A Kodiak moment.
Canaccord Genuity Energy Analyst Marcus Talbert is initiating coverage on Kodiak Oil & Gas with a bullish rating. In his view, Kodiak has the most productive asset base on a weighted average basis amongst its pure-play Bakken peers. He believes ~65% of Kodiak’s leasehold should be viewed as Tier 1 quality Bakken acreage, capable of generating pretax IRRs of 40-60% at current strip prices.
Furthermore, Talbert says Kodiak’s above-average growth prospects should warrant a premium to the peer group, and he believes the stage is set for multiple expansion based on project execution in 2012. Over the next two years, he estimates Kodiak will grow EBITDA by +100% and become free cash flow positive by year-end 2013. He believes this growth profile is underappreciated for a small-cap Bakken pure-play.
Talbert sees the stock as attractively priced for a company with its relative growth potential and resource upside. In his view, the company has the right combination of oil leverage, superior capital productivity and catalysts on the horizon that should contribute to its investor momentum and further increase its valuation relative to its peers. These catalysts include a firm commitment to growth with an eight rig operated program in 2012 and pad drilling initiatives that should capture cost efficiencies and enhance margins.
Kodiak Oil & Gas (KOG : NYSE : US$9.66), Net Change: 0.51, % Change: 5.57%, Volume: 16,210,263
Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.
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