Kodiak Gas Services resumed with a Buy at BofA

BofA analyst Neel Mitra resumed coverage of Kodiak Gas Services with a Buy rating and $30 price target. EQT, Kodiak’s financial sponsor, participated in a secondary offering of 6.1M shares that priced at $25 per share after Kodiak filed a shelf registration earlier this year with the end of EQT’s lockup period, the analyst noted. There has long been an overhang on the stock regarding EQT’s potential sell down given that EQT needed to source funds to pay down debt it assumed from KGS and many believe that EQT ultimately wants to exit its sponsorship position as well, so the firm see this as the start of a series of secondary offerings from EQT, prompting the overhang to remain. However, simultaneous to the offer close, Kodiak plans to repurchase $25M of common stock at a price equal to the public offering price of $25 per share, so approximately 1M shares, bringing the outstanding share count down to approximately 83M, the firm noted.