How are energy investors positioned?
Comstock Resources, Inc. (CRK) reported its Q2 2025 earnings, surpassing analysts’ expectations with an EPS of $0.13 against a forecast of $0.10, a 30% surprise. Revenue also exceeded projections, reaching $470.26 million, compared to the anticipated $425.44 million. Despite these positive results, the company’s stock fell 12.84% to $20.79 in post-earnings trading. According to InvestingPro data, 12 analysts have recently revised their earnings expectations downward for the upcoming period, potentially explaining the market’s cautious stance. The stock is currently trading above its Fair Value estimate, suggesting it may be overvalued at current levels.
Key Takeaways
- Comstock Resources beat EPS and revenue forecasts significantly.
- Stock price declined by 12.84% post-earnings despite positive results.
- Production levels decreased by 14% year-over-year.
- The company focuses on Western Haynesville development.
- Future guidance remains cautious amid operational cost concerns.
Company Performance
Comstock Resources reported mixed performance for Q2 2025. Although the company achieved a 24% increase in oil and gas sales to $344 million, production levels averaged 1.23 billion cubic feet equivalent per day, marking a 14% decline from the previous year. The company’s focus on developing its Western Haynesville assets remains strong, with significant investments in drilling and operational improvements.
Financial Highlights
- Revenue: $470.26 million, up from $425.44 million forecasted.
- Earnings per share: $0.13, exceeding the forecast of $0.10.
- EBITDAX: $260 million for the quarter.
- Operating cash flow: $210 million.
- Adjusted net income: $40 million.
Earnings vs. Forecast
Comstock Resources outperformed market expectations with an EPS of $0.13, a 30% surprise over the $0.10 forecast. Revenue also saw a positive surprise, coming in at $470.26 million, 10.53% above the expected $425.44 million. This marks a significant achievement compared to previous quarters, highlighting the company’s ability to exceed market predictions despite operational challenges.
Market Reaction
Following the earnings release, Comstock’s stock fell by 12.84% to $20.79. This decline reflects investor concerns over the company’s reduced production levels and potential future operational costs. The stock’s performance is a notable deviation from its 52-week high of $31.174, indicating a cautious market sentiment despite the earnings beat.
Outlook & Guidance
Looking ahead, Comstock Resources plans to drill 19 net wells in Western Haynesville in 2025 and turn 13 net wells to sales. The company is also considering divesting non-core properties to accelerate debt reduction, which appears crucial given its debt-to-equity ratio of 1.48. Future guidance remains cautious, with the company exploring gas-fired power generation opportunities to bolster its strategic initiatives. Analyst price targets range from $12 to $28, reflecting mixed sentiment about the company’s prospects. Get deeper insights into CRK’s valuation and growth potential with InvestingPro’s exclusive financial metrics and expert analysis.
Executive Commentary
CEO Jay Allison expressed optimism about the Western Haynesville development, stating, "We have never been more encouraged about what we’re sitting on in the Western Haynesville." President and CFO Roland Burns added, "We’re very bullish about ’26 and what you see in the futures market and the demand we know that’s coming on."
Risks and Challenges
- Decreased production levels: A 14% drop in production could impact future revenue.
- Operational costs: Rising drilling and completion costs may affect profitability.
- Market volatility: Fluctuating natural gas prices could influence financial stability.
- Regulatory pressures: Potential changes in environmental regulations may pose challenges.
- Competition: Increased interest in Haynesville drilling locations could heighten competitive pressures.
Q&A
During the Q&A session, analysts focused on the Western Haynesville well performance and completion strategies. The company confirmed its commitment to the region’s development and discussed potential non-core asset sales to optimize its portfolio.
Full transcript - Comstock Resources Inc (CRK) Q2 2025:
Conference Operator: Good day and thank you for standing by. Welcome to the Comstock Resources Second Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. Please be advised that today’s conference is being recorded.
I’d now like to hand the conference over to Jay Allison, Chairman and CEO. Please go ahead.
Jay Allison, Chairman and CEO, Comstock Resources: Thank you. Welcome to the Comstock Resources second quarter twenty twenty five 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’ll find a presentation entitled Second Quarter twenty twenty five Results. I have 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.
Please refer to Slide two in 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 can be no assurance that such expectations will prove to be correct. Five years ago, we made the decision to lease acreage and to drill exploratory well in what we now call the Western Haynesville. Today our Western Haynesville footprint has grown to nearly five and twenty five thousand net acres, and we have now drilled 29 wells with 24 of those currently producing. 10 are producing from the Haynesville Shale and 14 from the Bossier Shale.
The Western Haynesville well’s vertical depths range from 14,000 feet to 19,200 feet, with completed lateral lengths of 6,700 feet to 12,763 feet. Since we have put the first well online in 2022, we have made many changes to our drilling and completion design for this area. Both the Haynesville and Bossier shells in this area are rich in organic contact, very thick, and have high pressure. This year we have drilled two pilot holes, taken logs and whole cores to increase our knowledge about the best ways to complete the wells in the future to maximize the EURs of the wells. As we develop our vast acreage position in the Western Haynesville, we’re also building out our own midstream to support it.
To that end, we just put our new gas treating plant in operations, which increased our treating capacity by 400,000,000 cubic feet per day. In the second quarter, we turned five new Western Angel wells to sales. These wells include the Elijah one to the North and the Bellmire to the South, which is 30 miles away. Both of these wells appear to be some of the best we have ever, ever drilled. The second quarter wells were drilled and completed at an all in cost of $2,647 per completed lateral foot, which is substantially less than the wells we completed in the last three years.
Over the last three years, we have decided not to engage in the M and A market to build drilling inventory for the future. Instead, we have put resources into amassing the Western Haynesville land position and derisking this new play. The path we’ve chosen is not an easy one in a public company setting as future operating results are hard to predict, and many of our actions are aimed at creating long term value versus creating immediate short term results that benefit the next quarter. In order to protect our balance sheet, we pulled back from drilling wells in our legacy Haynesville area, which still accounts for over 80% of our production. We now have four rigs working in our legacy Haynesville area, which will allow us to stabilize production there as we grow the Western Haynesville.
