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It Happened in The Haynesville For Comstock Last Year

Successful drilling in the re-emerging Haynesville Shale was the highlight of 2016 for Frisco, TX-based Comstock Resources Inc. The company is sticking around in the North Louisiana play for more this year.

Despite a limited drilling budget in last year, Comstock added 286 Bcfe of new proved oil and natural gas reserves, primarily related to its Haynesville properties. In addition, the company experienced 144 Bcfe in upward revisions, primarily related to the strong performance of the Haynesville wells drilled in 2015 and 2016, it said.

Comstock drilled 13 wells (7.9 net) in 2016; 11 (7.8 net) of the wells were Haynesville wells, and the remaining two (0.1 net) were non-operated Eagle Ford shale wells. The average initial production rate of the six completed operated Haynesville wells was 24 MMcf/d.

The company plans to drill 20 (15.5 net) additional Haynesville wells in 2017 and complete the 2016 wells at an estimated capital outlay of $142.9 million. The company has budgeted an additional $7 million for other non-drilling expenditures. It also has tentatively budgeted an additional $17.6 million for two (1.7 net) Bossier Shale wells that may be drilled in late 2017 depending upon natural gas prices.

“We recently announced a new Haynesville drilling joint venture, which we can use to acquire additional acreage and to grow our inventory of drilling locations,” CEO Jay Allison said during a conference call Friday. “The 2017 drilling program, combined with improved oil and natural gas prices, will result in substantial growth in our revenues, cash flow and EBITDAX [earnings before interest, taxes, depreciation, depletion, amortization and exploration expenses] in 2017. We are able to invest again in the high-return Haynesville program because of the step we took in 2016 to protect and enhance our liquidity.”

Comstock produced 62 Bcfe, or 169 MMcfe/d, during 2016. Natural gas production grew 13% in 2016 to 53.7 Bcf while oil production decreased by 55% to 1.4 million bbl. Natural gas comprised 87% of 2016 production as compared to 72% in 2015.

Production in the fourth quarter was 14 Bcfe, or 153 MMcfe/d, which was comprised of 3,217 bbl of oil and 133 MMcf of natural gas. The production decline in the fourth quarter was primarily attributable to the suspension of the drilling program in June, which was restarted in the fourth quarter; the divestiture of certain natural gas properties in the fourth quarter; and the shut-in of certain Haynesville Shale production for offset completion activity.

The company’s average realized natural gas price, including realized hedging gains, of $2.32/Mcf in 2016 was comparable to the $2.33/Mcf realized in 2015. The average realized oil price decreased by 17% to $38.24/bbl in 2016 as compared to $46.19/bbl in 2015.

Comstock's average realized natural gas price, including realized hedging gains, increased 41% to $2.85/Mcf in the fourth quarter as compared to $2.02/Mcf in the fourth quarter of 2015. The Company's average realized oil price increased by 27% to $45.96/bbl in the fourth quarter as compared to $36.26/bbl in the fourth quarter of 2015.

Comstock reported a net loss of $135.1 million (minus $11.52/share) for 2016 compared to a net loss of $1 billion (minus $113.53/share) for 2015. Excluding nonrecurring items from each period's results, the net loss for 2016 would have been $171.4 million (minus $14.61/share) compared to a net loss of $189.2 million (minus $20.51/share) in 2015.

For the fourth quarter Comstock reported a net loss of $54.9 million (minus $4.48/share) compared to a net loss of $288.5 million (minus $31.26/share) for the fourth quarter of 2015.  Excluding nonrecurring items from each period's results, the net loss for the fourth quarter would have been $31.6 million (minus $2.58/share) compared to a net loss of $42.2 million (minus $4.57/share) in the fourth quarter of 2015.

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