Comstock Resources (CRK) Valuation Update - Oct 17

[dan_s]

I have updated my forecast/valuation model for CRK. It will be posted to the EPG website this afternoon.

My valuation increases $0.25 to $15.25, which is just 3.5 X annualized operating CFPS. That's a low multiple for a company with this much running room. The reason for the increase is simply the higher ngas prices I am now using for Q3 and Q4 in my forecast models. I am still using $3.25/MMBtu for HH gas in 2024.

Comstock is very close to a pure gasser. Over 99.9% of their production is dry gas from the Haynesville and East Texas.

TipRanks: " In the last 3 months, 5 ranked analysts set 12-month price targets for CRK. The average price target among the analysts is $13.00. The 5 price targets range from $11 to $15."

I expect Comstock to give us more details on their Western Haynesville area where they have been aggressively adding more leasehold. They are also selling gas directly to LNG exporters under long-term supply contracts at a premium to HH prices.

Comstock has been outspending operating cash flow this year, but they have more than enough liquidity to do so. The Company has no near-term debt problems.

Looking ahead to 2024, if Comstock's realized natural gas price is $3.25/mcf, they should generate over $1.1 billion of operating cash flow next year.

Long-term outlook is bright: If U.S. natural gas prices go to $5.00/MMBtu in 2025 (Raymond James' forecast), Comstock's operating cash flow will exceed $2 billion AND my stock valuation would double.

This one is for investors that are bullish on natural gas.