Q2 2024 Comstock Resources Inc Earnings Call
In listen only mode.
Speaker Change: After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone to remove yourself from the queue. You May press Star one one again.
I would now like to hand, the call over to Jay Allison Chairman and CEO. Please go ahead.
Jay Allison: Thank you I want to thank everybody for spending the time with US This morning going over our results. We appreciate your time.
Speaker Change: Welcome to the Comstock resources second quarter, 2024 financial and operating results Conference call. You can view a slide presentation during or after this call by going to our website at www Dot Comstock resources Dot com and downloading the quarterly results presentation.
Speaker Change: There you'll find a presentation entitled second quarter 2024 results have Jay Allison Chief Executive Officer of Comstock and with me is Roland Burns, our President and Chief Financial Officer, Dan Harrison, Our Chief operating Officer, and Ron Mills, our VP of finance and Investor Relations.
Speaker Change: Please refer to slide two in our presentations and note that the discussions today will include forward looking statements within the meaning of securities laws, while we believe the expectations in such statements should be reasonable there can be no assurance that such expectations will prove to be correct.
Jay Allison: Before I start in the fall.
Speaker Change: Well part of the presentation I would like to make a few comments.
Speaker Change: As a pure play natural gas producer with 750000 net acres in the Haynesville shale basin, which is the best located to serve the growing natural gas demand along the Gulf coast the future for the company has never ever been brighter.
Jay Allison: However, the challenge is managing through these times with natural gas prices at all time lows on an inflation adjusted basis.
Speaker Change: So now it's how you manage the present.
Speaker Change: To shine the brightest when the rebound occurs.
Jay Allison: We have all the tools to accomplish this including a very experienced management team, who has managed and much harder times.
Jay Allison: <unk> financial liquidity of $1 $2 billion, the industry's lowest cost structure.
Jay Allison: No bond maturities until 2029, and a very supportive major shareholder with the Jones family yet.
Jay Allison: Singly directly invested a $100 million in the company to support our leasing program.
Jay Allison: Our 300000 net acres in our legacy Haynesville still has over 1400 net drilling locations, which represents over 30 years of future drilling.
Jay Allison: In addition, we have captured 450000 net acres and our margin Western Haynesville area that continues to look promising with each new well that we drill.
Jay Allison: Our operations group as Dan Erikson will address in a few minutes.
Dan Erikson: Becoming more efficient with each new well drilled and is bringing down our drilling and completion cost and the new play.
Speaker Change: So even when the quarterly numbers are weaker due to natural gas prices being low.
Jay Allison: We're more encouraged than ever about the future because we trust our core region as well as our Western Haynesville region and now our task is to execute daily to continued to create wealth, Bob de risking our new play and by reducing well cost in R&D.
Jay Allison: Hi.
Jay Allison: We are in a very volatile time.
Jay Allison: But we have been here before.
Jay Allison: And I've never seen a brighter future for natural gas in North America, or the world that I see today.
Jay Allison: That will go to slide three second quarter 2024.
Jay Allison: Highlights.
Jay Allison: On slide three we summarize the highlights for the second quarter.
Jay Allison: Our financial results continue to be heavily impacted by the continued weak natural gas prices as our average realized gas price before hedging was $1 65 for the quarter with hedging you is $2 12.
Jay Allison: As a result, our oil and gas sales, including hedging for $278 million in the quarter and we generated cash flow from operations of $118 million.
Jay Allison: Our <unk> 41 per share and adjusted EBITDAX was $167 million.
Jay Allison: Our adjusted net loss was <unk> 20 per share for the quarter.
Jay Allison: In the second quarter, we drilled 11 successful operated Haynesville and Bossier shale horizontal wells in the quarter with an average lateral length of 11346 feet and we turned to sales 12 successful operated haynesville and Bossier shale horizontal wells with an average IP rate of two <unk>.
Jay Allison: 32 million per day, and average lateral length of 8847 feet.
Jay Allison: We're continuing to advance our western Haynesville exploratory play.
Jay Allison: The western Haynesville acreage position totals more than 450000 net acres now.
Jay Allison: We currently have 12 successful producing wells in our new play six from the Haynesville shale and six from the Bossier shale, we recently completed the drilling activity.
Jay Allison: Both two well pads in the western Haynesville play with the drilling efficiencies from the pad drilling we reduced the latest well drill times to 54 days, we expect to turn in the next six western Haynesville wells to sales around the end of the year and we currently have two rigs running into play today.
Jay Allison: I'll have Roland go over the second quarter financial results Roland.
Roland: Thanks Jay.
Roland: On slide four we cover the second quarter financial results our production in the second quarter of one four Bcf per day increased 4% from the second quarter of 2023.
Roland: At the very low natural gas prices offset this production increase which resulted in our oil and gas sales in the quarter, a $278 million declining 2% from 2023 second quarter.
Jay Allison: EBITDAX for the quarter was $167 million and we generated $118 million.
Jay Allison: Cash flow in the quarter.
Jay Allison: We reported adjusted <unk> adjusted net loss of $58 million for the second quarter or <unk> 20 per share as compared to a $1 billion of net income in the second quarter of 2023.
Jay Allison: The higher <unk>.
Jay Allison: DD&A in the quarter, which was attributable to the decline in proved undeveloped reserves, which results from having to use the very low natural gas prices.
