Kodiak Oil & Gas (KOG) has extensive oil and gas holdings in North Dakota, where it focuses most of its operations. Furthermore, the company is rapidly expanding its operations through responsible capital expenditures, funded by private offerings and available cash flow, making it a growth-oriented company.

I think Kodiak makes an excellent buy for both 12-month and 3-year investors. The current price is, in my opinion, trading at a significant discount to Kodiak’s real value, given its asset base and oil-centered outlook.

The Market

The recent quarter did not treat Kodiak well, as it reported an EPS of $0.09, falling short of the Street’s consensus of $0.11. It also did not do particularly well revenue-wise, falling over $10 million short of projections. However, this should not be a particular surprise but, rather, it should be seen as part of a larger trend in the oil and gas sector. Giants of the likes of Exxon Mobil (XOM) missed targets as well. I await second-quarter 2012 earnings for a more exact view of gas and oil subsector behavior.

Valuation

In the ballpark of its current price, $8.50, Kodiak is a competitively priced stock that stands to realize a large upside. I think a conservative estimate puts a 12-month target at around $11.50. Furthermore, Kodiak’s forward P/E is around 13, making it a decent buy at this price. Additionally, a quick glance at Kodiak’s 90-day, 180-day, and 12-month simple moving averages shows a steady trend of growth over both a short-term and long-term time arch.To continue reading, click here.