We issued an updated research report on energy explorer, Comstock Resources Inc. CRK on Nov 26, 2015. Comstock Resources delivered better-than-expected third-quarter 2015 results. While the company’s Haynesville operations continue to impress, its sales and income have dropped drastically in recent quarters due to cheap commodity prices. This is mostly because the company derives its reserves/production from oil and natural gas.
The positives and negatives are reflected in Comstock Resources’ current Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Comstock Resources' strong acreage position in the prolific Haynesville/Bossier Shale play in the East Texas and North Louisiana region has attractive reserve and production growth prospects. The company continues to deliver strong results from the Haynesville program. Production has seen a substantial increase, while drilling costs have witnessed a decline, thereby resulting in improved margins.
It is to be noted that during the third quarter, Comstock Resources incurred a loss of $1.06 per share (excluding one-time items), narrower than the Zacks Consensus Estimate of a loss of $1.23.
Additionally, management has not been shy of divesting assets, in particular those that do not fit into the company’s long-term growth plan. Following the 2008 offshore GoM asset divestiture (through the Bois d’Arc sale), Comstock Resources has emerged as a pure-play onshore operator with a focus on low-risk oil and gas properties.
However, similar to other independent exploration and production companies, results of Comstock Resources are directly exposed to oil and gas prices. Continued weakness in commodity prices has significantly affected the company’s revenues, earnings and cash flows.
Stocks to Consider
Some better-ranked players in the energy sector are Energy Transfer Equity LP ETE, Murphy USA Inc. MUSA and Boardwalk Pipeline Partners LP BWP. Each of these stocks sport a Zacks Rank #1 (Strong Buy).
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