Jay Allison: Required by the SEC to determine reserves accounted for much of the loss for the quarter.
Jay Allison: As natural gas prices improve those proved undeveloped reserves will be back on the books and we will see the DD&A rate go back to it's lower it's lower levels in future quarters.
Jay Allison: On slide five we cover our year to date financial results.
Jay Allison: Production in the first six months of 2024 of one five Bcf per day.
Jay Allison: It was 6% higher than the first six months of 2023.
Jay Allison: Natural gas and oil sales in the first half of the year were $614 million, which was down 9% from 2020 Three's first half despite the increase in production.
Jay Allison: And that's also due to the lower natural gas prices EBIT.
Jay Allison: EBITDAX for the first six months of the year was $396 million and we generated $300 million of cash flow during the first half of the year.
Jay Allison: We reported an adjusted net loss of $67 million for the first six months of the year are 24 per share as compared to $93 million of net income for the same period in 2023.
Jay Allison: On slide six we break down our natural gas price realization in the second quarter it.
Jay Allison: It was a very challenging quarter as our correlate Nymex how about price only averaged $1 89.
Jay Allison: The average Henry hub spot price in the quarter was a little bit better at $2 <unk>.
Jay Allison: Our realized gas price during the second quarter averaged $1 65.
Jay Allison: Collecting that 24 to <unk>.
Jay Allison: Differential to the settlement price and a 30 <unk> differential to our reference price.
Jay Allison: In the second quarter were 28% hedged, which improved our realized gas price to $2 12.
Jay Allison: On slide seven we detail our operating cost per Mcf.
Jay Allison: In our EBITDAX margin, our operating cost per Mcf averaged 84 for the second quarter <unk> hired in the first quarter rate with the same as our second quarter rate of last year.
Jay Allison: Production and AD valorem taxes were 14 lifting costs were 27 sets gathering costs for 38, and our G&A costs were <unk> <unk> for the quarter.
Jay Allison: Our EBITDAX margin after hedging came in at 61% in the second quarter down.
Jay Allison: Down from the 68% margin, we had in the first quarter due to the even weaker natural gas prices.
Jay Allison: Slide eight we recap our spending on drilling and other development activity during the quarter. We spent a total of $221 million on development activities in the second quarter virtually all of that was spent on our haynesville and Bossier shale drilling program in the first six months of this year, we drove $18.
Jay Allison: Or a 14.9 net horizontal haynesville wells.
Jay Allison: At 9% or $8 six net Bossier wells.
Jay Allison: We turned 30 wells to sales or 27, nine net operated wells and they had an average IP rate of 25 million cubic feet per day.
Jay Allison: Slide nine recaps, our balance sheet at the end of the second quarter, we ended the quarter with $325 million of borrowings outstanding under our credit facility, giving us a total of $2 9 billion in debt, including our outstanding senior notes.
Jay Allison: In early April.
Jay Allison: We issued $400 million of additional notes due in 2029 and use the proceeds to pay down outstanding borrowings under our bank credit facility.
Jay Allison: On April 30th our Bank group reaffirmed our borrowing base at $2 billion and our elected commitment stayed the same at $1 5 billion.
Jay Allison: So at the end of the second quarter, we had $1 $2 billion of liquidity.
Jay Allison: I'll now turn the call over to Dan to discuss our operations. Okay. Thank you Roland.
Dan Erikson: On slide 10 is our current drilling inventory as it stands at the end of the second quarter.
Dan Erikson: Our total operated inventory now has 1698 gross locations.
Dan Erikson: <unk> thousand 300, net locations and this equates to an average 77% average working interest.
Dan Erikson: Nonoperating inventory has 1227 gross locations and 159 net locations, which represents a 13%.
Jay Allison: Average working interest across the non operated inventory.
Jay Allison: The drilling inventory is split between the Haynesville and Bossier locations and we have a split into our four different groups.
Jay Allison: With our short laterals that youll up to 5000 foot.
Jay Allison: Medium laterals run between 5080 500 foot.
Jay Allison: Our long laterals from 8500 feet up to 10000 feet long and our extra long laterals for those over 10000 feet.
Jay Allison: And our gross operated inventory. We currently have 258 short laterals three.
Jay Allison: 352 medium laterals 446, long laterals and 642 extra long laterals.
Jay Allison: The gross operated inventory is split with 52% in the Haynesville and 48% of our locations in the Bossier.
Jay Allison: 64% of our gross operated inventory have laterals longer than 8500 feet and 38% of the total gross operated inventory have laterals longer than 10000 feet.
Jay Allison: The average lateral of inventory now stands at 9077 feet.
Jay Allison: And this is up slightly from 9015 feet that we had at the end of the first quarter.
Jay Allison: Our inventory provides us with over 30 years of future drilling locations based on our current 2020 for activity.
Jay Allison: On Slide 11 is a chart outlining our average lateral length drilled based on the wells that we have time to sales.
Jay Allison: During the second quarter, we turned to 12 wells to sales with an average lateral length of 8847 feet.
Jay Allison: The individual lengths range from 4222 feet up to 10040 <unk>.
Jay Allison: Our record longest lateral still stands at 15726 feet.
