Strong Q1 Earnings for Comstock Resources - Analyst Blog

Domestic energy explorer, Comstock Resources Inc. CRK reported strong first-quarter 2014 results, courtesy of a significant increase in natural gas price realization. Increased expenses related to operations, however, dampened the results somewhat.  

Earnings per share − excluding one-time items – came in at 8 cents against the year-ago adjusted loss of 48 cents. The bottom-line also surpassed the Zacks Consensus Estimate of 6 cents.    

Total revenue increased 49.4% year over year to $141.9 million. Moreover, the top line beat the Zacks Consensus Estimate of $137.0 million.   

Volume Analysis

Comstock's quarterly volume contracted 8.8% year over year to 16.6 billion cubic feet equivalent (Bcfe), of which 66.2% was natural gas. The downtrend reflects output shrinkage from its East Texas/North Louisiana operations that comprised most of the total volume.

Production in the East Texas/North Louisiana operating region decreased 34.0% year over year to 8.9 Bcfe (98.9% gas). Output from South Texas and Other properties came in at approximately 7.3 Bcfe and 0.4 Bcfe, respectively.

Price Realizations

Average oil price realization (before hedging) was $96.59 per barrel (versus $105.82 per barrel in the first quarter of 2013) and average natural gas realization was $4.70 per thousand cubic feet/Mcf (compared with $3.15 per Mcf in the year-earlier quarter).

Costs & Expenses

Gathering and transportation costs came in at $3.8 million, representing a decline of 10.1% from the year-ago quarter. Lease operating cost of approximately $15.1 million was down 14.1% year over year. However, total operating expenses increased 5.0% from the first quarter of 2013 to $121.7 million.

Cash Flow & EBITDAX

Comstock generated operating cash flow from continuing operations of $95.7 million in the reported quarter against $73.8 million in the year-earlier quarter. EBITDAX (earnings before interest, taxes, depreciation, depletion, amortization, exploration expense and other non-cash expenses) from continuing operations were $110.3 million, up 52.2% year over year.

Capital Expenditure & Balance Sheet

During the first quarter, Comstock spent $140.7 million on development drilling activities. As of Mar 31, 2014, Comstock had approximately $1.8 million in cash and cash equivalents and $949.1 million in long-term debt. The debt-to-capitalization ratio at the end of the quarter was approximately 50.1%.

Zacks Rating

Comstock currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked players in the oil and gas exploration and production industry like Rex Energy Corporation REXX, RSP Permian Inc. RSPP and Clayton Williams Energy Inc. CWEI. All the stocks sport a Zacks Rank #1 (Strong Buy).