So far this year, we have turned 21 wells to cells with an average lateral length of 11,803 feet and a per well initial production rate of 25,000,000 cubic feet per day. As Dan will go over in a few minutes, we’re excited about the Horseshoe wells that we are adding to our drilling program that the added rig will focus on. As Roland will cover in a few minutes, the second quarter financial results benefited from the improved natural gas price we’re seeing this year versus 2024. Our natural gas and oil sales grew to $344,000,000 and we generated $210,000,000 of operating cash flow or zero seven one dollars per diluted share. Our adjusted net income for the quarter was $40,000,000 or $0.13 per share.
We’re also excited to announce that we’re working with NextEra Energy, who leads the nation in the development of power generation, to explore the development of gas fired power generation assets near our growing Western Haynesville area that can power potential data center customers. We believe our location, which is 100 miles from the Dallas Metroplex, is an ideal site with natural gas, water, and electrical grid infrastructure resources that could support data center development. I will now turn it over to Roland to discuss the financial results we reported yesterday. Roland?
Roland Burns, President and CFO, Comstock Resources: Yeah, thanks Jay. On slide four, we covered the second quarter financial results. Our production in the second quarter averaged 1.23 Bcfe per day, which is 14% lower than the 2025, reflecting our decision to drop rigs in early twenty twenty four and our deferral of completion activity last year into this year. With the improvement in natural gas prices, our oil and gas sales in the quarter increased 24% to $344,000,000 in the second quarter this year despite the lower production. EBITDAX for the quarter was $260,000,000 and we generated $210,000,000 of cash flow in the quarter.
As Jay said, we reported adjusted net income of $40,000,000 for the second quarter or $0.13 per diluted share compared to a loss in the 2024. Slide five is the financial results for the first half of this year. Production averaged 1.26 Bcfe per day in the first six months of the year, 15% lower than the same period in 2024, and our oil and gas sales in the first six months of this year increased 22% to $749,000,000 EBITDAX in the first six months was $553,000,000 and we generated $449,000,000 of cash flow. For the first half of this year, our adjusted net income is $94,000,000 or $0.32 per diluted share as compared to a loss in the same period of 2024. Slide six breaks down our natural gas price realizations for the year and the quarter.
Our quarterly NYMEX settlement price for the second quarter averaged $3.44 However, the average Henry Hub spot price in the second quarter averaged a much lower $3.16 32% of our gas is sold in the spot market. So the appropriate NYMEX kind of reference price for our activity was about $3.35 for the second quarter. Our realized gas price for the second quarter was $3.2 reflecting a $0.42 basis differential compared to the NYMEX settlement price and a $0.33 differential compared to the reference price. We were 56% hedged in the second quarter, so that improved our realized price to $3.6
Dan Harrison, Chief Operating Officer, Comstock Resources: and we earned a $4,400,000 profit from third party marketing activity, which improved our realized price to $3.1
Roland Burns, President and CFO, Comstock Resources: Slide seven, we detail our operating cost per Mcfe and our EBITDAX margin. Our operating cost per Mcfe averaged $0.80 in the second quarter, dollars $0.03 lower than the first quarter rate and $04 lower than the 2024. Our EBITDAX margin was 74% in the second quarter compared to 76% in the first quarter. Production and ad valorem taxes were down $01 from the first quarter rate due to lower natural gas prices, and our lifting cost improved by $02 in the quarter. Gathering and G and A costs remained unchanged in the second quarter compared to the first quarter.
Slide eight, we recap our spending on drilling and other development activity. We spent $268,000,000 development activity in the second quarter. And for the first six months this year, we’ve now drilled 16 wells or 14.5 net wells, and those are in that target the Haynesville Shale. And then we’ve also drilled another three gross wells, so three net wells that target the Bossier Shale for a total of 19 wells drilled so far this year. We turned 24 or 20.3 net operated wells to sales, which had an average IP rate of 27,000,000 cubic feet per day.
On slide nine, we recap what our balance sheet looks like at the end of the second quarter. We ended the quarter with $475,000,000 of borrowings outstanding under our credit facility, having paid down $35,000,000 during the second quarter. Our borrowing base is $2,000,000,000 under the credit facility, and our elected commitment still is $1,500,000,000 Our last twelve months leverage ratio has improved to three times and will continue to improve as we get away from the 2024 results, which are weighed down by low natural gas prices. At the end of the second quarter, we had approximately $1,100,000,000 of liquidity. I’ll now turn it over to Dan to discuss the drilling and operating results.
Dan Harrison, Chief Operating Officer, Comstock Resources: Okay. Thanks, Roland. On slide 10, here’s just an overview of our latest acreage footprint in the HaynesvilleBossier in East Texas and North Louisiana. We now have 1,105,000 gross and 826,741 net acres that are prospective for commercial development of the Haynesville and Bossier Shales. Over on the left is our Western Haynesville acreage footprint, which we have grown to nearly 525,000 net acres, and over on the right are 302,000 net acres in our legacy Haynesville area.
We have 24 wells currently producing on our Western Haynesville acreage, which is virtually undeveloped compared to our legacy Haynesville area. With the high pay thickness and pressures we encounter in the Western Haynesville, we expect that Western Haynesville will yield significantly more resource potential per section than our legacy Haynesville. On slide 11, outlines our new development plan utilizing the Horseshoe lateral concept. The Horseshoe well design concept combines two separate and adjacent shorter laterals into a longer single lateral, which results in a much more efficient use of capital. We realized 35% savings in our drilling costs when drilling a 10 ks lateral Horseshoe wells compared to a 5,000 foot sectional lateral well.
Our drilling inventory in the legacy Haynesville now includes 149 Horseshoe locations. We completed our first Horseshoe well last year, the Sebastian 11 number five. It had a 9,382 foot lateral, and we had an IP rate of 31,000,000 cubic feet per day. To date, this year, we’ve drilled two additional Horseshoe wells. So in 2025, we plan to drill a total of nine Horseshoe wells, and we will drill 10 Horseshoe wells in 2026.
On Slide 12 is our updated drilling inventory at the end of the second quarter. Our total operated inventory consists of fifteen thirty eight gross locations and twelve twenty two net locations, which equates to a working interest of approximately 80%. Our non operated inventory has eleven twenty five gross locations and 137 net locations, and this represents an average 12% working interest. The drilling inventory is split between the Heinzl and Bossier. Our drilling inventory is comprised of short laterals less than 5,000, our medium laterals over twenty five and eight thousand five hundred foot, our long laterals between 8,500 foot and 10,000 foot, and our extra long laterals over 10,000 foot.
Our gross operated inventory, we have 42 short laterals, three eighteen medium laterals, five seventy three long laterals, and six zero five extra long laterals. The gross operated inventory is evenly split with 50 in the Haynesville and 50% in the Bossier. Over 75% of the gross operated inventory consists of laterals greater than 8,500 feet. Our drilling inventory includes the 149 Horseshoe locations, which are also split half and half between the Haynesville and the Bossier. The average lateral length in the inventory is now up to 9,686 feet.
This is up 85 feet from the end of the first quarter. So this inventory provides us with over thirty years of future drilling locations based on our current activity level. On slide 13, there’s a chart outlining the average lateral length drilled. This is based on the wells that we have drilled to TD. The average lateral lengths are shown separately for our legacy Haynesville area and our Western Haynesville area.
In the second quarter, we drilled eight wells to total depth in the legacy Haynesville, and these had an average lateral length of 11,705 feet. The individual laterals ranged from 7,782 feet up to 15,190 feet. Record long laterals on our legacy Haynesville acreage still stands at 17,409 feet. In the second quarter, we drilled four wells to total depth in the Western Haynesville, and these wells had an average lateral length of 7,933 feet. The individual lengths range from 6,708 feet up to 8,836 feet.
Our longest lateral drilled to date in the Western Haynesville still stands at 12,763 feet. To date, we’ve drilled 122 wells with laterals longer than 10,000 feet, and we’ve drilled 47 wells with laterals longer than 14,000 feet. Slide 14 outlines the wells that were turned to sales on our legacy Haynesville acreage this year. So far for the year, we’ve turned 21 wells to sales on our legacy Haynesville acreage. The individual IPs for these wells range from 16,000,000 a day up to 37,000,000 a day, and our average IP was 25,000,000 a day.
The average lateral length for these wells was 11,803 feet, and the individual laterals ranged from 9,252 feet up to 17,409 feet. And four of our eight rigs that we have currently running are drilling on our Legacy Haynesville acreage. Slide 15 outlines the five wells that have been turned to sales on our Western Haynesville acreage this year. We discussed the 24 mile step out well, the Olajawan 1H, during our last quarter’s conference call. Since we last reported earnings, we’ve turned four additional wells to sales.
These four wells had an average lateral length of 11,044 feet and an average initial production rate of 35,000,000 cubic feet a day, and four of our eight rigs are currently drilling on our Western Haynesville acreage. Slide 16 highlights the average drilling days and our average footage drilled per day in the legacy Haynesville area. In the second quarter, we drilled eight wells to total depth in the legacy Haynesville, and we averaged twenty eight days to total depth. This is two days slower than the prior quarter. In the second quarter, we averaged nine twenty one feet per day on our legacy Haynesville, and this is a 10% decrease versus the 2025 and a 7% decrease versus our 2024 full year average of nine eighty seven feet drilled per day.
Now, the additional drilling days and the lower daily footage that we had drilled in the second quarter compared to the first quarter were really the result of two wells in our East Texas area that experienced some drilling difficulties associated with some highly overpressured SWD zones. The best well drilled to date on our Legacy Haynesville acreage averaged fourteen sixty one feet per day, and we drilled that well to TD in fourteen days. Slide 17 highlights our drilling progress in the Western Haynesville. During the second quarter, we drilled four wells to total depth in the Western Haynesville. This now gives us a total of 29 wells that we’ve drilled to total depth through the end of the second quarter.
Since we spud our initial well in the ’1, we have seen significant improvement in our drilling times. Our first three wells drilled in 2022 averaged ninety five days to reach TD. Our average drilling time dropped to seventy days in 2023 and dropped again to fifty nine days for 2024 full year average. In the second quarter, we averaged fifty eight drilling days for the four wells that we drilled the total depth. This is a decrease of one day compared to the 2024 full year average, but reflects an increase of three days compared to the first quarter.
And the increase in the drilling days compared to the first quarter can really be attributed to two things. The first one being one of our wells in the second quarter had to be sidetracked up in the vertical due to a downhole motor that we had come apart. And secondly, all four of the wells drilled in the second quarter were over 1,500 foot deeper vertically than the wells we drilled in the first quarter. The additional drilling days in the second quarter is also a reflection
Carlos Escalante, Analyst, Wolfe Research: of
Dan Harrison, Chief Operating Officer, Comstock Resources: the lower footage drilled per day. Our fastest well drilled to date, the Western Hazel, still stands at thirty seven days, and that well had a 12,045 foot lateral. Slide 18 is a summary of our D and C costs through the second quarter for our benchmark long lateral wells that are located in our legacy Haynesville area. These costs reflect all our legacy area wells that had laterals greater than 8,500 feet. The drilling costs are based on when the wells reached TD, and our completion costs that we show here are based on when the wells are turned to sales.
So during the second quarter, we drilled seven of our benchmark long lateral wells to total depth. The second quarter drilling cost averaged $696 a foot, which is a 33% increase compared to the first quarter. Like I mentioned earlier in our second second quarter drilling efficiency, we incurred some additional drilling costs on a couple of our East Texas wells in the second quarter due to drilling difficulties that were associated with the localized, highly overpressured SWD zones. During the second quarter, we also turned eight wells to sales on our legacy Haynesville acreage. The second quarter completion costs came in at $724 a foot.
This represents a 15% decrease compared to the first quarter. And the lower completion costs in the second quarter were partially driven by lower frac costs that we had associated with lower fuel costs. And so we did have more of our fracs in the second quarter that utilized a higher percentage of natural gas for fuel. We also experienced much better efficiency drilling out frac plugs in the second quarter. We currently have the four rigs running on the Legacy Haynesville acreage, and as we look ahead, we believe our D and C cost will remain relatively flat to slightly lower for the remainder of the year.
