Comstock Resources (CRK) Q2 Results - Aug 5

[dan_s]

COMSTOCK RESOURCES, INC. REPORTS SECOND QUARTER 2020 FINANCIAL AND OPERATING RESULTS

FRISCO,TX, Aug. 05, 2020 (GLOBE NEWSWIRE) -- Comstock Resources, Inc. ("Comstock" or the "Company") (NYSE: CRK) today reported financial and operating results for the quarter ended June 30, 2020.

Financial Results for the Three Months Ended June 30, 2020

For the second quarter of 2020, Comstock reported net loss available to common stockholders of $60.0 million or $0.29 per share. The loss was primarily related to an unrealized loss on the mark to market value of the Company's derivative financial instruments as future natural gas prices have improved substantially since March 31, 2020. Net income available to common stockholders as adjusted to exclude the unrealized hedging losses and certain items not related to normal operating activities for the second quarter of 2020 was $1.7 million or $0.01 per diluted share. < the Adjusted Net Loss compares to my forecast of $12.3 million.
The unrealized derivative loss was $65.6 million in the second quarter and the other items include $5.4 million in non-cash interest amortization resulting from adjusting debt assumed in the Covey Park acquisition to fair value; $2.9 million of non-cash accretion resulting from adjusting the preferred stock issued in connection with the Covey Park acquisition to fair value; and $0.9 million for a loss on early extinguishment of debt.

Comstock produced 116.5 billion cubic feet ("Bcf") of natural gas and 359,142 barrels of oil or 118.6 billion cubic feet of natural gas equivalent ("Bcfe") in the second quarter of 2020.
> Natural gas production averaged 1,280 million cubic feet ("MMcf") per day, an increase of 185% over natural gas production in the second quarter of 2019. < Compares to my forecast of 1,350 million cubic feet per day including NGLs. The growth in natural gas production was primarily attributable to the Covey Park acquisition completed in July 2019 and the successful results from Comstock's Haynesville shale drilling activities in 2019 and 2020.
> Oil production in the second quarter of 2020 decreased to 3,947 barrels of oil per day from 7,628 barrels per day produced in the second quarter of 2019 due primarily to the expected production decline of the Bakken Shale properties acquired in 2018 as wells as oil production shut-in in the second quarter due to low oil prices. < Compares to my forecast of 4,800 BOPD. 23% of the Company's net oil production was shut in or curtailed during the second quarter.

Comstock's average realized natural gas price in the second quarter of 2020, including realized hedging gains, decreased to $1.88 per Mcf (my forecast was $1.75/Mcf) as compared to $2.29 per Mcf realized in the second quarter of 2019. The Company's average realized oil price in the second quarter of 2020, including realized hedging gains, decreased to $37.89 per barrel (compared to my forecast of $26.00/bbl for oil) as compared to $52.12 per barrel in the second quarter of 2019.

Oil and gas sales were $232.8 million (including realized hedging gains) in the second quarter of 2020 as compared to $130.1 million in the second quarter of 2019. EBITDAX, or earnings before interest, taxes, depreciation, depletion, amortization, exploration expense and other noncash expenses, of $162.1 million in the second quarter of 2020 increased by 74% over EBITDAX of $93.2 million for the second quarter of 2019. The Company's operating cash flow generated in the second quarter of 2020 of $117.5 million (compares to my forecast of $98.5 million cash flow from operations) increased 77% over operating cash flow of $66.3 million in the second quarter of 2019.
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CRK is one of my Top Picks for 2020, especially with gas prices firming up faster than I expected them to this week.

This sets up a strong Q4:
"Since its last operational update, Comstock has not put any new Haynesville Shale wells on production. In April, Comstock released its completion crews in order to delay new production coming on line during the summer months given the expectations for low natural gas prices. As a result of the low activity in the second quarter, Comstock currently has 35 (18.9 net) wells drilled but not completed. Completion activity has been resumed in the third quarter and Comstock currently expects to turn approximately 25.0 net wells to sales in the last six months of 2020."

[dan_s]

I have updated my forecast/valuation model for CRK. I'm increasing my valuation by $1 to $10.50, because of the increase in natural gas prices and the increase in their liquidity as of 6/30/2020.
CRK closed at $6.03.
First Call's price target is $8.15.

[isiem]

Dan - do you know anything about the Senior Notes, who holds them and are there plans to refinance these?
Ivar

[dan_s]

A table showing Comstock's debt is on page 15 of their 10Q

Since the Senior notes aren't due until 2025 and 2026 I doubt they will refinance them this year. I don't know who owns them.

Jerry Jones' large stake in Comstock is important. Since he owns a $Billion football team he has a lot of Dallas banks willing to lend his company money. Debt is not an issue for Comstock.