Comstock Resources Inc: A Hidden Play on LNG Exports

With a surge in natural gas demand due to future LNG exports by Cheniere Energy, Comstock Resources provides a hidden way to invest in those increases.

Apr 13, 2014 at 10:51AM

The recent data points from the CEO of Cheniere Energy (NYSEMKT:LNG) should catch the attention of all investors interested in the natural gas revolution ongoing in the U.S. For those not familiar with Cheniere Energy, the company is working toward exporting liquefied natural gas, or LNG, at the Sabine Pass Terminal in La. and the Corpus Christi Terminal in Tx.

With Cheniere nearly doubling over the past year, one of the best ways to play the export boom are natural gas producers in the Haynesville shale in La. One such producer is Comstock Resources (NYSE:CRK), and naturally the largest landholder in that area is Chesapeake Energy (NYSE:CHK).

Export plans
In an interview with the Financial Times, Cheniere Energy CEO Charif Souki suggested that the U.S. couldn't solve European dependence on Russian natural gas by exports alone. Or at least it couldn't be resolved by the current limited approvals and credible plans in the planning stages.

For its part, Cheniere Energy has the only project approved by U.S. regulators. The LNG export facility at Sabine Pass in La. will start exports in 2015 and reach full capacity in 2018. At that time, it will export 2.2 Bcf/d of natural gas compared to daily consumption in Europe that will reach up to 50 Bcf/d. Unfortunately for Europe, large portions of the exports are already contracted to companies in South Korea and India.

To put the export totals into perspective, Cheniere would export 800 Bcf per year if it ran operations without interruptions 365 days a year. The current natural gas in storage in the U.S. after a brutally cold winter was only 826 Bcf. That level of usage will require further ramps in natural gas production. Don't forget that several other applications are currently in the process for export terminals that could materially increase demand for natural gas down the road.

Comstock Resources position
The Haynesville shale in northern La. provides an opportune point to quickly ship natural gas to the coast. Current infrastructure bottlenecks in the prolific Marcellus shale make it impractical that the region can supply the substantial needs coming from the coast.

Comstock Resources provides a hidden play on LNG exports considering it forecast natural gas production to decline during 2014 to 40 to 44 Bcf from the 55.7 Bcf produced in 2013. The company has natural gas reserves of 452.7 Bcf, mostly in the Haynesville shale area, but the low prices have the company shifting toward oil production, specifically in the Eagle Ford Shale. In fact, it only drilled two wells in the area during 2013 and expects limited focus this year despite the increase in natural gas prices.

The lack of capital spent on natural gas by Comstock Resources is interesting considering Chesapeake Energy has specifically discussed shifting a few resources toward that area in anticipation of surging Gulf Coast demand. The company plans to increase the rigs in the Haynesville shale to 7-9 rigs during 2014 after only having four rigs working in the fourth quarter. Chesapeake saw production decline by 51% year over year, so it might take substantial increases in drilling to reverse the downtrend.

Bottom line
While Comstock Resources isn't shifting its focus toward drilling in the Haynesville area due to demand expectations, the company has the assets -- with a resource potential of 6 Tcf -- to meet future demand. Even though Chesapeake Energy has slightly increased production resources in the area, the general consensus among natural gas producers doesn't match the production requirements of Cheniere Energy. The disconnect is perplexing and one that investors will want to watch down the road, but ultimately the company with the reserves will benefit the most.

OPEC is absolutely terrified of this game-changer
Imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock... and join Buffett in his quest for a veritable LANDSLIDE of profits!


Mark Holder has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers