Comstock Resources Inc., one of the most prolific natural gas producers in the Haynesville Shale, has dropped rigs, cut completion crews and suspended the quarterly dividend to wait out more favorable commodity prices.
The Frisco, TX-based independent, with close to 750,000 net acres across the Haynesville, reported solid production results within its core development, the western portion of the play. Once prices cooperate, the company would be “well-positioned to benefit from the longer-term growth in natural gas demand,” CEO Jay Allison said. He discussed the outlook during a quarterly conference call on Wednesday.
Comstock is “best located to serve the growing natural gas demand along the Gulf Coast,” Allison said. “The future for the company has never ever been brighter.
“However, the present challenge is managing through these times with natural gas prices at all-time lows on an inflation-adjusted basis. So now you manage the present to shine the brightest when the rebound occurs.” Comstock has “all the tools to accomplish this.”
The focus centers on ways to fortify the company until gas pricing is more attractive, an effort that has been ongoing for months. Allison in May signaled the “all-hands” effort as prices slumped. Shareholder Jerry Jones, who owns the Dallas Cowboys, stepped in at that time to pony up another $100 million, giving him two-thirds control.
Comstock’s realized natural gas prices averaged $1.65/MMBtu in the second quarter, versus $1.81 in 2Q2023 and $2.06 in 1Q2024.
Two operated rigs have been dropped, bringing the count to five. Fracture spreads have been cut from three to two. In addition, there are “no remaining long-term commitments for pressure pumping services,” a sign that well completions are tabled.
The “next six wells” are timed to be turned to sales in late 2024/early 2025, Allison noted. That would coincide with projections for rising activity in 2025 linked to more LNG exports from the Gulf Coast.
Until then, the company is basically taking a break from completing/fracturing wells, aka a “frack holiday.”
“We believe that we’re building a great asset…well positioned to benefit from the substantial growth in demand for natural gas…” The growth is forecast to be driven by future liquefied natural gas export demand. “It will begin to show up in the second half of the year.”
The private exploration and production companies also have reduced activity, according to executives. The privates also are “waiting on higher gas prices,” CFO Roland Burns said.
Allison added that activity would “basically kind of stay status quo until everybody sees these gas prices move up.” It won’t matter “whether you’re private or public. You don’t aggressively drill these wells” at low gas prices.
[Forward Look: Quickly understand where the price of natural gas is headed with these graphic day-on-day comparisons of NGI's forward curves at 70 locations. View Now.]
Comstock’s work remained steady in the Haynesville between April and June, with natural gas output rising 4% year/year to average 1.44 Bcf/d. The company drilled 9.2 net wells in the Haynesville and Bossier formations with average lateral lengths of 11,346 feet.
There were 11.7 net operated wells turned to sales, with average initial production rates of 22 MMcf/d.
In DeSoto Parish, LA, some Haynesville horseshoe wells also are being developed. The design converts four sectional laterals into two two-mile lateral wells. Comstock detailed that drilling and completion (D&C) costs for four 4,450-foot laterals averages $40 million, or $2,270/lateral foot. However, costs for two 9,200-foot horseshoe laterals is $32 million, or $1,740/per lateral foot. The D&C savings with the horseshoe design saves about $530/lateral foot, or 23% lower costs, according to Comstock.
Net losses totaled $123 million (minus 43 cents/share) in the quarter, versus year-ago losses of $46 million (minus 17 cents). Operating cash flow declined to $118 million from $145 million.
Natural gas sales fell to $217 million from year-ago revenue of $229 million. Total gas and oil sales increased year/year to $218 million from $230 million.
