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COMSTOCK RESOURCES INC 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Comstock Resources, Inc.

Filing date:

02/21/2025

TLDR:

Comstock Resources Inc. reported a net loss of $218.8 million in 2024, a significant downturn compared to the previous year’s net income of $211.9 million, primarily due to lower natural gas prices. The company is focused on developing its Haynesville shale assets and growing its drilling inventory.

ELI5:

Comstock Resources, a natural gas company, lost money this year because gas prices went down. They’re trying to make more money by drilling in a specific area called Haynesville shale.

Accession #:

0000950170-25-024783

Published on

Analyst Summary

  • Total revenue decreased by 19% from $1.57 billion in 2023 to $1.25 billion in 2024.
  • The company reported a net loss of $218.8 million in 2024 compared to a net income of $211.9 million in 2023.
  • Average natural gas price decreased from $2.40/Mcf in 2023 to $1.98/Mcf in 2024.
  • Long-Term Debt increased from $2.64 billion in 2023 to $2.95 billion in 2024.
  • Net cash from operating activities decreased significantly from $1.02 billion in 2023 to $620.3 million in 2024.
  • Operating Margin decreased from 14.5% to -13.4%.
  • DD&A per Mcfe increased from $1.16 to $1.51.
  • The PV10 value decreased from $2,374,630 (thousands) in 2023 to $1,598,194 (thousands) in 2024.

Opportunities and Risks

  • Price Volatility: The company’s performance is highly susceptible to fluctuations in natural gas prices.
  • Reserve Replacement: Maintaining production levels requires continuous successful drilling and acquisition activities.
  • Environmental Regulations: Stringent and evolving environmental regulations could increase operating costs.
  • Debt Burden: High debt levels could restrict financial flexibility and growth opportunities.
  • Cybersecurity Threats: Potential disruptions to operations and data breaches due to cyberattacks.
  • Haynesville Shale: The company’s focus on the Haynesville shale, a premier natural gas basin, provides a solid foundation.
  • Western Haynesville Expansion: Successful exploration and development in the Western Haynesville area could significantly increase reserves and production.
  • LNG Export Demand: Proximity to Gulf Coast markets positions the company to benefit from increasing LNG exports.
  • Midstream Venture: Pinnacle Gas Services LLC provides a strategic advantage in gathering and treating natural gas.

Potential Implications

Company Performance

  • Maintaining capital discipline is crucial for navigating the low natural gas price environment.
  • Successful development of Western Haynesville assets is essential for increasing reserves and production.
  • The company’s profitability and reserve valuations are under pressure due to low natural gas prices.
  • The company faces significant liquidity challenges, as indicated by its low current, quick, and cash ratios.
  • The low-interest coverage ratio raises concerns about debt sustainability.

Stock Price

  • The negative net income and EPS reflect a challenging operating environment, potentially impacting investor confidence.
  • The decline in PV10 value suggests a deterioration in the value of its reserves, which could negatively affect the stock price.
  • A high P/S ratio suggests potential overvaluation.

SEC Filing Report: Comstock Resources Inc. (CRK) 10-K for Fiscal Year Ended December 31, 2024

Executive Summary

This report analyzes Comstock Resources Inc.’s (CRK) 10-K filing for the fiscal year ended December 31, 2024. The analysis focuses on key financial metrics, management’s discussion, risk factors, and reserve estimates. CRK faces challenges due to depressed natural gas prices, impacting profitability and reserve valuations. While the company is focused on developing its Haynesville shale assets and growing its drilling inventory, the current environment necessitates a conservative operating plan. The overall assessment is a Hold, reflecting the company’s asset base and strategic direction balanced against the current market headwinds. Key recommendations include close monitoring of natural gas price trends, capital expenditure discipline, and successful execution of the Western Haynesville development.

