CRK - Comstock Resources: Unexpected Downside Protection

2024-05-06 17:50:04 ET

Summary

• Comstock Resources, Inc. operates in the high-cost Haynesville basin.
• The Haynesville has expensive wells compared to other basins, making it less favorable for dry gas producers.
• The rig count for dry gas producers is declining and finally, industry production of natural gas is declining as well. Meanwhile, demand is increasing.
• The market now appears to be looking forward to a balance between supply and demand that will lead to a natural gas price recovery.
• Comstock does have low cash production costs.  Therefore, the company does have positive cash flow that can be used to meet costs despite the low commodity prices.

Comstock Resources, Inc. ( CRK ) is probably in one of the higher cost basins, the Haynesville, even though the Haynesville producers will likely make money in the long run. Sometimes, though, high costs are not the only consideration when looking towards the future....

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