NYSE:CRK Comstock Resources Q3 2024 Earnings Report $18.38 +0.02 (+0.11%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$18.62 +0.25 (+1.33%) As of 04/25/2025 05:34 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Comstock Resources EPS ResultsActual EPS-$0.17Consensus EPS -$0.16Beat/MissMissed by -$0.01One Year Ago EPS$0.04Comstock Resources Revenue ResultsActual Revenue$304.50 millionExpected Revenue$308.75 millionBeat/MissMissed by -$4.25 millionYoY Revenue Growth-19.20%Comstock Resources Announcement DetailsQuarterQ3 2024Date10/30/2024TimeAfter Market ClosesConference Call DateThursday, October 31, 2024Conference Call Time11:00AM ETUpcoming EarningsComstock Resources' Q1 2025 earnings is scheduled for Wednesday, April 30, 2025, with a conference call scheduled on Thursday, May 1, 2025 at 11:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Comstock Resources Q3 2024 Earnings Call TranscriptProvided by QuartrOctober 31, 2024 ShareLink copied to clipboard.There are 13 speakers on the call. Operator00:00:00Good day and thank you for standing by. Welcome to the Q3 2024 Comstock Resources Earnings Call. At this time, all participants are in a listen only mode. For the speakers' presentation, there will be a question and answer session. Call. Operator00:00:27Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jay Allison, Chairman and CEO. Please go ahead. Speaker 100:00:38Perfect. And welcome everyone that's listening in. Welcome to the Comstock Resources Q3 2024 Financial and Operating Results Conference Call. You can view a slide presentation during or after this call by going to our website at www.comstockresources.com and downloading the quarterly results presentation. There you will find a presentation entitled 3rd Quarter 2024 Results. Speaker 100:01:09I am Jay Allison, Chief Executive Officer of Comstock and with me is Roland Burns, our President and Chief Financial Officer Dan Harrison, our Chief Operating Officer and Ron Mills, our VP of Finance and Investor Relations. If you would, please refer to Slide 2 and our presentations and note that our discussions today will include forward looking statements within the meaning of securities laws. While we believe the expectations in such statements to be reasonable, there could be no assurance that such expectations will prove to be correct. If you would turn to Slide 3, before we start going over this slide, I do want to make a few comments. On Tuesday, I was watching Bloomberg News and the headline was Big Oil Sees AI Boom Driving Crazy Demand for U. Speaker 100:02:05S. Natural gas. Now, by the way, I love that word crazy. Then on Wednesday, I read in the journal Wall Street Giants to make $50,000,000,000 bet on AI and power projects with the gas is going to be at the forefront of this natural gas can back up those intermittent renewables very nicely and natural gas fired plants will be critical in supplying around the clock power to data centers. Now, since those headlines came out on Tuesday, Wednesday, I know they're not trick or treat headlines. Speaker 100:02:42So today is Halloween everyone, so happy Halloween. It does make you smile a little bit having a pure natural gas company report results on Halloween. I told someone I was hoping tonight I'd see a kid in my front door dresses of flame, either that or is a horseshoe, either one's good with me. Anyhow, the good news or the treat for natural gas companies is that America and the world needs more natural gas in the very near future as demand for an additional 15 Bcf of LNG feed gas gets nearer along with growth in power demand being driven by the growth in data centers and AI. The question is though here's the question, is where does Comstock fit into this puzzle and how did we position ourselves over the past 4 years to be a difference maker in the U. Speaker 100:03:37S. Natural gas market? As one analyst stated on Monday, the producing basins are facing inventory exhaustion. You either add inventory by M and A or exploratory drilling. Comstock has chosen 4 years ago to grow inventory through exploration in our new Western Haynesville play. Speaker 100:04:01Since 2020, we have secured 450,000 net acres in the Western Haynesville and we have drilled 18 wells over an area of 26 miles to give birth to a major natural gas field close to the LNG demand corridor, which could potentially add decades of additional drilling inventory. I told someone it is like a dog chasing a car and catching it. That's what we did in Western Haynesville. We talked to 450,000 net acres and now we're learning how to drive the car or in our case develop the Western Haynesville well by well. The results today look very, very promising. Speaker 100:04:45So the future looks very bright. In fact, today, Dan Harrison, our COO, will report on our 13th Western Haynesville well and give you cost per foot. And yes, number 13 is a lucky number for us today even on Halloween. That kind of makes you smile too. So on this Halloween day, we're thankful to be the treat as a corner of being is being turned for natural gas demand. Speaker 100:05:09So now let me go back to the presentation on Slide 3. On Slide 3, we summarize the highlights of the Q3. Our financial results continue to be heavily impacted by the continued weak natural gas prices as our average realized gas price before hedging was $1.90 for the quarter. As a result, our oil and gas sales including hedging were $305,000,000 in the quarter and we generated cash flow from operations of $152,000,000 or $0.52 per share and adjusted EBITDAX of $202,000,000 Our adjusted net loss was $0.17 per share for the quarter, Given the lower completion activity that was planned for this quarter, we had only 8 operated wells turned to sell since the company's last update. These wells had an average initial production of 21,000,000 cubic feet per day. Speaker 100:06:07One of those was our first Horseshoe Haynesville well, which had an initial IP rate of 31,000,000 per day, which Dan will talk about later. We're continuing to advance our Western Haynesville exploratory play. Our acreage in the emerging play is now up to 453,881 net acres. Most importantly, we have substantially reduced the well cost in the Western Haynesville with our 13th well recently completed at a cost of approximately $2,814 per lateral foot. This was a single well with an 11,400 foot lateral, which did not get the cost savings that we see on a 2 well pad. Speaker 100:06:52The next 5 wells in the Western Angel are expected to return to sales in late 2024 to early 2025. 4 of those are on 2 well pads. Now I give it over to Roland to go through the Q3 financial results. Roland? Speaker 200:07:07All right. Thanks, Jay. On Slide 4, we cover our Q3 financial results. Our production in the 3rd quarter averaged 1.4 Bcfe per day, which was 2% higher than the Q3 of 2023. Continued low natural gas prices resulted in our oil and gas sales in the quarter declining 3% to $305,000,000 EBITDAX for the quarter was $202,000,000 and we generated $152,000,000 of cash flow in the 3rd quarter. Speaker 200:07:38We reported an adjusted loss of $49,000,000 for the Q3 of $0.17 per share. Higher depreciation, depletion and amortization in the quarter really accounted for the loss. The higher amortization rate driving the increase in our DD and A was caused by a decrease in proved undevolved reserves, which had to be determined under SEC rules based on the low natural gas prices we've had over the last 12 months. On Slide 5, we cover our year to date financial results. Production in this period averaged 1.5 Bcfe per day and that was 5% higher than the same period in 2023. Speaker 200:08:18Again, low natural gas prices caused our oil and gas sales in the 1st 9 months of the year to decrease 7% to $919,000,000 as compared to 2023. Our EBITDAX for the 1st 9 months of this year is $598,000,000 and we generated $452,000,000 of cash flow. We reported a net loss of $121,000,000 for the 1st 9 months of this year or $0.42 per share as compared to income of $105,000,000 in the same period in 2023. On Slide 6, we break down our natural gas price realizations in the quarter. The quarterly NYMEX settlement price averaged $2.16 in the 3rd quarter and the average Henry Hub spot price averaged $2.09 Our realized gas price during the 3rd quarter averaged $1.90 reflecting a $0.26 differential to the settlement price and a $0.23 differential to the reference price. Speaker 200:09:19In the Q3, we were 28% hedged, which improved our realized gas price to $2.28 As we look ahead to the 4th quarter, we'll be 50% hedged. On Slide 7, we detail our operating cost per Mcfe and our EBITDAX margin. Our operating cost per Mcfe averaged $0.77 in the 3rd quarter, that's a $0.07 improvement from the 2nd quarter rate. And then our margin improved 67% in the 3rd quarter as compared to 61% in the 2nd quarter. A lot of that was driven by lower production and ad valorem taxes, which were down $0.05 reflecting a reduction in the statutory rate in Louisiana. Speaker 200:10:06Our lifting costs were also down $0.05 in the quarter. Our gathering costs were up $0.03 in the quarter, but this is solely due to some prior period adjustments from some of our transport agreements. So we expect to see that back to its kind of normal rate in the Q4. And our G and A costs were unchanged from the 2nd quarter. On Slide 8, we recap our spending on our drilling and other development activity. Speaker 200:10:34We spent a total of $184,000,000 on development activities in the 3rd quarter. For all of the 1st 9 months of this year, we've drilled 23 or 18.6 net Haynesville wells and 12 or 11.1 Bossier wells. We've also turned 41 or 35.9 net operated wells to sales so far this year that had an average IP rate of 24,000,000 per day. Slide 9 recaps our capitalization at the end of the 3rd quarter. We ended the quarter with $415,000,000 of borrowings outstanding under our credit facility, giving us $3,000,000,000 of total debt including our outstanding senior notes. Speaker 200:11:21Yesterday, our bank group unanimously reaffirmed our borrowing base of $2,000,000,000 and our elected commitment still remains at $1,500,000 under the bank credit facility. And given the extended period of low natural gas prices that we've had, our bank group approved an amendment to loosen the covenant leverage ratio that we had. The new leverage ratio under the amendment increases to less than 4 times through the Q1 of next year and steps back down to 3.75 times in the Q2 of 2025 and then to less than 3.5 times by the Q3 of 2025. At the end of the Q3, we ended the quarter with $1,100,000,000 of liquidity. I'll now turn the call over to Dan to discuss the operations. Speaker 300:12:16Okay. Thanks, Roland. If you look over on slide 10, this is an updated slide from our last call, which outlines the new development plan we have utilizing the Horseshoe Lateral concept. To test the concept, we have we've successfully drilled and completed our 1st single horseshoe well, the Sebastian 11 No. 5. Speaker 300:12:37This is located in DeSoto Parish, Louisiana and it's located in one of our isolated single section acreage blocks. We turned the well to sales early last week and we just recently reached an IP rate of 31,000,000 cubic feet a day from a 9,382 foot completed lateral that is in the Haynesville shale. Building upon this successful test, we will be pursuing additional Horseshoe well projects in the future. The technology allows us to develop acreage that before presented more challenging economics by being limited to drilling short laterals. The section we have depicted on this slide represents a project we have scheduled for late next year. Speaker 300:13:21This section would have originally been developed by drilling 4,000 or 5,000 foot laterals from 2 well pads with a $40,000,000 capital cost. This same section will now be developed from a single 2 well pad drilling 2 horseshoe laterals with a $32,000,000 capital cost. And this is based on the D and C cost of $17.40 a foot and our recently completed Sebastian well cost came in slightly lower than this. The project will deliver cost savings of 23% or $8,000,000 which substantially improves all our key economic performance metrics. We expect the well performance from the Horseshoe wells will match that of our regular 10,000 foot laterals. Speaker 300:14:08And with this success, we have also optimized our drilling inventory by converting 57% of our short Haynesville locations to 64 future Horseshoe locations. We're still in the process of evaluating our short boser locations for additional Horseshoe locations. On Slide 11 is our current drilling inventory as it stands at the end of the Q3. Our total operated inventory now stands at 1607 gross locations. That's 12.52 net locations, which equates to a 78% average working interest. Speaker 300:14:47The non operated inventory now stands at 1199 gross locations and 158 net locations, which represents a 13% average working interest. The drilling inventory split between Haynesville and Bossier locations broken down into our 4 different categories bilateral length, the short laterals less than 5,000 foot, the medium laterals 25,008,500 foot, our long laterals between 8,500 and 10,000 foot and our extra long laterals that go past 10,000 feet. In our gross operated inventory, we now have 180 short laterals, 331 medium laterals, 482 long laterals and 6 14 extra long laterals. And inventory is split evenly basically between the Haynesville and the Bossier. The updated inventory numbers include the impact of identifying 64 Horseshoe locations in the Haynesville shale. Speaker 300:15:492 thirds or 68 percent of the gross operated inventory has laterals longer than 8,500 feet and 38% of the gross operated inventory had laterals longer than 10,000 feet. The average lateral length now stands at 9,261 foot and this is up slightly from our 9,077 feet, which we had at the end of the second quarter. This inventory provides us over 30 years of future drilling locations based on this year's activity. On slide 12 is the chart outlining our average lateral length drilled based on wells that we've turned to sales. During the Q3, we turned 11 wells to sales with an average length of 12,580 feet. Speaker 300:16:40Individual lengths range from 8,912 feet to 15,303 feet. Our record longest LIBOR still stands at 15,726 feet. All the wells we turned to sales during the Q3 had laterals longer than 8,500 feet. And furthermore, 9 of the 11 wells that turned to sales during the quarter were extra long laterals that were over 10,000 feet. As we mentioned earlier, we did not turn to sales any wells on our Western Haynesville acreage during the Q3. Speaker 300:17:15However, we do have 6 additional wells in the Western Haynesville that