Domestic energy explorer,
Comstock Resources Inc.
) reported third quarter adjusted loss per share (from continuing
operations) of 40 cents, wider than the Zacks Consensus Estimate
of a loss of 30 cents, primarily due to a drop in natural gas
output amid lower drilling activity in the Haynesville and
Following the disappointing results announced after market
hours on Monday, Nov 4, shares of the natural gas-focused
exploration and production company opened at $17.40 on Nov 5 -
down as much as 6.5% from the previous close. The stock price
fell further, settling at $17.14, when the market closed
However, Comstock's performance improved from the year-ago
quarter adjusted loss of 73 cents per share. The tapered loss
could be attributable to higher realized prices and the company's
increased focus on oil production that offers lucrative returns
compared to natural gas.
Total revenue increased 14.9% year over year to $111.6 million
amid higher price realizations and declining operating costs.
However, it failed to beat the Zacks Consensus Estimate of $113.0
Comstock's quarterly volume contracted 24.2% year over year to
17.4 billion cubic feet equivalent (Bcfe), of which 78.2% was
natural gas. The downtrend reflects output shrinkage from its
East Texas/North Louisiana operations that comprised most of the
Production in the East Texas/North Louisiana operating region
decreased 35.5% year over year to 11.5 Bcfe (99.1% gas). Output
from the South Texas and Other properties came in at
approximately 5.5 Bcfe and 0.4 Bcfe, respectively.
Average oil price realization (before hedging) was $104.83 per
barrel (versus $99.34 per barrel in the third quarter of 2012)
and average natural gas realization was $3.33 per thousand cubic
feet/Mcf (compared with $2.43 per Mcf in the year-earlier
Costs & Expenses
Gathering and transportation costs came in at $4.5 million,
representing a decline of 25.8% from the year-ago quarter. Lease
operating cost of approximately $13.0 million was almost flat
year over year. Total operating expenses decreased 4.2% from the
third quarter of 2012 to $120.7 million.
Cash Flow & EBITDAX
Comstock generated operating cash flow from continuing operations
of $62.9 million in the reported quarter against $59.7 million in
the year-earlier quarter. EBITDAX (earnings before interest,
taxes, depreciation, depletion, amortization, exploration expense
and other non-cash expenses) from continuing operations were
$81.8 million, up 11.0% year over year.
During the reported quarter, Comstock repurchased 631,096
shares (1.3% of the outstanding shares) at $14.63 per share.
Capital Expenditure & Balance Sheet
During the third quarter, Comstock spent $104.2 million on
development drilling activities. For the full year, the company
plans to spend $345 million in drilling 51.6 net wells.
Comstock's full-year plans also include an expenditure of $140
million for the purchase of additional properties in the
developing oil rich plays.
As of Sep 30, 2013, Comstock had approximately $228.4 million
in cash and cash equivalents and $688.3 million in long-term
debt. The debt-to-capitalization ratio at the end of the quarter
was approximately 41.0%.
Comstock plans to shift to more oil-focused production as
natural gas prices remain weak. The company expects oil to
comprise 20% of the total production during 2013 and plans to
increase it to around 40% by the end of 2014. Moreover, 96% of
the 2013 budget is expected to be spent on oil-related
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Comstock currently retains a Zacks Rank #3 (Hold), implying that
it is expected to perform in line with the broader U.S. equity
market over the next one to three months.
Meanwhile, one can consider other oil and gas exploration and
production firms like
Memorial Production Partners LP
VOC Energy Trust
Clayton Williams Energy Inc.
) as attractive investment opportunities. All the firms sport a
Zacks Rank #1 (Strong Buy).