Jay Allison: Eight of the 12 wells turned to sales during the quarter had laterals longer than 8500 feet.
Speaker Change: During the second quarter, we did not have any extra long lateral wells that turned to sales.
Jay Allison: One of the 12 wells turned to sales during the second quarter was on our Western Haynesville acreage. This was the Ingram Morton number one H, well, which had a lateral length of 7764 feet.
Jay Allison: And this well was reported on our last call.
Jay Allison: Looking ahead, we have several extra long lateral slated to turned to sales over the remainder of the year and we do expect our average lateral length for all of 2024 will be approximately 10150 feet.
Jay Allison: On a total of 45 wells that will turn into sales.
Jay Allison: To recap our long lateral activity to date, we have drilled a total of 103 wells with laterals longer than 10000 feet.
Jay Allison: And we drilled 38 wells with laterals over 14000 feet.
Jay Allison: Yes.
Jay Allison: Slide 12 outlines our new well activity since we last provided well results in late April.
Jay Allison: Since our last call we have 15, new wells that have been turned to sales.
Jay Allison: The individual IP rates on these wells range from 10 million a day up to 31 million cubic feet a day.
Jay Allison: With the average test rate of 21 million cubic feet per day.
Jay Allison: The average lateral length was 9802 feet.
Jay Allison: With the individual links ranging from $42 22 up to 15330 feet.
Jay Allison: Recapping our activity, we're continuing to run five rigs after dropping two rigs in the first quarter.
Jay Allison: For our completions, we had been running two frac crews all year since we dropped down from three frac crews at the beginning of the year.
Jay Allison: This month, we also temporarily released one of our two frac crews for a short two months gap until we pick it up again early in the fourth quarter.
Jay Allison: Two of the five rigs are currently drilling in the western Haynesville.
Jay Allison: Both of these rigs recently finished drilling our first two well pads on the acreage and these two well pads will be completed in the fourth quarter and turned to sales just after the first of the year.
Jay Allison: And the Western Haynesville, we anticipate having a total of six wells that will turn to sales.
Jay Allison: From November just after year end.
Jay Allison: On slide 13 is a summary of our D&C costs through the second quarter for our benchmark.
Jay Allison: Long lateral wells that are located on our core east, Texas, and North Louisiana acreage position.
Jay Allison: This covers all laterals greater than 8500 feet long and during the quarter. We turned 11 wells to sales that were one our core.
Jay Allison: East, Texas, North, Louisiana acreage in eight of the 11 wells fell into our midst mark long lateral group.
Jay Allison: In the second quarter, our D&C cost averaged $1730 per foot on our benchmark oils.
Jay Allison: This reflects a 15% increase compared to the first quarter.
Jay Allison: Our second quarter drilling costs averaged $936, a FERC, which is a 31% increase compared to the first quarter.
Jay Allison: Howard drilling cost for the quarter were associated with our Baker three well pad in the Lake <unk> area, where we encountered significant drilling difficulties.
Jay Allison: In addition, four of our eight <unk> wells were drilled inside the boundary of our gas storage facility, which requires an additional shallow intermediate casing string to be set.
Jay Allison: Our second quarter completion costs came in at $794 a foot and this is a 1% increase compared to the first quarter.
Jay Allison: We do expect our D&C cost will return to normal levels remained flat to slightly lower for the next couple of quarters.
Jay Allison: On slide 14 is an illustration of a new development. We have planned that will utilize the horsey lateral concept that has recently gained traction in the industry.
Jay Allison: While the small handful of horseshoe wells have been drilled in the other basins only one horse you will to date has been drilled in the Haynesville shale basin, which was earlier this year.
Jay Allison: To test the concept, we recently spud a single horse you well in Desoto parish, Louisiana.
Jay Allison: It is located on one of our isolated single section acreage blocks.
Jay Allison: The well is currently drilling we should reach TD within the next few days.
Jay Allison: This technology will allow us to develop acreage in the future that before can only have been developed a drilling short laterals with more challenging economics.
Jay Allison: The second portrait on this slide would have originally been developed by drilling four to 5000 foot laterals from two pads with a $40 million capital costs.
Jay Allison: We now plan to develop the segment from a single two well pad drilling 210000 foot Horsham laterals for $32 million in capital.
Jay Allison: This capital cost represents only a 1% to 2% cost premium to a regular straight 10000 foot lateral.
Jay Allison: The project will deliver 23% in cost savings or $8 million.
Jay Allison: Significantly improving the economics and also providing some additional benefits such as reducing our surface footprint and lowering emissions from fewer well bores.
Jay Allison: We expect the well performance from the <unk> wells were matched that of our regular 10000 foot laterals.
Jay Allison: And once this technology becomes more de risked we can further increase the average lateral length of our inventory.
Jay Allison: Converting short laterals into long laterals and further enhancing our efficiencies.
Jay Allison: I'll now hand, the call back over to Jay to summarize our outlook Dan. Thank you Roland Thank Dan Youre talking about the Horseshoe Wills.
Speaker Change: I'm thinking about the majority owner of the stock is owns a Dallas Cowboys, who Cowboys horseshoes.
Speaker Change: <unk> go together so thank.
Speaker Change: Thank you for that report, let's go to page 15 of direct you to slide 15, where we summarize our outlook for 2024.
