Longterm I think we all see KOG being bought out at a nice premium, At least that's where my sentiments lie.
In the mean time, where are we vulnerable? The price of oil. Below $80/B we can't make a profit. KOG couldn't keep the lights on long. Share price would tank and we'd be snatched up by one of the big boys. An oil glut would be very hard on the fracking industry, especially smaller operators that don't have cash reserves to fall back on.
Not that I want to see this happen. I like the profits I have in KOG and other oil stocks. But it's important to keep an eye out for the downside in business. Every business has potential risks/downsides, including KOG.
Environmental issues, regulations, politics would be the other area to watch out for.
You're making some assumptions that don't hold water jws.
First of all, oil at $80- would certainly affect ALL oil companies because investors think in "groups" and quite often overlook what's happening on an individual company, which is what smart investors always look at.
E.g. KOG's spread at $105- oil was over $60-!
Yes, but.........why doesn't that show-up in "earnings?
Because KOG plows it all back into drilling aggressively.
Yes, but doesn't KOG have contractual obligations for seven rigs and wouldn't that be a drain if oil dropped way down?
They're all on 2-year leases and are staggered out so KOG could be down to zero rigs if they wanted to get out of them and KOG has hedges to cover the draw-down.
Yes, but what about the debt?
If KOG drew down their rigs in that 2-year period, they would have cash flow from existing wells to more than paying the interest on those 7-year bonds.
Yes, but if oil prices went down to $40- and stayed there for 7-years, how would KOG ever meet those bond obligations?
They wouldn't, but then gasoline prices would be under a buck!
Sure..............sounds like a reasonable scenario to me!