COMSTOCK RESOURCES INC Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Western Haynesville Development: Successfully navigated low gas prices in 2024. Acquired acreage in Western Haynesville, built midstream system with Quantum Capital Solutions (up to $300M for gathering/treating). Drilled 11 wells in 2024, turned 11 to sales with strong IP rates.
• Legacy Haynesville Operations: Drilled 37 wells in 2024, average IP rate 23 million cubic feet per day. Improved drilling times; average lateral length 10,104 feet. Managed drilling and completion costs, with some wells showing improved performance.
• Financial Actions: Reduced capital spending, suspended quarterly dividend, increased hedging, shorted balance sheet via equity private placement and senior notes offering to conserve cash and enhance liquidity.

Segment Performance

• Western Haynesville: Holds 518,000 net acres. In 2024, drilled 11 wells, turned 11 to sales with an average IP rate of 38 million cubic feet per day. Drilling cost per lateral foot down 33% and completion cost per lateral foot down 28% compared to 2022. Acquired 265,000 net acres at $4.401 per acre, more than doubling acreage position.
• Legacy Haynesville: Has 301,000 net acres. Production in Q4 2024 was 12% lower than Q4 2023. Oil and gas sales in Q4 2024 were $336 million, down 5% due to lower production. EBITDAX for Q4 2024 was $252 million, and cash flow generated was $223 million.

Guidance

• 2025 Outlook: Focus on Western Haynesville. Expect to drill 19.9 net wells and turn 16.9 net wells to sales in Western Haynesville. In legacy Haynesville, run 2-3 rigs depending on prices, drill 20.4 net wells and turn 22.8 net wells to sales. Fund drilling from operating cash flow and use excess to pay down debt. Midstream expenditures in Western Haynesville expected $130-150M, funded by midstream partner.

Risks

• Geological/Operational: Uncertainty in reservoir quality and thickness in Western Haynesville; drilling in deeper, hotter zones poses challenges with treating pressures and completion costs.
• Market: Volatility in natural gas prices; dependence on midstream infrastructure and LNG market demand impacts sales and pricing.

Question and Answer

• Q: Thoughts on reservoir quality in Western Haynesville's shallower portions? A: Dan Harrison stated it's too early to determine, but expects drilling costs to be lower in shallower areas and reservoir quality may vary, with more data needed as drilling progresses.
• Q: CapEx trend and completion cost compression in Western Haynesville? A: Dan Harrison said there's more room to lower costs, with completion costs still having potential to decrease. Treating pressures are higher in Western Haynesville vs. legacy, but fracs are consistent, and there's room for further cost reductions.
• Q: Development plan for Western Haynesville pads? A: Dan Harrison mentioned striving to drill two well pads, with approximately 50-60% of wells initially on two well pads, but spacing and optimum spacing require more data collection.
• Q: Gas macro and hedges? A: Jay Allison and Roland Burns discussed a positive outlook on the US LNG fleet, with hedges protecting against downside, and focus on balancing production with market needs to ensure stable gas prices and financial performance.