Comstock Resources (CRK) Update - Nov 24

Comstock Resources (CRK) Update - Nov 24

Postby dan_s » Wed Nov 24, 2021 4:16 pm

I finished reviewing the updated profile for CRK this afternoon and it will be posted to the EPG website soon.

My valuation stays at $20, but I could easily justify a higher valuation. Comstock is on pace to generate over $350 million of free cash flow from operations this year and should double it in 2022 with a realized natural gas price of $3.65/MMBtu (~50% of their 2022 gas is hedged at a weighted average of $3.31/MMBtu). I know you guys don't like hedging programs, but they do lock in solid revenues. In this case, even if ngas drop to $3.00 in 2022, Comstock would still generate over $4.00 of operating cash flow per share next year. A valuation of 5X operating cash flow per share is more than justified.

Comstock holds over 1,900 low-risk / high return horizontal drilling locations in the Haynesville Shale play in North Louisiana. Today, those undrilled locations are worth more than CRK's current market-cap. Jerry Jones made a wise investment.

There seems to be a perception that Comstock has a debt problem. IT DOES NOT. It has no near-term senior debt coming due until 2025 and it has over $1 billion of liquidity. Plus, it is generating lots of free cash flow, so it won't need to draw on its credit line.

CRK is a "Screaming Takeover Target" except for the fact that Jerry Jones doesn't need any money.
Dan Steffens
Energy Prospectus Group
Posts: 27321
Joined: Fri Apr 23, 2010 8:22 am

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