On Nov 3, energy explorer Comstock Resources Inc. (CRK) reported third-quarter 2014 adjusted loss of 5 cents per share (excluding one-time items), which failed to meet the Zacks Consensus Estimate of earnings of 10 cents owing to lower volumes and weak oil realizations. A significant rise in operating expenses further dampened the results. Shares of Comstock fell over 15% on the NYSE to close at $9.47 following the dismal results.
However, the bottom line improved substantially from the year-ago quarter loss of 40 cents. Higher oil-linked sales and better natural gas realizations aided the result.
Total revenue increased 30% year over year to $145 million but lagged the Zacks Consensus Estimate $154 million.
Volume Analysis
Comstock’s quarterly volume fell 5.8% year over year to 16.4 billion cubic feet equivalent (Bcfe), of which nearly 59% was natural gas. The downtrend reflects output shrinkage from its East Texas/North Louisiana operations that comprised a significant part of the total volume.
Production in the East Texas/North Louisiana operating region decreased 36% year over year to 7.4 Bcfe (about 99% gas). Output from South Texas and Other properties came in at approximately 8.7 Bcfe and 0.4 Bcfe, respectively.
Price Realizations
Average oil price realization (before hedging) was $95.92 per barrel (versus $104.83 per barrel in the third quarter of 2013) and average natural gas realization was $3.85 per thousand cubic feet/Mcf (compared with $3.33 per Mcf in the year-earlier quarter).
Costs & Expenses
Gathering and transportation costs came in at $3.1 million, representing a decline of over 30% from the year-ago quarter. However, lease operating cost of approximately $16 million marked a 22.4% year-over-year rise.
Total operating expenses increased nearly 20% from the third quarter of 2013 to $144.7 million.
Cash Flow & EBITDAX
Comstock generated operating cash flow from continuing operations of $100.5 million in the reported quarter against $62.9 million in the year-earlier quarter. Earnings before interest, taxes, depreciation, depletion, amortization, exploration expense and other non-cash expenses (EBITDAX) from continuing operations was $114.4 million, up 39.8% year over year.
Capital Expenditure & Balance Sheet
In the reported quarter, Comstock spent $103.6 million on development drilling activities. As of Sep 30, 2014, the company had approximately $6.4 million in cash and cash equivalents and $1,000.3 million in long-term debt. The debt-to-capitalization ratio at the end of the said quarter was approximately 51.6%.
Zacks Rank
Comstock currently carries a Zacks Rank #3 (Hold).
Stocks that Warrant a Look
One could consider better-ranked players in the same industry like Cobalt International Energy, Inc. (CIE), Cheniere Energy, Inc. (LNG) and LRR Energy, L.P. (LRE). All these stocks hold a Zacks Rank #2 (Buy).
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