Q3 2024 Comstock Resources Inc Earnings Call

In This Article:

Participants

M. Jay Allison; Chairman of the Board, Chief Executive Officer; Comstock Resources Inc

Roland Burns; President, Chief Financial Officer, Secretary, Director; Comstock Resources Inc

Daniel Harrison; Chief Operating Officer; Comstock Resources Inc

Ronald Mills; Vice President - Finance and Investor Relations; Comstock Resources Inc

Kalei Akamine; Analyst; Bank of America

Carlos Escalante; Analyst; Wolfe Research

Charles Meade; Analyst; Johnson Rice & Company, L.L.C.

Jake Roberts; Analyst; TPH&Co.

Greta Drefke; Analyst; Goldman Sachs

Noel Parks; Analyst; Tuohy Brothers Investment Research

Bertrand Donnes; Analyst; Truist Securities, Inc.

Jeff Jay; Analyst; Daniel Energy Partners

Paul Diamond; Analyst; Citigroup Inc.

Presentation

Operator

Good day, and thank you for standing by. Welcome to the third quarter 2024, Comstock Resources earnings call. (Operator Instructions).
Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jay Allison, Chairman and CEO. Please go ahead.

M. Jay Allison

Perfect, and welcome, everyone that's listening in. Welcome to the Comstock Resources third quarter 2024, 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 third quarter 2024 results.
I am 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.
If you would, please refer to Slide 2 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 could be no assurance that such expectations will prove to be correct.
If you would turn to Slide 3, before we start going over this slide, I do want to make a few comments. On Tuesday, I was watching Bloomberg News, and the headline was "big oil sees AI boom driving crazy demand for U.S. natural gas" now by the way, I love the word crazy.
Then on Wednesday, I read in the Journal, "Wall Street giants to make $50 billion bet on AI and power projects" with the "Gas is going to be at the forefront of this "Natural gas can back up those intermittent renewables very nicely" and "Natural gas-fired plants will be critical in supplying round-the-clock power to data centers."
Now since those headlines came out on Tuesday, Wednesday, I know they are not trick-or-treat headlines. So today is Halloween, everyone. So Happy Halloween, it does make you smile a little bit, having a pure natural gas company report results on Halloween. I told someone I was hoping tonight, I'd see a kid in my front door addresses a flame, either that or is a horseshoe, either one is good with me.
Anyhow, the good news or the treat for natural gas companies is that America and the world needs more natural gas in the very near future as demand for an additional 15 Bcf of LNG feed gas gets nearer along with growth in power demand being driven by the growth in data centers and AI.
The question is, though, here's the question, is where does Comstock fit into this puzzle? And how did we position ourselves over the past four years to be a difference maker in the U.S. natural gas market. As one analyst stated on Monday, "The producing basins are facing inventory exhaustion." You either add inventory by M&A or exploratory drilling. Comstock has chosen four years ago to grow inventory through exploration in our new Western Haynesville play.
Since 2020, we have secured 450,000 net acres in the Western Haynesville, and we drilled 18 wells over an area of 26 miles to give birth to a major natural gas field close to the LNG demand corridor, which could potentially add decades of additional drilling inventory.
I told someone that it's like a dog chasing a car and catching it. That's what we did in Western Haynesville. We got the 450,000 net acres and now we're learning how to drive the car or in our case, develop the Western Haynesville well by well. The results to date look very, very promising. So the future looks very bright.
In fact, today, Dan Harrison, our COO, will report on our 13th Western Haynesville well and give you cost per foot. And yes, number 13 is a lucky number for us today even on Halloween, that kind of makes you smile too. So on this Halloween Day, we're thankful to be the treat as the corner of being is being turned for natural gas demand.
So now let me go back to the presentation on Slide 3. On Slide 3, we summarize the highlights of the third quarter. Our financial results continue to be heavily impacted by the continued weak natural gas prices as our average realized gas price before hedging was $1.90 for the quarter.
As a result, our oil and gas sales, including hedging were $305 million in the quarter and we generated cash flow from operations of $152 million or $0.52 per share and adjusted EBITDAX of $202 million. Our adjusted net loss was $0.17 per share for the quarter.
Given the lower completion activity that was planned for this quarter, we had only eight operated wells turned to sales since the company's last update. These wells had an average initial production of 21 million cubic feet per day. One of those was our first Horseshoe Haynesville well, which had an initial IP rate of 31 million per day, which Dan will talk about later.
We're continuing to advance our Western Haynesville exploratory play. Our acreage in the emerging play is now up to 453,881 net acres. Most importantly, we have substantially reduced the well cost in the Western Haynesville with our 13th well recently completed at a cost of approximately $2,814 per lateral foot. This was a single well with an 11,400-foot lateral, which did not get the cost savings that we see on a two-well pad.
The next five wells in the Western Haynesville are expected to return to sales in late 2024 to early 2025. Four of those are on two-well pads. Now I'll give it over to Roland to go through the third quarter financial results. Roland?

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