Domestic energy explorer Comstock Resources Inc. (CRK) has announced it will start paying out a portion of its earnings in the form of shareholder dividends. The Frisco, Texas-based company initiated its quarterly dividend at the rate of 12.5 cents per share, making the annualized dividend payout 50 cents per share. The first installment is payable on Jun 15, to shareholders of record as of May 31, 2013.
Comstock, which recently sold its oil and gas properties in Reeves and Gaines counties in West Texas to Rosetta Resources Inc. (ROSE) for $808 million in net proceeds, has bolstered its long-term earnings and cash flow visibility on the back of high returns from the promising Eagle Ford shale assets in South Texas.
Comstock has also announced plans to buy back up to $100 million of its common stock.
We believe that the dividend start-up and the share repurchase program not only highlights Comstock’s commitment to create value for shareholders but also underlines the oil and gas finder’s healthy financial condition and confidence in its business going forward.
Comstock’s large acreage position in the prolific Haynesville/Bossier Shale play provides a multi-year inventory of low-risk development drilling opportunities. Supplemented with a low cost structure, 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 its geographically concentrated asset base, offset these strengths and is the key area of concern, in our view.
As a result, Comstock currently carries 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.
However, there are domestic upstream energy operators like EPL Oil & Gas Inc. (EPL) and Abraxas Petroleum Corp. (AXAS) that offer tremendous value and are worth buying now. Both these companies sport a Zacks Rank #1 (Strong Buy).
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