Energy Prospectus

TipRanks 6-18-2025: "Wolfe Research upgraded Comstock Resources (CRK) to Outperform from Peer Perform with a $34 price target Wolfe sees Comstock’s investment case evolving from a distributable cash flow valuation where the multiple is the output, to a resource-based valuation reflecting a drilling backlog being derisked by ongoing well tests, previously overlooked by industry, the analyst tells investors in a research note. Comstock is primed to benefit from the firm’s base case that sees elevated gas prices over the next 18 months, Wolfe adds."

Comstock is a former Sweet 16 Company that is now on my Watch List.
> It is Pure Gasser with current production of approximately 1.3 Bcf per day.
> Most of Comstock's production is from the Haynesville Shale and Deep Bossier. Its location can get premium gas prices because it is close to the Louisiana Gulf Coast and some of the largest LNG export facilities.
> I took a hard look at it back on May 24th and updated my forecast/valuation model. On that date my valuation of CRK was $25/share.
> If HH natural gas price does average $4.90/MMBtu in 2026 (EIA's current forecast), then Wolfe Research's $34 price target is reasonable because CRK should generate operating cash flow per share near $5.20 at that gas price and 6X CFPS is a reasonable valuation multiple for a Company which does have a lot of "Running Room" in a very good location.

Mitsubishi is buying Haynesville gas producer Aethon (a private company) for $8 billion.

Jerry Jones' large equity stake in Comstock makes it a unique public company because outside of his family's ownership the outstanding shares are only ~45 million. If you are a Day Trader, CRK might interest you. Take a hard look at the 1 year chart.

If HH natural gas does average $4.90/MMBtu in 2025, I think AR, CTRA, EQT, RRC have more upside potential. Crescent Energy (CRGY) is a Screaming Buy if you think gas prices will be that high next year because its "Running Room" in South Texas is also close to Gulf Coast LNG exporters.

FWIW I do think the "Right Price" for HH natural gas will be over $5.00/MMBtu in 2026 and might be as high as $7.00 if we have another cold winter.

Bloomberg:

Japan’s Mitsubishi is reportedly in talks to buy the US shale production and pipeline assets of Aethon Energy Management. Citing a source familiar with the matter, Reuters reported this week that talks were ongoing and that a deal could fetch around $8bn. Meanwhile, in a separate report published on the same day, Bloomberg cited multiple sources familiar with the matter and said that if a deal worth close to $8bn goes ahead, it would be Mitsubishi’s largest ever acquisition.

According to Bloomberg’s sources, a deal could be announced in the next couple of months. Some of them added that a deal would likely be structured as a purchase of Aethon’s portfolio. It is also possible that another buyer could emerge to bid for Aethon’s assets, according to the sources.

Indeed, this comes after Bloomberg and Reuters both reported in April that Abu Dhabi National Oil Co. (ADNOC) was also considering a potential transaction involving Aethon. None of the companies have commented publicly on the matter, though.

Aethon is focused on developing the Haynesville shale, with its assets concentrated in North Louisiana and East Texas. The company says it is one of the largest privately owned gas producers in North America.

Reuters reported in November 2024, citing sources familiar with the matter, that Aethon was exploring options for its production and midstream assets. According to those sources, options being explored included a sale or an initial public offering (IPO) at a valuation of about $10bn including debt.

This was reported against the backdrop of a boom in artificial intelligence (AI) and data centres that was driving up demand for power, which in turn was boosting the prospects of gas producers. Additionally, gas producers near the US Gulf Coast, including in the Haynesville, have seen rising demand for years as LNG export capacity in the region ramped up, with the trend ongoing today.

Mitsubishi is a global LNG player with stakes in LNG projects in Malaysia, Oman, Australia, Russia, the US and Canada and total equity LNG production of about 13mn tonnes per year (tpy), Reuters noted. This includes a stake in the Cameron LNG terminal in Louisiana. Expanding its nearby upstream and midstream gas holdings could therefore be seen as an attractive option for the Japanese company.

Comstock ranks a low 78th in my ranking. I believe the Comstock share price has run up too far. The Comstock share price has increased with 53.1% in since Jan 2025 and 215.4% since Jan 2024.

In the case of Comstock, I believe that looking at generated cash flows only is too limited.
For a Comstock evaluation also the balance sheet and the shareholder returns should be considered.
The Comstock balance sheet is weak with a lot of long-term debt ($ 3.05 B), a high 2025 debt/EBITDA ratio (1.6-1.7), and a low equity ratio (34.5% only).

Due to the balance sheet Comstock does not return funds to shareholders. My judgement is that the balance sheet requires another $ 0.8-1.0 B before shareholder returns will be implemented.

As a matter of principle, I do not short stocks. A lot of people however do not have this principle. Late May 2025 22.2% of the Comstock share float was shorted.

I would not short CRK because they have HUGE potential natural gas reserves in East Texas. Not yet "Proved Reserves" but high 2P and 3P.

Plus Jerry Jones' stake in the company draws a lot of attention.

I do agree that based on the current fundamentals, there are much better choices if you want more exposure to natural gas.

If demand for natural gas in the U.S. spikes during July/August, we will probably see $5.00/MMBtu for HH NGas in Q4 2025.