Comstock Resources Q4 2024 Earnings Call Summary

Overall Business Tone & Market Sentiment

• Business Highlights: Comstock Resources (CRK) navigated a tough year with historically low natural gas prices ($1.98/Mcf average in 2024, one of the lowest in 30 years). The company responded by cutting capital expenditures, reducing drilling activity, and focusing on hedging strategies to stabilize cash flows.

• Market Tone: The call had a cautious but slightly optimistic tone. Management emphasized capital discipline, production restraint, and hedging to protect against volatility. They highlighted that no E&Ps in their view were aggressively ramping production, signaling market discipline in the face of weak pricing​.

Management Commentary

1. Natural Gas Production Levels (Historical & Forecast)

• 2024 production: Averaged 1,250 – 1,325 MMcfe/d in Q4.

• 2025 forecast: Expected to range 1,300 – 1,400 MMcfe/d​.

• Drilling activity in 2025:

  • Western Haynesville: 20 wells drilled, 17 wells turned to sales.

  • Legacy Haynesville: 26 wells drilled, 29 wells turned to sales.

2. Production Curtailments & Shut-ins

• Management stressed discipline in the Haynesville Basin, with no plans to increase output aggressively:
  "We certainly haven't seen any type of effort to ramp up at all from the public or private operators. We’ve seen great discipline in the basin."​.

• They explicitly stated: "We’re not going to overproduce, period."​.

3. TIL (Turned in Line) & DUC (Drilled but Uncompleted) Wells

• 2024 Total:

  • Drilled: 50 wells. Turned to sales: 48 wells​.

• 2025 Guidance:

  • Western Haynesville: 20 drilled, 17 turned to sales.

  • Legacy Haynesville: 26 drilled, 29 turned to sales​.

4. Hedging Strategy, and Realized Prices & Break-even Costs

• Comstock expanded its hedging program significantly in 2024 to mitigate exposure to low gas prices.

• By Q4 2024, the company had hedged 50% of its expected 2025 and 2026 production, ensuring price stability despite market volatility​.

• The company shifted its hedging strategy in 2024 to include a larger mix of swaps and collars, allowing for downside protection while keeping some upside exposure.

• Comstock is prioritizing a more aggressive hedging strategy for 2026, increasing the volume of production hedged via collars, likely in anticipation of a stronger pricing environment

• Realized Prices (2024): $2.51/Mcf in Q4 after hedging​.

• 2025 Hedging Details:

  • Q1 2025: 695 MMcf/d at $3.50 – $3.80/MMBtu.

  • Q1 2026: 780 MMcf/d at $3.50 – $4.35/MMBtu.

  • Similar collar structures for Q2–Q4​.

Break-even Production Costs & Margin Protection

• The company did not explicitly state its break-even price, but given its focus on cost-cutting and a 20% improvement in realized prices from hedging, Comstock appears to be targeting a breakeven price in the $2.50–$3.00/Mcf range for 2025​.

• Management stated: "We remain focused on hedging to secure profitability, ensuring we can run our drilling programs even in a weak pricing environment."​.

• With realized prices increasing due to hedging, Comstock has ensured stability in revenue despite the challenging low-price environment in 2024. They expect 2025 hedge coverage to allow them to maintain cash flows while keeping production steady.

5. Rig & Frac Crew Activity (Historical & Forward-Looking)

• 2024 Cuts: Reduced activity by releasing two rigs and one frac spread.

• 2025 Plans:

  • Western Haynesville: Running four operated rigs.

  • Legacy Haynesville: Running two to three rigs​.

6. Pipelines, LNG Projects & Energy Infrastructure

• Pipeline System:

  • CRK owns 246 miles of high-pressure pipelines and a gas treating plant at Bethel, with a second treating plant under construction at Marquez.

  • Midstream buildout in Western Haynesville funded 100% by Quantum Capital Solutions (up to $300M)​.

• LNG Contracts:

  • Evaluating direct contracts with LNG shippers and power generators.

  • 90% of Western Haynesville acreage remains undedicated, allowing flexibility in marketing gas​.

  • Management on LNG deals:
    ”We see opportunities to lock in contracts with LNG exporters and industrial users, but we don’t want all our eggs in one basket."​.

Q&A Highlights

1. Market Discipline & Production Outlook

• Analysts inquired about E&P production growth:

  • Management response: "We don’t see any E&P company out there out of control on their production rates. None of them."​

2. Hedging & Marketing Strategy

• Analysts asked about securing demand via contracts:

  • CRK confirmed they are looking at LNG and industrial buyers, with potential to lock in 10-20% of production in contracts​.

3. Infrastructure & Midstream Investments

• Pipeline acquisition strategy:

  • CRK acquired key pipeline assets in legacy Haynesville, which they now control: "We bought a lot of that pipeline in one of our acquisitions. It has become a very valuable piece of the company."​.

Key Takeaways for Natural Gas & Oil Traders

1. Production discipline remains a key theme—no plans to flood the market with excess supply.

2. Hedging & pricing strategy appears conservative, with ~50% of production locked in at $3.50–$4.35/MMBtu.

3. Focus on LNG demand—management sees opportunities in direct contracts with LNG shippers & industrial users.

4. Midstream investments & infrastructure expansion suggest Western Haynesville will be a key growth area.

5. Cautious tone on natural gas prices, with a focus on cash flow protection & debt reduction.

Overall, Comstock's strategy indicates market restraint, controlled production growth, and an emphasis on securing premium pricing through infrastructure and LNG exposure.