Dan
For Comstock, during the Q3 Earnings call the CEO/CFO said that paying down debt is their first priority and then the CEO mentioned the remaining $100 million of revolving debt would be extinguished in Q4. My question is, after that, how easily can Comstock acquire the remaining structured debt (2029 is 1.2 billion at 6.75%; 2030 is $900 million at 5 7/8%). Is this debt callable, or otherwise highly marketable and liquid, such that they can buy back and retire as much as their FCF will allow?
If not, I'm wondering what they do with remaining FCF. It seems like their CapEx is pretty well established so I'm guessing there are no surprises in this area. There was absolutely NO mention of buybacks, so that tells me that they have zero interest in them. The Management struck a very conservative posture so I don't think they're the base + variable dividend type, but maybe more like base + special dividends.
Any thoughts on this, and any idea what Jerry wants them to do? With their bad hedges rolling off 12/31, and a possible doozy back-half of the Winter coming, no current debt service or extraneous CapEx to siphon off cash, the cash flow for Q1 could be ridiculous.
Scott
Comstock questions
Re: Comstock questions
Unless natural gas prices come way down, Comstock is going to generate over $300 million of free cash flow in Q1.
My guess is that they ramp up the drilling program in 2023. With $6.00 ngas prices, the Haynesville wells payout in a few months. The increased capex will be offset quickly by more operating cash flow. (Comstock thinks they have 20 TCF of recoverable gas).
In June 2022, the Company repurchased $26.1 million principal amount of its 6.75% senior notes due in 2029 for $24.9 million. The Company
recognized a gain of $1.0 million on early retirement of debt relating to the repurchase. < They can also do more of this.
Jerry Jones' family doesn't need more dividend income, but the board needs to do what's right for all shareholders. I'd like to see a well-defined dividend program set up.
My 2023 forecast based on Comstock's realized ngas price being $6.25/mcf. < Raymond James forecast is that HH ngas will average $8.00 in Q1 2023 and $7.00 for the year 2023.
Revenues of $3,567 million (TipRanks estimate is $$3,160 million)
Net Income of $1,804 million
Earnings per share of $11.32 (TR > $7.55)
Operating cash flow of $2,661 million / $11.32 per share (TR > $7.55 per share)
Free cash flow could be as high as $1.5 billion, which compares to Comstock's LT Debt of $2.3 billion
My guess is that they ramp up the drilling program in 2023. With $6.00 ngas prices, the Haynesville wells payout in a few months. The increased capex will be offset quickly by more operating cash flow. (Comstock thinks they have 20 TCF of recoverable gas).
In June 2022, the Company repurchased $26.1 million principal amount of its 6.75% senior notes due in 2029 for $24.9 million. The Company
recognized a gain of $1.0 million on early retirement of debt relating to the repurchase. < They can also do more of this.
Jerry Jones' family doesn't need more dividend income, but the board needs to do what's right for all shareholders. I'd like to see a well-defined dividend program set up.
My 2023 forecast based on Comstock's realized ngas price being $6.25/mcf. < Raymond James forecast is that HH ngas will average $8.00 in Q1 2023 and $7.00 for the year 2023.
Revenues of $3,567 million (TipRanks estimate is $$3,160 million)
Net Income of $1,804 million
Earnings per share of $11.32 (TR > $7.55)
Operating cash flow of $2,661 million / $11.32 per share (TR > $7.55 per share)
Free cash flow could be as high as $1.5 billion, which compares to Comstock's LT Debt of $2.3 billion
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Comstock questions
I think CRK may employ more of a special dividend strategy in the future. Their acreage is also highly valuable, so I would not count out a potential sale. With the $100M remaining bank debt to be paid off...they will have zero near term debt and lots of FCF coming in.
Re: Comstock questions
The balance sheet is in great shape and a "fixed + special" dividend would be nice. IMO CRK is a "Screaming Takeover Target", but it won't sell unless Jerry Jones wants a sale.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group