Comstock Resources ((CRK)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Comstock Resources’ recent earnings call conveyed a generally positive sentiment, driven by strong sales growth, record LNG exports, and strategic expansion in Western Haynesville. Despite facing challenges such as lower realized gas prices, increased completion costs in certain areas, and a high leverage ratio, the company’s strategic advancements and financial resilience were highlighted as key strengths.
Record LNG Exports
Comstock Resources reported record LNG exports, reaching 18.7 billion cubic feet (Bcf). This milestone significantly boosted the demand for natural gas, showcasing the company’s ability to capitalize on the growing global energy needs.
Increased Natural Gas and Oil Sales
The company experienced a notable increase in natural gas and oil sales, reaching $335 million, which marks a 10% rise compared to the same period last year. This growth underscores Comstock’s robust market presence and effective sales strategies.
Strong Financial Liquidity
Comstock Resources reported strong financial liquidity, exceeding $900 million. This position is expected to be further strengthened by the upcoming Shelby Trough divestiture, anticipated to close in December, which will enhance the company’s financial flexibility.
Western Haynesville Expansion
The company has significantly expanded its footprint in Western Haynesville, now covering over 530,000 net acres with an impressive inventory of 2,559 net drilling locations. This expansion is a testament to Comstock’s strategic focus on growth and resource optimization.
Operational Efficiency in Legacy Haynesville
Comstock maintained industry-leading operational efficiency in legacy Haynesville, with drilling and completion costs averaging $1,229 per lateral foot. This efficiency highlights the company’s commitment to cost-effective operations.
Lower Realized Gas Prices
The company faced challenges with lower realized gas prices, averaging $2.75, which reflected a $0.32 basis differential compared to the NYMEX settlement price. This aspect remains a concern for future profitability.
Increased Completion Costs in Western Haynesville
Completion costs in Western Haynesville rose by 24% due to higher frac costs and shorter average lateral lengths. This increase poses a challenge to maintaining cost efficiency in the region.
High Leverage Ratio
Comstock reported a leverage ratio of 3x, a figure that the company expects to improve as financial performance rebounds from previously low natural gas prices. This improvement is crucial for long-term financial stability.
Forward-Looking Guidance
Looking ahead, Comstock Resources provided significant guidance on its operations and financial outlook. The company plans to enhance its Western Haynesville operations by running four rigs, with expectations to drill 19 wells and turn 13 wells to sales in 2025. Additionally, the Shelby Trough asset divestiture for $430 million is expected to improve the leverage ratio and enhance liquidity, supporting the company’s strategic goals.
In summary, Comstock Resources’ earnings call highlighted a positive outlook, driven by strategic expansions and strong financial performance. Despite challenges with gas prices and completion costs, the company’s robust liquidity and operational efficiency position it well for future growth. Investors and stakeholders can look forward to continued advancements in the Western Haynesville region and improved financial metrics as Comstock executes its strategic initiatives.