we plan to turn to sales by the end of the year or early January 2025. The first of these 6 wells was turned to sales last week and we are it's currently being flow tested. Looking ahead, we have several extra long laterals slated to turn to sales over the remainder of the year and we expect our average lateral length for all of 2024 will be approximately 10,100 feet on a total of 48 wells turned to sales. To recap on our long lateral activity to date, we've now drilled 109 wells, laterals longer than 10,000 feet and we have drilled 40 wells with laterals over 14,000 feet. Slide 13 outlines our new well activity since we last provided the well results at the end of July. Speaker 300:18:13Since our last call, we have 8 new wells that have turned to sales. The individual Opry rates on these range from 10,000,000 cubic feet a day up to 31,000,000 cubic feet a day with an average test rate of 21,000,000 cubic feet a day. The average lateral length was 12,391 feet with the individual laterals that range from 9,382 feet up to 15,272 feet. This list includes our first horse, you will, the Sebastian 11 5, turned to sales last week that achieved an IP rate of 31,000,000 cubic feet a day. Recapping our activity levels, we're currently running 5 rigs and 2 frac crews. Speaker 300:19:01Our second frac crew returned in late September following a 70 day frac holiday during the Q3. We currently have 2 of the 5 rigs drilling in the Western Haynesville. We also have both of our frac fleets currently working in the Western Haynesville where we're in the process of fracking our first two well pads. Both 2 well pads will be completed in the Q4 and turned to sales at year end. In addition to these two well pads, we also have 2 single wells that turn to sales by year end, which generates the total 6 Western Haynesville wells turning to sales between now year end. Speaker 300:19:42On Slide 14 is the summary of our D and C costs through the Q3 for our Benchmark long lateral wells that are located on our core East Texas and North Louisiana acreage. This covers our wells with laterals greater than 8,500 feet long. And during the quarter, all 11 wells that we turned to sales were located on our core East Texas, North Louisiana acreage and all 11 wells fell into our benchmark long lateral group. We're now providing the drilling cost per foot based on the date the wells reached TD. This provides a better view of the current drilling environment and drilling cost environment and just to be better aligned with the timing of when we when the drilling dollars are actually being spent. Speaker 300:20:30The completion cost per foot continues to use the term to sales date. So in the Q3, our drilling cost averaged $6.42 a foot. This is a 3% increase compared to the 2nd quarter. Our 3rd quarter completion cost came in at $7.76 per foot, which represents a 6% decrease compared to the Q2. When we kind of look out ahead to the next couple of quarters, we do see our D and C cost remaining flat to going slightly lower. Speaker 300:21:04And I'll now turn the call back over to Jay to summarize the 2024 outlook. Speaker 100:21:09Okay, Raul. Thank you, Dan. Thank you. If you would, I'll direct you to Slide 15, where we summarize our outlook for 2024. As we stated last quarter, we've taken a number of steps in response to the significantly low natural gas prices this year. Speaker 100:21:27During the Q1, we released 2 of our operated drilling rigs, reducing our rig count to 5 rigs. We also released 1 of our frac spreads, reducing our frac fleet to 2 spreads. We no longer have any long term commitments for our pressure pumping services. With those steps, our 2024 CapEx expected to be down 25% to 35% from the 2023 level. We suspended our quarterly dividend, saving approximately $140,000,000 of dividend payments. Speaker 100:22:02In late March, our majority shareholder, Jerry Jones, had invested an additional $100,500,000 into the company through an equity private placement. Starting in late February, we have added significantly to our hedge position starting in the Q4 of 2024 and extending through the end of 2026. We're targeting a hedge level of 50% of our expected production level. In early April, we further enhanced our liquidity position with a $400,000,000 senior notes offering. We are evaluating our planned activity level in 2025 based upon the outlook for natural gas demand and we'll adjust our drilling program as needed to a response to the natural gas prices. Speaker 100:22:53We'll continue to maintain our very strong financial liquidity, which totaled just under $1,100,000,000 at the end of the third quarter. Our industry leading lowest cost structure is an asset in the current low natural gas price environment as our cost structure is substantially lower than the other public natural gas producers. We remain very focused on proving up our Western Haynesville play and continuing to add to our extensive acreage position in this exciting play. Our Western Haynesville acreage position totals over 450,000 net acres. We believe that we are building a great asset in the Western Haynesville that will be well positioned to benefit from the substantial growth in demand for natural gas in our region is on the horizon driven by the growth in LNG exports that begins to show up in the second half of next year. Speaker 100:23:50I will now have Ron provide some specific guidance for the rest of the year. Ron? Speaker 400:23:56Thanks, Jay. On Slide 16, we provide our 4th quarter guidance. The 4th quarter production expected to remain in the $13.25 to 13.75 expected and as has been discussed on prior calls. That's related to the impact of the timing of dropping the 2 rigs in late in Q1. The TNC CapEx guidance for the quarter is $225,000,000 to $275,000,000 Due to the timing of bringing wells online, we now expect 43 net wells to be turned to sales in 2024 versus the original expectation of 38 to 39 wells when we provided our original guidance. Speaker 400:24:46Those wells are coming on at the very end of the year, so there's not much production impact, but we do bear the full brunt of that capital expenditure. We continue to anticipate leasing CapEx of $2,000,000 to $5,000,000 per quarter and CapEx related to Pinnacle Gas Services, which is funded by our partner Quantum is expected to be $50,000,000 to $90,000,000 during the quarter. On the cost side, LOE is expected to average $0.24 to $0.28 per Mcfe, while GTC costs are expected to average $0.34 to $0.40 per Mcfe. Production and ad valorem taxes expected to average $0.14 to $0.18 while the DD and A is expected to remain in the 1.40 dollars to $1.55 range. On G and A side, cash G and A remains in the $6,000,000 to $8,000,000 per quarter range with about $3,000,000 to $4,000,000 of non cash G and A expenses expected. Speaker 400:25:49With the current SOFR rates in the April notes offering, we now anticipate our cash interest expense to be $54,000,000 to $56,000,000 during the quarter and our non cash interest in the quarter will be $3,000,000 to $4,000,000 Effective tax rate remains in the 22% to 25% range and we still expect to defer roughly almost 100% of those taxes. I'll now turn the call back over to Jill to answer questions. Operator00:26:17Thank you, Ron. At this time, we will conduct the question and answer session. First question comes from Clay Akermes with Bank of America. Please go ahead. Your line is open. Speaker 500:26:44Hey, good morning, guys. Thanks for getting me on. I guess I'd like to start with the elephant in the room, which is the planned outspend for 4Q. To frame it up a little bit, I think we're all pleased to see that you guys have the waiver. But I think some of the market thought that tripping the covenant will lead you back to more of a free cash priority. Speaker 500:27:00From our perspective, I think we get it. We see you trying to stabilize production and division for maybe a better 25%. Just hoping that you can kind of talk through your motivations to outspend through this soft pricing and then maybe articulate your plans to manage the balance sheet in 2025? Speaker 200:27:18Yes, that's a good question. I think really when we originally had the plan in place and by the time you kind of execute the plan, prices were a little bit stronger and we figured it would really cover that those expenditures planned for this year. And I think the only there's a little higher expenditure level only because the drilling days are been quicker in the Western Haynesville. So a lot of the completion work that was going to crossover, some of that was going to crossover into 2025. It's kind of now expected to be mostly in the quarter. Speaker 200:27:50So other than looking at an individual quarter, I think if you looked at it a longer period, there isn't really been much change at all in the plans. It's just how the cost end up being reported. So our goal for 2025 is again to with a higher hedge level, I think it will be easier to achieve and take some of the risk out of gas prices is to try to balance the capital we invest back into with the cash flow we generate from operations. Speaker 500:28:26Got it. So it's really timing and your plan to keep activity continue to progress forward. Maybe my next question is really on the Western Haynesville. Maybe this is for Dan. Cost per foot on the Hodges is better than our high end estimate and it's just one well. Speaker 500:28:42You've got a 2 well pad coming up, so maybe those costs are getting better. Maybe as an aside, if you can discuss those drilling costs, we'll take that. But more broadly, with the amount of wells that you'll have online, the data points on cost, maybe you have an event path ahead. When can we expect more fulsome update on the Western Haynesville in 2025? Speaker 300:29:02Well, I think we're going to be probably next year, early next year on the next call, we're going to be coming forward with, obviously, a lot more information on the Western Haynesville. You're right, this 2,814 Foot, which is a big milestone for us, was a single well. And of all the wells we drilled today, of course, this is the 13th well we started to sell. This was the fastest one we drilled to TD, 51 days. If you go back a few years, we started out drilling these things in 75, say 70 to 80 days. Speaker 300:29:38And now this one comes in at 51 days, so a massive improvement and we're kind of still working a few days off. But we had really good execution on this particular well, the Hodges number 1, drilling just all phases of the operation went really well. We've got some pretty good frac pricing in place also right now. The well fracked really good. And I'll also point out, one of the big drivers is the lateral length and the length on this one was 11,400 foot or 405 foot. Speaker 300:30:12So that obviously is very important in that cost per foot number. Now the numbers that we typically the numbers that we're kind of putting out on kind of our targets, you mentioned $3,000 a foot is all kind of normalized to a 10,000 foot lateral. So anytime you have a 11,000 to 12,000 foot lateral, it's going to generate a little bit better cost per foot and vice versa. If you're at 8,500 to 9,000 foot lateral, it's going to be a little bit higher cost per foot. Speaker 500:30:41Thanks for that. We are watching with interest guys. Speaker 300:30:44Yes. Thank you. Operator00:30:46Thank you. One moment for our next question. The next question comes from Carlos Espalante with Wolfe Research. Go ahead, Carlos. Your line is open. Speaker 600:30:59Hey, good morning, guys. Thank you for taking my call. Well, first of all, I'd like to start with the Horseshoe results because they are certainly encouraging. And I think directionally, this is what the investment community wants to see. Now I do think that we need to rationalize how this translates into free cash flow generation. Speaker 600:31:22So my question and bearing in mind, because you guys know this better than I do that not all acreage is created equal. What's the geographical spread of the 64 locations that you think are candidates for this across your Haynesville locations? Thanks. Speaker 300:31:41Good question. So that is 64 just in the Haynesville. And you're right, I'll just start off. We are very happy with the results on the Sebastian well. We didn't we had no issues in drilling the well. Speaker 300:31:56I'm going to say maybe 2 extra days if you compare that to just drilling a straight 10,000 foot lateral, just didn't have any issues. And the frac, it frac. If you just if you didn't know that it was a horseshoe well, you can't tell we couldn't tell any difference in frac in those straight 10,000 foot lateral and frac in the horseshoe. The well did frac really good again. So results look fantastic. Speaker 300:32:22So we're super excited about it. As far as the spread of the locations, I'd say they're pretty evenly kind of spread across. If you look at that acreage position and just kind of from south to north, I think we've got them they're just pretty much all across the basin. So we've got them in the 1.6b per 1,000. We got them in the 1.8b per 1,000 type curve areas up to the 2. Speaker 300:32:48So I think kind of the answer for you is really it's just spread out across all the acreage. It's not really in any specific rig effort spot. Speaker 600:32:59Sure. That certainly helps. I guess your answer provided me with another question, if you will, on that same topic. And maybe this is a bit too early because the Western Haynesville is still a by all means an exploration play. But do you feel like you will come across the geometry lease line issues that you have in the Haynesville, in the traditional Haynesville? Speaker 600:33:24And then just to finish up my second question, which is also in the Western Haynesville, what do you expect to be the average lateral length for your program going forward, bearing in mind that you have a hotter reservoir and it's more difficult to drill? Speaker 300:33:43Okay. So kind of I think your first question maybe is maybe how confined will be with lease lines in the Western Haynesville versus Louisiana. So really the big difference between is in Louisiana, we deal with square mile sections, right? Every section is a unit. So we're usually either confined to drill on a 5,000 foot, a 10,000 foot or a 15,000 foot or later on in the play, we did 7,500 foot laterals. Speaker 300:34:13Now we've got the ability to turn the wellbore around and then horseshoe. And so we deal the lease lines are the section lines. In Texas, you don't have sections. It's abstract surveys. You pretty much can build your units. Speaker 300:34:33They're more customized. They're more much more regular in shape and size. And so you're going to have laterals in Texas that are kind of any