Company Overview

Comstock Resources, Inc. is an independent natural gas producer primarily operating in the Haynesville shale. The company focuses on developing its drilling opportunities and exploring its Western Haynesville play. CRK’s strategy includes growing cash flow, production, and reserves through development, strategic acquisitions, and a disciplined financial approach.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management acknowledges the dependence on natural gas prices and the volatility inherent in the market. The narrative emphasizes a focus on organic drilling inventory growth and efficient operations. A key development is the Western Haynesville midstream venture, Pinnacle Gas Services LLC, designed to support production growth in that area. Management’s tone is cautiously optimistic, highlighting strengths like high-quality properties and proximity to premium natural gas markets, while acknowledging the need for a conservative operating plan in 2025.

Financial Statement Analysis

Income Statement

  • Revenue: Total revenue decreased by 19% from $1.57 billion in 2023 to $1.25 billion in 2024, primarily due to lower natural gas prices.
  • Net Loss: The company reported a net loss of $218.8 million in 2024 compared to a net income of $211.9 million in 2023.
  • Average Natural Gas Price: Decreased from $2.40/Mcf in 2023 to $1.98/Mcf in 2024.
  • Operating Expenses: Depreciation, depletion, and amortization (DD&A) increased significantly, reflecting lower reserve estimates due to depressed prices.

Balance Sheet

  • Total Assets: Increased slightly from $6.25 billion in 2023 to $6.38 billion in 2024.
  • Long-Term Debt: Increased from $2.64 billion in 2023 to $2.95 billion in 2024.
  • Stockholders’ Equity: Decreased from $2.38 billion in 2023 to $2.33 billion in 2024.

Cash Flow Statement

  • Operating Activities: Net cash from operating activities decreased significantly from $1.02 billion in 2023 to $620.3 million in 2024, reflecting lower profitability.
  • Investing Activities: Capital expenditures decreased, indicating a more conservative investment approach.
  • Financing Activities: The company issued senior notes and common stock to bolster liquidity and manage debt.

Key Ratios

Ratio 2024 2023 Trend
Operating Margin -13.4% 14.5% Decreasing
DD&A per Mcfe $1.51 $1.16 Increasing

Risk & Opportunity Assessment

Risks

  • Price Volatility: The company’s performance is highly susceptible to fluctuations in natural gas prices.
  • Reserve Replacement: Maintaining production levels requires continuous successful drilling and acquisition activities.
  • Environmental Regulations: Stringent and evolving environmental regulations could increase operating costs.
  • Debt Burden: High debt levels could restrict financial flexibility and growth opportunities.
  • Cybersecurity Threats: Potential disruptions to operations and data breaches due to cyberattacks.

Opportunities

  • Haynesville Shale: The company’s focus on the Haynesville shale, a premier natural gas basin, provides a solid foundation.
  • Western Haynesville Expansion: Successful exploration and development in the Western Haynesville area could significantly increase reserves and production.
  • LNG Export Demand: Proximity to Gulf Coast markets positions the company to benefit from increasing LNG exports.
  • Midstream Venture: Pinnacle Gas Services LLC provides a strategic advantage in gathering and treating natural gas.

Uncommon Metrics

  • Organic Drilling Inventory Growth: The company’s focus on acquiring undeveloped leasehold through direct leasing or acquisitions of undeveloped acreage is a differentiator.
  • MiQ Certification: Achieving independent certification for methane emissions demonstrates a commitment to environmental stewardship.
  • Horseshoe Wells: Drilling “horseshoe” wells to improve economics and reduce the surface footprint.

Conclusion & Actionable Insights

Comstock Resources faces significant challenges due to the current low natural gas price environment. While the company possesses valuable assets and a strategic focus on the Haynesville shale, its profitability and reserve valuations are under pressure. The company’s success hinges on maintaining capital discipline, successfully developing its Western Haynesville assets, and benefiting from future improvements in natural gas prices.