On slide 19 is a summary of our D and C cost through the second quarter for all the wells drilled in the Western Haynesville acreage. During the second quarter, we drilled four wells to total depth. These had an average lateral length of 7,933 feet. The second quarter drilling cost averaged $18.75 dollars a foot, which represents a 36% increase compared to the first quarter. The dominant driver for the higher drilling cost in the second quarter was the shorter laterals.
Our average lateral length in the second quarter was 7,933 feet, and this compares to an average lateral length of 10,728 feet for the wells we TD’d in the first quarter. We do plan on targeting much longer laterals in the Western Haynesville as we go forward. Also, one of our four wells drilled during the second quarter had to be sidetracked in the vertical downhole due to a motor that came apart. During the second quarter, we also turned six wells to sales on our Western Haynesville acreage that had an average lateral length of 10,445 feet. We did not turn any wells to sales in the first quarter.
So the second quarter completion cost averaged $13.00 $5 a foot. This is a 1% decrease compared to the 2024. Our frac crews have continued to execute with very good efficiency. And during the second quarter, all but one of our six wells that we turned to sales were fracked using a blended fuel of natural gas and diesel. We do currently have four of our rigs running in the Western Haynesville.
We also have two full time dedicated frac fleets, and both of these fleets do have the ability to run off a blend of natural gas and diesel. So now I’ll turn the call back over to Jake.
Jay Allison, Chairman and CEO, Comstock Resources: Thank you, Dan. Thank you, Roland. If you would please refer to Slide 20, where we summarize our outlook for 2025. In 2025, we remain primarily focused on building our great asset in the Western Haynesville that will position us to benefit from the longer term growth in natural gas demand. We currently have four operated rigs drilling in the Western Haynesville and continue to delineate the new play.
We expect to drill 19 or 18.9 net wells and turn 13 net wells to sales in Western Haynesville this year. We’ll continue to build out our Western Haynesville midstream assets to keep up with the growing production from the area. Our new Marquet gas treating plant started operations this month, which more than doubled our gas treating capacity. In the Legacy Haynesville, we’re currently running four rigs to build production back up for 2026. We expect to drill 32 or 24 net wells and turn 32 or 26.8 net wells to sales in the Legacy Haynesville this year.
Given the tremendous interest in acquiring properties in the Haynesville, we currently plan to divest certain noncore properties during 2025, which will allow us to accelerate deleveraging of our balance sheet. We continue to have the industry’s lowest producing cost structure and expect drilling efficiencies to continue to work toward driving down drilling and completion costs in 2025 in both the Western and legacy Haynesville areas, with strong financial liquidity, as Roland reported, totaling almost $1,100,000,000 We now have a few slides that show some guidance for the rest of the year, So please reach out to Ron if you want to discuss those slides.
Ron Mills, VP of Finance and Investor Relations, Comstock Resources: All right, Liz, we can go and
Roland Burns, President and CFO, Comstock Resources: open up to Q and A.
Conference Operator: Our first question comes from the line of Carlos Escalante with Wolfe Research.
Carlos Escalante, Analyst, Wolfe Research: Hey, good morning team. Thank you for taking my question. I guess I’ll start out by asking a question on Western Haynesville, particularly on the step out to the Northwest, which you point out in your map. This well seems to be a relative step out from your current PDP and it seems to us like it’s another positive confirmation of initial reservoir pressure and therefore productivity. Now it also looks like through state data that it might be a shallower well and so I think we should expect some cooler bottom hole temperatures when you run those wells.
All that to say is to say if you can perhaps walk us through what your key takeaways and learnings from drilling on that specific area have been, and obviously what it means for your underlying capital will per cost trend?
Jay Allison, Chairman and CEO, Comstock Resources: Well, that’s the Elijah one to the North and you drop down to the Belmar and then to the left is the Jennings and then the Mill.
Dan Harrison, Chief Operating Officer, Comstock Resources: Yeah, that’d be correct. I think, Carlos, I think the well you’re when you say to the Northwest, think that’s if I’m just looking at the map here that’s probably our Jennings well. We drilled a two well pad up there, and that well That’s
Carlos Escalante, Analyst, Wolfe Research: correct, yes.
Dan Harrison, Chief Operating Officer, Comstock Resources: Yeah, that well was shallower, definitely on the shallower part of the acreage versus some of these other ones we drill. Jay mentioned it earlier in his opening just the TBD depth ranges. And so that particular well is the 14,000 foot book end of those. He gave you 14,000 to 19,200. That’s the 14,000 foot TBD well.
It’s also our record fastest well that we drilled at thirty seven days to TD. So it does make a big difference on where you’re drilling on the acreage, the number of drilling days, and also the cost. That well was also our cheapest, fastest, significantly cheaper, really. So we’ve got a pretty good range here of depths, temperatures, drilling cost across the acreage. So yeah, just kind of point that out.
Jay Allison, Chairman and CEO, Comstock Resources: We had to tube up some of the wells that were deeper, hotter. And so Dan, you may talk about not having to tube some of these wells up.
Dan Harrison, Chief Operating Officer, Comstock Resources: So we have, just due to the pressures on the initial wells we drilled, of course, were extremely high pressures. Everything that we flow up in the core flows we just flow the wells up the casing. We tube them up at a later day. We didn’t do that down here just because of the extremely high shut in pressures, flowing pressures. We didn’t want to be flowing at those kind of pressures up the production casing.
But when you get up in this area where these Jennings wells are, because they are shallower and we do have a little bit less pressure, we’re comfortable flowing those up the casing. We did run tubing in those, but in the future, wells above, we kind of are looking at a cutoff depth. Those are definitely above it. We’ll flow those wells or the wells in that depth range up the casing in the future, and that’ll drop our cost probably at least another $150 a foot. So I think had we not run tubing in that well, I think we’d have been looking at a sub $2,000 per foot well cost.
Jay Allison, Chairman and CEO, Comstock Resources: Well, think another comment on the Elijah one. We completed it a little different than we did the other wells. But we came down to the Balmire, which is 30 miles away, really about 33 miles away from the Elijah one, and we completed it the same way that we completed the Elijah one. Both of those, as we reported, they’re some of the two best wells we’ve ever drilled. We did tweak the completions, and I think that’s the whole focus on the program is we think we’ve captured our 525,000 net acres.
