Comstock Resources, Inc. (NYSE:CRK)

A leader in natural gas

Comstock Resources (CRK) sports the lowest costs for a dry gas producer in the industry among major producers. That is a successful strategy if you do not want to produce rich gas or crossover to being classified as an oil producer that also has large amounts of natural gas production.

Management reported operating expenses of $.56 per MCF, Administrative costs of $.04 MCF, and $.94 for depreciation. These base costs probably represent a significant competitive advantage that will last for years. Favorable geology combined with decent execution will be hard for industry competitors to overcome.

The company has a clear advantage in the current "low rig use" environment. The low costs mean that this company will be drilling first because it is the most profitable in the industry at many pricing levels. Therefore, this company will maximize the results of a pricing rally when compared to many competitors in the industry. Simply stated, this company will be able to produce more new production because it is more profitable for the company to do so when prices rise compared to many competitors.