different links between say 5000, 10000 feet. You can have some at 9, you can be at 8, you can be at 6,500, 11,500, not really Louisiana you're in those kind of specific 5, 10 or 15 or 7,500 foot groupings. But so really that's kind of the difference in drilling in one state versus the other. Speaker 300:35:08As far as average lateral length in the Western Haynesville, I think we're looking at about 10,000 foot average. We've got a lot better at handling the bottom of temperature. So that's really not an issue. I think probably the bigger driver there is not the temperature. It's just there are some minor faults here and there. Speaker 300:35:27So there's just certain there's some geohazards in certain places you just where you can't drill across and have to stop. And so that's really kind of the only driver there. Obviously, we're trying to drill the longest laterals we can now that we're holding acreage. But I see, I think 10,000 is a pretty good number looking out ahead of what our average lateral length will be. So we've drilled a 12,700 foot max already. Speaker 300:36:00I think our shortest lateral right now is, I want to say, 7,800 feet. So we're not having any issues drilling these 10, 11,500 foot laterals. It's just limited by, like I said, geohazards or other factors. Speaker 600:36:20Wonderful. Thank you, guys. Operator00:36:22Thank you. Standby for our next question. The next question comes from Charles Meade with Johnson Rice. Go ahead, Charles. Your line is open. Speaker 700:36:34Good morning, Jay, Roland and Dan and the whole Comstock team there. Speaker 800:36:39I want Speaker 700:36:39to go back to the Sebastian well. I can't help but notice that it's the shortest lateral with the highest IP on the quarter. So I know it's early, but do you think this is just luck of the draw? Or is there something else going on here perhaps? Speaker 300:36:57It's not luck of the draw. I'd say all of the horseshoes we do in Louisiana are pretty much going to be about the same lateral length unless we and maybe I think someday we'll probably reach out and attempt to do a horseshoe that's maybe 7,500 foot and 7,500 back. That's way out. We're getting out ahead of ourselves. But this is kind of about what we would expect from a well in the area where we drill this well on this acreage. Speaker 300:37:31So we're not surprised at all. I mean, we totally expected this was going to be the result. And I see this being very, very repeatable. Speaker 700:37:42Got it. Got it. That's good. It's good to have your opinion on that. And then going back to the Western Haynesville, and I think you've discussed this a bit. Speaker 700:37:51It's great to see what you've done with that Hodge as well. But as you think of repeating that or trying to deliver repeat on that, leaving aside the lateral length, what are the pieces of the whole well construction and completion puzzle that you're going to be most focused on to try to get a repeat of that dollar per foot metric? Speaker 300:38:12Well, I think first of all, we got to be we and we have become more consistent. We've had some really good showings, but we have we in the early wells, we didn't have the consistency. So we're becoming much more consistent at basically the really good performance. And so we figure we always get a 5% to 7% cost reduction on pad drilling versus a single well pad. So this is a pretty good number for a single well pad. Speaker 300:38:44This well on the longer ladder, like I mentioned just a little bit ago helps with that number. That's going to always move the number down a little bit when you start going over 10,000 feet, okay? And this one was 11,400 feet. So had this exact same well, like I said, we had great execution across all phases. If this would have been a 9,000 foot lateral, this would have been the cost per foot would have been a little bit higher. Speaker 300:39:09And if we had been 12,000 foot, it's a little bit lower than this. So we definitely see the cost, we start doing pad drilling with this performance. We're going to generate numbers lower than this $2,800 per foot. Speaker 700:39:25That's great detail. Thank you. Operator00:39:28Thank you. Standby for our next question. The next question comes from Jacob Roberts with TPH and Co. Jacob, go ahead. Your line is open. Speaker 700:39:39Good morning. Speaker 600:39:42Good morning. Speaker 900:39:43I believe you've all previously contemplated adding a few rigs next year. And I understand it might be a little bit early to talk about 2025. But given where the commodity price is today, how are you thinking about the timing of those rig adds, if at all? And then maybe as well if I could tack on what you might consider a balanced program in terms of those rigs at current commodity prices? Speaker 200:40:09Yes, it's a good question. It is kind of early because we will really be watching the gas market, how if we have a winner or not, those would be a lot of factors, especially driving gas prices in the first half of twenty twenty five. As the second half of twenty twenty five, we kind of see some increased demand. So, yes, that's something we're looking at really hard in deciding when we bring back the 2 rigs that we dropped in the Q1 of this year. And as we do have a lot of flexibility and when we do that, we think we can light up the services when needed and we have a lot of services we can with short notices drop. Speaker 200:40:51So again, want to be very responsive to whatever environment we have in 2025 and target having a higher hedge percentage in 2025, that 50% level is kind of what we are going to target. We're 40% almost hedged now for 2025. So we have a little work to do there, but that should help us stay more on track than where this year if the 1st 3 quarters, we were a little bit less than 30% hedged. Speaker 900:41:25Thanks. I appreciate the color. Maybe if we could look at the Western Haynesville and particularly the midstream, can you frame the current runway you have, what the Q2 25 addition will add to that runway, maybe in terms of quarters or wells that you ultimately see being able to handle being able to be handled? Speaker 200:41:44Yes, it's a good question. As we with these 6 wells coming on that will go into our Pinnacle system there, that are coming on and we'll be at a pretty good rate by the in January. We start to really hit the treating capacity, not the pipeline capacity of our Bethel treating plant. And we do have quite a bit of backup capacity where we could offload Speaker 1000:42:14to a Speaker 200:42:15couple of other midstream companies that we have contracted capacity and a good rate on. So we can definitely do that. We just would prefer to have it in our own facility. And so that's where the key a lot of the expenditures that we are incurring now, especially in the Q4 and early in the Q1 next year is really to open up a new gas treating plant at Marquet, which will be on the other end of our Western Haynesville footprint. And then that's going to add $400,000,000 a day of treating capacity. Speaker 200:42:47So then we'll be have a lot of capacity to handle the growth out there. So as that one comes online, we do have the ability to offload and process under these arrangements we put in place. So, we definitely won't have any restraints as far as actually producing what we do. So, and then as we evaluate the program and add more rigs, that's where we're continuing to look and say, do we want to build out additional capacity for the play. Speaker 900:43:24Great. Appreciate the time. Operator00:43:26Thank you. Stand by for our next question. The next question comes from Greta Drevke with Goldman Sachs. Greta, go ahead. Your line is open. Speaker 1100:43:37Hi, good morning and thank you for taking my question. I was just wondering if you could spend a bit more time on the Horseshoe Wells and the benefits you're realizing there. Is there a proportion of your overall operations that you hope to apply this technique to over time? And do you see potential for any upside to your 64 Horseshoe locations that you've outlined? Thank you. Speaker 300:43:55Good question. So we do definitely see an upside as far as the number of locations that will get converted. So the 64 that we've got converted in the inventory so far is just on the Haynesville side. We're still working through the Bossier all of our Bossier sticks and we'll probably have a number on that sometime in the Q1. As far as the number of horseshoes kind of pushing into our development program, I mean, being that this news is pretty fresh, we obviously are going to do more and want to do more. Speaker 300:44:34For right now, in our drilling program, obviously, we've got a lot of things in place and it takes a lot of time obviously to get things drill ready and to move around, just a lot of lead time. So our next we have a single horseshoe that's coming up early. Next summer is the next project. We got a 2 well pad Horseshoe, which is the one we talked about on the slide here that is later next year. And we also have a triple we got a triple Horseshoe well pad that will come up behind that in 2026. Speaker 300:45:07So like I said, we love the results. It's just that it's hard to add push a bunch of these into our drilling program that's already been set for a little long on short notice. But I can see more than what we have scheduled now maybe get pushed into the program as we get a little bit more data on this well and have some time to just get the drilling program revised a little bit, which takes a little bit of work. Got Speaker 100:45:35you. Well, my only comment would be if you we always high grade our inventory, our 1400 locations, etcetera. And now the Horseshoe will be accelerated to the front of that, as Dan had said. So that's a good thing based upon the recent results we just have in this Haynesville well. Again, we may have that many or more in the Bossier as we keep looking at that in the Q1 of 2025. Speaker 200:46:03Some of the other indirect positives from the horseshoe, especially as we get through the Bossier inventory, in our reserves, it will move these up with much higher economic results. And so even in low prices, some of these can come very economic. And so yes, we see the IRRs on the Horseshoe wells being 2 to 3 times better than a short lateral Haynesville well, Dan Harrison says 3 times better. So that's a it makes a lot more of that inventory very economic at lower gas prices. So you'll see some impact and that improved just be able to bring some a lot more of that inventory into the proved undeveloped reserves. Speaker 300:46:49Yes. And I think I didn't really answer that part of your question. So I mean as far as the performance versus the single 5 ks, our return rate, it basically triples the return on the wells. Our payouts will be less than half. If you just look at 2, the 2 single 5ks versus the horse yield, we're going to generate $5,500,000 to $6,000,000 additional PV-ten value. Speaker 300:47:14And so pretty substantial. Speaker 1100:47:18Thank you. That's really helpful. And then my second question is I was wondering if you could speak about the outlook for M and A in the Haynesville. Do you expect consolidation to continue more broadly? And do you see opportunities for bolt on M and A either in the Western or Legacy Haynesville for Comstock from here? Speaker 200:47:35Well, we continue to keep a good eye especially in the Western Haynesville where we've had great opportunity to partner with other companies that want the shallow production or the existing production and we've been able to acquire the deep rights and actually have acreage held by production. So those opportunities interest us a lot in that area And there's been it's a fairly the older vertical wells are fairly mature, so they are being divested by the larger companies that own them. And so we continue to work that part of the M and A cycle. And yes, there are still private operators that have a plan to divest. So we expect to see those private companies probably over time be consolidated over the next several years and probably the as gas prices get to more attractive levels is probably what kind of feels that to start up again in earnest. Speaker 1100:48:38Makes a lot of sense. Thank you. Operator00:48:41Thank you. One moment for our next question. Next question comes from Noel Parks with Tuohy Brothers Investment Research. Go ahead. Your line is open. Speaker 800:48:54Hi, good morning. Just had a couple. I was just wondering, you mentioned it being important to avoid faulting in the Western Haynesville. I was wondering to what degree you can anticipate those. I don't know if it's seismic or legacy penetrations or anything. Speaker 800:49:15So just curious on how you're handling that? Speaker 300:49:19We do have 3 d seismic over almost the entire acreage position that we have. And so we've got a really good look on mapping of where everything is and got everything pretty much identified. So I don't see we don't really see that as any kind of an issue for us. It's just something that we do when we plan when we're going to lay out our sticks in the development. Obviously, that's a very important factor. Speaker 300:49:49But we do have 3 d, good data. So we've got a pretty good picture of what it looks like. Speaker 800:49:56Great. Thanks. And I am sort of a macro topic, in certain season, I heard another gas producer sort of affirm a point that you've made in the past, which is that lower for longer natgaspricing and therefore real lower level of activity is likely to make for a tougher ramp up of industry activity and then possibly get that get reflected in a higher peak in gas prices when we see them come back. So with just another quarter under our belts with prices where they are a little better heading into winter. But just wonder about your perception of that and maybe a weak winter versus normal winter perspective on maybe where that peak might occur? Speaker 200:50:51Yes, that's a great question. That's the challenge of the natural gas industry is there is a lot of demand on the horizon that comes in pretty large increments. And but it's not here today. And so near term gas prices are going to be really dependent on what's the demand for heating in the winter. And that's something we all have to see how it plays out. Speaker 200:51:19So in the short term, especially the first half of twenty twenty five is going to be really tied to that winter. Although, I think we have two factors that are in our favor there. One is there is startup of new demand on the LNG side. It's up to even today at the highest rate it's been. And 2, the rig count has been very low and so production declines will also be there to help tighten the supply. Speaker 200:51:52And as you can see, even