Speaker Change: As we stated in the last quarter, we really have taken a number of steps in response to to the significantly low natural gas prices this year during.
Jay Allison: During the first quarter, we announced that we've released two of our operated drilling rigs we've reduced our rig count to five rigs and we also released one of our frac spreads, reducing our frac spreads to two spreads.
Jay Allison: We no longer now have any long term commitments for our pressure pumping services.
Jay Allison: With those steps are.
Speaker Change: 2020 for Capex is expected to be down 34% to 41% from the 2023 level, we suspended our quarterly dividend that saved about $140 million.
Jerry Jones: And dividend payments in late March majority stakeholder, Jerry Jones invested an additional $105 million to the company through an equity placement that the company had starting in late February.
Jerry Jones: We did add significantly to our hedge position starting in the fourth quarter of 2024 and extending that through the year end 2026, we are targeting a hedge level of 50% of our expected production level to those years in early April we further enhanced our liquidity position with a $400 million senior notes.
Jerry Jones: Offering and we continued to maintain a very strong financial liquidity, which totaled just under $1 2 billion.
Jerry Jones: At the end of the second quarter, our industry, leading lowest cost structure is an asset in the current low natural gas price environment is our cost structure is substantially lower than the other public natural gas producers remain very very focused on proving up our western haynesville play and continuing to add.
Speaker Change: Two our extensive acreage position in this exciting play.
Speaker Change: Our western Haynesville acreage position totals over 450000 net acres to date.
Rob: We believe that we are building a great asset and a western haynesville that we'll be well positioned to benefit from the substantial growth in demand for natural gas in a region that is on the horizon driven by the growth in LNG exports that began to show up in the second half of next year I'll now turn it over to Rob.
Bob: On to Bob provide specifics for the rest of the year Ron Thanks, Jay on Slide 16, we provide.
Bob: Financial guidance for the third quarter and the remainder of 2024 for the third quarter.
Bob: Our D&C capex to range between 135, and $185 million and our full year D&C guidance range on Capex remains $750 million to $850 million.
Speaker Change: The midstream capital outlook remains unchanged and the leasing.
Speaker Change: Capital.
Bob: The third and fourth quarter remains in the $2 million to $5 million range. The full year moved up $5 million to $10 million, just due to actual second quarter leasing costs.
Speaker Change: Hello, and GTC costs, both for the third quarter and fourth.
Bob: Full year remain unchanged from prior levels.
Bob: On the production and AD valorem the guidance range remains the same.
Bob: Which.
Bob: Includes the impact of a lower severance tax rate in Louisiana, basically being offset by a higher AD valorem rate.
Bob: The DD&A rate as mentioned by Roland earlier is expected to be higher through the remainder of the year.
Roland: Using the current low prices looking ahead, though we would anticipate that to return to a more normal level.
Roland: In the kind of price environment that we see in 2025.
Speaker Change: No other changes to our G&A or interest outlook that we provided in prior quarters and we continue to.
Ed: Anticipate differing virtually 100% of our of our deferred taxes with that I will turn the call over to Ed.
Ed: Sure.
Ed: The operator for Q&A.
Speaker Change: Thank you as a reminder to ask a question you will need to press star one one on your telephone.
Speaker Change: Yourself from the queue you May press Star one again, we ask that you. Please limit yourself to one question and one follow up to allow everyone. The opportunity to participate please standby, while we compile the Q&A roster.
Speaker Change: Our first question.
Speaker Change: Comes from the line of Carlos Escalante.
Ed: Research.
Carlos Escalante: Hey, good morning, gentlemen, thank you for taking my question.
Speaker Change: Good morning.
FICO: And FICO good morning, FICO, if I use the second quarter completed wells as a proxy for your drilling pace on wells under 5000 feet.
Speaker Change: I'm getting a number that is roughly less than 10% per quarter.
Speaker Change: Bearing in mind your horse shoe concept update how do you how do you all see the allocation towards a potentially successful program going into the future quarters and future years.
Speaker Change: So.
Dan Erikson: Yes. This is Dan I'll kind of address this the short laterals. We did have one short lateral that we reported here. We had we had nicely really already kind of had drilled that well when we were having when we had our last call, but I think with the success of the Horseshoe concept I think really the majority of all of the wells short wells that we have in our inventory.
Speaker Change: We will convert to long laterals.
FICO: But there will be a few where we've just got maybe one short lateral left and Thats all thats left to be drilled and it's bounded by other wells, where if you did if.
Speaker Change: If you did decide to drill.
FICO: You have to drill a short lateral so we.
FICO: We won't be able to convert all of them the 10-K horseshoe wells, but I think.
FICO: A good chunk of the inventory, we will be able to convert to 10 case.
Speaker Change: Wonderful and then my follow up real quick on that same topic.
Speaker Change: The fact that is less than 10% that you're drilling at that specific land sort of emphasizes why market may be able to or may be reticent to recognize that <unk>. When you say 25 to 30 years of inventory so.
Dan Erikson: On that same topic, Dan what what's the end goal here is it more of a recognition of.
Dan Erikson: What the risk may be on the concept or is this the first one for <unk> com.
Dan Erikson: I think this is the first of many to come in just like with anything that's new.
