Comstock Resources (CRK) Q3 Earnings Beat, Output Ramps Up

Comstock Resources, Inc. (NYSE:CRK) delivered third-quarter 2019 adjusted net income per share of 17 cents, ahead of the Zacks Consensus Estimate of 14 cents. Results rebounded from the year-ago loss of 78 cents on strong production. However, the company’s total revenues of $224.44 million came below the Zacks Consensus Estimate of $234 million due to lower commodity price realizations. The top line, however, skyrocketed 118.53% year over year.

Production & Realized Prices

Production of oil and natural gas averaged 100.9 billion cubic feet equivalent (Bcfe), up 244.58% from the year-ago level as the company’s successful Haynesville shale drilling program continues to yield returns. Natural gas output accounted for approximately 96.4% of the company’s total production compared with almost 88.7% in the year-earlier quarter, primarily owing to the Covey Park acquisition.

On third-quarter earnings call, Comstock announced its acquisition of a privately-held company with Haynesville shale properties, which was made on Nov 1. Located in DeSoto Parish, LA, the acquired acreage consists of 3,000 net acres alongside 12.7 net future drilling locations. Per the deal, Comstock issued 4,500,000 shares of common stock in connection with the all-stock acquisition. According to the company, the acquired oil and gas reserves are anticipated to have a capacity of 89 Bcfe.

The average realized crude oil price in the quarter under review was $51.24 per barrel, representing a drop of 17.7% from the year-ago realization of $62.29. The average realized natural gas price was $1.99 per thousand cubic feet compared with $2.59 in the same period last year.

Expenses

Total operating expenses in the third quarter summed $148.08 million, higher than the year-ago figure of $59.9 million, primarily due to higher lease operating and gathering & transportation expenses. Notably, the company’s lease operating costs increased to $29.1 million from $10.4 million a year ago. Moreover, Comstock’s production taxes rose to $6.96 million. Gathering and transportation expenses also inched up to $23.41 million.

Cash Flow, EBITDAX & Balance Sheet

Comstock’s operating cash flow was $143.3 million, surging 192.4% from the year-ago number of $49 million. Earnings before interest, taxes, depreciation, amortization and exploration (or EBITDAX) also soared handsomely. The metric grew 146.2% year over year to $188.6 million from $76.6 million a year ago.

As of Sep 30, the company had $53.24 million as cash and cash equivalents. Its long-term debt of $2508.07 million translated to a debt-to-capitalization ratio of 70.09%.

Guidance

For the fourth quarter, Comstock now forecasts capex within $140-$150 million. The company intends to produce in the range of 1.3-1.4 Bcfe/d.

Its natural gas and oil production outlook for 2020 is expected to be 1.25-1.45 Bcfe/d and capex is estimated in the $460-$490 million band.

Zacks Rank & Key Picks

Comstock currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the energy space include Phillips 66 (NYSE:PSX) , Delek Logistics Partners, L.P. (NYSE:DKL) and PBF Logistics LP (NYSE:PBFX) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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