We’ve captured our reserve pool. Now what we’re doing, which is what your question is, every ninety days we’re reporting on how we’re tweaking this to de risk it to create this tremendous value for what? For the natural gas that’s needed for LNG data, industrial demand, etcetera. And then the MEN well is a little different well. You may want to talk about that, Dan.
Dan Harrison, Chief Operating Officer, Comstock Resources: Yeah, the MEN well was also one that we tweaked. And when Jay says we tweaked the completions, we just tightened up our stage spacing a little bit, which just gives us a little bit more intensity. Basically, we’re fracking in just over shorter distance. The MEN well was also in a well on our shallower acreage, kind of similar to the Jennings. The production looks fantastic on it.
It’s only been on for probably a couple of months now, but low D and C costs, good results. We’ve had Jay mentioned, so we’ve had the Elagio one, the Bellmire, and the MEN are really the three that we probably tweaked the most on the completions with the tighter stage spacing. When you know the well,
Jay Allison, Chairman and CEO, Comstock Resources: it’s 38,000,000 a day IP at a shallower depth.
Dan Harrison, Chief Operating Officer, Comstock Resources: Yeah. And looking at our just even though they haven’t been on long, when we look at the initial production rates and we look at the pressure decline just over that little short period, those three wells do or three of our best looking wells.
Carlos Escalante, Analyst, Wolfe Research: Terrific. Very helpful color, guys. Guess taking a step back now and looking at it from a more general perspective, considering that you started the year out guiding for 17 TILs in the Western Haynesville and due to unforeseen issues, we’re down to 13. What are the ramifications of this to your 2027 target of HVP ing all your leases through 70 wells? Is that question right?
Also let’s say 1B question, what is the run rate for tails in the Western Hazel? Yep, go ahead.
Dan Harrison, Chief Operating Officer, Comstock Resources: I mean, I don’t know the number right off the top of my head, but I’m going say it’s really not a big mover. Obviously, our drilling speeds are getting faster, so that’s pulling wells forward. We have the one well that has the midstream issue that we’re waiting to get it connected. And then, of course, we’ve drilled two pilot holes also, so that pushes the dates back a little bit. But overall, in general, like you asked, in the general sense, it’s not really pushing any of these wells back.
Roland Burns, President and CFO, Comstock Resources: No, I think that’s more of a function of these wells could have come on in December, and now they’re forecast to be January. You’re talking about a month or so delay as far as how they fall this year, which could change again based on
Dan Harrison, Chief Operating Officer, Comstock Resources: Midstream issues, a little bit more randomness in that as far as if some of them are going to be delayed. But overall, our drilling times, in the greater sense, and over a longer term, our drilling times is what’s going to really drive cadence of those numbers.
Conference Operator: Our next question comes from the line of Derrick Whitfield with Texas Capital.
Derrick Whitfield, Analyst, Texas Capital: Good morning, all, and thanks for your time.
Jay Allison, Chairman and CEO, Comstock Resources: Good morning.
Derrick Whitfield, Analyst, Texas Capital: So similarly, kind of taking a step back and looking at the Western Haynesville more holistically, you guys have had considerable exploration and delineation success and have drastically improved the commerciality of the plate with limited missteps to date. To be clear, again, for the benefit of investors, the increase in capital allocation to the legacy Haynesville is in no way an indication of change in relative value of the Western Haynesville and was part of a broader initiative to return the legacy play to maintenance levels of spending in a more concerted gas environment. Do I have that part right?
Jay Allison, Chairman and CEO, Comstock Resources: Yes, you know what, I didn’t even think about that. When you brought that up, I mean we didn’t add a rig in the legacy area because we have any doubts about the Western Haynesville at all. In fact, you’re the very first person I’ve ever heard say that, so I’m kind of shocked at that. But I guess that’s common sense question. But no, no, what we did is we said the strength of legacy allowed us to want to drill the Circle M well even in 2021, 2022.
And then when prices shot up in ’twenty three, most of the acreage that we acquired in Western Haynesville was from free cash flow because prices were high. But what got the Joneses and the shareholders in the game initially was the value and the predictability of our legacy acreage. And so when you start cutting the rig back from nine to eight to seven to six, five to four to three, then the predictability of our growth is not there. So you’ve got to go ahead and add another rig in the core, which is the legacy, in order just to offset some of the risk that you may have and delays that you may have as why we derisk this giant footprint in the Western Haynesville. So Derek, in no way at all does it imply that we pulled anything back as far as the attitude about the Western Haynesville at all.
I mean, that is a great question, but it never even came into my mind, ever. I mean, like ever.
Roland Burns, President and CFO, Comstock Resources: And I would add that it more reflects the fact that drilling and completion costs are down and we can add this rig and stay in our original budget and the availability of those services is with the lower oil prices. And it also reflects kind of our decision to sell some non core properties, and so this is getting kind of prepared to replace that production, and it also reflects kind of the excitement about the horseshoe wells and the ability to kind of add a lot of those to the schedule, which are going to be in the legacy Haynesville. So it kind of it’s probably more reflects opportunity that we see in those areas versus any doubts about putting the capital in the Western Haynesville.
Jay Allison, Chairman and CEO, Comstock Resources: Yeah, I would say again, 50% of our gas is hedged for ’25, same in ’26, that’s risk adjustment. We’ve added a lot of Horseshoe wells, 149, and we said, okay, we won’t increase our budget in 2025 if we add this rig to drill wells. And mainly it’s to drill horseshoe wells, and you saw the economics are incredible. So those are all new in the last year, that 149 list. So we just said, why don’t soften up the development of the Western Angel?
Because like we said, it’s exploration exploitation, but scattered out. We’re drilling 80 miles to the north and south and twenty, thirty miles to the east and west because we’re so comfortable with what we think we’re finding and what we found. And at the same time, when the geological group says we need to core some wells, well it does cost some time and money. We said, Okay, well let’s core all those wells, and then we plan on really drilling one more pilot hole in Cornett near the Eligero one maybe this year. So you work that in the numbers too, and that gives you a little bit more time to tie geologically everything together.