Speaker Change: I think the public wants to see more of them drilled they want to see it become routine they want to see it de risked so.
Speaker Change: I think they.
Bob: I'll be a little bit further into that process.
Bob: And the other basins I think really mainly the Permian and I think if you on the Eagle Ford for the whole <unk>.
Dan Erikson: There was one drilled earlier this year that was in it was problem free so.
Dan Erikson: And like I said, we're almost at TD on the one that we're enrolling in its been problem free to date so.
Dan Erikson: We feel really good about it I think we feel really good about significantly reduced in the short laterals in our inventory we will have more 10-K's, our average lateral length will be up it will our efficiencies will be way up.
Dan Erikson: So we just need to do more where it becomes routine.
Dan Erikson: <unk>.
Speaker Change: Take some of the risk out like that.
Speaker Change: <unk> says if you save $8 million when you drill these wells a couple of them.
Speaker Change: That does add to our inventory because some of these wells we've pushed back to the latter part of our drilling inventory and after you have these cost savings we can bring them forward if you need to drill.
Speaker Change: Alright, and yes, some of these big drill because they've.
Dan Erikson: We've.
Dan Erikson: We've had them for a while and some of the production gets low so we just just to protect our leasehold.
Bob: While we'll put some of these on our drilling schedule.
Speaker Change: Wonderful thank you gentlemen.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: It comes from the line of Jacob Roberts of GTH and company.
Jacob Roberts: Good morning.
Jacob Roberts: Good morning.
Jacob Roberts: Wanted to dig in a bit more on the Baker wells and some of the issues that you highlighted can you speak to any correlation.
Speaker Change: Between what occurred and the IP rates.
Speaker Change: Are there any impact to the EUR or we might expect.
Speaker Change: <unk> mean that region is something that might need to be avoided in the future.
Speaker Change: Well its certainly out on the edge of our acreage footprint.
Speaker Change: That is we do know from past drilling up in that area that the wellbore stability is a little bit more.
Speaker Change: The rocket sales just as a little bit more instability.
Speaker Change: And so really we had.
Speaker Change: Normally that area are typically drills the drilling cost is a little bit.
Speaker Change: More expensive, maybe $16 50 to $7500 a foot is kind of normal worse back over in.
Speaker Change: Texas in the Stateline area, we're in that $14 50 to $500 a foot.
Speaker Change: So we had we drilled five wells.
Speaker Change: Two of the wells were the ones that really gave us problems we ended up.
Speaker Change: Had one well drilled to TD, we lost a lateral we tried to sidetrack. It we ended up having a sidetrack it twice to get it drilled and we basically had another well that we had to sidetrack zones. So.
Speaker Change: One a very pleasant experience, but.
Speaker Change: It's definitely an outlier if you look at just kind of we're all we're all of our acreage is it's out on the edge.
Speaker Change: We knew that area was kind of tough to drill. So just it's just a one time event and it will we drill it because the acreage was expiring.
Speaker Change: We had to drill it or lose it and so we did decide to do full development and drill five wells all the way across the section.
Speaker Change: So.
Speaker Change: That's just a onetime event and I think if you do pull that out we're back around that $15 $500 a foot.
Speaker Change: Total D&C costs for this quarter, which is what we will be it for Q3 and Q4.
Speaker Change: Okay, Great I appreciate that my second question.
Speaker Change: So the two two well pads it sounds like Youre drilling is wrapped up.
Speaker Change: We appreciate the.
Speaker Change: Update on the days to drill but.
Speaker Change: Can you give us a sense of where cost per foot is sitting on the drilling side of things now that you're done.
Speaker Change: Yes, so actually we see costs going down a little bit.
Speaker Change: We actually started seeing a big movement in pipe prices just here the last couple of months.
Speaker Change: We're working through inventory that we already have but I think by the time, we get to wells that turned to sales in Q1 that were completing right at the end of Q4.
Speaker Change: We're seeing some significant savings on pipe cost.
Speaker Change: So we'll definitely should see our D&C cost basically come down Q3, and really further into Q4 and Q1.
Speaker Change: Great I appreciate the time guys.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Charles Meade of Johnson Rice.
Danny Ron: Good morning, Jay and Roland Danny Ron.
Charles: Hey, Charles Hi, Charles.
Danny Ron: Yes.
Charles Meade: I wanted to ask.
Dan Erikson: A question Dan I think you partially answered this in your prepared remarks, but I just want to make sure I heard it right maybe get an elaboration.
Speaker Change: I was looking at Europe.
Speaker Change: <unk> Capex.
Speaker Change: It was up.
Speaker Change: It's both down versus <unk>, but it's also a pretty wide range on.
Speaker Change: On the upper and lower bound at least it seems that way to me and so I think I heard you say in your prepared comments that you recently dropped what are your two frac crews youre going to let it you can let it.
Speaker Change: You're just going to be running one crew for August or September it sounds like youre going to pick it up again. It is that did I hear that right is that the driver of the Capex decline in <unk>.
Speaker Change: And what other pieces are there that may be contributing to a wide range.
Speaker Change: Well I think.
Speaker Change: It's not totally that but that's the kind of significant driver. That's just kind of a reflection of dropping the rigs earlier in the year I mean, obviously, we got less wells to complete.
