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Kodiak Oil & Gas Corp (KOG): The Bakken Is Still Roaring

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Kodiak Oil & Gas Corp (USA) (NYSE:KOG)What if I told you that you could own a stock whose oil production is up 107% year over year with a PE (TTM) of 14.8? What if I also told you that this stock’s EPS is also slated to grow by over 34% this year? At this point, you would probably be thinking what a great deal this is.

The company I’m talking about is a little known exploration and production player called Kodiak Oil & Gas Corp (NYSE:KOG). It operates primarily in the Bakken oil field in North Dakota, and is seeing triple digit year-over-year production gains and 26% quarter-over-quarter gains.

Upcoming quarters

In the latest quarter Kodiak Oil & Gas Corp (NYSE:KOG) missed expectations, but provided guidance forecasting a great Q2 and Q3, which will see strong EPS gains due to increased production growth as more projections come online. Kodiak Oil & Gas Corp (NYSE:KOG) has reduced the time from spud to production from 30 to 20 days this year, and plans on reducing its rig count from 7 to 6 to boost margins.

Kodiak is also planning on adding a new crew this May to help get projects online faster and keep up with maintenance, which could act as a small catalyst until next quarter or a production update. This company is trading at the lower end of its 52-week trading range and is significantly undervalued versus its growth expectations. Kodiak Oil & Gas Corp (NYSE:KOG) does have a lot of debt ($1 billion), but this is manageable, as Kodiak continues posting strong production gains and is now consistently profitable.

Another cheapo

Another cheap shale play is Northern Oil & Gas, Inc. (NYSEAMEX:NOG), which trades with a PE (TTM) of 11.4, saw 30% production growth year over year last quarter, and is projected to grow its EPS by 18% this year. Northern Oil & Gas, Inc. (NYSEAMEX:NOG) operates primarily in the Bakken and Three Forks play as well, but also owns a bit of land west of that in Montana that is still a part of the Bakken play.

Right now, 72% of Northern Oil & Gas, Inc. (NYSEAMEX:NOG)’s North Dakota acreage is developed and 63% of its total holdings are developed, leaving ample room for Northern to keep drilling and boosting production. Northern Oil & Gas, Inc. (NYSEAMEX:NOG) also acquired interests in another 6,022 net mineral acres in Q1 2013, boosting its holdings to 181,823 net acres primarily in the Bakken.

A bigger player

If you are looking for a bigger player that is more stable, look no further than Hess Corp. (NYSE:HES) , which has plans to boost Bakken Shale output to 120,000 bpd by 2015. This would be a sharp uptick from 65,000 bpd from the beginning of 2013. Hess’s cost to drill a well in the Bakken has fallen by 36%, from $13.4 million to $8.6 million. This means that while Hess Corp. (NYSE:HES) is boosting oil production, it is also boosting margins, making it even more profitable.

Hess Corp. (NYSE:HES) plans on bringing 175 more wells into production in North Dakota, with two thirds of that in the Bakken and the other third in the Three Forks. Hess Corp. (NYSE:HES) also pays a small 0.5% dividend. While Hess Corp. (NYSE:HES) isn’t a Bakken pure play, its growth potential is still huge. It also trades at 1.1 times book value, so even if the price of oil goes down, you are protected.

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