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Eagle Ford Drives Comstock's Shift to Oil From NatGas

Comstock Resources Inc. last year grew its oil production by 29% but saw natural gas production fall by close to one-third (32%), thanks in large part to its drilling program targeting the Eagle Ford Shale, the company said Tuesday.

Meanwhile, the Frisco, TX-based producer said its proved oil and natural gas reserves increased about 6.2% year/year in 2013 -- from 551 Bcfe to 585 Bcfe -- with 73% now classified as proved developed, and 95% operated by Comstock.

Production from continuing operations for the full-year 2013 totaled 69.6 Bcfe, or 191 MMcfe/d, with 2.3 million bbl of oil and 55.7 Bcf of gas. Oil production comprised 20% of Comstock's total production in 2013, compared with 12% in 2012.

Output in 4Q2013 totaled 16.4 Bcfe, or 179 MMcfe/d, with 26% oil and 74% natural gas. Oil production averaged 7,598 b/d in the quarter, an 11% sequential increase over the average of 6,870 b/d produced during 3Q2013.

The company's current net oil production is about 10,000 b/d.

In a note Wednesday, BMO Capital Markets analyst Dan McSpirit said the exploration and production (E&P) company’s 4Q2013 production rate was below expectations (193 MMcfe/d) and the market's consensus (190 MMcfe/d).

"Goes to show managing an E&P, and the market's expectations, is more difficult than modeling one," McSpirit said. "It is what it is -- spreadsheet drilling versus actual drilling."

But McSpirit added that analysts "see development drilling of the Eagle Ford Shale as driving visible, economic growth and affording a backstop on valuation. We also see exploration appeal through the recently acquired TMS [Tuscaloosa Marine Shale] leasehold. Wrap that in a strong balance sheet and attractively priced shares."

Comstock had expected to complete 18 gross (12 net) wells targeting the Eagle Ford in November and December, and to have them producing in December as well, but delays scuttled those plans.

"The planned completion activity encountered significant delays from the original schedule resulting in the first production for many of the new wells occurring three to four weeks later than anticipated," Comstock management said. The operator also had to shut in existing oil production in December longer than anticipated for ongoing hydraulic fracturing (fracking) activity.

Comstock placed 10 gross (7.3 net) wells targeting the Eagle Ford into production during the last week of December, and it has placed an additional nine gross (6.3 net) wells in the Eagle Ford into production so far this month. The company has another 23 gross (17.2 net) Eagle Ford wells either waiting for or in the process of completion.

The company spent $344 million on drilling activities in 2013, plus an additional $137.1 million on lease acquisition for future exploration and development.

Last month, Comstock said it planned to spend $450 million in 2014 on an oil-focused drilling program targeting the Eagle Ford and the TMS, which the company entered in November (see Shale Daily, Dec. 18, 2013; Nov. 15, 2013; Nov. 8, 2013). On Tuesday, the company said it plans to drill 71 gross (47.6 net) wells in both plays in 2014, and would continue to delineate its acreage there.

As it transitions to oil, Comstock said it expects oil production to grow from 2.3 million bbl in 2013 to between 4.1 and 4.6 million bbl in 2014. Conversely, gas production is forecast to fall, from 55.7 Bcf in 2013 to 40-44 Bcf in 2014.

Proved reserves for 2013 were an estimated 22.0 million bbl of crude oil and 453 Bcf of natural gas, or 585 Bcfe.

Comstock has scheduled a conference call for Feb. 11 to discuss 4Q2013 earnings.

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