Speaker Change: Went from three to two I think basically right at the first of the year, we've been running two all year, we just GAAP to this one frac crew, probably a couple of weeks ago, we're slated to pick it up around like the first week of October.
Speaker Change: So, but we also just like I mentioned earlier, we see the costs coming down the pipe prices are coming down significantly finally, that's kind of one of the last pieces were.
Speaker Change: We've seen the prices come down we've already seen the rig costs come down a little bit the frac costs come down a little bit earlier this year. So.
Speaker Change: So just overall the cost.
Speaker Change: Cost of services coming down.
Speaker Change: With that one frac crew being gone for.
Speaker Change: Two out of the three months for Q3 is the driver on Capex.
Speaker Change: That is helpful detail and then I had a question about the drilling times in the western Haynesville. So.
Speaker Change: You guys highlighted the 54 days can you put that in in some bigger context of where your where your early wells.
Speaker Change: Fell on how many days it took to drill and also.
Speaker Change: What do you think is a reasonable goal for days to drill in the next 12 to 18 months.
Speaker Change: Yes, I think.
Speaker Change: So we make great progress on our drilling days to TD in the Western Haynesville. We now the wells had been different links so that kind of comes into place on the number of days, especially in the western haynesville with the higher temperatures.
Speaker Change: But we we generally were around like that 85 day, Mark when we started.
Mark: And we've shaved it down to these last couple of wells on these two well pads were $54 56 days.
Speaker Change: So.
Speaker Change: That's pretty significant and I think there is some still some running room. There we're still got some efficiencies we look to gain.
Mark: Drilling in the lateral so I think we will we can move that number down a little bit but you might add then does.
Speaker Change: The low number of days with those were long laterals correct, yes, and those were both.
Speaker Change: I think one of them one was the 10000 foot lateral one was just under 11000 foot lateral.
Speaker Change: So.
Speaker Change: Both in the Haynesville the higher temperatures, so I mean, thats kind of the everything we drill today, that's basically what I would say are the toughest wells.
Speaker Change: That we've drilled based.
Speaker Change: Basically tds lateral links temperatures.
Speaker Change: So yes, we've made a big.
Speaker Change: We've made a big big improvement there and like I say, we still are working on a few things to work those numbers down a little bit lower but Charles.
Speaker Change: The 16th well.
Charles: You go from 85 days to $54 31 days you save.
Charles Meade: That's a whole much drilling.
Speaker Change: Even if you use 26 2007 that means that.
Speaker Change: The wells that we're drilling now.
Speaker Change: We've saved half the time it was 54 days I mean, we've already shaved off 26 seven days. So these wells, you'll probably end up drilling another well per year because of our drilling efficiencies with the same number of rigs it could equate to that is huge savings in <unk>.
Speaker Change: Your questions are on cost savings.
Speaker Change: 31 days of drilling with these deepwater wells that.
Speaker Change: That's a lot of money.
Speaker Change: Got it. Thank you that's helpful context, Jay and Dan.
Charles Meade: You bet. Thanks Charles.
Speaker Change: Thank you our.
Barton time: Our next question comes from the line of Barton time of <unk>.
Charles Meade: Louis.
Barton time: Hey, good morning, guys that just staying on the horseshoe well.
Speaker Change: Sample you give looks very promising on the cost side.
Speaker Change: I know, it's early but are there any expectations on the productivity of these wells you get the full amount that you would have gotten from the two shorter shorter laterals or do you kind of lose like 5% of the recoveries and how does the shape of that well look like is it a lower pro forma IP and maybe the two combined wells, but a lower decline or any thoughts there.
Speaker Change: Yes, that's a really good question so we definitely.
Speaker Change: We expect the performance to be the same as the 10-K well.
Speaker Change: The only really mild difference between the horseshoe will end up with 10000 foot across two sections of straight lateral is almost right lateral you do get complete across the section line that 660 foot.
Speaker Change: The state you can't perforate within 330 foot of a lease line. So on a horse you will.
Speaker Change: Basically we've got 240 600 foot sections.
Speaker Change: 9200 foot we're on a 10-K, so on a straight 10-K, you get to perforate a little bit more.
Speaker Change: As far as the amount that's completed across the 10-K.
Speaker Change: So but on a per unit basis, we expect the performance to be totally the same.
Speaker Change: Okay. That's great color. Thanks, and then shifting gears on that on the private side of the Haynesville. We can see some of the data on our side it looks like theres been some drops on the rig side throughout the year, but over the last four months or so it's been kind of stable.
Speaker Change: I'm just wondering if you have a temperature check maybe on the private operators in your discussions with them do you get the impression that they've already settled into a steady program or are they also looking at the strip right now and actively debating maybe dropping some activity.
Speaker Change: Well, we don't we haven't really I.
Speaker Change: I don't have that.
Speaker Change: A lot of insight other than kind of knowing how we coordinate our schedules with the other operators, but I think the private operators cut cut rigs back very dramatically.
Speaker Change: And they're kind of kept that same rate. So we haven't seen any increase in activity.
Speaker Change: That's on the Horizon I think they are waiting to really say when gas prices.
Speaker Change: Kind of justify that.
Speaker Change: Yeah.
Speaker Change: Yes, the higher rig count has been on the public side, mainly with the with southwestern.
Speaker Change: Yes, I think thats it.
