Mizuho Upgrades Comstock Resources (CRK) to Neutral

Mizuho analyst Nitin Kumar upgraded Comstock Resources (NYSE: CRK) from Underperform to Neutral with a price target of $18.00.

The analyst comments "Our key concerns for the Comstock investment case were above-peer balance sheet leverage and limited inventory depth. By obtaining covenant relief from its lending group with 3Q24 earnings, management has given itself some time to bring down leverage particularly if natural gas prices improve as we expect. Success on several wells completed in the emerging Western Haynesville over the last two years gives confidence about the potential reserves, and we expect the company could provide an update early in 2025. Critically, well costs are tracking lower (adjusted for target depth and complexity relative to the legacy Haynesville), and the asset sits near the confluence of two of the key drivers of improving gas fundamentals - LNG exports and AI datacenter growth. Although the company has not announced any marketing deals related to the demand areas, they could be well positioned to see higher realizations. The midstream infrastructure for the Western Haynesville is being funded via the Quantum JV, reducing balance sheet risk. Finally, in 2024 management took the decision to allow volumes to decline by dropping to 5 rigs. We expect them to add back 2 rigs in 2025 to stabilize production levels, and then eventually grow volumes. With natural gas prices improving (at least based on our forecast), this incremental activity should still allow CRK to generate FCF for balance sheet deleveraging and eventually, cash returns."

For an analyst ratings summary and ratings history on Comstock Resources click here. For more ratings news on Comstock Resources click here.

Shares of Comstock Resources closed at $16.80 yesterday.

You May Also Be Interested In

• Chevron signed an agreement with Iraq's Basra Oil Company to advance commercial negotiations for West Qurna 2
• Permian Resources Corp (PR) PT Lowered to $24 at UBS Ahead of Q2 Earnings
• DBV Technologies refreshes ATM program with $150M ADS offering