• Natural Gas and Oil Sales: $405 million.
• Operating Cash Flow: $239 million or $0.81 per diluted share.
• Adjusted EBITDA: $293 million.
• Adjusted Net Income: $53.8 million or $0.18 per diluted share.
• Production: 1.28 BCFE per day, 17% lower than Q1 2024.
• Realized Gas Price: $3.58 per MCF.
• Operating Cost per MCFE: $0.83.
• EBITDAX Margin: 76%.
• Development Spending: $250 million.
• Total Debt: $3.1 billion.
• Liquidity: Approximately $1 billion.

• Warning! GuruFocus has detected 7 Warning Signs with CRK.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Comstock Resources Inc (NYSE:CRK) reported a significant increase in natural gas and oil sales, reaching $405 million in Q1 2025, driven by higher natural gas prices.
• The company achieved a major milestone with the successful drilling of the Elijah one well in the Western Haynesville, which confirmed the potential of their geologic work and added thousands of future drilling locations.
• Comstock Resources Inc (NYSE:CRK) has materially reduced the cost of wells and continues to optimize drilling and completion designs to maximize performance and returns.
• The company has strong financial liquidity, totaling almost $1 billion, and expects to fund its drilling program out of operating cash flow.
• Comstock Resources Inc (NYSE:CRK) has made significant progress in reducing greenhouse gas and methane emissions, achieving a 28% improvement in greenhouse gas intensity over the past two years.

Negative Points

• Production in Q1 2025 averaged 1.28 BCFE per day, which is 17% lower than the first quarter of 2024 due to the decision to drop two rigs early and defer completion activity.
• The company experienced a $16 million loss on third-party gas marketing due to high volatility in gas prices and obligations to fill transport commitments.
• Operating costs per MCFE increased by $0.11 compared to the fourth quarter, driven by higher production and ad valorem taxes.
• Comstock Resources Inc (NYSE:CRK) has a substantial amount of debt, with $3.1 billion in total debt, including outstanding senior notes.
• The company faces challenges in expanding its midstream infrastructure to keep up with growing production, which could delay the drilling of new wells in certain areas.

Q & A Highlights

Q: Could you discuss the reservoir quality of the Olajuwon well in the Western Haynesville compared to wells drilled to the south, and how much of your position has been delineated following this well result? A: The Olajuwon well, located 24 miles from the nearest well, shows reservoir quality as good as those in the core area. It is a Haynesville well with good thickness, and the logs supported our expectations. This well significantly de-risks a substantial portion of our acreage in the northeast end of our footprint. (Daniel Harrison, COO)

Q: Can you elaborate on the structure and value of the BKV partnership, and is there a scenario where you could offer a lower carbon intensity power solution to a data center or industrial client? A: The partnership with BKV aims to develop carbon capture and sequestration projects, enhancing our location's attractiveness for potential power generation facilities. This aligns with our strategy to offer low carbon footprint solutions, making us an ideal area for data centers. (Roland Burns, CFO)

Q: With the success of the Olajuwon well, when can we expect results from other parts of the position, and where do you plan to step out next? A: We plan to drill a two-well pad near the Olajuwon in Q4, with more wells fanning out across the footprint in 2026. The timing is contingent on midstream build-out to support these locations. (Daniel Harrison, COO)

Q: How many rigs do you envision the Western Haynesville supporting if gas prices cooperate, and is there a strategic approach to growth? A: We aim to prudently develop and de-risk the Western Haynesville, controlling the pace of drilling to match market demand and infrastructure capabilities. Our focus is on maintaining balance sheet strength while meeting power demand growth. (M. Jay Allison, CEO)

Q: Regarding the quarterly shape of your wells turned to sales (TILs), how confident are you in achieving the production ramp-up in the second half of the year? A: The production ramp-up is supported by a combination of the timing of TILs and the mix of wells, with more Western Haynesville wells coming online in the second half. The TIL cadence is weighted towards the latter part of the year. (Unidentified Speaker)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.