for Comstock, we've actually had, even though we cut our activity back in the Q1, it's not really to the Q4 that we really start to see the decline. And we were one of the first to really cut back activity in the Haynesville. We weren't the last. And I think you'll see that a lot of especially the private operators followed several months later. And you'll see the Q1, just a lot of that decline really showing up in the Haynesville. Speaker 200:52:23So help I think they help us kind of balance that supply and demand during the period compared to last year when we had the opposite or coming into this year, we had the opposite situation. We had a really high activity level and a warm winter and the 2 kind of created the big drop in gas prices that we've suffered this year. So, it's going to be, I think a more volatile gas market and I think you could have that trying to balance the market, they balance it with price. That's just how the gas market works. So if there's a little bit too much gas, the price drops a lot. Speaker 200:53:03If there's not enough gas, the price goes up a lot. And I think we're going to have a lot of volatility in 2025 as different these different factors kind of play against each other. Speaker 100:53:16And then Noel, I'd comment on the defaulting question. I mean, we have major control points for almost all of our 450,000 net acres. I mean, we do have those points. And as Dan said, we've got 3 d seismic on the majority of it. And if you look at M and A, a lot of the M and A was done $4, $5 gas price and the Holy Grail is inventory. Speaker 100:53:42You typically do M and A or inventory every now and then size if you're small, but a lot of the M and A is inventory. The Holy Grail is inventory. So I think what we were able to do, we were able to go take an old gas field, which is now we call the Western Haynesville, we meant deeper just like we did in the core of the HaynesvilleBossier. And we figured out that technically that we can drill and complete these wells and make it competitive with our core. So it's all about the right geographic spot. Speaker 100:54:18It's about the right drill bit performance. It's about the right EUR. And then all of a sudden you throw in our horseshoe, makes it a little bit more exciting because as Dan and Roland said, the IRR on the horseshoe is 3 times better than your typical Haynesville will. So and you get to the banks, the 17 banks looking at us and they look at the whole company and they look at the future and that's why we had unanimous approval. It all makes a lot of sense. Speaker 100:54:47Just to your point, you have to weather this storm in order to be there when the bright light and sun comes back out. And we are more than well positioned to do that. Operator00:55:00Thank you. One moment for our next question. Next question comes from Bertrand Donnes with Truist. Please go ahead. Your line is open. Speaker 1200:55:12Hey, team. Just wanted to follow-up on the rig count commentary. You did a great job of notifying your rigs late last year to get them dropped by I think the end of Q1. So it seems like you have a big pretty good bit of flexibility on those. Do you have an updated estimate on that? Speaker 1200:55:28Maybe how many months it would take for you to drop or pick up rigs? And maybe just logistically, do you have to do it around December? Or is it just as easy for you to do it, say, summer or fall? Speaker 200:55:39Yes. There's no real time frame. Typically, we've got about half the rigs that in our fleet that are really just require a 45 day notice. So we have to plan around that and then obviously the logistics of moving a rig out, obviously not going to just pull it out in the middle of a project or middle of Speaker 800:56:00a Speaker 200:56:01multi well pad. So it's really all about planning for it. So that's obviously something we looking at very hard as we're pondering our 2025 budget and the right activity level and kind of see how things play out. But it's typically December when we really make these final decisions like we did last year and then hopefully have a good plan to get it in place quickly like we're able to do for the 2024 year. Speaker 100:56:32The one thing that we've tried to do is we've tried to have all of our rigs be capable of drilling in the Western Haynesville. Even if they're drilling in the legacy area, we want them to be qualified if you need to move them over to the Western Haynesville. Speaker 1200:56:49That makes sense. And then switching gears to the land leasing program, it seems to continue to be strong. It seems like every time you think you have an idea of how much is out there, you keep finding more attractive opportunities. Is that because of the movement in gas prices? Or is the leasing team just kind of hitting their stride or is your view on the long term value changing? Speaker 1200:57:10Just why do you keep surprising to the upside on that? Speaker 100:57:14Well, if you spent 4 years looking at 3 d and at logs and well results and you have an area kind of like I said, it's like we were chasing this big footprint and we actually caught it. So if there's a little bit extra out there, I mean, you keep your land group busy to clean up around where you're already leased. And if there's anything else that you need to add to expand a little bit. But I'd give you 90% of our leasing program is in our rearview mirror. And I think if you look at our balance sheet, the debt that we've incurred, that's like a big M and A event. Speaker 100:57:58I mean, we have acquired the acreage. We're now drilling it. We control the midstream with Pinnacle and you see the well costs are coming down. And as I said, the Holy Grail is inventory. If we've got 1400 locations, the majorities are those in our legacy. Speaker 100:58:15I mean, just think of the upside they would have on the 450,000 net acres in the Western Haynesville. That is the goal. So we just keep clean it up, but you shouldn't expect any quarter where we spend this $50,000,000 to $100,000,000 like we had done in the past. Those days are behind us. And the reason we were successful in acquiring that acreage is because gas was low. Speaker 100:58:42Nobody was out there doing it. Speaker 1200:58:46Okay. Very well said. And then just want to clarify something. I think I heard a triple horseshoe pad in 2026. Is that 3 horseshoe wells or is that 3 sets of 2 horseshoe wells for a total of 6? Speaker 1200:58:57Thanks guys. Speaker 300:58:59So that is 3 horseshoe wells, which would be prior to that would have been 6 5000 foot laterals. Speaker 1200:59:08Makes sense. Thanks. Operator00:59:11One moment for our next question. The next question comes from the line of Jeff Jay with Daniel Energy Partners. Please go ahead. Your line is open. Speaker 800:59:22Hey, guys. Thanks for taking the question. Real quick for me. Looking at the Horseshoe D and C of about 1700 a foot versus kind of, I guess, traditional laterals of that length at about kind of 1400, 1500. Is there any reason that you're as you do more of these and get better at them that you couldn't those 2 couldn't sort of get closer together? Speaker 800:59:42Or is there something about horseshoe drilling that's always going to be a little more expensive? Thanks. Speaker 300:59:49Well, on the completion side, it's really not any more expensive. So it's really on just the drilling side. And it's really just the cost of if you have great execution, it's just the cost of drilling doing a 180 degree turn. Obviously, that if you just equate that distance to drilling straight, it's going to take you longer to drill that distance. Bending back around at 180 degrees, you're just constantly I mean, we're using conventional tools. Speaker 301:00:17You're just constantly sliding and turning back around. So that's going to take an extra day or 2 and that's really about the only difference. Speaker 201:00:26Well, potentially, the Sebastian, under that number that's kind of reported on that slide. So I think that's a fairly conservative estimate too. Speaker 301:00:35It is. So we this was what we projected before we drilled the Sebastian well. So the Sebastian well right now we got projected coming in slightly less than $1700 a foot versus we had $17.40 is what we had modeled and what we had on this slide deck here. Speaker 801:00:53Got it. Thank you, guys. Speaker 101:00:55Yes. And that well, I mean, literally, it got IP yesterday. Speaker 301:00:59Yes. And that was a single I mean, that's a single horseshoe well. So really, if you do 2 horseshoe wells, you get 5% to 7% additional savings from pad drilling. Really, that or say, dollars 16.80 a foot on the Sebastian, if you do a 2 well pad, we should be able to drop that cost even lower. Got it. Operator01:01:23Thank you. One moment for the last question. The question comes from the line of Paul Diamond with Citi. Go ahead. Your line is open. Speaker 1001:01:34Thank you. Good morning all. Thanks for taking my call. Just a quick question for you on the 2025 hedging book. It's currently breaking down pretty evenly per quarter and with the curve currently sitting at around low 3s, I guess, how do you guys think about the timing and opportunity of kind of tranche in those that last little bit to bring you up to the 50% target? Speaker 201:01:57Right. And it is our yes, we will work diligently to bring that to get to the $0.50 level. That's kind of our target and we added a little bit post the Q3. Gas prices have been weaker here lately. So it's really up to kind of finding good spots to do that. Speaker 201:02:16And they've got good structures to do that. But potentially, if we're going to really try to like you said, we have it evenly spread out. But our production next year will be potentially weighted more toward the end of the second half of the year. So potentially there's a point where we can kind of focus on the latter part of 2025 to hit our goals where there's a little bit stronger pricing available. Speaker 101:02:46I think what we do, we advertise to you, whether you're a bank or a bondholder, an equity owner, analyst that our goal if that window opens up before we can hedge 50%, that's our goal and we'll be leaning into that window. Speaker 1001:03:06Understood. Appreciate the clarity. And just another quick one, you talked about the 57% conversion of Haynesville locations to Horseshoe. I just want to get some idea of where the other 43% kind of sits. Are those have been rolled out? Speaker 1001:03:22Or is that just haven't got to them yet or still under evaluation? Speaker 301:03:28Well, they're always under evaluation, but we can't convert all of them to horseshoe wells because they're some things have to work out to be able to convert. First of all, you have to have 2 of your you have to have 2 sticks together, right? So if you have in a lot of places, we just have one stick. And so you can't obviously, you can't do anything with that. But you also have to have a lot of this is on these isolated sections where we still have some sticks left and it's also in areas where we've got quite a bit of development, maybe mostly developed and we have a few sticks kind of left to infill. Speaker 301:04:08So the spacing has to be right. So you can't have 2 of your sticks on opposite side of the section that are too far apart to be able to accomplish the horseshoe. So when you kind of factor in all of those different things that you have to have to make it work, that's kind of I said we ended up with just 57% of that inventory that got converted. Speaker 201:04:28Got it. So it would Speaker 1001:04:29be a reasonable read through that you'd probably run into similar types of issues in the Bossier acreage as well? Speaker 301:04:34That would be correct. And on the Bossier side, if you just look at the acreage and you lay out nothing but Bossier Sticks, we got a little bit more of a clean slate to work with, obviously, because it's not as drilled up as the Haynesville. So we'll still have a lot of ability to drill the long laterals in the Bossier whereas in the Haynesville, we got a lot of those drilled and some of these horseshoes are connecting the short. We skipped over and then drilled the short laterals and we were doing the development because just because of the economics. And so now that we can come back and you got 2 of them there, you can hook them up. Speaker 301:05:13So maybe in the future, we get a little bit more comfortable with maybe how wide we can space the horseshoes. We can maybe convert a few. We just need to get a little bit further down the road on what our abilities are going to be. I'm talking about how wide, maybe right now they're 1100 feet, 1200 feet apart between each side. But if we can we may be able to drill them 2,000 feet apart, where you have 2 sticks that are left to be drilled 2,000 feet apart, where you can do a big wide turn and hook them up. Speaker 301:05:46So I think that number will move in the future. We just need to get a little bit further down the road on what kind of we can do that's kind of within reason. Speaker 1001:05:58Got it, Chris. Appreciate the clarity. I'll leave it there. Operator01:06:02Thank you. I'm showing no further questions at this time. I would now like to turn it back to Jay Allison for closing remarks. Speaker 101:06:11First of all, I want to thank everybody for staying on the line for a little over an hour. With natural gas prices ranging between $1.65 $1.90 for the last 6 months, it's a difficult time for pure natural gas companies. That's just a fact. But what happens in those months really test your resolve. I want to acknowledge 3 groups over the past 6 months that consistently have stood firm. Speaker 101:06:401st, our 255 employees who create the exceptional results in both our legacy and Western Haynesville area. 2nd, our 17 banks who reaffirmed our $2,000,000,000 borrowing base and gave us unanimous approval on our bank amendment to loosen the leverage company. 3rd, the Jones family, who in the month of August made open market purchases of 13,500,000 shares of our stock for $138,000,000 I want to thank each of you as well as our bond and our equity owners. I can assure you we are on the exact right path to be positioned for the growth in natural gas demand that is just around the corner. Thank you for your time. Operator01:07:32Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallComstock Resources Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Comstock Resources Earnings HeadlinesQ1 EPS Estimate for Comstock Resources Boosted by AnalystApril 25 at 3:07 AM | americanbankingnews.comGulfport Energy, Magnolia Oil started with Buy ratings at UBSApril 23, 2025 | msn.comReal Americans Don’t Wait on Wall Street’s Next MoveWhat's happening in the markets right now should concern every freedom-loving American who's worked hard and saved smart. Your 401(k) doesn't deserve to be dragged through the mud by tariffs, trade wars, reckless spending, and political standoffs. And you don't have to stand by while Wall Street plays roulette with your future.April 27, 2025 | Premier Gold Co (Ad)Piper Sandler Reaffirms Their Sell Rating on Comstock Resources (CRK)April 23, 2025 | markets.businessinsider.comAnalysts Conflicted on These Energy Names: Comstock Resources (CRK) and Liberty Oilfield Services (LBRT)April 23, 2025 | markets.businessinsider.comUBS Initiates Coverage of Comstock Resources (CRK) with Neutral RecommendationApril 23, 2025 | msn.comSee More Comstock Resources Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Comstock Resources? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Comstock Resources and other key companies, straight to your email. Email Address About Comstock ResourcesComstock Resources (NYSE:CRK), an independent energy company, engages in the acquisition, exploration, development, and production of natural gas and oil properties in the United States. Its assets are located in the Haynesville and Bossier shales located in North Louisiana and East Texas. The company was incorporated in 1919 and is headquartered in Frisco, Texas. 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There are 13 speakers on the call. Operator00:00:00Good day and thank you for standing by. Welcome to the Q3 2024 Comstock Resources Earnings Call. At this time, all participants are in a listen only mode. For the speakers' presentation, there will be a question and answer session. Call. Operator00:00:27Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jay Allison, Chairman and CEO. Please go ahead. Speaker 100:00:38Perfect. And welcome everyone that's listening in. Welcome to the Comstock Resources Q3 2024 Financial and Operating Results Conference Call. You can view a slide presentation during or after this call by going to our website at www.comstockresources.com and downloading the quarterly results presentation. There you will find a presentation entitled 3rd Quarter 2024 Results. Speaker 100:01:09I am Jay Allison, Chief Executive Officer of Comstock and with me is Roland Burns, our President and Chief Financial Officer Dan Harrison, our Chief Operating Officer and Ron Mills, our VP of Finance and Investor Relations. If you would, please refer to Slide 2 and our presentations and note that our discussions today will include forward looking statements within the meaning of securities laws. While we believe the expectations in such statements to be reasonable, there could be no assurance that such expectations will prove to be correct. If you would turn to Slide 3, before we start going over this slide, I do want to make a few comments. On Tuesday, I was watching Bloomberg News and the headline was Big Oil Sees AI Boom Driving Crazy Demand for U. Speaker 100:02:05S. Natural gas. Now, by the way, I love that word crazy. Then on Wednesday, I read in the journal Wall Street Giants to make $50,000,000,000 bet on AI and power projects with the gas is going to be at the forefront of this natural gas can back up those intermittent renewables very nicely and natural gas fired plants will be critical in supplying around the clock power to data centers. Now, since those headlines came out on Tuesday, Wednesday, I know they're not trick or treat headlines. Speaker 100:02:42So today is Halloween everyone, so happy Halloween. It does make you smile a little bit having a pure natural gas company report results on Halloween. I told someone I was hoping tonight I'd see a kid in my front door dresses of flame, either that or is a horseshoe, either one's good with me. Anyhow, the good news or the treat for natural gas companies is that America and the world needs more natural gas in the very near future as demand for an additional 15 Bcf of LNG feed gas gets nearer along with growth in power demand being driven by the growth in data centers and AI. The question is though here's the question, is where does Comstock fit into this puzzle and how did we position ourselves over the past 4 years to be a difference maker in the U. Speaker 100:03:37S. Natural gas market? As one analyst stated on Monday, the producing basins are facing inventory exhaustion. You either add inventory by M and A or exploratory drilling. Comstock has chosen 4 years ago to grow inventory through exploration in our new Western Haynesville play. Speaker 100:04:01Since 2020, we have secured 450,000 net acres in the Western Haynesville and we have drilled 18 wells over an area of 26 miles to give birth to a major natural gas field close to the LNG demand corridor, which could potentially add decades of additional drilling inventory. I told someone it is like a dog chasing a car and catching it. That's what we did in Western Haynesville. We talked to 450,000 net acres and now we're learning how to drive the car or in our case develop the Western Haynesville well by well. The results today look very, very promising. Speaker 100:04:45So the future looks very bright. In fact, today, Dan Harrison, our COO, will report on our 13th Western Haynesville well and give you cost per foot. And yes, number 13 is a lucky number for us today even on Halloween. That kind of makes you smile too. So on this Halloween day, we're thankful to be the treat as a corner of being is being turned for natural gas demand. Speaker 100:05:09So now let me go back to the presentation on Slide 3. On Slide 3, we summarize the highlights of the Q3. Our financial results continue to be heavily impacted by the continued weak natural gas prices as our average realized gas price before hedging was $1.90 for the quarter. As a result, our oil and gas sales including hedging were $305,000,000 in the quarter and we generated cash flow from operations of $152,000,000 or $0.52 per share and adjusted EBITDAX of $202,000,000 Our adjusted net loss was $0.17 per share for the quarter, Given the lower completion activity that was planned for this quarter, we had only 8 operated wells turned to sell since the company's last update. These wells had an average initial production of 21,000,000 cubic feet per day. Speaker 100:06:07One of those was our first Horseshoe Haynesville well, which had an initial IP rate of 31,000,000 per day, which Dan will talk about later. We're continuing to advance our Western Haynesville exploratory play. Our acreage in the emerging play is now up to 453,881 net acres. Most importantly, we have substantially reduced the well cost in the Western Haynesville with our 13th well recently completed at a cost of approximately $2,814 per lateral foot. This was a single well with an 11,400 foot lateral, which did not get the cost savings that we see on a 2 well pad. Speaker 100:06:52The next 5 wells in the Western Angel are expected to return to sales in late 2024 to early 2025. 4 of those are on 2 well pads. Now I give it over to Roland to go through the Q3 financial results. Roland? Speaker 200:07:07All right. Thanks, Jay. On Slide 4, we cover our Q3 financial results. Our production in the 3rd quarter averaged 1.4 Bcfe per day, which was 2% higher than the Q3 of 2023. Continued low natural gas prices resulted in our oil and gas sales in the quarter declining 3% to $305,000,000 EBITDAX for the quarter was $202,000,000 and we generated $152,000,000 of cash flow in the 3rd quarter. Speaker 200:07:38We reported an adjusted loss of $49,000,000 for the Q3 of $0.17 per share. Higher depreciation, depletion and amortization in the quarter really accounted for the loss. The higher amortization rate driving the increase in our DD and A was caused by a decrease in proved undevolved reserves, which had to be determined under SEC rules based on the low natural gas prices we've had over the last 12 months. On Slide 5, we cover our year to date financial results. Production in this period averaged 1.5 Bcfe per day and that was 5% higher than the same period in 2023. Speaker 200:08:18Again, low natural gas prices caused our oil and gas sales in the 1st 9 months of the year to decrease 7% to $919,000,000 as compared to 2023. Our EBITDAX for the 1st 9 months of this year is $598,000,000 and we generated $452,000,000 of cash flow. We reported a net loss of $121,000,000 for the 1st 9 months of this year or $0.42 per share as compared to income of $105,000,000 in the same period in 2023. On Slide 6, we break down our natural gas price realizations in the quarter. The quarterly NYMEX settlement price averaged $2.16 in the 3rd quarter and the average Henry Hub spot price averaged $2.09 Our realized gas price during the 3rd quarter averaged $1.90 reflecting a $0.26 differential to the settlement price and a $0.23 differential to the reference price. Speaker 200:09:19In the Q3, we were 28% hedged, which improved our realized gas price to $2.28 As we look ahead to the 4th quarter, we'll be 50% hedged. On Slide 7, we detail our operating cost per Mcfe and our EBITDAX margin. Our operating cost per Mcfe averaged $0.77 in the 3rd quarter, that's a $0.07 improvement from the 2nd quarter rate. And then our margin improved 67% in the 3rd quarter as compared to 61% in the 2nd quarter. A lot of that was driven by lower production and ad valorem taxes, which were down $0.05 reflecting a reduction in the statutory rate in Louisiana. Speaker 200:10:06Our lifting costs were also down $0.05 in the quarter. Our gathering costs were up $0.03 in the quarter, but this is solely due to some prior period adjustments from some of our transport agreements. So we expect to see that back to its kind of normal rate in the Q4. And our G and A costs were unchanged from the 2nd quarter. On Slide 8, we recap our spending on our drilling and other development activity. Speaker 200:10:34We spent a total of $184,000,000 on development activities in the 3rd quarter. For all of the 1st 9 months of this year, we've drilled 23 or 18.6 net Haynesville wells and 12 or 11.1 Bossier wells. We've also turned 41 or 35.9 net operated wells to sales so far this year that had an average IP rate of 24,000,000 per day. Slide 9 recaps our capitalization at the end of the 3rd quarter. We ended the quarter with $415,000,000 of borrowings outstanding under our credit facility, giving us $3,000,000,000 of total debt including our outstanding senior notes. Speaker 200:11:21Yesterday, our bank group unanimously reaffirmed our borrowing base of $2,000,000,000 and our elected commitment still remains at $1,500,000 under the bank credit facility. And given the extended period of low natural gas prices that we've had, our bank group approved an amendment to loosen the covenant leverage ratio that we had. The new leverage ratio under the amendment increases to less than 4 times through the Q1 of next year and steps back down to 3.75 times in the Q2 of 2025 and then to less than 3.5 times by the Q3 of 2025. At the end of the Q3, we ended the quarter with $1,100,000,000 of liquidity. I'll now turn the call over to Dan to discuss the operations. Speaker 300:12:16Okay. Thanks, Roland. If you look over on slide 10, this is an updated slide from our last call, which outlines the new development plan we have utilizing the Horseshoe Lateral concept. To test the concept, we have we've successfully drilled and completed our 1st single horseshoe well, the Sebastian 11 No. 5. Speaker 300:12:37This is located in DeSoto Parish, Louisiana and it's located in one of our isolated single section acreage blocks. We turned the well to sales early last week and we just recently reached an IP rate of 31,000,000 cubic feet a day from a 9,382 foot completed lateral that is in the Haynesville shale. Building upon this successful test, we will be pursuing additional Horseshoe well projects in the future. The technology allows us to develop acreage that before presented more challenging economics by being limited to drilling short laterals. The section we have depicted on this slide represents a project we have scheduled for late next year. Speaker 300:13:21This section would have originally been developed by drilling 4,000 or 5,000 foot laterals from 2 well pads with a $40,000,000 capital cost. This same section will now be developed from a single 2 well pad drilling 2 horseshoe laterals with a $32,000,000 capital cost. And this is based on the D and C cost of $17.40 a foot and our recently completed Sebastian well cost came in slightly lower than this. The project will deliver cost savings of 23% or $8,000,000 which substantially improves all our key economic performance metrics. We expect the well performance from the Horseshoe wells will match that of our regular 10,000 foot laterals. Speaker 300:14:08And with this success, we have also optimized our drilling inventory by converting 57% of our short Haynesville locations to 64 future Horseshoe locations. We're still in the process of evaluating our short boser locations for additional Horseshoe locations. On Slide 11 is our current drilling inventory as it stands at the end of the Q3. Our total operated inventory now stands at 1607 gross locations. That's 12.52 net locations, which equates to a 78% average working interest. Speaker 300:14:47The non operated inventory now stands at 1199 gross locations and 158 net locations, which represents a 13% average working interest. The drilling inventory split between Haynesville and Bossier locations broken down into our 4 different categories bilateral length, the short laterals less than 5,000 foot, the medium laterals 25,008,500 foot, our long laterals between 8,500 and 10,000 foot and our extra long laterals that go past 10,000 feet. In our gross operated inventory, we now have 180 short laterals, 331 medium laterals, 482 long laterals and 6 14 extra long laterals. And inventory is split evenly basically between the Haynesville and the Bossier. The updated inventory numbers include the impact of identifying 64 Horseshoe locations in the Haynesville shale. Speaker 300:15:492 thirds or 68 percent of the gross operated inventory has laterals longer than 8,500 feet and 38% of the gross operated inventory had laterals longer than 10,000 feet. The average lateral length now stands at 9,261 foot and this is up slightly from our 9,077 feet, which we had at the end of the second quarter. This inventory provides us over 30 years of future drilling locations based on this year's activity. On slide 12 is the chart outlining our average lateral length drilled based on wells that we've turned to sales. During the Q3, we turned 11 wells to sales with an average length of 12,580 feet. Speaker 300:16:40Individual lengths range from 8,912 feet to 15,303 feet. Our record longest LIBOR still stands at 15,726 feet. All the wells we turned to sales