Comstock Resources(US:CRK)2024-07-31 22:04Financial Data and Key Metrics Changes - The average realized gas price before hedging was $1.65 for the quarter, while with hedging it was $2.12, reflecting the impact of low natural gas prices [5][6] - Oil and gas sales, including hedging, were $278 million in the quarter, generating cash flow from operations of $118 million or $0.41 per share, with adjusted EBITDAX at $167 million [5][7] - The adjusted net loss was $58 million for the second quarter or $0.20 per share, compared to a net income of $1 million in the second quarter of 2023 [8][9] Business Line Data and Key Metrics Changes - Production in the second quarter was 1.4 Bcfe per day, a 4% increase from the second quarter of 2023, but oil and gas sales declined by 2% due to low natural gas prices [7][8] - The company drilled 11 successful operated Haynesville and Bossier shale horizontal wells in the quarter, with an average lateral length of 11,346 feet [5][6] Market Data and Key Metrics Changes - The quarterly NYMEX settlement price averaged $1.89, while the average Henry Hub spot price was $2.04, leading to a realized gas price of $1.65 [9][10] - The company was 28% hedged in the second quarter, which improved the realized gas price to $2.12 [10] Company Strategy and Development Direction - The company is focused on managing through low natural gas prices while preparing for a future rebound, emphasizing its strong financial liquidity of $1.2 billion and no bond maturities until 2029 [3][4] - The Western Haynesville acreage position totals over 450,000 net acres, with plans to enhance drilling efficiency and reduce costs [4][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future of natural gas in North America, despite current low prices, and highlighted the importance of executing daily operations to create wealth [4][24] - The company anticipates a significant growth in demand for natural gas driven by LNG exports starting in the second half of next year [24] Other Important Information - The company suspended its quarterly dividend, saving about $140 million annually, and reduced its 2024 CapEx by 34% to 41% from 2023 levels [22][23] - The company has a strong focus on improving its Western Haynesville play and expanding its acreage position [24] Q&A Session Summary Question: Allocation towards short laterals and horseshoe concept - Management indicated that while not all short laterals can be converted to long laterals, a significant portion will be, with the horseshoe concept expected to lead to more long laterals in the future [27][29] Question: Issues with Baker wells and impact on IP rates - Management acknowledged drilling difficulties in the Baker area but emphasized that these issues were outliers and not indicative of future performance [32][33] Question: CapEx decline in Q3 - The decline in CapEx for Q3 is primarily due to reduced rig activity and the temporary release of one frac crew, with expectations for costs to decrease further [36][37] Question: Expectations for horseshoe wells' productivity - Management expects the performance of horseshoe wells to match that of regular 10,000-foot laterals, with no significant loss in recoveries anticipated [43] Question: Breakeven for Western Haynesville - The breakeven cost for the Western Haynesville is evolving, with expectations that efficient drilling will bring costs in line with traditional Haynesville wells [64]