Comstock Resources(US:CRK)2023-02-15 23:04Financial Data and Key Metrics Changes - Adjusted EBITDAX increased to $478 million, a 70% growth compared to the fourth quarter of 2021, driven by stronger natural gas prices and production increases [17][24] - Net income for the fourth quarter was $288 million, or $1.05 per share, representing a 191% increase from the fourth quarter of 2021 [24] - Free cash flow from operations was $129 million, 22% higher than the fourth quarter of 2021 [18][21] - The leverage ratio improved to 1.1x, down from 2.4x in 2021 [11][18] Business Line Data and Key Metrics Changes - Production increased 9% in the fourth quarter to 1.4 Bcfe per day compared to the same quarter in 2021 [17] - The company drilled 21 Haynesville/Bossier horizontal wells in the fourth quarter, with an average lateral length of 9,903 feet [14] - The average initial production (IP) rate for wells turned to sales was 26 million cubic feet per day [12][21] Market Data and Key Metrics Changes - Natural gas prices have fallen over 70% since September of the previous year, impacting the company's operational decisions [5] - The quarterly NYMEX settlement price averaged $6.26 per Mcf, while the realized price was $5.57, reflecting a $0.56 differential [27][28] Company Strategy and Development Direction - The company plans to adjust its drilling program to ensure it is funded by operating cash flow, maintaining a strong balance sheet [8][52] - Comstock increased its Haynesville/Bossier shale footprint by almost 100,000 net acres in 2022 without incurring debt or issuing new shares [7] - The company aims to be a leading producer in the Haynesville region, anticipating significant demand for natural gas from LNG shippers starting in 2025 [6] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by lower natural gas prices but expressed confidence in the company's low-cost structure and ability to maintain production growth [52][96] - The company expects to achieve a 6% production growth in 2023 while maintaining financial discipline [117] - Management highlighted the importance of the Freeport LNG restart as a potential catalyst for natural gas prices in 2023 [95] Other Important Information - The company reinstated its quarterly common stock dividend at $0.125 per share in the fourth quarter [13] - SEC proved reserves grew 9% to 6.7 Tcfe, with a 216% replacement of 2022 production [20][35] Q&A Session Summary Question: What is the company's strategy regarding rig count and production? - Management indicated that they are adjusting rig counts in response to lower natural gas prices and expect to maintain production levels with the current rig count [79][100] Question: How does the company plan to navigate the current market conditions? - The company plans to fund its drilling program with operating cash flow and maintain a strong balance sheet while being flexible in its operations [52][94] Question: Can the company elaborate on its leasing and acquisition strategy? - Management confirmed that they are more than halfway done with their leasing strategy and expect to continue building their position in the Haynesville region [97][121] Question: What are the expectations for production growth in 2023? - The company anticipates a 6% production growth in 2023, supported by a strong balance sheet and operational efficiency [117][118]