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Comstock Unveils $420M Capex Budget

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Domestic energy explorer Comstock Resources Inc. (CRK - Free Report) offered a glimpse of its 2013 capital spending plans.

The company has pegged its development and exploration budget at $420 million, down by more than 11% from its 2012 budgeted investment of approximately $475 million. In 2013, Comstock’s drilling programs will be focused on its Eagle Ford shale assets in South Texas and the Wolfbone properties in West Texas.

Comstock will be drilling approximately 85 (58.1 net) wells during the year, as against 86 (53.4 net) wells in 2012. Of the total, 42 (27.3 net) wells are scheduled to be horizontal Eagle Ford shale wells, 25 (19.9 net) will be vertical wells in the Wolfbone acreage, while 8 (7.3 net) will be horizontal Wolfcamp wells. Additionally, Comstock plans to drill 10 (3.6 net) wells in the Haynesville/Bossier shale, as and when required.

The company further informed that it expects to use six drilling rigs through the current year, equally divided between the Eagle Ford shale in South Texas and in West Texas. Comstock continues with its cautious approach toward natural gas, as reflected by its negligible drilling program in the gas-rich East Texas/North Louisiana region.

Frisco, Texas-based Comstock Resources is an independent oil and gas exploration and production company engaged in the acquisition, exploration, and development of oil and gas properties. The company’s operations are concentrated primarily in two regions in the U.S.: East Texas/North Louisiana and South Texas.

Comstock Resources’ 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 Resources 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. The rise in net debt/reduction of liquidity associated with the recent Delaware Basin acquisition is also a matter of concern.

As a result, Comstock shares currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.

However, there are certain other energy stocks like Recovery Energy Inc. and Cabot Oil & Gas Corp. (COG - Free Report) that offer tremendous value and are worth buying now. Both these upstream entities sport a Zacks #1 Rank (short-term Strong Buy rating).

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