Overall Assessment: Hold

Recommendations:

  • Monitor Natural Gas Prices: Closely track natural gas price trends and adjust capital expenditure plans accordingly.
  • Capital Expenditure Discipline: Maintain a conservative operating plan and prioritize projects with the highest returns.
  • Western Haynesville Execution: Focus on the successful development of the Western Haynesville area to increase reserves and production.
  • Debt Management: Explore opportunities to reduce debt and improve financial flexibility.

Comstock Resources, Inc. (CRK) Financial Analysis – 2024

This report analyzes the financial performance of Comstock Resources, Inc. (CRK) for the year ended December 31, 2024, based on its 10-K filing. The analysis includes key financial ratios, metrics, and commentary on the company’s overall financial health. The stock price at the time of reporting (2025-02-21) was $19.54.

1. Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin:

    • Ratio/Metric: ($1,254,455 – $1,423,070) / $1,254,455 = -13.44%
    • Trend: ($1,565,234 – $1,338,637) / $1,565,234 = 14.47%
    • Industry: The average gross profit margin for oil and gas companies varies widely but generally falls between 30% and 60%. Comstock’s negative gross profit margin is significantly below the industry average, indicating potential issues with cost management or pricing.
  • Operating Profit Margin:

    • Ratio/Metric: ($1,254,455 – $1,423,070) / $1,254,455 = -13.44%
    • Trend: $226,597 / $1,565,234 = 14.47%
    • Industry: The average operating profit margin for oil and gas companies typically ranges from 10% to 30%. Comstock’s negative operating profit margin is significantly below the industry average, indicating operational inefficiencies or high operating costs.
  • Net Profit Margin:

    • Ratio/Metric: (-$218,754) / $1,254,455 = -17.44%
    • Trend: $211,894 / $1,565,234 = 13.54%
    • Industry: The average net profit margin for oil and gas companies typically ranges from 5% to 15%. Comstock’s negative net profit margin is significantly below the industry average, indicating financial distress.
  • Return on Assets (ROA):

    • Ratio/Metric: (-$218,754) / (($6,382,097 + $6,253,623) / 2) = -3.45%
    • Industry: The average ROA for oil and gas companies typically ranges from 2% to 5%. Comstock’s negative ROA is significantly below the industry average, indicating inefficient asset utilization.
  • Return on Equity (ROE):

    • Ratio/Metric: (-$218,754) / (($2,333,544 + $2,383,191) / 2) = -9.28%
    • Industry: The average ROE for oil and gas companies typically ranges from 5% to 15%. Comstock’s negative ROE is significantly below the industry average, indicating poor returns to shareholders.
  • Earnings Per Share (EPS) – Basic and Diluted:

    • Ratio/Metric: Basic: -$0.76, Diluted: -$0.76
    • Trend: Basic: $0.76, Diluted: $0.76
    • Industry: EPS varies widely, but negative EPS indicates poor performance compared to industry peers.

Liquidity

  • Current Ratio:

    • Ratio/Metric: $284,034 / $612,854 = 0.46
    • Trend: $461,493 / $681,491 = 0.68
    • Industry: A current ratio of 1.0 or higher is generally considered healthy. Comstock’s current ratio is below 1.0, indicating potential liquidity issues.
  • Quick Ratio (Acid-Test Ratio):

    • Ratio/Metric: ($284,034 – $97,524) / $612,854 = 0.30
    • Trend: ($461,493 – $86,619) / $681,491 = 0.55
    • Industry: A quick ratio of 1.0 or higher is generally considered healthy. Comstock’s quick ratio is below 1.0, indicating potential liquidity issues.
  • Cash Ratio:

    • Ratio/Metric: $6,799 / $612,854 = 0.01
    • Trend: $16,669 / $681,491 = 0.02
    • Industry: A cash ratio of 0.5 or higher is generally considered healthy. Comstock’s cash ratio is very low, indicating significant liquidity risk.

