Production is 97-99% natural gas
Half of volumes hedged at average $2.61/MMBtu.
New York — After sending its frack crews home in April to wait out low gas prices, Haynesville Shale gas producer Comstock Resources is putting them back to work in time to catch an expected winter bump in gas prices, executives said during the company's second-quarter earnings conference call Aug. 6.
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"We have cut back the number of wells we are drilling and adjusted our completion schedule intentionally ... to generate free cash flow that we will use to pay down our debt and strengthen our balance sheet," Allison said. "We still expect a 3% to 5% pro forma production growth in 2020, even with the reduced activity and deferred completion schedule."
"Completions were suspended in April, which we expect will lead to a lighter [Q3], but ultimately leave the company in a better position by year-end 2020 as higher netbacks boost cash flows," Truist shale oil and gas analyst Welles Fitzpatrick told his clients after earnings were released Aug. 5. "While [Q2] production was in line, gas shut-ins remained at elevated levels, making up 4% of total gas production."
Comstock brought two frack crews back to work in June and plans to add another this month, boosting its rig count to five from four in August and possibly adding a sixth rig later in the year, executives said. Comstock expects the increased production in the second half of the year will keep its production, which is 97-99% natural gas, at the 1.275 Bcf-equivalent/d in its guidance, with half hedged at an average $2.61/MMBtu. In 2021, executives said, production volumes should increase slightly and 64% of the company's gas is hedged at $2.51/MMBtu.
The added free cash flow from rising prices will be directed to paying down debt exclusively, Allison said. "We have prioritized free cash flow goals for 2020 overproduction growth, but have maintained adequate investment to grow our production on a longer-term basis."
"There is no indication the company will grow in 2020 or 2021 as it plans to generate free cash flow, reduce leverage and protect returns by hedging 55-70% of 2021 production," market research firm Enverus' analyst Jimmy McNamara said. "The Haynesville firm is on trend with its Appalachian peers, improving its 2Q20 drilling and completion costs to $1,000/foot, or 20% below its 2019 average."
Reporting after markets closed Aug. 5, Comstock said it had $1.7 million, or 1 cent/share, in adjusted income in Q2, compared to $12.7 million, or 12 cents/share, in the same quarter a year ago.
The S&P Capital IQ consensus earnings estimate for Q2 was for Comstock to break even, with 0 cents/share in adjusted income.
Driven largely by a $65.6 million loss in the value of its hedging portfolio, Comstock reported GAAP losses of $60 million, or 29 cents/share, compared with income of $21.4 million, or 20 cents/share, in Q2 last year.
Comstock reported revenues of $179.5 million in the Q2, compared with $128.1 million in the same period a year ago.
The company reported that EBITDAX grew 74% to $162.1 million in the Q2 compared with $93.2 million last year.
Oil-and-gas production grew to 118.6 Bcfe in Q2, compared with 45.1 Bcfe in Q2 of last year, primarily because of the acquisition of Covey Park Energy in July 2019.
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August 07, 2020 at 03:38AM
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US shale gas driller Comstock is timing output with winter gas market - S&P Global
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