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Comstock (CRK) Q1 Earnings Lag on Weak Price Realizations

Zacks Equity Research

Comstock Resources, Inc. CRK reported first-quarter 2019 adjusted net income per share of 22 cents, missing the Zacks Consensus Estimate of 27 cents. Lower-than-expected gas and oil price realizations caused this underperformance. Precisely, gas price realizations came in at $2.72 per thousand cubic feet, falling short of the Zacks Consensus Estimate of $2.85. Oil price realization of $45.34 per barrel also lagged the Zacks Estimate of $49.88.

However, the bottom line rebounded from the comparable year-ago period’s loss of 23 cents. This can be primarily attributed to the production gains from Haynesville and Bakken plays.

The company’s total revenues of $126.9 million fell shy of the Zacks Consensus Estimate of $131 million but jumped 74.8% year over year.

Comstock Resources, Inc. Price, Consensus and EPS Surprise

Comstock Resources, Inc. Price, Consensus and EPS Surprise

Comstock Resources, Inc. price-consensus-eps-surprise-chart | Comstock Resources, Inc. Quote

Production & Realized Prices

Production of oil and natural gas averaged 38 billion cubic feet equivalent (Bcfe), up 67.4% from the year ago as the company’s successful Haynesville shale drilling program continues to yield returns. Notably, oil production came in at 810 thousand barrels of oil (Mbbl) compared with 190 Mbbl in the prior-year quarter. This massive skyrocketing surge of 326.3% is attributed to higher production from the Bakken assets acquired in the Jerry Jones transaction. Natural gas output accounted for 87.2% of the company’s total production compared with 95% in the year-earlier quarter.

The average realized crude oil price in the quarter under review was $45.34 per barrel, representing a plunge of 34% from the year-ago realization of $68.71. The average realized natural gas price during the quarter was $2.72 per thousand cubic feet compared with $2.75 in the same period last year.

Expenses

Total operating expenses in the first quarter summed $73.6 million, lower than the year-ago figure of $77.7 million, primarily owing to the absence of loss from the sale of oil and gas properties, which amounted to $28.6 million in the first quarter of 2018. Notably, the company’s lease operating costs per Mcfe decreased to 38 cents from 43 cents a year ago. However, Comstock’s production taxes doubled to 16 cents per Mcfe in the quarter under consideration. Gathering and transportation expenses also inched up a penny to 20 cents per Mcfe in the first quarter of 2019.   

Cash Flow, EBITDAX & Balance Sheet

Comstock’s operating cash flow was $74.7 million, soaring 247% from the year-ago level of $21.5 million. Earnings before interest, taxes, depreciation, amortization and exploration (or EBITDAX) also increased handsomely. The metric augmented 80% y/y to $97 million from $54 million in the year-ago period.

As of Mar 31, the company had $29.3 million as cash and cash equivalents. Its long-term debt of $1,265.8 million translated to a debt-to-capitalization ratio of 68.4%.   

Guidance

For 2019, Comstock now forecasts capex of $318 million for drilling and completion activities in Haynesville/Bossier play as compared to the prior view of $364 million. It additionally intends to spend $27 million on oil properties. The company keeps its 2019 natural gas and oil production outlook intact at 385-415 million cubic feet per day and 8-9 thousand barrels per day, respectively.

Zacks Rank and Other Stocks to Consider

Comstock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Meanwhile, investors interested in the energy space can also consider a few other top-ranked (Zacks Rank #1) players such as:

Devon Energy Corporation DVN: Devon’s 2019 earnings are expected to grow 68.2% on a year-over-year basis.

Repsol SA REPYY: Repsol delivered average beat of 8.98% in the trailing four quarters.

Bonanza Creek Energy, Inc. BCEI: The company pulled off average positive surprise of 3.99% in the preceding four quarters. Bonanza Creek’s 2019 revenues are projected to rise 23.1% year over year.

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