But no, no, no. Anything, we have never ever been more encouraged about what we’re sitting on in the Western Haynesville period. As I was talking to the Joneses today, he said you need to broadcast for sure. We’re not ever, right now in the foreseeable future, even thinking about issuing equity to grow this stuff at all, period. In other words, that’d be another question that might be out there.
We’re going to divest some noncore assets. We’re going use those dollars to pay down our debt. We’ll delever that way for a while, and then we’ll let Dan and the group drill and complete these Western Haynesville wells with the big land grab, Derek, being behind us. Now we do have probably $25,000,000 or 30,000,000 budgeted for land in 2025. Some of that’s in the core, some of it’s just a cleanup in the Western Haynesville.
But that’s where we’re going, and it is a different story, but it’s such an incredible story. So great question.
Derrick Whitfield, Analyst, Texas Capital: Understood, and it makes complete sense. And as my follow-up, I wanted to see if you could offer some perspective on what you’re seeing in the Western Haynesville that’s leading you down the path of testing restricted check management. I know it’s been part of a broader optimization process in all plays, but I imagine there’s a specific reason as to why you guys are approaching that in the second half from a testing perspective based on whether it’s your data or competitive data, but some data.
Dan Harrison, Chief Operating Officer, Comstock Resources: Well, that’s a good question. And so of the things we knew early on coming into this play was obviously it’s deep and it’s hot. And just if you look across the acreage up in the core of the play, you can see that when you get in the deeper parts of the core, you need to probably be a little bit more disciplined on how you draw the wells down. So down here, we’re at the very end of that scale as far as with the depths and the pressures that we have. And so I think pressure dependent Parm, what we’ve seen on the wells is that we float our wells in a lot of different ways.
We’ve got wells all the way across the board trying to see what works, and what we see is a little bit more of a decline in year one, just basically choking them back, which is part of the reason our production is low, is this was just self imposed. We’ve gotten more aggressive at choking the wells back, trying to maintain a real disciplined drawdown. And so that’s in the results we see, and when we model it out, and we do look at competitor wells, the state data, leads you to think that you should get a little better if you flow them at basically more conservative rates. And I do believe that. You just got to find the right balance as far as when you’re modeling the economics for return and payout versus the long term value of the PV-10s.
And that’s just what we’re working through right now.
Jay Allison, Chairman and CEO, Comstock Resources: And I think, Derek, that’s one reason we came up and adjusted the production. In other words, we said whatever we see every 90 days, we’re going to tell you. We’re going to tell you and we’re going to adjust it accordingly. And that’s just what it’s telling us to do. And it’s like Dan said, if you can choke it back a little bit more and have a much higher EUR and the IRR looks fantastic and the payout looks good, etcetera, And you’ve got this inventory on 525,000 net acres.
And that’s how we want to manage it. It is managing, like we said. It’s taken care of today, but it’s also managing for long term.
Conference Operator: Our next question comes from Kalei Akamai with Bank of America.
Kalei Akamai, Analyst, Bank of America: Hey, good morning, guys. Jay, Roland.
Jay Allison, Chairman and CEO, Comstock Resources: Good morning.
Kalei Akamai, Analyst, Bank of America: My first question good morning. I want to ask you about the non core sales effort here. Can you talk a little bit about how you think about sizing a sale? I do intend to minimize the associated PDP. I would imagine that you’d want to keep that because that’s gas torque and if gas prices go up, then that’s your pathway to deleveraging.
And then on top of that, are there any metrics that you can point to help us understand the value of locations in this market?
Roland Burns, President and CFO, Comstock Resources: Yeah, that’s a good question. I mean, think that we are looking to there’s an opportunity, I think in this market in our basin, where before I think the last several years until this year, basically that market was really around selling PDP and out there, those are the type buyers that dominated the acquisition space and it’s changed a lot this year. There’s a lot of interest in our basin and new players coming in that are very interested in drilling locations and with a higher gas price, lower return projects in the Haynesville now become very attractive and make a lot of money for folks. We have a very deep inventory in the legacy Haynesville and some of it we just in our particular circumstance for the next ten years, we just can’t get to any of that. And so selling off some of that inventory that we view that we would not develop anytime soon, can add a lot of NPV value to the company because we create value out of it.
So yeah, I think we’re focused on more of that than really selling a lot of production or producing reserves.
Jay Allison, Chairman and CEO, Comstock Resources: Well, and remember, as we de risk the Western Haynesville, we had inventory. In other words, if we thought that we wouldn’t potentially be adding material inventory in the Western Haynesville, we wouldn’t be looking at divesting anything in our legacy. But if you look at the legacy and you say you have thirty, forty years of inventory, and the market tells you that there’s a demand for some drilling inventory, and they win and we win, if we sell and they buy, then we should take a hard look at it if it makes Comstock a much better company and it launches somebody else into the area, and mainly for LNG demand.
Kalei Akamai, Analyst, Bank of America: Got it. I appreciate that. For my second question, I’m hoping that you can talk about your coring program and what you’re attempting to learn here. Our our kind of base case for the Western Hayesville is basically 3,000 locations across three fairways, each with a different number of drilling horizons. Does that kind of align with how you guys see it?
And will this program help confirm that case?
Dan Harrison, Chief Operating Officer, Comstock Resources: Yes, I think you’re spot on there. Of course, there’s two reasons to drill pilot holes out here for us. And we’ve got kind of some tentative plans on where we want to drill our pilot holes across the entire footprint right now. Those will probably move around a little bit for various reasons. But in some areas, we just need to drill a pilot hole just to get the logs just because we don’t have any kind of well control in that area, we need it to be able to steer our lateral and know where we’re landing it in the zone.
And then secondary reason is basically to cut course and do all of that science work, get our TOCs, and basically let that help you back into what an original gas in place number looks like. And also to basically just get all of the mechanical properties, and maybe it’ll help us make some tweaks to our completions.
Jay Allison, Chairman and CEO, Comstock Resources: Now I would comment that remember, 80% of the Western Haynesville is HPP’d, and some of the cores that we would probably drill would be in HPP’d acreage. Now the first ones will be in the acreage that we need to drill to continue to hold. But even if you look at the Elijah one, you’ve got a really good company that’s a Japanese company that’s drilled a well there. They’re completing their well now, I believe, with the same frac crew we use to complete our wells. But we would still like the core well close to that Elijah one.