during the Q3 had laterals longer than 8,500 feet. And furthermore, 9 of the 11 wells that turned to sales during the quarter were extra long laterals that were over 10,000 feet. As we mentioned earlier, we did not turn to sales any wells on our Western Haynesville acreage during the Q3. Speaker 300:17:15However, we do have 6 additional wells in the Western Haynesville that we plan to turn to sales by the end of the year or early January 2025. The first of these 6 wells was turned to sales last week and we are it's currently being flow tested. Looking ahead, we have several extra long laterals slated to turn to sales over the remainder of the year and we expect our average lateral length for all of 2024 will be approximately 10,100 feet on a total of 48 wells turned to sales. To recap on our long lateral activity to date, we've now drilled 109 wells, laterals longer than 10,000 feet and we have drilled 40 wells with laterals over 14,000 feet. Slide 13 outlines our new well activity since we last provided the well results at the end of July. Speaker 300:18:13Since our last call, we have 8 new wells that have turned to sales. The individual Opry rates on these range from 10,000,000 cubic feet a day up to 31,000,000 cubic feet a day with an average test rate of 21,000,000 cubic feet a day. The average lateral length was 12,391 feet with the individual laterals that range from 9,382 feet up to 15,272 feet. This list includes our first horse, you will, the Sebastian 11 5, turned to sales last week that achieved an IP rate of 31,000,000 cubic feet a day. Recapping our activity levels, we're currently running 5 rigs and 2 frac crews. Speaker 300:19:01Our second frac crew returned in late September following a 70 day frac holiday during the Q3. We currently have 2 of the 5 rigs drilling in the Western Haynesville. We also have both of our frac fleets currently working in the Western Haynesville where we're in the process of fracking our first two well pads. Both 2 well pads will be completed in the Q4 and turned to sales at year end. In addition to these two well pads, we also have 2 single wells that turn to sales by year end, which generates the total 6 Western Haynesville wells turning to sales between now year end. Speaker 300:19:42On Slide 14 is the summary of our D and C costs through the Q3 for our Benchmark long lateral wells that are located on our core East Texas and North Louisiana acreage. This covers our wells with laterals greater than 8,500 feet long. And during the quarter, all 11 wells that we turned to sales were located on our core East Texas, North Louisiana acreage and all 11 wells fell into our benchmark long lateral group. We're now providing the drilling cost per foot based on the date the wells reached TD. This provides a better view of the current drilling environment and drilling cost environment and just to be better aligned with the timing of when we when the drilling dollars are actually being spent. Speaker 300:20:30The completion cost per foot continues to use the term to sales date. So in the Q3, our drilling cost averaged $6.42 a foot. This is a 3% increase compared to the 2nd quarter. Our 3rd quarter completion cost came in at $7.76 per foot, which represents a 6% decrease compared to the Q2. When we kind of look out ahead to the next couple of quarters, we do see our D and C cost remaining flat to going slightly lower. Speaker 300:21:04And I'll now turn the call back over to Jay to summarize the 2024 outlook. Speaker 100:21:09Okay, Raul. Thank you, Dan. Thank you. If you would, I'll direct you to Slide 15, where we summarize our outlook for 2024. As we stated last quarter, we've taken a number of steps in response to the significantly low natural gas prices this year. Speaker 100:21:27During the Q1, we released 2 of our operated drilling rigs, reducing our rig count to 5 rigs. We also released 1 of our frac spreads, reducing our frac fleet to 2 spreads. We no longer have any long term commitments for our pressure pumping services. With those steps, our 2024 CapEx expected to be down 25% to 35% from the 2023 level. We suspended our quarterly dividend, saving approximately $140,000,000 of dividend payments. Speaker 100:22:02In late March, our majority shareholder, Jerry Jones, had invested an additional $100,500,000 into the company through an equity private placement. Starting in late February, we have added significantly to our hedge position starting in the Q4 of 2024 and extending through the end of 2026. We're targeting a hedge level of 50% of our expected production level. In early April, we further enhanced our liquidity position with a $400,000,000 senior notes offering. We are evaluating our planned activity level in 2025 based upon the outlook for natural gas demand and we'll adjust our drilling program as needed to a response to the natural gas prices. Speaker 100:22:53We'll continue to maintain our very strong financial liquidity, which totaled just under $1,100,000,000 at the end of the third quarter. Our industry leading lowest cost structure is an asset in the current low natural gas price environment as our cost structure is substantially lower than the other public natural gas producers. We remain very focused on proving up our Western Haynesville play and continuing to add to our extensive acreage position in this exciting play. Our Western Haynesville acreage position totals over 450,000 net acres. We believe that we are building a great asset in the Western Haynesville that will be well positioned to benefit from the substantial growth in demand for natural gas in our region is on the horizon driven by the growth in LNG exports that begins to show up in the second half of next year. Speaker 100:23:50I will now have Ron provide some specific guidance for the rest of the year. Ron? Speaker 400:23:56Thanks, Jay. On Slide 16, we provide our 4th quarter guidance. The 4th quarter production expected to remain in the $13.25 to 13.75 expected and as has been discussed on prior calls. That's related to the impact of the timing of dropping the 2 rigs in late in Q1. The TNC CapEx guidance for the quarter is $225,000,000 to $275,000,000 Due to the timing of bringing wells online, we now expect 43 net wells to be turned to sales in 2024 versus the original expectation of 38 to 39 wells when we provided our original guidance. Speaker 400:24:46Those wells are coming on at the very end of the year, so there's not much production impact, but we do bear the full brunt of that capital expenditure. We continue to anticipate leasing CapEx of $2,000,000 to $5,000,000 per quarter and CapEx related to Pinnacle Gas Services, which is funded by our partner Quantum is expected to be $50,000,000 to $90,000,000 during the quarter. On the cost side, LOE is expected to average $0.24 to $0.28 per Mcfe, while GTC costs are expected to average $0.34 to $0.40 per Mcfe. Production and ad valorem taxes expected to average $0.14 to $0.18 while the DD and A is expected to remain in the 1.40 dollars to $1.55 range. On G and A side, cash G and A remains in the $6,000,000 to $8,000,000 per quarter range with about $3,000,000 to $4,000,000 of non cash G and A expenses expected. Speaker 400:25:49With the current SOFR rates in the April notes offering, we now anticipate our cash interest expense to be $54,000,000 to $56,000,000 during the quarter and our non cash interest in the quarter will be $3,000,000 to $4,000,000 Effective tax rate remains in the 22% to 25% range and we still expect to defer roughly almost 100% of those taxes. I'll now turn the call back over to Jill to answer questions. Operator00:26:17Thank you, Ron. At this time, we will conduct the question and answer session. First question comes from Clay Akermes with Bank of America. Please go ahead. Your line is open. Speaker 500:26:44Hey, good morning, guys. Thanks for getting me on. I guess I'd like to start with the elephant in the room, which is the planned outspend for 4Q. To frame it up a little bit, I think we're all pleased to see that you guys have the waiver. But I think some of the market thought that tripping the covenant will lead you back to more of a free cash priority. Speaker 500:27:00From our perspective, I think we get it. We see you trying to stabilize production and division for maybe a better 25%. Just hoping that you can kind of talk through your motivations to outspend through this soft pricing and then maybe articulate your plans to manage the balance sheet in 2025? Speaker 200:27:18Yes, that's a good question. I think really when we originally had the plan in place and by the time you kind of execute the plan, prices were a little bit stronger and we figured it would really cover that those expenditures planned for this year. And I think the only there's a little higher expenditure level only because the drilling days are been quicker in the Western Haynesville. So a lot of the completion work that was going to crossover, some of that was going to crossover into 2025. It's kind of now expected to be mostly in the quarter. Speaker 200:27:50So other than looking at an individual quarter, I think if you looked at it a longer period, there isn't really been much change at all in the plans. It's just how the cost end up being reported. So our goal for 2025 is again to with a higher hedge level, I think it will be easier to achieve and take some of the risk out of gas prices is to try to balance the capital we invest back into with the cash flow we generate from operations. Speaker 500:28:26Got it. So it's really timing and your plan to keep activity continue to progress forward. Maybe my next question is really on the Western Haynesville. Maybe this is for Dan. Cost per foot on the Hodges is better than our high end estimate and it's just one well. Speaker 500:28:42You've got a 2 well pad coming up, so maybe those costs are getting better. Maybe as an aside, if you can discuss those drilling costs, we'll take that. But more broadly, with the amount of wells that you'll have online, the data points on cost, maybe you have an event path ahead. When can we expect more fulsome update on the Western Haynesville in 2025? Speaker 300:29:02Well, I think we're going to be probably next year, early next year on the next call, we're going to be coming forward with, obviously, a lot more information on the Western Haynesville. You're right, this 2,814 Foot, which is a big milestone for us, was a single well. And of all the wells we drilled today, of course, this is the 13th well we started to sell. This was the fastest one we drilled to TD, 51 days. If you go back a few years, we started out drilling these things in 75, say 70 to 80 days. Speaker 300:29:38And now this one comes in at 51 days, so a massive improvement and we're kind of still working a few days off. But we had really good execution on this particular well, the Hodges number 1, drilling just all phases of the operation went really well. We've got some pretty good frac pricing in place also right now. The well fracked really good. And I'll also point out, one of the big drivers is the lateral length and the length on this one was 11,400 foot or 405 foot. Speaker 300:30:12So that obviously is very important in that cost per foot number. Now the numbers that we typically the numbers that we're kind of putting out on kind of our targets, you mentioned $3,000 a foot is all kind of normalized to a 10,000 foot lateral. So anytime you have a 11,000 to 12,000 foot lateral, it's going to generate a little bit better cost per foot and vice versa. If you're at 8,500 to 9,000 foot lateral, it's going to be a little bit higher cost per foot. Speaker 500:30:41Thanks for that. We are watching with interest guys. Speaker 300:30:44Yes. Thank you. Operator00:30:46Thank you. One moment for our next question. The next question comes from Carlos Espalante with Wolfe Research. Go ahead, Carlos. Your line is open. Speaker 600:30:59Hey, good morning, guys. Thank you for taking my call. Well, first of all, I'd like to start with the Horseshoe results because they are certainly encouraging. And I think directionally, this is what the investment community wants to see. Now I do think that we need to rationalize how this translates into free cash flow generation. Speaker 600:31:22So my question and bearing in mind, because you guys know this better than I do that not all acreage is created equal. What's the geographical spread of the 64 locations that you think are candidates for this across your Haynesville locations? Thanks. Speaker 300:31:41Good question. So that is 64 just in the Haynesville. And you're right, I'll just start off. We are very happy with the results on the Sebastian well. We didn't we had no issues in drilling the well. Speaker 300:31:56I'm going to say maybe 2 extra days if you compare that to just drilling a straight 10,000 foot lateral, just didn't have any issues. And the frac, it frac. If you just if you didn't know that it was a horseshoe well, you can't tell we couldn't tell any difference in frac in those straight 10,000 foot lateral and frac in the horseshoe. The well did frac really good again. So results look fantastic. Speaker 300:32:22So we're super excited about it. As far as the spread of the locations, I'd say they're pretty evenly kind of spread across. If you look at that acreage position and just kind of from south to north, I think we've got them they're just pretty much all across the basin. So we've got them in the 1.6b per 1,000. We got them in the 1.8b per 1,000 type curve areas up to the 2. Speaker 300:32:48So I think kind of the answer for you is really it's just spread out across all the acreage. It's not really in any specific rig effort spot. Speaker 600:32:59Sure. That certainly helps. I guess your answer provided me with another question, if you will, on that same topic. And maybe this is a bit too early because the Western Haynesville is still a by all means an exploration play. But do you feel like you will come across the geometry lease line issues that you have in the Haynesville, in the traditional Haynesville? Speaker 600:33:24And then just to finish up my second question, which is also in the Western Haynesville, what do you expect to be the average lateral length for your program going forward, bearing in mind that you have a hotter reservoir and it's more difficult to drill? Speaker 300:33:43Okay. So kind of I think your first question maybe is maybe how confined will be with lease lines in the Western Haynesville versus Louisiana. So really the big difference between is in Louisiana, we deal with square mile sections, right? Every section is a unit. So we're usually either confined to drill on a 5,000 foot, a 10,000 foot or a 15,000 foot or later on in the play, we did 7,500 foot laterals. Speaker 300:34:13Now we've got the ability to turn the wellbore around and then horseshoe. And so we deal the lease lines are the section lines. In Texas, you don't have sections. It's abstract surveys. You pretty much can build your units. Speaker 300:34:33They're more customized. They're more much more regular in shape and size. And so you're going to have laterals in Texas that are kind of any different links between say 5000, 10000 feet. You can have some at 9, you can be at 8, you can be at 6,500, 11,500, not really Louisiana you're in those kind of specific 5, 10 or 15 or 7,500 foot groupings. But so really that's kind of the difference in drilling in one state versus the other. Speaker 300:35:08As far as average lateral length in the Western Haynesville, I think we're looking at about 10,000 foot average. We've got a lot better at handling the bottom of temperature. So that's really not an issue. I think probably the bigger driver there is not the temperature. It's just there are some minor faults here and there. Speaker 300:35:27So there's just certain there's some geohazards in certain places you just where you can't drill across and have to stop. And so that's really kind of the only driver there. Obviously, we're trying to drill the longest laterals we can now that we're holding acreage. But I see, I think 10,000 is a pretty good number looking out ahead of what our average lateral length will be. So we've drilled a 12,700 foot max already. Speaker 300:36:00I think our shortest lateral right now is, I want to say, 7,800 feet. So we're not having any issues drilling these 10, 11,500 foot laterals. It's just limited by, like I said, geohazards or other factors. Speaker 600:36:20Wonderful. Thank you, guys. Operator00:36:22Thank you. Standby for our next question. The next question comes from Charles Meade with Johnson Rice. Go ahead, Charles. Your line is open. Speaker 700:36:34Good morning, Jay, Roland and Dan and the whole Comstock team there. Speaker 800:36:39I want Speaker 700:36:39to go back to the Sebastian well. I can't help but notice that it's the shortest lateral with the highest IP on the quarter. So I know it's early, but do you think this is just luck of the draw? Or is there something else going on here perhaps? Speaker 300:36:57It's not luck of the draw. I'd say all of the horseshoes we do in Louisiana are pretty much going to be about the same lateral length unless we and maybe I think someday we'll probably reach out and attempt to do a horseshoe that's maybe 7,500 foot and 7,500 back. That's way out. We're getting out ahead of ourselves. But this is kind of about what we would expect from a well in the area where we drill this well on this acreage. Speaker 300:37:31So we're not surprised at all. I mean, we totally expected this was going to be the result. And I see this being very, very repeatable. Speaker 700:37:42Got it. Got it. That's good. It's good to have your opinion on that. And then going back to the Western Haynesville, and I think you've discussed this a bit. Speaker 700:37:51It's great to see what you've done with that Hodge as well. But as you think of repeating that or trying to deliver repeat on that, leaving aside the lateral length, what are the pieces of the whole well construction and completion puzzle that you're going to be most focused on to try to get a repeat of that dollar per foot metric? Speaker 300:38:12Well, I think first of all, we got to be we and we have become more consistent. We've had some really good showings, but we have we in the early wells, we didn't have the consistency. So we're becoming much more consistent at basically the really good performance. And so we figure we always get a 5% to 7% cost reduction on pad drilling versus a single well pad. So this is a pretty good number for a single well pad. Speaker 300:38:44This well on the longer ladder, like I mentioned just a little bit ago helps with that number. That's going to always move the number down a little bit when you start going over 10,000 feet, okay? And this one was 11,400 feet. So had this exact same well, like I said, we had great execution across all phases. If this would have been a 9,000 foot lateral, this would have been the cost per foot would have been a little bit higher. Speaker 300:39:09And if we had been 12,000 foot, it's a little bit lower than this. So we definitely see the cost, we start doing pad drilling with this performance. We're going to generate numbers lower than this $2,800 per foot. Speaker 700:39:25That's great detail. Thank you. Operator00:39:28Thank you. Standby for our next question. The next question comes from Jacob Roberts with TPH and Co. Jacob, go ahead. Your line is open. Speaker 700:39:39Good morning. Speaker 600:39:42Good morning. Speaker 900:39:43I believe you've all previously contemplated adding a few rigs next year. And I understand it might be a little bit early to talk about 2025. But given where the commodity price is today, how are you thinking about the timing of those rig adds, if at all? And then maybe as well if I could tack on what you might consider a balanced program in terms of those rigs at current commodity prices? Speaker 200:40:09Yes, it's a good question. It is kind of early because we will really be watching the gas market, how if we have a winner or not, those would be a lot of factors, especially driving gas prices in the first half of twenty twenty five. As the second half of twenty twenty five, we kind of see some increased demand. So, yes, that's something we're looking at really hard in deciding when we bring back the 2 rigs that we dropped in the Q1 of this year. And as we do have a lot of flexibility and when we do that, we think we can light up the services when needed and we have a lot of services we can with short notices drop. Speaker 200:40:51So again, want to be very responsive to whatever environment we have in 2025 and target having a higher hedge percentage in 2025, that 50% level is kind of what we are going to target. We're 40% almost hedged now for 2025. So we have a little work to do there, but that should help us stay more on track than where this year if the 1st 3 quarters, we were a little bit less than 30% hedged. Speaker 900:41:25Thanks. I appreciate the color. Maybe if we could look at the Western Haynesville and particularly the midstream, can you frame the current runway you have, what the Q2 25 addition will add to that runway, maybe in terms of quarters or wells that you ultimately see being able to handle being able to be handled? Speaker 200:41:44Yes, it's a good question. As we with these 6 wells coming on that will go into our Pinnacle system there, that are coming on and we'll be at a pretty good rate by the in January. We start to really hit the treating capacity, not the pipeline capacity of our Bethel treating plant. And we do have quite a bit of backup capacity where we could offload Speaker 1000:42:14to a Speaker 200:42:15couple of other midstream companies that we have contracted capacity and a good rate on. So we can definitely do that. We just would prefer to have it in our own facility. And so that's where the key a lot of the expenditures that we are incurring now, especially in the Q4 and early in the Q1 next year is really to open up a new gas treating plant at Marquet, which will be on the other end of our Western Haynesville footprint. And then that's going to add $400,000,000 a day of treating capacity. Speaker 200:42:47So then we'll be have a lot of capacity to handle the growth out there. So as that one comes online, we do have the ability to offload and process under these arrangements we put in place. So, we definitely won't have any restraints as far as actually producing what we do. So, and then as we evaluate the program and add more rigs, that's where we're continuing to look and say, do we want to build out additional capacity for the play. Speaker 900:43:24Great. Appreciate the time. Operator00:43:26Thank you. Stand by for our next question. The next question comes from Greta Drevke with Goldman Sachs. Greta, go ahead. Your line is open. Speaker 1100:43:37Hi, good morning and thank you for taking my question. I was just wondering if you could spend a bit more time on the Horseshoe Wells and the benefits you're realizing there. Is there a proportion of your overall operations that you hope to apply this technique to over time? And do you see potential for any upside to your 64 Horseshoe locations that you've outlined? Thank you. Speaker 300:43:55Good question. So we do definitely see an upside as far as the number of locations that will get converted. So the 64 that we've got converted in the inventory so far is just on the Haynesville side. We're still working through the Bossier all of our Bossier sticks and we'll probably have a number on that sometime in the Q1. As far as the number of horseshoes kind of pushing into our development program, I mean, being that this news is pretty fresh, we obviously are going to do more and want to do more. Speaker 300:44:34For right now, in our drilling program, obviously, we've got a lot of things in place and it takes a lot of time obviously to get things drill ready and to move around, just a lot of lead time. So our next we have a single horseshoe that's coming up early. Next summer is the next project. We got a 2 well pad Horseshoe, which is the one we talked about on the slide here that is later next year. And we also have a triple we got a triple Horseshoe well pad that will come up behind that in 2026. Speaker 300:45:07So like I said, we love the results. It's just that it's hard to add push a bunch of these into our drilling program that's already been set for a little long on short notice. But I can see more than what we have scheduled now maybe get pushed into the program as we get a little bit more data on this well and have some time to just get the drilling program revised a little bit, which takes a little bit of work. Got Speaker 100:45:35you. Well, my only comment would be if you we always high grade our inventory, our 1400 locations, etcetera. And now the Horseshoe will be accelerated to the front of that, as Dan had said. So that's a good thing based upon the recent results we just have in this Haynesville well. Again, we may have that many or more in the Bossier as we keep looking at that in the Q1 of 2025. Speaker 200:46:03Some of the other indirect positives from the horseshoe, especially as we get through the Bossier inventory, in our reserves, it will move these up with much higher economic results. And so even in low prices, some of these can come very economic. And so yes, we see the IRRs on the Horseshoe wells being 2 to 3 times better than a short lateral Haynesville well, Dan Harrison says 3 times better. So that's a it makes a lot more of that inventory very economic at lower gas prices. So you'll see some impact and that improved just be able to bring some a lot more of that inventory into the proved undeveloped reserves. Speaker 300:46:49Yes. And I think I didn't really answer that part of your question. So I mean as far as the performance versus the single 5 ks, our return rate, it basically triples the return on the wells. Our payouts will be less than half. If you just look at 2, the 2 single 5ks versus the horse yield, we're going to generate $5,500,000 to $6,000,000 additional PV-ten value. Speaker 300:47:14And so pretty substantial. Speaker 1100:47:18Thank you. That's really helpful. And then my second question is I was wondering if you could speak about the outlook for M and A in the Haynesville. Do you expect consolidation to continue more broadly? And do you see opportunities for bolt on M and A either in the Western or Legacy Haynesville for Comstock from here? Speaker 200:47:35Well, we continue to keep a good eye especially in the Western Haynesville where we've had great opportunity to partner with other companies that want the shallow production or the existing production and we've been able to acquire the deep rights and actually have acreage held by production. So those opportunities interest us a lot in that area And there's been it's a fairly the older vertical wells are fairly mature, so they are being divested by the larger companies that own them. And so we continue to work that part of the M and A cycle. And yes, there are still private operators that have a plan to divest. So we expect to see those private companies probably over time be consolidated over the next several years and probably the as gas prices get to more attractive levels is probably what kind of feels that to start up again in earnest. Speaker 1100:48:38Makes a lot of sense. Thank you. Operator00:48:41Thank you. One moment for our next question. Next question comes from Noel Parks with Tuohy Brothers Investment Research. Go ahead. Your line is open. Speaker 800:48:54Hi, good morning. Just had a couple. I was just wondering, you mentioned it being important to avoid faulting in the Western Haynesville. I was wondering to what degree you can anticipate those. I don't know if it's seismic or legacy penetrations or anything. Speaker 800:49:15So just curious on how you're handling that? Speaker 300:49:19We do have 3 d seismic over almost the entire acreage position that we have. And so we've got a really good look on mapping of where everything is and got everything pretty much identified. So I don't see we don't really see that as any kind of an issue for us. It's just something that we do when we plan when we're going to lay out our sticks in the development. Obviously, that's a very important factor. Speaker 300:49:49But we do have 3 d, good data. So we've got a pretty good picture of what it looks like. Speaker 800:49:56Great. Thanks. And I am sort of a macro topic, in certain season, I heard another gas producer sort of affirm a point that you've made in the past, which is that lower for longer natgaspricing and therefore real lower level of activity is likely to make for a tougher ramp up of industry activity and then possibly get that get reflected in a higher peak in gas prices when we see them come back. So with just another quarter under our belts with prices where they are a little better heading into winter. But just wonder about your perception of that and maybe a weak winter versus normal winter perspective on maybe where that peak might occur? Speaker 200:50:51Yes, that's a great question. That's the challenge of the natural gas industry is there is a lot of demand on the horizon that comes in pretty large increments. And but it's not here today. And so near term gas prices are going to be really dependent on what's the demand for heating in the winter. And that's something we all have to see how it plays out. Speaker 200:51:19So in the short term, especially the first half of twenty twenty