Haynesville Shale pure-play Comstock Resources Inc. is pumping the brakes on natural gas drilling and shareholder distributions because of low commodity prices.
“In response to weak natural gas prices, Comstock plans to suspend its quarterly dividend until natural gas prices improve,” management said. “In addition, the company plans to reduce the number of operating drilling rigs it is running from seven to five.
“Two of the five drilling rigs will continue to be deployed in the company's Western Haynesville play.”
Front-month New York Mercantile Exchange natural gas futures were trading around $1.609/MMBtu as of mid-afternoon Wednesday.
“Being a pure-play natural gas company in a sub-$2 natural gas market calls for decisive actions to weather the volatility, and at the same time continue positioning Comstock to benefit from the longer-term growth in natural gas demand in the foreseeable future,” CEO Jay Allison told analysts Wednesday during the fourth quarter earnings call. “America will need to deliver an additional 10 Bcf/d to the LNG facilities currently under construction in the next few years.”
In January, Comstock released one hydraulic fracturing crew. It now expects to run one to two crews for the remainder of the year, Allison said.
Despite the current challenges, “We’re bullish on the long-term outlook for natural gas, and are growing our resource base in the advantaged proximity to the Gulf Coast market.”
The Western Haynesville asset, meanwhile, “allows us to materially grow our drilling inventory organically versus” through the mergers and acquisitions market, the CEO said.
He added that the family of Dallas Cowboys owner Jerry Jones, the largest Comstock shareholder, “is in 100% approval of all of our prior actions as well as our recent moves to protect our balance sheet in this volatile natural gas market. They are in the cockpit with us, helping fly this plane with a steady hand on the throttle, looking into the future where global natural gas markets are counting on our U.S. gas to provide needed, clean energy.”
Allison said the company’s goal in future years is to look back on this moment “and say, ‘We handled it well and continued to create corporate value in a weak period for natural gas.’”
As a result of the reduced drilling program, Comstock plans to spend $750-850 million in 2024 for development and exploration projects, with 46 operated horizontal wells planned. It also expects to turn 44 operated wells to sales in 2024.
“Comstock expects to spend $125 million to $150 million on its Western Haynesville midstream system, which will be funded by its midstream partnership,” management noted.
Comstock is the 14th biggest producer of natural gas among U.S. publicly traded firms, according to NGI’s most recent tally.
The company produced 141 Bcf during the fourth quarter of 2023, compared with 133 Bcf in the same period a year earlier.
“Continued weak natural gas prices weighed heavily on the fourth quarter results,” management said.
Comstock fetched an average realized natural gas price after hedging of $2.51/Mcf during 4Q2023, down from $4.19 in 4Q2022.
Net income was $107.6 million (39 cents/share) for the final three months of the year, versus profits of $516.9 million ($2.08) in 4Q2022. Total quarterly revenue fell to $410.6 million from $922.4 million.
Full-year 2023 earnings were $211.1 million (76 cents/share), compared with $1.12 billion ($4.75) in 2022. Annual revenue dropped to $1.57 billion from $3.63 billion.