And we do have a three d shoot in that area. That’s the only area that we think we need to have a little bit more seismic work done. So we’ve implemented that program too. So this is proactive work. Now it costs money to do that.
And that is all in our budget too. And that goes back to, we didn’t grow through M and A. Growing. We own our asset base. We’re just derisking it, improving it up.
And then as you do that, to your first question, if there’s something over in the legacy that you won’t drill for a long time, that’s good, and you can get top dollar for it, and both the buyer and the seller win, then we should be shuffling that around too and protect our balance sheet. That’s exactly what we’re doing.
Conference Operator: Our next question comes from Phillips Johnston with Capital One.
Ron Mills, VP of Finance and Investor Relations, Comstock Resources: Thanks for the time. Wanted to ask a follow-up question on the non core asset sale, program. Can you maybe just give us a sense of what sort of order of magnitude we’re talking about in terms of potential proceeds? And also, you expect any sort of tax leakage on those sales?
Jay Allison, Chairman and CEO, Comstock Resources: No, we really don’t go into the details on what the divestiture would look like.
Roland Burns, President and CFO, Comstock Resources: Yeah, I think next quarter, hopefully we’ll be able to kind of provide that, so we have ongoing process and so we just don’t think that’s helpful to the process. Okay. We don’t believe on the tax side that there’s any significant tax liability, matter of fact, passage of the one big beautiful bill is very supportive especially our situation and the ability to use, have future deductions for things like interest, etcetera. So that’s actually gonna be a real positive benefit, I think, on our tax rates going forward, and especially the third quarter when that was adopted, making adjustments to that. But I think we see that all very positive and probably reducing the future tax liability that we might have seen before the bill was passed.
Ron Mills, VP of Finance and Investor Relations, Comstock Resources: Okay, good. And then your implied CapEx guidance for the second half of the year, it’s relatively flat versus the first half of the year and that’s despite your rig count going to eight here in the back half of the year from seven in Q2 and something a little less than seven on average in Q1. And despite that, I guess the outlook for 32 wells drilled in the second half versus 19 in the first half. So what gives you guys confidence that CapEx will increase in the second half of the year?
Dan Harrison, Chief Operating Officer, Comstock Resources: I think if you look at where we’re at really today, just in the second quarter versus end of last year, our D and C costs are down probably on the order of 10% or so in that neighborhood. A lot of that is the pipe prices. We started seeing significant savings in our pipe prices, mainly in the first quarter. We got a little bit in the fourth quarter. As long as those hopefully, the tariff issues don’t send that the other way, but as long as that continues, that’s a big piece of that lower cost for the remainder of the year.
And then the rest of it is just basically spread out on vendor costs. Costs are just down a little bit. I think some of that may be the slowdown in the Permian with the lower oil prices and just the fact that the rigs haven’t really just exploded and taken off on the gas side. We just see it across all the services. There’s also the cadence of completions, and
Roland Burns, President and CFO, Comstock Resources: so when that actually occurs and what period is also a big factor more so than when the wells are drilling. So I think that’s actually probably a little bit less activity, know, completion activity in the second half of the year. Right. That was in the first budget.
Conference Operator: Our next question comes from Charles Meade with Johnson Rice.
Charles Meade, Analyst, Johnson Rice: Good morning, Jay. Ron to Dan and the whole team there.
Jay Allison, Chairman and CEO, Comstock Resources: Hello, Charles.
Charles Meade, Analyst, Johnson Rice: Jay, I believe you have had talked in the past that you guys, on on the Elijah on Pickens Well, that you guys had a little bit of a different completion design there. And I wonder if you could give us an update on how that how that well is performing with that different completion design and if you’ve used that sort of design subsequently in any of these more recent wells.
Dan Harrison, Chief Operating Officer, Comstock Resources: Hey, Charles. Yes, we have. The Elajoalong was the first well that we made the tweak on, and basically we just went from 150 foot to 100 foot stages. See on a lot of these wells, especially the deeper ones in this range, we are typically not quite at our frac design rate when we start out, and so just to basically address that, we decided to go to tighter stages, and we basically carried it out for the entire lateral on the Elagia one. We wanted that to be we didn’t want to have a mixed bag along the lateral of how we completed it.
So the entire lateral was completed with 100 foot stages. We’ve done really two other wells since then, the Mann 1H and the Bell Meyer, and I think it is making a difference. It’s early. We’ve only had the Elagio one on for about three and a half months, but it’s still flowing just a hair under the 27,000,000 starting rate that we set it on, and the pressure drop per day looks really, really good. So we’re very encouraged by it.
I think we’ll be going more in that direction.
Charles Meade, Analyst, Johnson Rice: Got it. Thank you for that detail. And then Roland, I get that for good reasons, you’re a little reticent to talk about the divestiture program, I’m curious, when I look at your acreage map, to me, most obvious sale for Comsac, you guys being really deep in inventory with the rest of the industry, at least in the Haynesville, really short on inventory, it would be in that Angelina River trend. Is that a reasonable inference, or is that not the direction you’re going?
Roland Burns, President and CFO, Comstock Resources: No, that’s a reasonable
Jay Allison, Chairman and CEO, Comstock Resources: I think for Einstein, that’s a good guess.
Roland Burns, President and CFO, Comstock Resources: Right, that’s the reason. Look, and it’s an area that we just haven’t been active in, but is active in the industry. Yeah, hopefully we’ll have a good view of that at our next report and we’re kind of really hoping that really lets us accelerate our deleveraging goals this year while still being able to invest in Western Haynesville.
Conference Operator: Our next question comes from Noel Parks with Tuohy Brothers Investment Research. Noel, you may be on mute. Our next question comes from Paul Diamond with Citi.
Carlos Escalante, Analyst, Wolfe Research: Thank you. Good morning.
Paul Diamond, Analyst, Citi: Thanks for taking the call. Just wanted to touch a bit on the Oyster Well program. I know you guys have talked about 10 this year, 10 next. Just wanna get an understanding of how is what would cause you to move off that? Like, if you started to see better results, could you lean in?
Worse results? Could you lean out? Just kind of how to think about your high level strategy there.
Dan Harrison, Chief Operating Officer, Comstock Resources: So, Paul, I think we’re encouraged, excited about the Horseshoe wells. We’ve put our first one on last year. Essentially see it as no different than a 10 ks straight well. I mean, a lot of our Horseshoe wells that we have in the inventory are still in some of our better type curve areas than just our regular straight wells that we’re drilling. So that’s one big thing that we like about them.
We’ve drilled three to date. We just TD’ed our third one here probably just last week. We’ve had zero problems drilling them. I’ve said before, add maybe two days to a 10,000 foot straight well. Just add two days to bend it around and make it a horseshoe.
Just zero issues drilling, zero issues completing that first one. We’ll complete these next ones here probably over this next quarter. So really, there’s nothing we don’t like about them right now. Understood. Appreciate the clarity.
Paul Diamond, Analyst, Citi: And just a quick follow-up. So you just announced the you have the NextEra agreement. Just wanna get an understanding of how you guys are thinking about potential, you know, scale, structures, duration, timing, if any of that is kind of on
Derrick Whitfield, Analyst, Texas Capital: the books yet or is
Paul Diamond, Analyst, Citi: it still just an agreement to kind of look into it together?
Jay Allison, Chairman and CEO, Comstock Resources: We’ve done business with NexTier for at least ten years and we’ve got a big footprint and most of our Western Angels undedicated and it is 100 miles away from both Houston and the Dallas Metroplex. So if we can collaborate, which we’ve done is in agreement with the largest natural gas fleet in The United States next year, it does bring experience in power generation development and operating natural gas power generation facilities in what we think is an area that will need some data centers. So we’ve been working with them for months and months and months, and we said, well, let’s just see if we can’t go forward on this. So we don’t go into any more details of our customers, but we do think that we have a really good site for a data center near the Western Haynesville area. And I don’t think we could pick a better partner.
Conference Operator: Our next question comes from Jacob Roberts with Tudor, Pickering, Holt.
Jay Allison, Chairman and CEO, Comstock Resources0: Good morning.
Jay Allison, Chairman and CEO, Comstock Resources: Good morning.
Jay Allison, Chairman and CEO, Comstock Resources0: I wanted to when we look at 2026, I think at current strip prices, we’d see you guys in 100,000,000 to $150,000,000 of free cash flow next year. Just curious, if pricing were to return to $375,000,000 can you give us your thoughts on potentially outspending cash flow to execute growth? And is there a price where we might see you guys reduce activity like we have in the past? And I apologize for the long question, but I’m wondering if that relative capital allocation has changed given the development of the Western Haynesville over the last eighteen months?
Roland Burns, President and CFO, Comstock Resources: Well, it’s really early for us still to be talking about our twenty sixth activity, which we haven’t announced yet, but I think that we really like where the company is now with the balanced program and both the legacy and the Western Haynesville and we’ll be reaping the benefit of the higher production from the money we’re spending this year because it takes almost nine months really to get production when you kind of add a rig line. And so, I don’t think we’ll see any case where we’d be out spending, so obviously we would adjust activity level. But yeah, we’re very bullish about how 2026 will look for the company, plays. Yeah, we’ll be setting our budget later this year. It’s usually late in the fall when we kind of gauge our activity.
We have lots of flexibility in how we do that activity, especially in the obviously the core where we have a lot of well to well rig contracts, we always have the ability to flex activity based on the outlook that we see. But we’re still very bullish about ’26 and what you see in the futures market and the demand we know that’s coming on and even with our direct talks about providing long term supply to some of the really large users, a lot of that is starting to crank it crank into ’26.
Jay Allison, Chairman and CEO, Comstock Resources0: Okay, thank you. And I wanted to circle back to some of the coke management in the Western Haynesville. I’m just trying to understand, in terms of trying different things or experimenting different ways, how should we be thinking about the timeline on that well data before you’re able to make a decision as to what the optimal approach is? Is it you choke now and it’s fourteen months later that you’re able to say this was good or bad? Just kind of any color around that would be great.
Dan Harrison, Chief Operating Officer, Comstock Resources: Well, that’s a really good question on the timeline because it is a longer timeline because you definitely can’t get quick answers. We’ve flowed them several different ways. We’ve been really aggressive on some. More of the wells of late, we’ve been very proactive as far as starting to choke them back and basically bring the rates back down a little bit. Just based on early modeling stuff we’ve done, we’re definitely expecting a little bit better EURs with the conservative drawdown.
We haven’t done one yet that’s really conservative. That’s probably the next test that we’re kind of looking at here in the near future is pulling one at a much lower rate straight out of the gate. And as far as the timeline to get that data, you’re probably talking a minimum of a year to get an idea what it’s going to do, and maybe even eighteen months to two years to really start dialing in on an exact answer.
Roland Burns, President and CFO, Comstock Resources: But you have your feedback of the drawdowns as you produce, but that’s giving you clues, I guess, you on the right path?
Dan Harrison, Chief Operating Officer, Comstock Resources: Yeah. And there has been some other industry operators out there that have drilled a few wells and have some state data out there that’s in our data set we’re looking at. I think we’re on the way to getting there. But you do kind of have to wait and let them play out a little bit, see where they’re headed.
Conference Operator: That concludes today’s question and answer session. I’d like to turn the call back to Jay Ellison for closing remarks.
Jay Allison, Chairman and CEO, Comstock Resources: Again, thank you for your hour plus time. I want to conclude it in that one, and the Joneses in particular, but all of us we want to protect the balance sheet. That’s number one, number one, number one. And then I think that we can deliver this non core asset sale if it’s a win win for us and for the buyer, we’ll use those proceeds to delever. Over and over and over, we have never been more positive about the Western Haynesville.
We just want you to know how we’re managing it every 90 days. But we do have that 525,000 net acres, 80% of it is HPP, and we commit to you that we’re managing it. At the same time, Nextera comes in and we’re really excited to work with them on potential data center area. We want to grow our inventory. We’re going to grow it organically, not with M and A.
And when this LNG demand keeps growing and growing and growing, as other companies have said, the Haynesville needs to supply most of that growth. And we want to be a big part of that. So again, thank you for your patience. We always try to be very transparent with you and where we’re going, and we’ll report again in ninety days. Thank you.
Conference Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
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