It has been about a month since the last earnings report for Comstock Resources (CRK). Shares have added about 1.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Comstock due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Comstock Q4 Earnings Miss on Higher Costs
Comstock Resources reported fourth-quarter adjusted net income per share of 35 cents, missing the Zacks Consensus Estimate by a penny owing to higher operating costs. However, the bottom line turned around from the comparable year-ago period’s loss of 31 cents. This can be primarily attributed to production gains from Haynesville and Bakken plays.
The company’s total revenues of $153.5 million lagged the Zacks Consensus Estimate by 0.16% but jumped 109.5% year over year.
Production & Realized Prices
Production of oil and natural gas averaged 36 billion cubic feet equivalent (Bcfe), up 53% from a year ago, as the company’s successful Haynesville shale drilling program continues to yield returns. Notably, oil production came in at 843 thousand barrels of oil (Mbbl) compared with 214 Mbbl in the prior-year quarter. The massive jump of 294% is attributed to higher production from Bakken assets acquired in the Jerry Jones transaction. Natural gas output accounted for 85.9% of the company’s total production compared with 94.5% in the year-ago quarter.
The average realized crude oil price during the fourth quarter was $54.96 per barrel, representing a decrease of 3% from the year-ago realization of $56.48. The average realized natural gas price during the quarter was $3.28 per thousand cubic feet vis a vis $2.94 in the year-ago period.
Fourth-quarter cash operating cost was 77 cents per thousand cubic feet equivalent (Mcfe), up from 68 cents in last year’s corresponding period amid higher production taxes. The company’s production taxes increased to 20 cents from 7 cents in the year-ago period. Comstock’s lifting expense and gathering expense came in at 37 cents and 20 cents, respectively, decreasing from 39 cents and 22 cents incurred in the fourth quarter of 2017. The company was able to lower DD&A cost by 22.4% year over year to $1.00 per Mcfe.
Cash Flow, EBITDAX & Balance Sheet
Comstock’s operating cash flow was $95.6 million, reflecting a massive increase of 154% from the year-ago level of $37.6 million. Earnings before interest, taxes, depreciation, amortization and exploration (or EBITDAX) also increased handsomely. The metric increased 117% y/y to $112.5 million from $56 million in the year-ago period.
As of Dec 31, 2018, the company had $23.2 million in cash and cash equivalents. The company had a long-term debt of $1,244.4 million, representing a debt-to-capitalization ratio of 68.6%.
As of Dec 31, 2018, Comstock’s proved reserves totaled 2,424 bcfe of natural gas, reflecting 108.6% growth from the corresponding period of 2017. Of the total proved reserves, 29% were proved developed and 86% were operated by the company.
For 2019, Comstock forecasts capex of $364 million for drilling and completion activities in Haynesville/Bossier play. The company plans to drill 58 wells and forecasts 50% growth in natural gas output in 2019. It additionally intends to spend $24.2 million on Eagle Ford and Bakken assets.
Comstock forecasts 2019 natural gas production of 385-415 million cubic feet per day and crude output within 8-9 thousand barrels per day.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months.
At this time, Comstock has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Comstock has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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