UPDATE: Bottom Fishing Comstock Resources $CRK as Classic Value Play?

by royalarse13

On Feb 7th I published a post analyzing the merits of buying $CRK.  It can be found here.

After a 2-day dip buyers promptly rushed in at higher prices moving $CRK modestly higher over the next few weeks.  Then, on Friday March 15th $CRK announced the sale of a significant asset. 


The details of the sale: Comstock Resources sells all of its 40,200 net acres in oil-rich Delaware Basin to Rosetta Resources Inc.

The oil-rich assets are in West Texas and the total proceeds of the sale are ~$768 million. Note that Comstock has ~$2.6 Billion in total assets (vs. $1.3 in total debt), so this cash infusion represents a significant influx for the company at a time when investors were penalizing the stock for being over-leveraged. 

Proceeds from the sale will be used to reduce its outstanding debt and to fund an increase to its 2013 drilling program in the Eagle Ford shale. Capex was down for 2012 since they were in a tight cash flow position, so we can expect production to ramp up as Comstock is no longer as restrained in their CAPEX.

Production impacts:

Total oil production in 2012 was 6300 Boe/d.  The asset sold was roughly 25% of their oil production and 1% of total natgas.  However the cash will be used to enhance production elsewhere and over time their substantial reserves will be tapped to fill the output gap created.

Market Loves the Sale: