Comstock Resources, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Haynesville Shale Focus: Comstock is focused on the Western extension of the Haynesville Shale, leveraging technology. They have 530,000 net acres in the Western Haynesville with significant resource potential.
• Drilling and Completion: In Q3, 3 Western Haynesville wells were online (8 total for 2025), with an average lateral length of 8,566 feet and initial production rate of 32 MMcf/day. Legacy Haynesville had 28 wells online, with an average lateral length of 11,919 feet and initial production rate of 25 MMcf/day. Drilling and completion costs in legacy Haynesville were industry-leading at $1,229 per lateral foot.
• Midstream Assets: A new Marquez gas treating plant started operations in July, doubling gas treating capacity.

Segment Performance

• Oil and Gas Sales: Third quarter oil and gas sales were $335 million, a 10% increase from Q3 2024. Year-to-date sales reached $1.1 billion, up 18%.
• Production: Third quarter average production was 1.22 Bcfe per day. Year-to-date average production was 1.24 Bcfe per day.
• EBITDAX: Third quarter EBITDAX was $249 million. Year-to-date EBITDAX was $802 million.
• Cash Flow: Third quarter operating cash flow was $190 million ($0.65 per diluted share). Year-to-date cash flow was $639 million.
• Net Income: Third quarter adjusted net income was $28 million ($0.09 per diluted share). Year-to-date net income was $122 million ($0.41 per diluted share).
• Divestitures: In September, sold legacy Cotton Valley wells for net proceeds of $15.2 million. In October, entered into an agreement to sell Shelby Trough assets for $430 million, expected to close in December.

Guidance

• Western Haynesville: 2025 plan includes 4 operated rigs drilling, 19 wells drilled, and 13 wells turned to sales.
• Legacy Haynesville: 2025 plan includes 4 rigs drilling, 33 net wells drilled, and 35 net wells turned to sales.
• Liquidity: Strong liquidity over $900 million, enhanced by proceeds from the Shelby Trough divestiture closing in December.

Risks

• Unitization and Working Interest: Uncertainty in unitization and working interest precision in the Western Haynesville, affecting inventory count accuracy.
• Market Dynamics: Fluctuations in natural gas prices, competition in gas marketing, and potential impacts of third-party midstream operations on realized prices.

Question and Answer

Q: Broader question on 2026 capital efficiency A: Daniel Harrison discussed efficiency gains in legacy and Western Haynesville, noting progress with horseshoe wells in legacy and ongoing learning in Western Haynesville Q: Gas marketing competition A: Miles Allison and Daniel Harrison discussed midstream control and direct sales to end users, emphasizing Comstock's position to directly supply gas to large users Q: Western Haynesville unitization A: Daniel Harrison and Roland Burns discussed unitization challenges and inventory assumptions, noting conservative estimates due to ongoing unitization processes Q: 2026 Western Haynesville prosecution A: Daniel Harrison talked about rig activity and pad development in the Western Haynesville, with plans to drill 19 wells and turn 13 to sales Q: AI/data centers and LNG demand A: Miles Allison discussed market evolution and Comstock's willingness to participate in industrial agreements, highlighting opportunities in the Gulf Coast industrial market