Comstock Resources Inc. (CRK) slipped to a 52-week low of $12.20 on Oct 13. Significant decline in oil and gas prices was responsible for the downfall.
Since the beginning of 2014, the domestic energy explorer’s shares have lost over 29%. Moreover, the company's shares have slumped over 50% since the release of its second-quarter results on Aug 4.
Apart from Comstock Resources, the share price of QEP Resources Inc. (QEP) – belonging to the same industry − also dropped over 9% yesterday to reach $23.
What Induced the Share Price Decline?
Comstock Resources, being an independent natural gas and oil exploration and production company, its business is solely dependent on crude and gas prices. The lesser the prices of the commodities, lower will be the incentive for the company to produce oil and gas. Again, the decreased output will lead to lower revenue. Let’s see how the commodities’ prices are behaving.
The pricing environment of natural gas is weak. From a peak of about $13.5 per million British thermal units (MMBtu) in 2008, natural gas is trading at $3.92 per MMBtu, representing a decline of more than 70% over six years. Excess supply of natural gas owing to shale revolution is primarily responsible for such a low price.
Moreover, owing to abundant domestic supply and weak global demand for oil, West Texas Intermediate (WTI) crude is now trading at $85.74 per barrel, which is significantly below the psychological threshold of $100 per barrel.
Hence, the weak pricing environment of the commodities has dented investor sentiments which are reflected in the company’s share price.
Currently, Comstock Resources carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market in the next 1 to 3 months.
Stocks to Consider
One can consider stocks in the same industry like Cobalt International Energy Inc. (CIE) and World Point Terminals LP (WPT). Both stocks sport a Zacks Rank #1 (Strong Buy).
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