Comstock Resources Inc (CRK) Q4 2024 Earnings Call Highlights: Navigating Challenges with ...

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Production: Fourth quarter production averaged 1.35 BCFE per day, 12% lower than Q4 2023.
Revenue: Oil and gas sales in Q4 declined 5% to $336 million.
Adjusted Net Income: $46 million for Q4, or $0.16 per share.
Cash Flow: Generated $223 million of cash flow during Q4.
EBITDAX: $252 million for Q4.
Annual Production: 2024 production averaged 1.4 BCF per day.
Annual Revenue: Oil and gas sales decreased 7% to $1.3 billion in 2024.
Annual Cash Flow: Generated $675 million in 2024.
Adjusted Net Loss: $69 million in 2024, or $0.24 per share.
Operating Costs: Averaged $0.72 per MCFE in Q4.
EBITDAX Margin: Improved to 73% in Q4 from 67% in Q3.
Drilling and Completion Costs: Q4 drilling cost averaged $660 per foot; completion costs $863 per foot.
Debt: Total debt of $3 billion with $415 million under credit facility.
Financial Liquidity: Approximately $1.1 billion at the end of Q4 2024.
Proved Reserves: Grew 6% to 7 TCFE at year-end 2024.
Hedging: 50% of 2025 gas production hedged at an average price of $0.348 or better.

Warning! GuruFocus has detected 6 Warning Signs with CRK.

Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Comstock Resources Inc (NYSE:CRK) successfully expanded its Western Haynesville acreage to 518,000 net acres, providing a significant growth opportunity.
The company reported substantial improvements in drilling efficiency, reducing drilling costs by 33% and completion costs by 28% compared to 2022 levels.
CRK's strategic partnership with Quantum Capital Solutions has secured $300 million for midstream infrastructure development, enhancing operational capabilities.
The company achieved a 6% reserve growth in 2024, with a total of 7 TCFE of proved reserves, demonstrating strong resource potential.
CRK maintained strong financial liquidity with $1.1 billion, positioning the company well for future investments and debt reduction.

Negative Points

Natural gas prices in 2024 were at a 30-year low, excluding the COVID year, impacting revenue and profitability.
The company reported a 12% decline in production for the fourth quarter of 2024 compared to the same period in 2023.
CRK suspended its quarterly dividend in 2024 to conserve cash flow, which may affect investor sentiment.
The company faced higher depreciation, depletion, and amortization expenses, contributing to a net loss of $69 million in 2024.
There is uncertainty regarding future drilling costs and potential tariff impacts on pipe prices, which could affect operational expenses.

Q & A Highlights

Q: Can you discuss the reservoir quality as you move to the shallower portions of the Western Haynesville subbasin? A: Daniel Harrison, Chief Operating Officer, explained that while drilling the deepest and hottest parts currently, moving to shallower areas may reduce D&C costs. However, the reservoir quality and EURs in these areas remain to be seen. The expectation is that costs will decrease as they continue to learn and optimize drilling processes.

Q: What are the main factors contributing to the D&C cost compression in the Western Haynesville? A: Daniel Harrison noted that the Western Haynesville requires higher treating pressures due to depth and frac gradients, which contributes to higher costs. However, efficiencies in drilling and completion processes are expected to continue reducing costs. Roland Burns, CFO, added that initial wells bear infrastructure costs, which will decrease as more wells are drilled.

Q: What is the typical development plan for Western Haynesville pads in terms of well count and spacing? A: Daniel Harrison stated that while it's too early to determine optimal spacing, they aim for two-well pads where possible. About 50-60% of wells will be on two-well pads, with the rest as singles, depending on acreage constraints.

Q: How do you view the potential for M&A activity given higher gas prices? A: Roland Burns mentioned that while some private companies might consider selling due to favorable gas prices, there is currently low activity in the Haynesville. Comstock remains disciplined and focused on organic growth rather than M&A.

Q: What are your plans for securing long-term contracts with LNG or industrial users? A: Roland Burns indicated that Comstock aims to have a balanced portfolio of purchasers, including LNG shippers and power generation projects. They are open to direct contracts but will ensure a diversified approach to maximize value.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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