Speaker Change: Other than that everybody outspent them has dropped a lot of rigs yes.
Speaker Change: I agree with Roland I think I think youll basically.
Roland: Youll kind of stays status quo until or bases. These gas prices move up.
Speaker Change: I Wonder if you've looked at the core does that 9000 square miles what they call. The core when you drill a well there are other Bossier Haynesville you got a 40% decline in the first year you need to be real careful about drilling and a $1 nine a gas price, whereas in luck in Western Asia, we haven't seen that type of decline.
Speaker Change: Via another reason.
Speaker Change: Private or public that you don't aggressively drill these wells.
Speaker Change: Great. Thanks, guys.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: Comes from the line.
Speaker Change: Kevin Mccurdy, our Pickering energy partners.
Kevin McCurdy: Hey, good morning, guys.
Kevin McCurdy: Wanted to ask about activity toggles now that the debt covenant debt covenant as well, but less of concern just given the state of gas prices is there any situation, which would result in the frac holiday extending into <unk>.
Speaker Change: Or are there any other changes you would consider this year to activity levels.
Speaker Change: I think we're I think the Frac holiday is I think we've pretty much got it said I don't really see it extending further into Q4.
Speaker Change: Just based on what we know today, and where we see prices going in so.
Speaker Change: I mean really kind of a short answer there, but I think I think our schedule, we kind of look at it.
Speaker Change: We look at it all the time, so we can obviously both of those levers.
Speaker Change: <unk>, if we if we see that you still see.
Speaker Change: So gas prices improving as you get to the very end of the year.
Speaker Change: And so you have to have so I think unless.
Speaker Change: The last kind of 25 changes.
Speaker Change: Yes, I don't think radically I think thats kind of what would drive our activity level in the fourth quarter right and we're not contractually obligated, obviously with Frac crews something we can definitely.
Speaker Change: Should things the outlook really change I mean, obviously, we can change with it.
Speaker Change: And Fortunately in the fourth quarter, we do hit our.
Speaker Change: Our swap position, where we are.
Speaker Change: <unk> percent at $3 50.
Speaker Change: So that's something that if prices continue to deteriorate, we will at least to end up in that quarter than we have.
Speaker Change: I think we've adequately hedged for 2026, so far with 35% of our production hedged at $3 50, plus range and as we said in the opening and our goal is to edge at least 50% of all of the 25 26 production.
Speaker Change: So we are getting out of the 20 plus percent hedge environment into the 50% environment.
Speaker Change: Thanks for that that's helpful and.
Speaker Change: And just wanted to ask did any of the <unk> weather impacts fell into the third quarter or did you guys see any impacts from the hurricane.
Speaker Change: We did have impact from the hurricane it nicely.
Speaker Change: We're getting barrel yet when it moved up into the we didn't have any impacts in our western haynesville area, but when it moved up into our core area.
Speaker Change: There were just a bit.
Speaker Change: Really.
Speaker Change: The small and the tone of tornadoes and really the thing that hurts us is not necessarily our operations, but all of the trading third party treating facilities that we flow too.
Speaker Change: Basically they go down a long power. So it really does it really hurts. Our production were just got at their mercy and we did have that for approximately a week to 10 days and that and that impact is incorporated in the third quarter guidance correct.
Speaker Change: I appreciate it thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Leo Mariani of Raw.
Speaker Change: Okay.
Leo Mariani: Hey, guys wanted to do.
Leo Mariani: Just digging a little bit more.
Leo Mariani: Kind of expectations heading into the fourth quarter. I think you guys had previously talked about fourth quarter production being down around 10%.
Speaker Change: Year over year, I know a couple of wells kind of slipped.
Speaker Change: In January and potentially so wanted to see if that's still rough.
Speaker Change: We're awfully valid and then with respect to fourth quarter Capex. It looks like that's getting ready to maybe move a little higher as the Frac crew comes back just trying to get at Ascension <unk> Capex look more like second quarter of 'twenty four capex.
Speaker Change: Yes.
Speaker Change: Good questions.
Leo Mariani: No change on that in terms of the fourth quarter 24 versus fourth quarter 'twenty three.
Leo Mariani: Like can be down about 10% and as.
Leo Mariani: As we've talked about that's a function of the timing of dropping those two rigs in February and March and kind of that six to nine month lag between dropping activity and seeing it show up in production and then you're absolutely right.
Leo Mariani: The capex level in the fourth quarter, we'll return more.
Leo Mariani: The level that you mentioned a lot of that is is a function of what we discussed earlier.
Leo Mariani: The Frac holiday all occurring in in the third quarter, that's why the third quarter and fourth quarter. So different in terms of capex levels.
Leo Mariani: But in the western.
Leo Mariani: But really the.
Speaker Change: Really no wells coming on in the second half of the year for the most part and then.
Speaker Change: A lot of a lot of production coming on in the Western Haynesville right around the end of the year.
Speaker Change: Maybe maybe a <unk> or outright before that and a lot in early January but we actually like the way that lines up with the gas market and all of that so.
Speaker Change: Yes, Thats a hub to power to do our analysis those are the wells were drilled on the pad two.
Speaker Change: <unk> added in the <unk> and the miles.
Speaker Change: So wells really the last week of December maybe.
