Comstock Resources: When The Market Gives You Lemons

Summary

  • Comstock Resources stock is down 20% due to warmer weather and high gas storage levels.
  • New LNG plants set to open in 2024-2026 will create new demand for gas.
  • The future investment case for Comstock Resources depends on higher gas prices and potential catalysts in the Haynesville region.
  • CRK is in the buy zone at current prices.

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Introduction

Comstock Resources (NYSE:CRK) is down 20% this month, following a decline back to the low-3's for Natty. Warmer weather and the prospects of more of the same, just crushed the stock. Then there are the relentless injections into gasaddition of another 60 BCF

CRK price Chart (Seeking Alpha)

NWS 3 month forecast (NWS)

The next U.S. LNG plants expected to open are the QatarEnergy-Exxon joint venture at Golden Pass in Texas in late 2024, the first phase of Venture Global LNG's Plaquemines in Louisiana in 2024-2026, and Cheniere Energy Inc's (LNG.A) expansion at its Corpus Christi plant in Texas in 2025.

DIF filtercake (Author's files)

The thesis for CRK

CRK Haynesville Footprint (CRK filings)

CRK low cost structure (CRK)

A couple of potential catalysts for the Haynesville

Q-3 for CRK

We're excited to partner with Quantum Capital Solutions, an affiliate of Quantum Capital Group to build out this system to handle future growth. To that effect, we have set up a mid-stream partnership with QL to build out the system to increase the capacity fourfold, will contribute to Pinnacle gathering and treating system to the partnership and QL will contribute 100% of the capital required up to $300 million for the build out of the gathering and treating system. We'll operate the partnership, which will be called Pinnacle Gas Services and will direct is activities. Quantum receives a preferred return and 80% of distributions until the investment hurdle is achieved, then that reduces to 30%.

Your takeaway

Oil price chart (Oil Price)

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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