Comstock Resources: Western Haynesville Is A Transformative Asset (Rating Upgrade)

2025-04-29 17:14:39 ET

Summary

• Upgrading Comstock Resources, Inc. from Sell to Buy due to higher natural gas prices and promising Western Haynesville acreage.
• Increased disclosure on the Western Haynesville acreage means it's no longer appropriate to value CRK based solely on current free cash flow.
• Western Haynesville acreage offers significant growth potential, making CRK an attractive investment for those bullish on LNG exports and gas demand.
• CRK stock remains high risk due to debt and cost uncertainties, but offers high-reward potential for investors buying on dips.

Over the past four years, I’ve written a total of 5 articles on natural gas exploration and production (E&P) company Comstock Resources, Inc. ( CRK ) here on Seeking Alpha , starting with a Buy recommendation back on March 10, 2021, “ Comstock Resources: A Leveraged Play on Gas Upside .”

However, I turned bearish CRK in the spring of 2023 with my April 26, 2023 piece titled “ Comstock Resources: 2023 Will Be Messy ,” and have rated the stock a Sell since that date.

This was not a bearish call on natural gas prices (NG1:COM), or gas-focused producers in general. Indeed, I wrote a bullish piece on Southwestern Energy, a stock since acquired by Expand Energy ( EXE ) on May 4, 2023, an article titled “ Southwestern Energy: Undervalued Natural Gas Company ” where I rated Southwestern a strong buy.

And I’ve written a series of bullish articles on gas-focused E&P giant EQT Corp. ( EQT ) in the past two years, most recently “ EQT: Raising Target on Strong Free Cash Flow Upside ” in late February this year.

Rather, my less-than-sanguine outlook for CRK was a company-specific call, based primarily on CRK’s hefty debt position and high free cash flow breakeven costs, the latter a measure of the price of natural gas CRK needs to generate free cash flow....

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