Comstock Resources (CRK) Valuation Update - June 3

[dan_s]

I have updated my forecast/valuation model for CRK and posted it to EPG website home page.
The update is based on my HH natural gas price deck of $7.50 for Q2, $8.00 for Q3, $9.00 for Q4 and $7.00 for year 2023.

My CRK valuation increases by $8 to $39/share.

For those of you that asked for details on how I calculate the Company's realized gas prices (net of estimated cash settlements on their hedges) I have added a box below and to the right of the forecast that shows how I calculate realized commodity prices. < The Excel spreadsheet is "macro driven" so you can download it to Excel and plug in whatever Henry Hub gas prices you think are reasonable within the new box which you think are reasonable and the spreadsheet will automatically update revenues, net income, EPS, operating cash flow and a price target for the stock.

PLEASE download the spreadsheet from the EPG home page and let me know if the addition at the bottom answers your questions about how realized gas prices impacts CRK's valuation.

[dan_s]

Make sure you download the forecast from the EPG home page. The forecast under the Sweet 16 tab and Comstock logo won't be updated until this afternoon.

[uberCOAT]

Dan,

Just a question on CRK's valuation. Let's say if J. Jones equitizes all of his preferred stock at some point this year (this is just an assumption) does that significantly change your valuation and projections?

Thanks

[dan_s]

The Company has 175,000 shares outstanding of Series B Convertible Preferred Stock, which are held by its majority stockholder. The holder of
the Series B Convertible Preferred Stock is entitled to receive quarterly dividends at a rate of 10% per annum, which are paid in arrears. The holder of the
Series B Convertible Preferred Stock may convert any or all shares of such preferred stock into shares of the Company's common stock at $4.00 per
share, subject to adjustment pursuant to customary anti-dilution provisions. The Company has the right to redeem the Series B Convertible Preferred Stock
at any time at face value plus accrued dividends. The Series B Convertible Preferred Stock is classified as mezzanine equity based on the majority
stockholder's ability to control the terms of conversion to common stock.

At 3-31-2022 Comstock had 232,919,869 share of common stock outstanding.

The answer is no, it would not impact my valuation. Note that my valuation is based on operating cash flow net of dividends paid on the preferred stock.

[uberCOAT]

Thanks Dan

[sl6886]

Dan

So in Q2 2022, the 615,000 (last line) is unhedged, and compiled at the price deck assumed price, correct?

[dan_s]

Yes, Comstock has ~615,000 mcfpd of unhedged gas in Q2
615,000 X 91 days in the quarter X $7.50 = $419,737,500 of gross revenues.
With the hedges, Comstock's gross revenues should be $644,512,000 with an average realized price of $5.23/mcf for gas and $100/bbl for their oil. They only have 230 bbls per day of oil. Comstock is a pure "gasser".

Based on my forecast, Comstock's operating cash flow should go from $292.2 million in Q1 ($1.26/share) to $473.0 million in Q2 ($2.04/share).