Comstock Resources (NYSE:CRK) (NYSE:CRM) reported a profitable third quarter in 2023, despite low natural gas prices, according to their recent earnings call. The company attributed their success to low operating costs, high margins, and a realized gas price of $2.41. Comstock also outlined its ongoing focus on expanding its Western Haynesville play and extensive acreage position.
Key takeaways from the call include:
- Comstock generated cash flow from operations of $167 million and reported adjusted net income of $0.04 per share for the quarter.
- The company drilled 13 successful Haynesville and Bossier shale wells and connected 21 wells to sales.
- Comstock partnered with Quantum (NASDAQ:QMCO) Capital Solutions for the midstream build-out needed to support their drilling program.
- The company provided financial guidance for the fourth quarter of 2023, including D&C CapEx guidance of $240 million to $280 million.
- Comstock plans to retain their quarterly dividend of $0.125 per common share and maintain strong financial liquidity.
- The company expects to benefit from the growth in demand for natural gas driven by LNG exports.
During the earnings call, Comstock Resources also provided an update on its drilling operations, which include a total of 1,760 gross locations and 1,338 net locations in their operated inventory. The company has also made progress in improving operational efficiency and expects further cost savings in the future.
In addition, Comstock discussed their partnership with Quantum and their plans for future growth. Quantum's financing is expected to provide Comstock with at least 2 billion cubic feet (Bcf) of natural gas per day by mid-2025. This projection is based on their expected production of 500 million cubic feet (Mcf) per day by mid-2025, with further investments and growth planned until 2028.
Looking ahead, Comstock plans to turn 10 wells to sales next year, with a focus on the Haynesville region. The company anticipates spending between $100 million and $200 million for their partnership with Quantum next year. In terms of future rig counts, Comstock did not provide specific numbers but stated that as they continue to build the company, the rig count will increase gradually to achieve their goal of 2 Bcf per day by 2028.
Furthermore, Comstock Resources is working on a partnership with Quantum to develop their Western Haynesville midstream, which will be phased in over a 5-year period. They are also considering adding hedges to mitigate risk and are aiming for a hedging position of over 40% for 2024.
Lastly, Comstock Resources discussed the future plans for its unrestricted subsidiary, which will receive equity dollars from Quantum and will be run on an unlevered basis initially. The company aims to maintain its dividend, manage its balance sheet, and be a strong partner to Quantum as they build the midstream in the Western Haynesville.
InvestingPro Insights
Drawing from InvestingPro's real-time data and tips, it's clear that Comstock Resources (CRK) is a company to keep an eye on. With a market cap of $3510M and a P/E ratio of 3.39 as of Q2 2023, the company has shown significant financial strength. The company's revenue growth, though slowing, still stands at a respectable 7.75% for the last twelve months as of Q2 2023.
InvestingPro Tips highlight that CRK yields a high return on invested capital and has strong earnings, which should allow the management to continue dividend payments. Indeed, the company has maintained a dividend yield of 3.97% as of 2023. It's also worth noting that despite some analysts revising their earnings downwards for the upcoming period, CRK has consistently increased its earnings per share, demonstrating its ability to generate profits.
For those interested in more in-depth analysis and tips, InvestingPro offers an additional 8 tips on CRK. This information can provide a more comprehensive view of the company's performance and potential, aiding in making informed investment decisions.
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