We are reiterating our Buy rating on Comstock Resources, Inc. (CRK) shares following the Bois d’Arc divestiture. This transaction is expected to streamline Comstock’s operations and position it as a pure-play onshore natural gas producer.

We continue to like the company for its growing volumes (first-half 2008 volumes were up 43%) and attractive valuation. The Haynesville Shale play offers significant long-term reserve-add potential, going forward. Comstock’s drilling success in the Cotton Valley formation is another catalyst for future production growth.

Comstock has a positive production growth profile and volumes are expected to grow approximately 25% to 30% this year. The company is successfully executing its strategy, as is evident from its strong production growth and effective controls year-to-date.

The sale of Comstock’s offshore operations will allow the company to streamline its operations and function as a pure-play onshore natural gas producer. The company’s balance sheet is improving the company’s debt-to-capitalization is expected to be approximately 17% following the sale of Bois d’Arc.

Comstock will spend $410 million this year on exploration and development activities, drilling approximately 133 onshore wells. Of this year’s budget, the East Texas/North Louisiana operating region accounts for $292 million (71% of the 2008 budget) to drill 101 wells. The company expects to spend $111 million in the South Texas region to drill 24 wells and $7 million to drill five wells in other regions.

Read the full analyst report on CRK

“CRK” Free Stock Analysis: Buy? Sell? Hold?
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