According to a 13G filed with the SEC, Citadel Advisors (a division of Ken Griffin’s Citadel Investment Group) owns 15.1 million shares of Kodiak Oil and Gas (NYSE:KOG). Kodiak is a $2.4 billion market cap exploration and production company- at 74 full time employees, this is a value of $32 million per employee- with a focus on developing oil and gas in North Dakota’s Bakken Shale. In its 13F for the end of March 2012, Citadel had been the largest hedge fund holder of KOG with 8.5 million shares (see more stocks Citadel owned). The stock’s movements have been correlated with those of oil prices so far this year and it is down about 10%, so Citadel is likely increasing its exposure to the oil boom taking place in the Bakken.
Analysts are extremely bullish on KOG. Its forward earnings are expected to be 18 times its trailing earnings, giving it a trailing P/E multiple of 156 and a forward multiple of 8.7. It should be noted that KOG missed earnings each of the last two quarters and only managed 8 cents per share of earnings in Q1 2012; analyst expectations are for 12 cents a share in Q2, 17 cents per share in Q3, and 21 cents per share in Q4 despite oil prices being well off their highs from their recent highs. Griffin is therefore betting that the company will successfully increase production enough that the stock price- which, while down this year, is up about 40% from a year ago- actually underestimates the value of the company.
While Citadel was the largest hedge fund holder of KOG, the stock was present in other portfolios as well. Billionaire Louis Bacon’s Moore Global Investments more than tripled its stake to 5.5 million shares in the first quarter of 2012 (see their top picks) and fellow billionaire Richard Chilton maintained a position of 2.7 million shares in Chilton Investment Company. Chilton has been a long-term investor in the stock (see more of Chilton's stock picks).
The massive growth expected from Kodiak would be a continuation of what it has achieved in the past. Revenues in the first quarter of 2011 were $13 million, and the company took $7 million in net losses; in the first quarter of 2012, revenue was $80 million and Kodiak had $2 million in net income. Revenues from gas sales - a very small portion of the business- increased by a factor of 10. The company declared in its 10-Q that it expects to complete 51 new net wells by the end of 2012. For comparison, at the end of April 2012 Kodiak had 66 net wells producing in the Bakken region.
It is difficult to compare Kodiak to other oil and gas companies. The closest comparison, Brigham Exploration and Production- one of the few public oil companies with a focus on the Bakken- was acquired by Statoil (NYSE:STO), which as a $77 billion market cap oil company that has interests in many other oilfields. Statoil is actually expected to see its earnings fall over the forward period compared to the past few months, which is why it trades at a trailing P/E of 6 even though it pays a substantial 3.8% dividend yield. Compared to oil & gas giant Exxon Mobil (NYSE:XOM), which is entering the Bakken but only has that as a small part of its business, KOG again stands out for its higher growth and trades at a lower multiple of its earnings projections. Exxon Mobil, which is one of the ten most popular energy stocks among hedge funds, is flat for the year while Statoil is down about 7%.