Analyst Actions: Kodiak Oil and Gas Corp Target Price Raised $2 at Credit Suisse; Shrs At Yr Highs
Transformational Acquisition Brings Scale in the Bakken; Revising Estimates and Raising Target Price to $11 (from $9).
"We Raise Our Target Price to $11 from $9. We raise our 'PD Plus' NAV-derived target to $11 from $9 to account for increased Bakken inventory on the back of the recent acquisition in Williams and McKenzie Counties, ND and an expected accelerated pace of development. The $590MM acquisition brings KOG 19.7 MMBoe in proved reserves (81% crude oil, 28% proved developed), 3.5 MBoe/d of production and adds up to 300 additional middle Bakken and TFS locations. Our NAV credits KOG with developing 314 Bakken/TFS locations in the next five years, or less than half of the company's project inventory.
Concentrated Core Position. "KOG has delivered strong results from Koala and the Fort Berthold Indian Reservation, and expects its Polar and Smokey areas to deliver similar wells. We estimate that roughly 70% of the company's 155k net acre position in the Williston Basin are in core areas of the play where KOG expects average well recoveries of 750-900 MBoe."
Picking Up the Pace in 2012. "With the recent acquisition, KOG is planning to accelerate to eight rigs by 2H12 from five currently. KOG expects to execute a $585MM capital budget next year (up 154%) to run a 6-8 rig program in the Bakken and drill 51 net wells. KOG introduced a production guidance range of 22-24 MBoe/d in 2012 and expects to exit the year at 30 mboe/d (from ~17 mboe/d in early January)."
Valuation. "KOG trades at an 25% discount to our $11 NAV estimate, in-line with the Credit Suisse SMID-cap E&P group, assuming long-term $84.00/bbl oil and $5.50/MMBtu natural gas. On multiples (EV/EBITDAX), KOG trades 5.9x 2012 and 3.2x 2013 (hedged at our deck) vs. the group at 5.8x and 3.5x, respectively.
Estimate Revisions: We are revising our 2011/2012/2013 EPS estimates to $0.24/$1.05/$1.43 (from $0.25/$1.17/$1.50) respectively."
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