Haynesville Shale-focused Comstock Resources Inc. is combating high diesel costs in its completions with natural gas-fueled hydraulic fracturing fleets, management said Tuesday.
In April, the Frisco,TX-based independent deployed its first BJ Energy Solutions Titan gas-powered fracturing fleet. The deployment subsequently cut completion costs 15% versus a conventional diesel-fueled fleet on the first two well pads, COO Dan Harrison told analysts during the 2Q2022 earnings call.
The natural gas-fueled “fleet has played a key role in helping us minimize our completion cost as the cost of diesel has increased significantly.” The deployment enabled Comstock to eliminate 1.4 million gallons of diesel fuel and about 2,000 metric tons of greenhouse gas emissions from its operations, Harrison said.
Comstock has since contracted with BJ to deploy a second natural gas-powered fleet, which should begin service in early 2023, management said.
The move comes amid a ramp-up in Haynesville activity by Comstock.
“We are investing a little more in our Haynesville drilling program by adding two operated rigs before the end of the year, which will drive additional production growth in 2023,” said CEO Jay Allison. One of the rigs “just started, got underway and the second additional rig is coming later this month.”
Management is “thankful to be a natural gas producer in the Haynesville, which we think is the best basin in North America to have dry natural gas,” Allison said.
More LNG Market Inroads
The CEO noted that Comstock is “selling gas directly to every LNG facility in Louisiana.” The company markets more than 2 Bcf/d of gas and produces “right at” 1.4 Bcf/d, according to Allison. “And if you look, we have about 1.7…with direct access to…this premium Gulf Coast market in sales.”
At the end of March, the company reported that it sold about 14% of its gas directly to liquefied natural gas facilities. That figure inched up to 15% for 2Q2022, and the company sells 70% of its gas in the Gulf Coast.
Citing a fixed regional basis under long-term sales contracts, only 10% of Comstock’s gas is subject to Perryville or Carthage hub differentials, management said.
CFO Roland Burns said the company expects to make further inroads in supplying LNG exporters with feed gas from the Haynesville.
“Yes, we see that increasing, especially as we go into next year and we continue to engage in talks,” he said. “We want to be a big supplier to…especially the Louisiana LNG shippers, as we have a lot of gas that we can deliver to them,” he said. “So that’s the ultimate driver of demand in our region, and that’s where we can probably get the best price realizations.”
This year, Comstock has added “some additional income” by marketing third-party gas via extra capacity and Gulf Coast transport that it cannot yet use for equity production, Burns said.
The company has “that excess capacity and the difference between the Gulf Coast indexes and the regional differences have been pretty significant,” he said.
Comstock has been able to approach “some third parties and help them get a better price and then also make some margin for ourselves by using some of that capacity,” he said. “But as we need that production as our production grows in the area, what you see is that our equity goes first.”
Haynesville producers have been challenged by takeaway capacity constraints.
D&C Costs Up 21%
Comstock’s drilling and completion (D&C) costs jumped 12% sequentially, to $1,262/lateral foot in 2Q2022 from $1,124/lateral foot in 1Q2022. The 2Q2022 figure represents a 21% increase from last year’s average D&C cost, Harrison said.
“The cost increases we experienced during the second quarter were purely driven by the cost inflation we’re seeing across the basin,” he said.
Comstock drilled 18 operated Haynesville/Bossier horizontal wells with an average lateral length of 9,924 feet during 2Q2022. It also participated in another 13 nonoperated wells in the area. The company completed 14 operated wells across its Haynesville/Bossier acreage in 2Q2022. Lateral length and initial production rate averages were 9,577 feet and 26 MMcf/d, respectively.
Sixteen wells were turned to sales in 2Q2022, with another 14 slated to go online through September.
“Among the 16 new wells were five extra-long wells with laterals greater than 11,000 feet, the longest lateral this quarter coming in at 12,237 feet,” Harrison said.
The company also completed its first well on Western Haynesville acreage, Circle M Number 1H in Robertson County, TX, during 2Q2022. The Bossier well was completed with a 7,861-foot lateral, tested at 37 MMcf/d, and flowed for about three months on average at 30 MMcf/d, he said.
Oil and gas capital spending was $263.2 million for 2Q2022, up year/year from $164.3 million.
Comstock’s natural gas production totaled 123.95 Bcf during 2Q2022, down slightly from the 124.1 Bcf it reported for 2Q2021. During 2Q2022, oil production totaled 24,000 bbl, down year/year from 362,000 bbl; the 2Q2021 volume includes results of Bakken Shale assets sold in October.
Comstock’s average unhedged realized gas price was $6.93/Mcf in 2Q2022, up year/year from $2.59. The averaged unhedged oil price was $104.33/bbl, compared to $61.25 in 2Q2021.
Revenues totaled about $946.3 million in 2Q2022, compared with $343.7 million in 2Q2021.
Net income for 2Q2022 was $376.9 million ($1.60/share), swinging from a $179.7 million loss (minus 80 cents) year/year.
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