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Comstock (CRK) Q2 Loss Narrower Than Expected, Sales Miss

Domestic energy explorer Comstock Resources Inc. CRK reported second-quarter 2017 loss of $1.07 per share (excluding one-time items), narrower than the Zacks Consensus Estimate of a loss of $1.67. The better-than-expected results were driven by improved oil and gas prices, increased revenues and reduced operating expenses. In particular, oil and natural gas prices moved up 7.4% and 53.1%, respectively, compared to the year-ago quarter providing an impetus to the finances of the company. Further, Comstock’s quarterly loss significantly narrowed from the year-ago adjusted loss of $4.05 per share.

Quarterly revenues increased to $61.5 million from $40.7 million a year ago. The higher realized prices and the increased natural gas production resulted in improved gas sales in the quarter with the sales jumping 97% to $50.4 million. However, revenues were below the Zacks Consensus Estimate of $64 million owing to a decline in oil production and sales in the reported quarter compared with second-quarter 2016. 

Comstock Resources, Inc. Price, Consensus and EPS Surprise

 

Volume Analysis

Comstock’s quarterly volume was 18.8 billion cubic feet equivalent (Bcfe), compared with 15.6 Bcfe in the prior-year quarter. Natural gas output – constituting 92.2% of total production – increased 28.1% whereas oil output plunged 31% in the reported quarter. Growth in natural gas production is attributable to the company's successful Haynesville shale drilling program. However, the decline in oil production was due to the lack of drilling in the company's South Texas Eagle Ford shale properties.

Price Realizations

Average oil price realization (before hedging) was $45.34 per barrel, compared with $42.21 in second-quarter 2016. Average natural gas realization was $2.91 per thousand cubic feet/Mcf compared with $1.90 per Mcf in the year-earlier quarter.

Costs & Expenses

Total operating expenses were down 19.6% from second-quarter 2016 figure to $51 million.

Gathering and transportation costs were $3.5 million, down 11.9% from the year-ago quarter. Lease operating cost of $9.4 million suffered 27.3% year-over-year decline. Depreciation charges were down by 15.8% to $30.3 million in the reported quarter. Further, total expenses in the quarter did not include impairment charges and loss on oil and gas properties which were incurred in the year-ago quarter.

Cash Flow & EBITDAX

Comstock’s operating cash inflow from continuing operations were $25.9 million. This compared favorably with the operating cash outflow of about $8.3 million in the second quarter of 2016.  

EBITDAX from continuing operations increased significantly. The metric surged 126.8% year over year to $43.8 million.

Capital Expenditure & Balance Sheet

In the reported quarter, Comstock’s capital expenditure amounted $48.3 million compared with $21.5 million in the year ago quarter. The company spent $45.9 million on development drilling activities. This marks a 133% growth from $19.7 million spent a year ago.

As of Jun 30, 2017, the company had $35.3 million in cash and cash equivalents and $1,070.2 million in long-term debt.

Zacks Rank and Key Picks

Comstock is an independent energy company engaged in the acquisition, development, production and exploration of oil and natural gas properties. The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space include TransCanada Corporation TRP, Braskem S.A. BAK and Range Resources Corporation RRC. All three companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

TransCanada reported positive earnings surprise of 4.06% in the trailing four quarters.

Braskem reported positive earnings surprise of 107.79% in the trailing four quarters.

Range Resources reported positive earnings surprise of 250.00% in the previous quarter.

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