Domestic energy explorer
Comstock Resources Inc.
(
CRK
) reported weak first quarter results, hamstrung by depressed
natural gas prices.
The predominantly natural gas-focused exploration and production
firm reported adjusted loss per share of 30 cents in the quarter,
wider than the Zacks Consensus Estimate of a loss of 17 cents.
Comstock's performance also deteriorated considerably from the
year-ago adjusted loss of 10 cents per share.
Total revenues were up 33.0% year over year to $117.1 million,
aided by strong oil and gas sales but missed the Zacks Consensus
estimate of $122.0 million.
Volume Analysis
Comstock recorded quarterly volume growth of 27.7% year over
year to 25.5 billion cubic feet equivalent (Bcfe), of which 92% was
natural gas. The improvement was driven by strong contributions
from its East Texas/North Louisiana and South Texas operations.
Production in the East Texas/North Louisiana operating region
increased 23.1% to 19.3 Bcfe (99% gas), while output from the South
Texas properties came in at 5.1 Bcfe (52% gas), an approximately
47.9% increase from the year-earlier level.
Price Realizations
Average price realization per thousand cubic feet equivalent
(Mcfe), before hedging, was $4.39 in the quarter, down 0.7% year
over year. Average oil price realization (before hedging) was
$104.02 per barrel (versus $89.94 per barrel in first quarter 2011)
and average natural gas realization was $2.63 per Mcf (compared
with $3.96 per Mcf in the year-earlier quarter).
Comstock's high natural gas exposure raises its sensitivity to
gas price fluctuations, compared to its more-diversified
independent peers with a balanced oil/gas production profile. The
company saw its results suffer on the back of a sharp drop in gas
prices.
Costs & Expenses
Gathering and transportation costs, production taxes and lease
operating costs came in at $7.9 million (up 40.2% year over year),
$3.6 million (up 401.0%) and $14.7 million (up 27.7%) respectively,
while total operating expenses increased 20.0% over the first
quarter of 2011 to $115.6 million.
Cash Flow & EBITDAX
Comstock generated operating cash flow from continuing
operations of $133.2 million, reflecting an increase of 161.5% from
the year-earlier quarter. On the other hand, quarterly EBITDAX
(earnings before interest, taxes, depreciation, depletion,
amortization, exploration expense and other non-cash expenses) was
up 21.3% year over year to $133.2 million.
Capital Expenditure & Balance Sheet
During the first quarter of 2012, Comstock spent $167.9 million
on exploration/development drilling activities and $3.3 million on
property acquisitions. As of March 31, 2012, Comstock had
approximately $3.7 million in cash and cash equivalents and
$1,207.0 million in long-term debt. Debt-to-capitalization at the
end of the quarter was 54.0%.
Recommendation & Rating
Comstock's large acreage position in the prolific Haynesville
Shale play (in East Texas and North Louisiana) - where industry
heavyweights like
Chesapeake Energy Corp.
(
CHK
),
Encana Corp.
(
ECA
) and
Royal Dutch Shell plc
(
RDS.A
) are also leaseholders - provides a multi-year inventory of
low-risk development drilling opportunities. Supplemented with a
robust balance sheet, Comstock remains well positioned to maintain
a strong growth trajectory in the near- to medium-term.
However, the company's highly gas-weighted reserves/production
profile, along with exposure to the inherently cyclical and
volatile exploration and production sector, offset these strengths
and remains key areas of concern, in our view. We believe that
Comstock's current valuation adequately reflects its fairly
balanced risk/reward profile.
As such, we see the stock performing in line with the broader
market and maintain our long-term Neutral recommendation, supported
by a Zacks #3 Rank (short-term Hold rating).
CHESAPEAKE ENGY (
CHK
): Free Stock Analysis Report
COMSTOCK RESOUR (
CRK
): Free Stock Analysis Report
ENCANA CORP (
ECA
): Free Stock Analysis Report
ROYAL DTCH SH-A (RDS.A): Free Stock Analysis
Report
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