Comstock down 10%

[sl6886]

Comstock reported a loss of .57 per share, mostly due to an unrealized loss on hedging.

Dan, you were forecasting .04 per share, and the headline said they would have come in at $.06 per share without the U/L. What can you say about the unrealized loss? I'm assuming this presents a nice price point?

Thanks.

[dan_s]

For the third quarter of 2020, Comstock reported a net loss available to common stockholders of $130.9 million or $0.57 per share. The loss was primarily related to a $155.6 million unrealized loss on the mark-to-market value of the Company's derivative financial instruments that are held to hedge oil and natural gas prices as future natural gas prices have improved substantially since the end of the second quarter of 2020.
The adjusted net loss available to common stockholders excluding the unrealized loss on the hedge contracts and other non-recurring items for the third quarter of 2020 was $13.8 million or $0.06 per diluted share. < My forecast was $8.4 million income or 4 cents per share.

Comstock produced 102.6 billion cubic feet ("Bcf") of natural gas and 0.4 million barrels of oil or 104.7 billion cubic feet of natural gas equivalent ("Bcfe") in the third quarter of 2020. Natural gas production averaged 1,115 million cubic feet ("MMcf") per day, an increase of 5% over natural gas production in the third quarter of 2019. Oil production in the third quarter of 2020 decreased to 3,851 barrels of oil per day from 6,563 barrels per day produced in the third quarter of 2019. 12% of the Company's net oil production was shut in or curtailed during the third quarter of 2020 and 7% of the natural gas production was shut-in due to offset completion activity or due to curtailments related to storm activity or pipeline constraints.

My production forecast was 1,110,000 mcfpd and 4,200 bopd.

Comstock's average realized natural gas price in the third quarter of 2020, including realized hedging gains, decreased to $1.95 per Mcf as compared to $2.26 per Mcf realized in the third quarter of 2019. The Company's average realized oil price in the third quarter of 2020, including realized hedging gains, decreased to $33.52 per barrel as compared to $51.27 per barrel in the third quarter of 2019. Oil and gas sales were $212.2 million (including realized hedging gains) in the third quarter of 2020 as compared to $250.5 million in the third quarter of 2019. The lower oil and gas prices realized caused adjusted EBITDAX, or earnings before interest, taxes, depreciation, depletion, amortization, exploration expense and other noncash expenses, of $147.7 million in the third quarter of 2020 to decrease by 22% over adjusted EBITDAX of $188.6 million for the third quarter of 2019. The Company's operating cash flow generated in the third quarter of 2020 of $93.2 million decreased 35% over operating cash flow of $143.3 million in the third quarter of 2019.

I need to spend more time on the model , but my valuation won't change much.

[dan_s]

Comstock Resources, Inc. (CRK, $5.07, Buy; Target $7.50) -
Comstock announces choppy quarter but our bull thesis remains intact - Derrick Whitfield at Stifel

We view the release as negative near-term and positive long-term. The positives include: i) a strong production and free cash flow outlook in 2021 at strip prices and ii) continued progress in lowering well costs (down 11% from Q120). The negatives include: i) Q320 production miss on elevated capex, ii) lower than expected Q420 production guidance due to shut-ins, and iii) higher than expected 2021 capex. We caution investors to note the elevated capex will drive increasing returns in 2021 and 2022. Notably, we estimate adding the seventh rig in the 2H21 will drive 2022 production ~6% above consensus on capex that is in line with consensus. Net-net, while the quarter was choppy due to abnormal levels of curtailments (hurricane, offset completions, price-related impacts), our investment thesis remains intact as Comstock can still return 100% of its enterprise value by 2025 assuming strip prices. We would be buyers on weakness.