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Comstock (CRK) Q3 Earnings Beat, Helped by Production Surge

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Comstock Resources, Inc. (CRK - Free Report) reported third-quarter adjusted net income per share of 28 cents, ahead of the Zacks Consensus Estimate of 12 cents and turned around from the comparable 2017 period loss of $1.10 on strong production. The company’s total revenues of $102.7 million came above the Zacks Consensus Estimate of $97 million and increased 53.7% year over year.

Production & Realized Prices

The production of oil and natural gas averaged 33.3 billion cubic feet equivalent (Bcfe), up 55.7% from last year as the company’s successful Haynesville shale drilling program continues to yield dividends.

Comstock concluded its Jerry Jones transaction on Aug 13, so the third quarter includes 48 days of combined performance. The deal, which gave Jerry Jones’ Arkoma Drilling an 84% stake in the company in exchange for interest in certain North Dakota assets, will shift Comstock’s production to include higher volumes of oil. As proof of this, in the third quarter, natural gas output accounted for 82% of the company’s total production, while, in the year-ago period, 94% of Comstock's volumes were natural gas.

The average realized crude oil price during the third quarter was $62.29 per barrel, representing an increase of 34.1% from the year-ago realization of $46.45. However, the average realized natural gas price during the September quarter of 2018 was $2.59 per thousand cubic feet (Mcf), down 7.8% from the year-ago period.

Comstock Resources, Inc. Price, Consensus and EPS Surprise

Comstock Resources, Inc. Price, Consensus and EPS Surprise | Comstock Resources, Inc. Quote

Expenses

Third-quarter cash operating cost was 84 cents per thousand cubic feet equivalent (Mcfe), up from 73 cents per Mcfe in last year’s corresponding period. Comstock’s lifting expense and gathering expense came in at 41 cents and 20 cents, respectively, decreasing from 44 cents and 22 cents incurred in the third quarter of 2017.

However, the company’s production taxes surged to 23 cents from 7 cents in the year-ago period. Meanwhile, Comstock was able to lower its DD&A cost by 32.9% year over year to $1.02 per Mcfe. During the quarter under review, the company shelled $132.2 million as capital investment.

Cash Flow & EBITDAX

Comstock’s operating cash flow was $49 million, comparing favorably with the year-ago figure of $32.2 million. Earnings before interest, taxes, depreciation, amortization and exploration (or EBITDAX) increased handsomely as well. The metric rose from $50.3 million in the year-ago period to $76.6 million.

Financial Position

As of Sep 30, 2018, the natural gas-focused operator with a market capitalization of $882 million, had $31.8 million in cash and cash equivalents. The company had long-term debt of $1.2 billion, representing a debt-to-capitalization ratio of 70.5%. At the end of the third quarter, Comstock had $50 million outstanding on its five-year credit facility.

Guidance

The company released guidance for a 2019 capital budget of $377 million. Comstock forecasts next year natural gas production of 370–420 thousand cubic feet per day while crude output is expected at 8–9 thousand barrels per day.

Zacks Rank & Stock Picks

Comstock Resources currently retains a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are EOG Resources Inc. (EOG - Free Report) , Gulfport Energy Corp. (GPOR - Free Report) and Murphy Oil Corp. (MUR - Free Report) . EOG Resources carries a Zacks Rank #1 (Strong Buy), while Gulfport Energy and Murphy Oil have a Zacks Rank #2 (Buy).

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

EOG Resources earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average positive surprise being 18.1%.

Murphy Oil’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average positive surprise being 76.2%.

Meanwhile, over 30 days, Gulfport Energy has seen the Zacks Consensus Estimate for 2018 and 2019 increase 10.1% and 6%, to $1.74 and $1.41 per share, respectively.

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