Recap of Top Hedge Funds' 1Q15 Filings in the Energy Sector

(Continued from Prior Part)

Comstock Resources (CRK) has relatively lower total producing costs. However, the firm doesn’t have a strong balance sheet position. We’ll explain this later.

Earlier in July, Comstock Resources announced that it entered into an agreement with a private firm to sell its properties in oil and gas in the vicinity of Burleson County, Texas, for an amount of $115 million. The sale is expected to be closed by this month. It’s expected to provide Comstock with the proceeds to fund its drilling program in 2015, besides enhancing the firm’s liquidity. The company also issued a revision to its 2015 production guidance for oil and natural gas. It was lower than its earlier guidance. After the announcement, the company’s shares fell by 20%.

As we explained in Part 2 of this series, the rise in US oil inventories and rig counts adds to the pressure on oil prices. It has a negative impact on firms like Comstock Resources.

The massive fall in commodity prices contributed to the steep fall in the firm’s revenue in the past quarter—compared to the same period last year. To add to its woes, Comstock failed to hedge its production. It was largely exposed to a swift fall in oil prices.

Comstock has a high DE (debt-to-equity) ratio of 1.8x compared to its peers. Apache (APA) has a value of 0.5x. Occidental Petroleum (OXY) has a value of 0.2x, while EOG Resources (EOG) has a value of 0.4x for this metric. This could probably pressure the company to meet its obligations on servicing its debt. Comstock is part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). It has a stock weight of 0.99%.

Browse this series on Market Realist:

• Part 1 - Anadarko Petroleum: A Top Energy Company in 1Q15
• Part 2 - Why Bearish Trends Are Expected to Continue in Crude Oil
• Part 3 - Key for Investors: There’s Still Hope for Crude Oil