On Thursday, Kodiak Oil & Gas will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.
The Bakken Shale area in western North Dakota has been an instrumental part of the renaissance in U.S. energy production, and Kodiak Oil & Gas has been at the epicenter of the frenzied production activity going on in the play. Let's take an early look at what's been happening with Kodiak Oil & Gas over the past quarter and what we're likely to see in its quarterly report.
Stats on Kodiak Oil & Gas
Analyst EPS Estimate
Change From Year-Ago EPS
Change From Year-Ago Revenue
Earnings Beats in Past 4 Quarters
Source: Yahoo! Finance.
Will Kodiak Oil & Gas strike it rich this quarter?
In recent months, analysts have largely held their ground on Kodiak's earnings prospects, holding their first-quarter estimates unchanged but boosting their full-year 2013 consensus by a penny per share. The stock, though, has reflected far less optimism among investors, falling more than 12% since late January.
We've already gotten a strong idea of what Kodiak's first-quarter numbers will look like from its preliminary sales update. The company said that it more than doubled production from last year's first quarter to 21,700 barrels per day. That leaves Kodiak well behind regional leader Continental Resources and its levels of roughly triple Kodiak's output, but with 18 net wells completed and expectations for 75 net wells for the year, Kodiak expects another 35%-45% of production growth by the end of the year.
Kodiak's operational characteristics give investors a good idea of both its strengths and its weaknesses. It drills wells very quickly but without the same regard for cost that Continental Resources and Whiting Petroleum have. If Kodiak could cut its costs by 20% to get into the same $8 million per well league as Continental and Whiting, it could cut $150 million of its capital expenditures for drilling activity in 2013 alone.
One smart move that Kodiak has pursued is making improvements to its wastewater treatment infrastructure, especially by adding saltwater disposal injection wells of its own. Heckmann and other outside providers have had great success providing water services to drilling companies, but by moving more of those services in-house, Kodiak has the potential to produce substantial savings.
In Kodiak's report, pay close attention to any hints the company gives about potential merger and acquisition activity. Whether Kodiak is a buyer or a target, consolidation in the Bakken seems inevitable and could have a big impact on your investment returns.
Kodiak Oil & Gas is a dynamic growth story -- it offers great opportunities, but with those opportunities come great risks. Before you hitch your horse to this carriage, let us help you with your due diligence. To find out whether Kodiak is currently a buy or a sell, you're invited to check out The Motley Fool's premium research report on the company, which comes with a full year of updates and analysis as key news breaks. To get started simply click here now.
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The article Can the Boom Continue for Kodiak Oil & Gas? originally appeared on Fool.com.
Motley Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool owns shares of Heckmann and has the following options: Long Jan 2014 $4 Calls on Heckmann and Short Jan 2014 $3 Puts on Heckmann. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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