Why Comstock Resources shares fell more than 12% at the open today

What happened

Shares of Comstock Resources (NYSE: CRK), a US exploration and production company heavily focused on natural gas, saw its shares slump nearly 12.5% ​​in early trading on Tuesday. There was no company news today, but an activity update after Monday’s close could have been a factor here, along with the broadly weak market opening and early price decline. natural gas today.

So what

the S&P500 the index, after making an incredible comeback yesterday, opened sharply lower this morning. Investors were therefore in a dour mood. Now add the fact that natural gas prices were also lower this morning as oil rose, and you can see why investors would have preferred to avoid Comstock. Note that natural gas accounted for about 95% of the energy company’s revenue in the first nine months of 2021. These two factors alone could have easily led to an early decline.

Image source: Getty Images.

However, after Monday’s close, Comstock also reported its fourth quarter and full year 2021 production results. year-over-year production figures and an increase. in the reserves. That said, the company has spent far more on capital investments than it expected at the start of 2021. That could be making hay while the sun is shining, given high oil prices. energy this year. But it could also indicate that cost discipline is waning, which could worry investors given the growing focus on this factor on Wall Street. Either way, it looks like investors expected more from the update than they got. Add the other headwinds today and the stock plummeted.

Now what

The energy sector is highly volatile, so investors shouldn’t give too much credit to a single-day move. And smaller names, like the $1.6 billion market cap Comstock, tend to be among the most volatile. Most investors watching the space will likely be better served with a bigger, more diverse name like Chevron.

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Reuben Gregg Brewer has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.