Comstock Resources ((CRK)) has held its Q1 earnings call. Read on for the main highlights of the call.
The recent earnings call of Comstock Resources painted a picture of both optimism and caution. The company celebrated strategic successes, notably with the Olajuwon well and improved financial performance, yet faced challenges such as production decline, losses in gas marketing, and increased operating costs. This mixed sentiment reflects the dynamic environment in which Comstock operates.
Successful Olajuwon Well
The Olajuwon well in Freestone County marked a significant milestone for Comstock Resources. With an initial production rate of 41 million cubic feet per day, this well is a testament to the geological potential of the Western Haynesville play. Located 24.4 miles from the nearest producing well, it underscores the company’s strategic exploration efforts.
Improved Financial Performance
Comstock reported a robust financial performance with natural gas and oil sales reaching $405 million, driven by higher natural gas prices. The company generated $239 million in operating cash flow and achieved an adjusted net income of $53.8 million, a notable turnaround from the previous year’s loss in Q1 2024.
Drilling and Cost Efficiency
The company’s drilling operations have seen marked improvements in cost efficiency. The average lateral length for wells increased, while drilling costs per foot decreased by 21% from the fourth quarter. These efficiencies are crucial for maintaining competitiveness in the current market.
Strong Liquidity Position
Comstock ended the quarter with a solid liquidity position, having $510 million in borrowings and $1 billion in liquidity. The borrowing base was reaffirmed at $2 billion, providing the company with a stable financial foundation to support its operations and strategic initiatives.
Environmental Initiatives
In its commitment to sustainability, Comstock reported a 28% improvement in greenhouse gas intensity and a 2.5% reduction in methane emissions from 2023. The partnership with BKV Corporation to develop carbon capture projects further highlights the company’s dedication to environmental stewardship.
Production Decline
The company experienced a 17% decline in production in Q1 2025, averaging 1.28 Bcfe per day. This was attributed to strategic decisions to drop two rigs and defer completion activities, reflecting a cautious approach in response to market conditions.
Loss in Gas Marketing
Comstock faced a substantial $16 billion loss in third-party gas marketing due to volatile gas prices and obligations to fill transport. This highlights the challenges of navigating the unpredictable energy market.
Increased Operating Costs
Operating costs per Mcfe saw an increase of $0.11 from the previous quarter, driven by higher production and advertisement taxes, lifting costs, and gathering costs. Managing these rising expenses remains a priority for the company.
Forward-Looking Guidance
Looking ahead, Comstock Resources remains focused on the Western Haynesville play, with plans to drill 20 wells and turn 15 to sales in 2025. The company anticipates a midstream investment of $130 to $150 million, funded by partners, to capitalize on the growing demand for natural gas, spurred by rising prices and expanding LNG requirements.
In conclusion, Comstock Resources’ earnings call highlighted a blend of strategic successes and operational challenges. While the company celebrates achievements like the Olajuwon well and improved financial metrics, it must also navigate production declines and market volatility. The forward-looking guidance suggests a continued focus on strategic growth and environmental responsibility, positioning Comstock for future opportunities in the energy sector.