Kodiak Oil & Gas Corp (USA) (KOG): One Company Upping Its Bet on the Bakken

Further, high oil prices, when combined with drilling efficiencies, is a terrific recipe to boost the bottom lines of Bakken producers. That’s one reason Kodiak sees fit to boost its spending to take advantage of these higher profits, though it won’t benefit as much as some of its peers. For example, Oasis Petroleum Inc. (NYSE:OAS) has slashed 23% off its drilling costs over the past year to get its well costs down to around $8 million, while Kodiak’s are around $10 million. That’s enabling Oasis Petroleum Inc. (NYSE:OAS) to drill the same number of wells this year with $111 million less capital. Higher oil prices make the return on the capital being spent that much better.

Overall, oil companies are getting much better at drilling the Bakken, which is really having an impact on returns. Continental Resources, Inc. (NYSE:CLR), which is the top driller and producer, was able to shave 73 days and $7.5 million off the costs of drilling six wells by moving to multi-pads. That’s a 36% cycle time improvement, which is improving the company’s returns when oil is over $100 from a 50% rate of return to an even better 60% rate of return.

Kodiak has been been improving its well costs and average drilling days, though it’s not yet to the level of Continental Resources, Inc. (NYSE:CLR) or Oasis Petroleum Inc. (NYSE:OAS). Overall, the company has improved well costs from $12 million all the way to $10 million this year while it’s planning on slicing more than 10 days off its average drilling days. Significant cost reduction when combined with higher oil prices will really pad Kodiak Oil & Gas Corp (USA) (NYSE:KOG)’s bottom line, which will go a long way in funding the company’s bigger its Bakken bet this year. While I can’t say for sure if this will indicate that Kodiak will report blowout quarterly results on Aug. 1, it would seem to indicate that the company is getting a great return on the money its spending this year.

The article 1 Company Upping Its Bet on the Bakken originally appeared on Fool.com and is written by Matt DiLallo.

Fool contributor Matt DiLallo and The Motley Fool have no position in any of the stocks mentioned.

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