five is going to be really tied to that winter. Although, I think we have two factors that are in our favor there. One is there is startup of new demand on the LNG side. It's up to even today at the highest rate it's been. And 2, the rig count has been very low and so production declines will also be there to help tighten the supply. Speaker 200:51:52And as you can see, even for Comstock, we've actually had, even though we cut our activity back in the Q1, it's not really to the Q4 that we really start to see the decline. And we were one of the first to really cut back activity in the Haynesville. We weren't the last. And I think you'll see that a lot of especially the private operators followed several months later. And you'll see the Q1, just a lot of that decline really showing up in the Haynesville. Speaker 200:52:23So help I think they help us kind of balance that supply and demand during the period compared to last year when we had the opposite or coming into this year, we had the opposite situation. We had a really high activity level and a warm winter and the 2 kind of created the big drop in gas prices that we've suffered this year. So, it's going to be, I think a more volatile gas market and I think you could have that trying to balance the market, they balance it with price. That's just how the gas market works. So if there's a little bit too much gas, the price drops a lot. Speaker 200:53:03If there's not enough gas, the price goes up a lot. And I think we're going to have a lot of volatility in 2025 as different these different factors kind of play against each other. Speaker 100:53:16And then Noel, I'd comment on the defaulting question. I mean, we have major control points for almost all of our 450,000 net acres. I mean, we do have those points. And as Dan said, we've got 3 d seismic on the majority of it. And if you look at M and A, a lot of the M and A was done $4, $5 gas price and the Holy Grail is inventory. Speaker 100:53:42You typically do M and A or inventory every now and then size if you're small, but a lot of the M and A is inventory. The Holy Grail is inventory. So I think what we were able to do, we were able to go take an old gas field, which is now we call the Western Haynesville, we meant deeper just like we did in the core of the HaynesvilleBossier. And we figured out that technically that we can drill and complete these wells and make it competitive with our core. So it's all about the right geographic spot. Speaker 100:54:18It's about the right drill bit performance. It's about the right EUR. And then all of a sudden you throw in our horseshoe, makes it a little bit more exciting because as Dan and Roland said, the IRR on the horseshoe is 3 times better than your typical Haynesville will. So and you get to the banks, the 17 banks looking at us and they look at the whole company and they look at the future and that's why we had unanimous approval. It all makes a lot of sense. Speaker 100:54:47Just to your point, you have to weather this storm in order to be there when the bright light and sun comes back out. And we are more than well positioned to do that. Operator00:55:00Thank you. One moment for our next question. Next question comes from Bertrand Donnes with Truist. Please go ahead. Your line is open. Speaker 1200:55:12Hey, team. Just wanted to follow-up on the rig count commentary. You did a great job of notifying your rigs late last year to get them dropped by I think the end of Q1. So it seems like you have a big pretty good bit of flexibility on those. Do you have an updated estimate on that? Speaker 1200:55:28Maybe how many months it would take for you to drop or pick up rigs? And maybe just logistically, do you have to do it around December? Or is it just as easy for you to do it, say, summer or fall? Speaker 200:55:39Yes. There's no real time frame. Typically, we've got about half the rigs that in our fleet that are really just require a 45 day notice. So we have to plan around that and then obviously the logistics of moving a rig out, obviously not going to just pull it out in the middle of a project or middle of Speaker 800:56:00a Speaker 200:56:01multi well pad. So it's really all about planning for it. So that's obviously something we looking at very hard as we're pondering our 2025 budget and the right activity level and kind of see how things play out. But it's typically December when we really make these final decisions like we did last year and then hopefully have a good plan to get it in place quickly like we're able to do for the 2024 year. Speaker 100:56:32The one thing that we've tried to do is we've tried to have all of our rigs be capable of drilling in the Western Haynesville. Even if they're drilling in the legacy area, we want them to be qualified if you need to move them over to the Western Haynesville. Speaker 1200:56:49That makes sense. And then switching gears to the land leasing program, it seems to continue to be strong. It seems like every time you think you have an idea of how much is out there, you keep finding more attractive opportunities. Is that because of the movement in gas prices? Or is the leasing team just kind of hitting their stride or is your view on the long term value changing? Speaker 1200:57:10Just why do you keep surprising to the upside on that? Speaker 100:57:14Well, if you spent 4 years looking at 3 d and at logs and well results and you have an area kind of like I said, it's like we were chasing this big footprint and we actually caught it. So if there's a little bit extra out there, I mean, you keep your land group busy to clean up around where you're already leased. And if there's anything else that you need to add to expand a little bit. But I'd give you 90% of our leasing program is in our rearview mirror. And I think if you look at our balance sheet, the debt that we've incurred, that's like a big M and A event. Speaker 100:57:58I mean, we have acquired the acreage. We're now drilling it. We control the midstream with Pinnacle and you see the well costs are coming down. And as I said, the Holy Grail is inventory. If we've got 1400 locations, the majorities are those in our legacy. Speaker 100:58:15I mean, just think of the upside they would have on the 450,000 net acres in the Western Haynesville. That is the goal. So we just keep clean it up, but you shouldn't expect any quarter where we spend this $50,000,000 to $100,000,000 like we had done in the past. Those days are behind us. And the reason we were successful in acquiring that acreage is because gas was low. Speaker 100:58:42Nobody was out there doing it. Speaker 1200:58:46Okay. Very well said. And then just want to clarify something. I think I heard a triple horseshoe pad in 2026. Is that 3 horseshoe wells or is that 3 sets of 2 horseshoe wells for a total of 6? Speaker 1200:58:57Thanks guys. Speaker 300:58:59So that is 3 horseshoe wells, which would be prior to that would have been 6 5000 foot laterals. Speaker 1200:59:08Makes sense. Thanks. Operator00:59:11One moment for our next question. The next question comes from the line of Jeff Jay with Daniel Energy Partners. Please go ahead. Your line is open. Speaker 800:59:22Hey, guys. Thanks for taking the question. Real quick for me. Looking at the Horseshoe D and C of about 1700 a foot versus kind of, I guess, traditional laterals of that length at about kind of 1400, 1500. Is there any reason that you're as you do more of these and get better at them that you couldn't those 2 couldn't sort of get closer together? Speaker 800:59:42Or is there something about horseshoe drilling that's always going to be a little more expensive? Thanks. Speaker 300:59:49Well, on the completion side, it's really not any more expensive. So it's really on just the drilling side. And it's really just the cost of if you have great execution, it's just the cost of drilling doing a 180 degree turn. Obviously, that if you just equate that distance to drilling straight, it's going to take you longer to drill that distance. Bending back around at 180 degrees, you're just constantly I mean, we're using conventional tools. Speaker 301:00:17You're just constantly sliding and turning back around. So that's going to take an extra day or 2 and that's really about the only difference. Speaker 201:00:26Well, potentially, the Sebastian, under that number that's kind of reported on that slide. So I think that's a fairly conservative estimate too. Speaker 301:00:35It is. So we this was what we projected before we drilled the Sebastian well. So the Sebastian well right now we got projected coming in slightly less than $1700 a foot versus we had $17.40 is what we had modeled and what we had on this slide deck here. Speaker 801:00:53Got it. Thank you, guys. Speaker 101:00:55Yes. And that well, I mean, literally, it got IP yesterday. Speaker 301:00:59Yes. And that was a single I mean, that's a single horseshoe well. So really, if you do 2 horseshoe wells, you get 5% to 7% additional savings from pad drilling. Really, that or say, dollars 16.80 a foot on the Sebastian, if you do a 2 well pad, we should be able to drop that cost even lower. Got it. Operator01:01:23Thank you. One moment for the last question. The question comes from the line of Paul Diamond with Citi. Go ahead. Your line is open. Speaker 1001:01:34Thank you. Good morning all. Thanks for taking my call. Just a quick question for you on the 2025 hedging book. It's currently breaking down pretty evenly per quarter and with the curve currently sitting at around low 3s, I guess, how do you guys think about the timing and opportunity of kind of tranche in those that last little bit to bring you up to the 50% target? Speaker 201:01:57Right. And it is our yes, we will work diligently to bring that to get to the $0.50 level. That's kind of our target and we added a little bit post the Q3. Gas prices have been weaker here lately. So it's really up to kind of finding good spots to do that. Speaker 201:02:16And they've got good structures to do that. But potentially, if we're going to really try to like you said, we have it evenly spread out. But our production next year will be potentially weighted more toward the end of the second half of the year. So potentially there's a point where we can kind of focus on the latter part of 2025 to hit our goals where there's a little bit stronger pricing available. Speaker 101:02:46I think what we do, we advertise to you, whether you're a bank or a bondholder, an equity owner, analyst that our goal if that window opens up before we can hedge 50%, that's our goal and we'll be leaning into that window. Speaker 1001:03:06Understood. Appreciate the clarity. And just another quick one, you talked about the 57% conversion of Haynesville locations to Horseshoe. I just want to get some idea of where the other 43% kind of sits. Are those have been rolled out? Speaker 1001:03:22Or is that just haven't got to them yet or still under evaluation? Speaker 301:03:28Well, they're always under evaluation, but we can't convert all of them to horseshoe wells because they're some things have to work out to be able to convert. First of all, you have to have 2 of your you have to have 2 sticks together, right? So if you have in a lot of places, we just have one stick. And so you can't obviously, you can't do anything with that. But you also have to have a lot of this is on these isolated sections where we still have some sticks left and it's also in areas where we've got quite a bit of development, maybe mostly developed and we have a few sticks kind of left to infill. Speaker 301:04:08So the spacing has to be right. So you can't have 2 of your sticks on opposite side of the section that are too far apart to be able to accomplish the horseshoe. So when you kind of factor in all of those different things that you have to have to make it work, that's kind of I said we ended up with just 57% of that inventory that got converted. Speaker 201:04:28Got it. So it would Speaker 1001:04:29be a reasonable read through that you'd probably run into similar types of issues in the Bossier acreage as well? Speaker 301:04:34That would be correct. And on the Bossier side, if you just look at the acreage and you lay out nothing but Bossier Sticks, we got a little bit more of a clean slate to work with, obviously, because it's not as drilled up as the Haynesville. So we'll still have a lot of ability to drill the long laterals in the Bossier whereas in the Haynesville, we got a lot of those drilled and some of these horseshoes are connecting the short. We skipped over and then drilled the short laterals and we were doing the development because just because of the economics. And so now that we can come back and you got 2 of them there, you can hook them up. Speaker 301:05:13So maybe in the future, we get a little bit more comfortable with maybe how wide we can space the horseshoes. We can maybe convert a few. We just need to get a little bit further down the road on what our abilities are going to be. I'm talking about how wide, maybe right now they're 1100 feet, 1200 feet apart between each side. But if we can we may be able to drill them 2,000 feet apart, where you have 2 sticks that are left to be drilled 2,000 feet apart, where you can do a big wide turn and hook them up. Speaker 301:05:46So I think that number will move in the future. We just need to get a little bit further down the road on what kind of we can do that's kind of within reason. Speaker 1001:05:58Got it, Chris. Appreciate the clarity. I'll leave it there. Operator01:06:02Thank you. I'm showing no further questions at this time. I would now like to turn it back to Jay Allison for closing remarks. Speaker 101:06:11First of all, I want to thank everybody for staying on the line for a little over an hour. With natural gas prices ranging between $1.65 $1.90 for the last 6 months, it's a difficult time for pure natural gas companies. That's just a fact. But what happens in those months really test your resolve. I want to acknowledge 3 groups over the past 6 months that consistently have stood firm. Speaker 101:06:401st, our 255 employees who create the exceptional results in both our legacy and Western Haynesville area. 2nd, our 17 banks who reaffirmed our $2,000,000,000 borrowing base and gave us unanimous approval on our bank amendment to loosen the leverage company. 3rd, the Jones family, who in the month of August made open market purchases of 13,500,000 shares of our stock for $138,000,000 I want to thank each of you as well as our bond and our equity owners. I can assure you we are on the exact right path to be positioned for the growth in natural gas demand that is just around the corner. Thank you for your time. Operator01:07:32Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.Read morePowered by