Latest on Kodiak Oil And Gas

Kodiak Oil And Gas(NYSE:KOG) presented its capital spending plan for the year 2011 toward the end of 2010. It made history by being the company’s biggest projected investment ever at $200 million. Part of their plan was to complete 26 gross wells and drill 28 of them all in North Dakota’s Three Forks and Bakken oil plays. Expectations were between 5000 and 6500 oil equivalent barrels daily and finishing the year with a 9,000 BOE/D rate of production. Let’s take a closer look.

Winter In North Dakota

In spite of flooding, road closures and difficult weather Kodiak reported sales that were 133% higher then those of the previous years same quarter. They did however post a net loss because of derivative losses of $9.3 million.

The expenditure budget was also increased by Kodiak to $220 million. This was done to compensate for acreage acquisition as well as the addition of another drilling rig.

Reckoning With Mother Nature

At the mid point of the year citing the extreme winter that took place in the Bakken, Kodiak announced they were lowering the 5000 to 6500 BOE/D expectations but did not adjust the year end 9000 BOE/D number. In addition, well count expectations were raised to 42 gross wells.

Announcement Of The Acquisition

Kodiak announced at the end of June closing on an assets and leasehold acquisition for $85.5 million in the Williston Basin. This is in the Bakken play and boosted Bakken’s total acreage holdings ta 100,000 net acres. Cash and borrowings funded the purchase.

The acquisition coupled with higher than expected second quarter sales allowed the company to raise its borrowing power for its secured revolving credit facility first lien senior from $75 to $110 million and for the second lien term loan from $40 to $55 million.

Looking At An Excellent Year

That Kodiak was enjoying a strong year was apparent by the middle of the year. Company records were broken by gas and oil sales, even with the derivative losses net income was higher and the pace of production was moving toward meeting the end-of-year goals that had been set by the company. To be precise, five rigs were being operated reaching about 8,000 BOE daily and this positioned everything well to hit the 9,000 BOE/D target.

No Limits At All

It seems the company was not satisfied with just meeting their goals. In a private offering another $650 million was raised and an additional 50,000 Balkan acres obtained bringing the total to 150,000 net acres. This completely changed original expectations as new projections for the end of the year were revised to 17,000 BOE/D and for the end of the following year the number projected became 30,000 BOE/D.

Kodiak had an outstanding year of tremendous growth in 2011. In spite of all the difficulties they encountered at the start of the year especially dealing with the Balkan climates unpredictable hardships, they posted great results, added substantial acreage and tripled the company in size. To say it was a great year is truly an understatement.