S&P Rts Comstock Resources' Corp Cred B+, Bnk Ln BB- Comstock Resources Inc.NEW YORK--(BUSINESS WIRE)--Standard & Poor's today assigned its single-'B'-minus rating to Comstock Resources Inc.'s proposed $125 million senior subordinated notes due 2008. At the same time, Standard & Poor's assigned its single-'B'-plus rating to the company's corporate credit and its double-'B'-minus rating to Comstock's $190 million secured credit facility. The outlook is stable. The bank loan rating is one notch higher than the corporate credit rating since the facility is secured by all oil and gas properties of the company and the enterprise value assumed during a bankruptcy scenario is expected to cover the fully utilized bank facilities. The rating reflects risks Comstock faces as a small oil and gas exploration and production company with a highly leveraged balance sheet. Comstock's operations (366 Bcfe, 66% natural gas, 79% proved developed) are concentrated in three areas of the U.S., including the shallow waters See:
Golfo de Mexico Atlantic, Atlantic Ocean - the 2nd largest ocean; separates North and South America on the west from Europe and Africa on the east , southeast Texas Southeast Texas is a subregion of East Texas located in the southeast corner of the U.S. state of Texas. The subregion is geographically centered around the Houston–Sugar Land–Baytown and Beaumont–Port Arthur metropolitan areas. , and the border area of east Texas and north Louisiana North Louisiana, also known as Sportsman's Paradise, is a region in the U.S. state of Louisiana. The region has two metropolitan areas: Monroe and Shreveport-Bossier City. . Given this concentration, Comstock's lifting costs are favorable relative to its peers, at $.50-$.55 per thousand cubic feet equivalents (mcfe) of natural gas production. The company has grown rapidly since 1993, largely through acquisitions of producing properties and culminating in December 1997, $200 million acquisition of the offshore Gulf of Mexico properties of unrated Bois D'Arc Bois´ d'arc´ 1. (Bot.) The Osage orange (Maclura aurantiaca). The bois d'arc seems to be the characteristic growth of the black prairies. - U. S. Census (1880). Resources Inc. containing 115 Bcfe of proved reserves proved reserves The quantity of minerals expected to be recoverable under current economic and operating conditions. The amount of proved reserves is important in valuing the stock of a company with significant holdings in natural resources. . This acquisition, while expensive, brought critical mass in the Gulf of Mexico and potential increased production from undeveloped reserves. Comstock's reserves now have a fair mix of developed, producing properties. The company now has a nearly two-year inventory of exploration and development opportunities and an adequate reserve life of over seven years. Still, despite weak hydrocarbon hydrocarbon (hī'drōkär`bən), any organic compound composed solely of the elements hydrogen and carbon. The hydrocarbons differ both in the total number of carbon and hydrogen atoms in their molecules and in the proportion of hydrogen prices, acquisition prices remain very high and the company may be forced to develop prospects internally in the future, a strategy for which the company lacks experience and personnel. Barring further acquisitions, the company could have difficulty sustaining its current level of reserves and production. However, the recent joint venture with Bois D'Arc should assist the company in making the transition to successfully developing its own prospects. Given the company's low lifting costs and premium realizations due to the high BTU Btu: see British thermal unit. content of its gas, Comstock's cash margins have remained $.30-$.40 higher than its peers. Likewise, the company's cash flow generation is fairly strong relative to its size given the high cash margins and the flush production from its Gulf of Mexico operations. Thus, despite a much higher interest burden since the recent acquisition, Comstock is expected to generate cash flow interest coverages of over 4 times. However, as the company currently has limited hedging in place, coverages will fluctuate with volatile hydrocarbon prices. Debt leverage is currently high at nearly 70%, and with availability of about $45 million under the company's secured revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility, financial flexibility is somewhat limited. OUTLOOK: STABLE Comstock's low operating costs operating costs npl → gastos mpl operacionales and fairly stable production should provide satisfactory coverage of its increased interest burden. However, the company's highly leveraged balance sheet and heavy capital expenditure requirements currently preclude a higher rating, Standard & Poor's said. -- CreditWire CONTACT: Dmitri P Nayduch, 212-208-8396 For more information on criteria or subscriptions: http://www.ratings.standardpoor.com |
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