Comstock Resources Inc., which works in the Haynesville and Bakken shales, filed in late June applications with the Texas Railroad Commissioner to drill four new wells in the natural gas-rich Haynesville Shale in East Texas.
In a July 2020 investor presentation, Comstock highlighted favorable supply and demand fundamentals for natural gas with “sharp activity decline and production shut-ins to result in lower gas supply,” and also an improving outlook for natural gas prices.
The company estimates that near term demand destruction of 4-6 Bcf/d in the United States is possible from Covid-19 and liquefied natural gas (LNG) cargo cancellations, and that long-term prices will be supported by continued capital discipline, increased power generation demand, long-term LNG demand, and coal and nuclear retirements.
The company also highlighted its “significant scale in the Haynesville,” with 307,000 Haynesville shale net acres and an inventory of 1,977 net drilling locations.
Comstock owns 500 miles of gas gathering systems and has “limited basis risk due to proximity and contracts tied to Henry Hub,” and “low gathering, treating and transportation” costs.
During its first quarter earnings call, the Frisco, TX-based company’s chief executive had also struck an upbeat tone on the outlook for gas prices.
“While natural gas prices are expected to remain low in the near-term as we manage through an oversupplied market resulting from the winter heating season, we anticipate a much healthier supply and demand balance for natural gas later this year and in 2021,” CEO Jay Allison said in May.
“Our Haynesville drilling program generates economic returns even at today’s low natural gas prices,” Allison said. However, “we have cut back the number of wells we’re drilling in order to generate free cash flow that we will use to pay down our debt and strengthen our balance sheet. That’s a primary focus.”
Comstock produced 125.5 Bcfe in the first quarter, with 122.8 billion Bcf of natural gas and 454,495 bbl of oil.
Natural gas production averaged 1,349 MMcf/d, an increase of 270% over the year-earlier quarter. The growth was driven by last year’s acquisition of fellow Haynesville operator Covey Park Energy LLC and steady Haynesville drilling, the company said.
Comstock’s largest shareholder is the owner of the Dallas Cowboys, Jerry Jones, whose investment to date in Comstock totals $1.1 billion.
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