Current CRK Stock Info

Comstock operating cash flow to fund 40% natural gas production growth

The Permian has exploded in popularity in the last few years with many different E&P companies currently increasing development in the region. However, the Permian is not the only basin that has seen an activity increase in the last year. In fact, rigs active in the Permian have increased by 84% in the last year while rigs active in the Haynesville have increased by 127% in the same period. Comstock Resources (ticker: CRK) believes that its Haynesville properties have excellent development potential.

After selling off its South Texas conventional natural gas properties in December, Comstock is now focused entirely on Haynesville development. Comstock owns about 68,000 net acres of Upper Haynesville property, with an estimated 705 drilling opportunities. Comstock plans to develop the Haynesville significantly in 2017.

In an exclusive interview with Oil & Gas 360®, Comstock President and CEO Jay Allison told, “We think we can grow our natural gas production 40% in 2017 with these high-return Haynesville shale wells and spend within our operating cash flow.” Comstock currently expects 2017 CapEx to be $143 million, which will be spent to drill 22 gross wells.

Comstock Resources: 70%-100% IRR Drives Gas Producer to the Haynesville

Source: Comstock Jan 2017 Presentation

Completion improvements enhance EUR 20%

Allison certainly has reason for optimism, as Comstock has recently seen significant improvements in EUR due to enhanced completion designs. Increasing the proppant concentration in fracturing treatments yielded an EUR increase of 20%. Depending on natural gas prices, new wells with this enhanced completion design can yield IRRs of 70% to 100%.

The Haynesville itself also has certain advantages over other U.S. natural gas plays. The field is located near several major pipelines, meaning there is never any problem getting gas to markets. There is no transportation bottleneck like is seen in the Marcellus. Export hubs to Mexico and proposed LNG plants are all geographically close. These advantages keep differentials low, with combined gathering, processing and transport expected to amount to $0.37/Mcf in 2017.

Deleveraging improved balance sheet

According to Allison, factors that have historically hampered Comstock have been dealt with effectively. Comstock recapitalized its secured and unsecured noteholders on November 8, 2016, improving the balance sheet substantially. Additionally, Allison told Oil & Gas 360® that “One of the things that will happen in the near future is a debt-to-equity conversion, which will drive a material balance sheet change.”

Comstock has taken efforts to “risk adjust its future” in the last year. The company has hedged 37% of its projected 2017 production at $3.37. With current Henry Hub spot prices at $2.93, this hedge position gives a significant upside. Allison believes that normalizing weather effects will yield a higher gas price, stating “If you normalize weather … we think that the gas price is probably $3.40, $3.45 this year, $3.70 in 2018.” If gas prices raise to these levels, Comstock’s Haynesville wells could yield IRRs of 100% to 130%.

EnerCom Dallas presenter: CRK

Comstock Resources will be presenting its story at the Tower Club Downtown Dallas on Thursday, March 2, as part of EnerCom Dallas, an investor conference which is modeled after EnerCom’s The Oil & Gas Conference® in Denver.

The Dallas conference is designed to offer investment professionals a unique opportunity to listen to a wide variety of oil and gas company senior management teams update investors on their operational and financial strategies and learn how the leading independent energy companies are building value in 2017.

The forum offers healthy dialogue and informal networking opportunities for attendees.

To sign up for EnerCom Dallas and hear Comstock, or to find out more information about presenting companies and industry experts speaking at EnerCom Dallas, click here to visit the conference website.

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