Solvency/Leverage

  • Debt-to-Equity Ratio:

    • Ratio/Metric: $2,952,090 / $2,241,023 = 1.32
    • Trend: $2,640,391 / $2,358,414 = 1.12
    • Industry: The average debt-to-equity ratio for oil and gas companies typically ranges from 0.5 to 1.5. Comstock’s debt-to-equity ratio is within this range, indicating moderate leverage.
  • Debt-to-Assets Ratio:

    • Ratio/Metric: $2,952,090 / $6,382,097 = 0.46
    • Trend: $2,640,391 / $6,253,623 = 0.42
    • Industry: The average debt-to-assets ratio for oil and gas companies typically ranges from 0.3 to 0.6. Comstock’s debt-to-assets ratio is within this range, indicating moderate leverage.
  • Interest Coverage Ratio (Times Interest Earned):

    • Ratio/Metric: (-$168,615 + $210,621) / $210,621 = 0.20
    • Trend: ($226,597 + $169,018) / $169,018 = 2.34
    • Industry: An interest coverage ratio of 1.5 or higher is generally considered healthy. Comstock’s interest coverage ratio is very low, indicating difficulty in meeting its interest obligations.

Activity/Efficiency

  • Asset Turnover:

    • Ratio/Metric: $1,254,455 / (($6,382,097 + $6,253,623) / 2) = 0.20
    • Industry: The average asset turnover ratio for oil and gas companies typically ranges from 0.5 to 1.0. Comstock’s asset turnover ratio is low, indicating inefficient asset utilization.

Valuation

  • Price-to-Earnings Ratio (P/E):

    • Ratio/Metric: $19.54 / (-$0.76) = -25.71
    • Industry: A negative P/E ratio is not meaningful for comparison.
  • Price-to-Book Ratio (P/B):

    • Ratio/Metric: Market Cap = 292,260,645 * $19.54 = $5,710,275,928.30
      Book Value = $2,241,023 * 1000 = $2,241,023,000
      P/B = $5,710,275,928.30 / $2,241,023,000 = 2.55
    • Industry: The average P/B ratio for oil and gas companies typically ranges from 1 to 3. Comstock’s P/B ratio is within this range.
  • Price-to-Sales Ratio (P/S):

    • Ratio/Metric: $5,710,275,928.30 / ($1,254,455 * 1000) = 4.55
    • Industry: The average P/S ratio for oil and gas companies typically ranges from 0.5 to 2. Comstock’s P/S ratio is relatively high, suggesting overvaluation.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Ratio/Metric: EBITDA = -$168,615 + $795,397 + $194,890 + $130,504 + $205,407 + $39,435 = $1,196,918
      EV = $5,710,275,928.30 + $2,952,090,000 – $6,799,000 = $8,655,566,928.30
      EV/EBITDA = $8,655,566,928.30 / $1,196,918,000 = 7.23
    • Industry: The average EV/EBITDA ratio for oil and gas companies typically ranges from 6 to 10. Comstock’s EV/EBITDA ratio is within this range.

Growth Rates

  • Revenue Growth:

    • Ratio/Metric: ($1,254,455 – $1,565,234) / $1,565,234 = -19.86%
  • Net Income Growth:

    • Ratio/Metric: (-$218,754 – $211,894) / $211,894 = -203.24%
  • EPS Growth:

    • Ratio/Metric: (-$0.76 – $0.76) / $0.76 = -200%

Other Relevant Metrics

  • PV10 Value:

    • Metric: The PV10 value decreased from $2,374,630 (thousands) in 2023 to $1,598,194 (thousands) in 2024, a significant decline. This indicates a decrease in the present value of future net revenues from proved reserves.

2. Commentary

Comstock Resources’ financial performance in 2024 was weak, characterized by negative profitability margins and declining revenue. The company faces significant liquidity challenges, as indicated by its low current, quick, and cash ratios. While leverage is moderate, the low-interest coverage ratio raises concerns about debt sustainability. The negative net income and EPS reflect a challenging operating environment, and the decline in PV10 value suggests a deterioration in the value of its reserves.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️