What happened
Shares of Comstock Resources(NYSE: CRK), a U.S. exploration and production company with a heavy focus on natural gas, saw its shares swoon nearly 12.5% in early trading Tuesday. There was no company news today, but a business update after the close on Monday could have been a factor here, as well as the broadly weak market open and today's early drop in the price of natural gas.
So what
The S&P 500 index, after staging an incredible comeback yesterday, opened sharply lower this morning. So investors were in something of a dour mood. Now add in the fact that natural gas prices were lower this morning, too, while oil rose, and you can see why investors might have preferred to avoid Comstock. Note that natural gas made up roughly 95% of the energy company's revenue through the first nine months of 2021. Alone, these two factors could have easily led to an early drop.
Image source: Getty Images.
However, after the close on Monday, Comstock also reported its production results for the fourth quarter and full year of 2021. The news wasn't exactly bad, with drilling and investing efforts resulting in higher year-over-year production numbers and an increase in reserves. That said, the company spent materially more on capital investment than it planned at the start of 2021. That could be a case of making hay while the sun is shining, given the strong energy prices this year. But it could also indicate that cost discipline is waning, which might worry investors given the increasing focus on this factor on Wall Street. Either way, it seems that investors were hoping for more from the update than they got. Add in the other headwinds today, and the stock fell.
Now what
The energy sector is highly volatile, so investors shouldn't put too much credence in a single day's move. And smaller names, like $1.6 billion market cap Comstock, tend to be among the most volatile. Most investors looking at the space will probably be better served with a larger, more diversified name like Chevron.
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
