year for KOG. There is very little margin for error.
    KOG needs to secure it's undrilled leases. Leasing new prospects and top leasing will be very expensive especially for companies that are struggling for profitability.

    ReplyDelete
  3. embraceyourinnerhillbillyFebruary 29, 2012 at 8:27 PM

    This pps decrease is a buying opportunity...just how far will it drop is the $64 question.

    ReplyDelete

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