Comstock Resources(CRK) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q2 2023, production was 1.4 Bcfe per day, a 2% increase compared to Q2 2022. However, oil and gas sales were $285 million, down 53$676 million, a 33% decrease [30] - Adjusted net income for Q2 2023 was $1 million, compared to$274 million in Q2 2022, and for the first half of 2023, it was $93 million, down from$409 million in the prior year [29][30] Business Line Data and Key Metrics Changes - The company turned 17 successful operated wells to sales in Q2 2023, with an average lateral length of 10,887 feet, and connected 15 wells to sales since the last conference call [45][46] - The average initial production (IP) rate for the wells turned to sales was 21 million cubic feet equivalent per day [45] - D&C costs averaged $1,523 per foot in Q2 2023, a 4$2.10, with realized gas prices averaging $1.81, reflecting a$0.29 differential [31][48] - The company is 49% hedged, which improved the realized gas price to $2.25 [48] Company Strategy and Development Direction - The company is focused on expanding its acreage position in the Western Haynesville and plans to turn another 37 wells to sales by year-end 2023 [24][36] - The strategy includes managing drilling activity levels in response to low natural gas prices while maintaining a strong balance sheet and financial liquidity [71][72] - The company aims to benefit from the anticipated growth in LNG demand, projecting an increase from 12 Bcf per day to 21 Bcf by 2027 [28][42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future natural gas prices due to increasing LNG demand, despite current challenges from low prices and high drilling costs [27][42] - The company is committed to maintaining a strong balance sheet and financial liquidity, which totaled around$1.5 billion at the end of Q2 2023 [72] Other Important Information - The company plans to retain a quarterly dividend of 0.125 per common share [72] - D&C CapEx for Q3 2023 is expected to range between 240 million to $280 million, with full-year guidance remaining unchanged at$950 million to $1.15 billion [73] Q&A Session Summary Question: Details on Western Haynesville wells - Management highlighted the importance of well performance metrics beyond initial production rates, emphasizing ongoing evaluations of well productivity and operational efficiencies [62][64] Question: Production guidance trajectory - Management indicated that the exit rate for the year could exceed 1.5 Bcf per day, depending on the timing of well turnarounds [103][105] Question: Hedging strategy for 2024 - The company typically hedges around 40% of its production and is actively monitoring market conditions to secure revenue streams [125] Question: D&C cost changes - Management noted that efficiency improvements in frac crews and longer lateral lengths contributed to a decrease in D&C costs, despite some costs remaining stable [131][133]