Comstock Resources(CRK)2024-10-31 21:10Financial Data and Key Metrics Changes - The average realized gas price before hedging was $1.90 for the quarter, significantly impacted by weak natural gas prices [13] - Oil and gas sales, including hedging, were $305 million, with cash flow from operations of $152 million or $0.52 per share [14] - Adjusted net loss was $0.17 per share for the quarter, attributed to lower completion activity and higher depreciation, depletion, and amortization [18][19] - Year-to-date oil and gas sales decreased 7% to $919 million compared to 2023, with a net loss of $121 million or $0.42 per share [20][21] Business Line Data and Key Metrics Changes - Production in Q3 averaged 1.4 Bcfe per day, a 2% increase from Q3 2023 [17] - The company turned 41 operated wells to sales in 2024, with an average initial production rate of 24 million cubic feet per day [25] - The Western Haynesville acreage increased to 453,881 net acres, with significant cost reductions in well drilling [15][16] Market Data and Key Metrics Changes - The quarterly NYMEX settlement price averaged $2.16, while the average Henry Hub spot price was $2.09, leading to a realized gas price of $1.90 [22] - The company was 28% hedged in Q3, improving the realized gas price to $2.28, with plans to be 50% hedged in Q4 [22] Company Strategy and Development Direction - The company aims to grow inventory through exploration in the Western Haynesville play, securing 450,000 net acres since 2020 [10] - A focus on cost reduction and efficiency in drilling operations, with a target to maintain a strong financial liquidity position of approximately $1.1 billion [48][27] - The company plans to adjust its drilling program based on natural gas demand and prices, with a significant emphasis on the Western Haynesville [47][49] Management's Comments on Operating Environment and Future Outlook - Management highlighted the increasing demand for natural gas driven by LNG exports and data center growth, positioning the company favorably in the market [8][9] - The outlook for 2024 includes a 25% to 35% reduction in CapEx and a focus on maintaining a strong cost structure amid low natural gas prices [45][48] - Management expressed confidence in the Western Haynesville's potential, anticipating significant growth in natural gas demand in the coming years [49] Other Important Information - The company has successfully drilled and completed its first horseshoe well, achieving an initial production rate of 31 million cubic feet per day [30] - The drilling costs per foot for the third quarter averaged $642, with completion costs at $776 per foot, indicating a mixed cost environment [43] - The company has a robust drilling inventory, with 1,607 gross locations and plans to convert more locations to horseshoe wells for better economic performance [32][90] Q&A Session Summary Question: Discussion on planned outspend for Q4 and balance sheet management for 2025 - Management explained that the outspend is due to quicker drilling days and completion work expected to cross over into 2025, with a focus on balancing capital investment with cash flow generation [54][56] Question: Insights on Western Haynesville drilling costs and future updates - Management confirmed that drilling costs are improving, with a more detailed update expected early next year [57][58] Question: Geographical spread of horseshoe well locations and potential for additional locations - Management indicated that the 64 horseshoe locations are spread evenly across the Haynesville acreage, with potential for more locations as they evaluate the Bossier area [62][64] Question: Outlook for M&A in the Haynesville - Management expressed interest in potential M&A opportunities, particularly in the Western Haynesville, as larger companies divest mature vertical wells [93] Question: Handling geological challenges in the Western Haynesville - Management stated that they have 3D seismic data to identify geological hazards, minimizing risks in drilling operations [97][98] Question: Perception of natural gas pricing and winter demand - Management noted that near-term gas prices will depend on winter heating demand, with expectations for increased demand in the second half of 2025 [100]