Independent energy company Comstock Resources Inc. (CRK) announced plans to divest its non-core assets in Mississippi. Accordingly, the company signed a deal with a privately held company to sell the oil and gas properties in the region. The sale is expected to generate a net proceed of $75 million in cash for Comstock.
On an average basis, the to-be disposed assets produced 1,138 barrels of oil and 0.9 million cubic feet of natural gas per day in the first half of 2010. Although the closing of the deal is subject to certain rules and regulatory conditions, Comstock expects the deal to close before 2010 ends.
The divesture of non-core assets highlights the company’s urge to employ its resources for the betterment of Haynesville shale play, covering an area of 78,000 net acres with a resource potential of 3.7 trillion cubic feet equivalent and Bossier shale (approximately 45,000 net acres). Comstock is also focusing on strengthening its position in the Eagle Ford shale.
During the second quarter of 2010, Comstock’s production of natural gas upped 30% year over year to 20.0 billion cubic feet equivalent (“Bcfe”), attributed to the successful Haynesville shale drilling program.
We appreciate the company’s strong acreage position in the prolific Haynesville Shale that paves the way for attractive reserve additions and production growth prospects. Approximately, 75% of the total 2010 drilling program is earmarked for East Texas and North Louisiana, of which the major portion will go toward the development of the Haynesville play.
We believe that Comstock is making a steady progress to emerge as an industry strong player, following its exit from low profit making assets, with a resource play-focused production base that significantly lowers its risk profile.
However, we maintain our long-term Neutral rating on the stock, considering the unstable oil and gas prices and the company’s natural gas dependent portfolio.
Comstock currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
COMSTOCK RESOUR (CRK): Free Stock Analysis Report
Zacks Investment Research
