Comstock Can Be Counted On

We are reiterating our Buy rating on Comstock Resources, Inc. (CRK) shares following the Bois d'Arc divestiture. This transaction is expected to streamline Comstock's operations and position it as a pure-play onshore natural gas producer.

We continue to like the company for its growing volumes (first-half 2008 volumes were up 43%) and attractive valuation. The Haynesville Shale play offers significant long-term reserve-add potential, going forward. Comstock's drilling success in the Cotton Valley formation is another catalyst for future production growth.

Comstock has a positive production growth profile and volumes are expected to grow approximately 25% to 30% this year. The company is successfully executing its strategy, as is evident from its strong production growth and effective controls year-to-date.

The sale of Comstock's offshore operations will allow the company to streamline its operations and function as a pure-play onshore natural gas producer. The company's balance sheet is improving the company's debt-to-capitalization is expected to be approximately 17% following the sale of Bois d'Arc.

Comstock will spend $410 million this year on exploration and development activities, drilling approximately 133 onshore wells. Of this year's budget, the East Texas/North Louisiana operating region accounts for $292 million (71% of the 2008 budget) to drill 101 wells. The company expects to spend $111 million in the South Texas region to drill 24 wells and $7 million to drill five wells in other regions.

Read the full analyst report on CRK

Read the full analyst report on CRK