Comstock Resources (CRK) Q4 Results - Feb 17

[dan_s]

I will be updating my forecast/valuation models for CRK and AR today, after our webinar.
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FRISCO, TX, Feb. 15, 2022 (GLOBE NEWSWIRE) -- Comstock Resources, Inc. ("Comstock" or the "Company") (NYSE: CRK) today reported financial and operating results for the quarter and year ended December 31, 2021.

Highlights of 2021's Fourth Quarter

Generated free cash flow from operations of $105 million in the quarter and $262 million for the year.

Generated free cash flow including acquisition and divestiture activity of $204 million in the quarter and $343 million for the year.

Paid down $190 million of debt in the quarter.

Adjusted EBITDAX increased 41% to $297 million.

Operating cash flow (excluding working capital changes) increased 62% to $250 million or $0.90 per diluted share.

Fourth quarter capital spending was $140 million for drilling and completion activities and $39 million for acquisition activities.

Production increased 12% to 1,348 MMcfe per day (99% natural gas). < Compares to my forecast of 1,346.3 MMcfepd.

Revenues, after realized hedging losses, were $380 million, 37% higher than 2020's fourth quarter.

Adjusted net income to common stockholders was $99 million for the quarter or $0.37 per diluted share. < Compares to my forecast of $14 million (before pfd stock dividends of $4.4 million).


Financial Results for the Three Months Ended December 31, 2021

Revenues in the fourth quarter of 2021 totaled $379.9 million (inclusive of realized hedging losses of $275.5 million). Net cash provided by operating activities (excluding changes in working capital) generated in the fourth quarter was $249.8 million, and net income available to common stockholders for the fourth quarter of 2021 was $356.0 million ($1.30 per diluted share). Net income in the quarter included a pre-tax $469.8 million unrealized gain on hedging contracts held for risk management and a $162.2 million loss on the sale of the Company's Bakken assets. Excluding these items and certain other unusual items, adjusted net income available to common stockholders for the fourth quarter of 2021 was $98.8 million, or $0.37 per diluted share.

Comstock's production cost per Mcfe in the fourth quarter was $0.67 per Mcfe, which was comprised of $0.28 for gathering and transportation costs, $0.21 for lease operating costs, $0.10 for production and other taxes and $0.08 for cash general and administrative expenses. Production cost was $0.65 per Mcfe in the third quarter of 2021 and $0.60 in the fourth quarter of 2020. Comstock's unhedged operating margin was 87% in the fourth quarter of 2021 and 78% after hedging.

[dan_s]

At the time of this post CRK was trading at $7.72.
I have updated my valuation by $0.50 to $20.50, which is only 4X annualized operating cash flow per share for 2021-2022.

CRK's operating cash flow
2020A = $490.2 million ($2.12 per share)
2021A = $908.2 million ($3.92 per share)
2022E = $1,269 million ($5.45 per share) < Based on HH natural gas price averaging $3.75/MMBtu
2023E = $1,337 million ($5.69 per share) < Based on HH natural gas price averaging $3.50/MMBtu

CRK's hedge book is in much better shape after 2021.
> Only ~24% of their gas is hedged with Swaps at $2.64 to $2.68
> Another ~26% is hedged with collars that have ceilings of $3.83 to $4.01
> ~50% of their 2022 gas is unhedged (percentage increases as we move thru the year)

Net Asset Value based on PV10 of just their Proved reserves is approximately $15.68 at 12-31-2021 based on SEC pricing guidelines that are much lower than the current strip prices.

FCF will be used to payoff more debt in 1H 2022, then they are expected to start a dividend / stock buyback program.

I don't see anything that justifies CRK trading at less than 2X operating cash flow.