Speaker Change: Or the first week of January 2020, that's when we modeled.
Speaker Change: <unk> modeled it to come in.
Speaker Change: Okay. That's very helpful color and then I know obviously.
Speaker Change: 2025.
Speaker Change: Early here for that today, but just trying to get a sense in looking at strip prices for next year kind of three and a quarter to $3 30. Currently as you look out is that the right level that you think for Comstock to the kind of.
Speaker Change: Get back to where it was is it add a couple of rigs to kind of get back to 7% is that kind of how youre thinking about it here today is to kind of bring those rigs back next year.
Speaker Change: Yes that that price level is.
Speaker Change: Obviously.
Speaker Change: Is definitely works well for Comstock.
Speaker Change: Still early like I said, we don't really set our.
Speaker Change: Our activity for next year until we get more into the fourth quarter, and then November even December and make those decisions, but I mean, yes, we do like the way that the what.
Speaker Change: What the futures market has out there to see if that materializes and then having a stronger hedge position.
Speaker Change: Also helping to support that program.
Speaker Change: 25 than what we had going into 'twenty four.
Speaker Change: Okay. Thanks, guys.
Leo Mariani: Thank you Leo.
Speaker Change: Thank you.
Speaker Change: Question.
Speaker Change: Comes from the line.
Speaker Change: No matter.
Goldman Sachs: Goldman Sachs.
Speaker Change: Yes, good morning team. Thanks for taking the time to questions. The first one just your perspective on the A&D market.
Speaker Change: How do you think about acquisitions or potential proceeds from divestitures as we make our way over the course of the next year.
Speaker Change: Are there opportunities to optimize on a smaller scale or or even medium to larger.
Speaker Change: Larger sized bolt ons.
Speaker Change: I mean, we have incoming opportunities.
Speaker Change: All the time, we look at all of them.
Speaker Change: Some of them, we react to and go forward in.
Speaker Change: Acquiring the acreage that we did the last quarter.
Leo Mariani: But our real focus is right now as to the outspend and at our production going up not going down so we need to we need to take care of that are.
Speaker Change: Inbound calls that we have there they're mainly data centers that want to do business with us they are utilities they are storage.
Leo Mariani: Theyre more acreage a little bit of acreage to clean up what we have at least and Ron is budgeted for that.
Speaker Change: So.
Speaker Change: But we said at the very beginning our goal is if the M&A market is about <unk>.
Speaker Change: Inventory inventory inventory.
Speaker Change: Our goal is is that with the 450000 plus net acres in western Haynesville.
Speaker Change: We should have an incredible inventory of ads.
Speaker Change: That goes for the 2000 1400 locations that we have in our core debt.
Speaker Change: Thats certainly our goal our goal is I'd like to Dan Harrison focused operations.
Dan Harrison: You test your Geological group and we tested that group for four years.
Speaker Change: Had successful wells and with success, we've added new acreage.
Speaker Change: And each of the wells seems to be a little bit better there those different buckets.
Speaker Change: Seem to be a little better in another question that was asked earlier if you can drill these wells from 54 days well.
Speaker Change: Now a few drill two of those wells and 54 days you almost had a third well compared to the 85 day to reach until these hands, so that sufficiency and numbers saved a lot of lot of money.
Speaker Change: Every two wells in the old days now you get a third well for the same amount of money.
Speaker Change: Thats the efficiencies that we see so.
Speaker Change: So if we continue to prove up the geology continued to test.
Speaker Change: The seismic that we have in the area.
Speaker Change: And the wells continued to perform like they have in clean up like they have I think our goal is just to prove that we created great well when the market comes to US with this great gas demand for power generation and LNG and industrial demand.
Speaker Change: Our focus.
Speaker Change: <unk> spent a lot of money.
Speaker Change: Putting together this world class footprint in the Western Haynesville and now we just want to derisk, it well by well and we're not we're not on a big M&A bands at all.
Speaker Change: Yes.
Speaker Change: Great perspective, and then the follow up to just now.
Speaker Change: One question, we get asked a lot is sorry to breakeven at the Western Haynesville. When you think of your cost of supply.
Speaker Change: A cost of capital return fully burdened for G&A and interest.
Speaker Change: All the ancillary what what is that breakeven in your mind for Henry hub equivalent.
Speaker Change: Well, yes of course, it's evolving in the Western Haynesville is where we're at.
Speaker Change: We continue to work down that drilling and completion costs, but kind of where we see the cost VN with efficient program that we'll have next year with four rigs and kind of.
Speaker Change: Pad drilling that makes puts it more it starts to get it more on par with our traditional haynesville, we actually the two areas are going to be very similar as far as internal rate of return.
Speaker Change: <unk> and <unk>.
Speaker Change: Cost per reserves found I mean, the difference is we have a lot more money in a western haynesville well, but we have a lot more reserves the reserves or double.
Speaker Change: So it's a different type of play that.
Speaker Change: Yes.
Speaker Change: Declines are different so there is yes.
Speaker Change: We're still trying to figure out what.
Speaker Change: How to produce the western Haynesville wells.
Speaker Change: And so there is a difference there that you get probably a little bit more production out of a traditional haynesville well in the first six months, but then the second six months, you'll get a lot more production out of Western Haynesville well is the way we are producing them with a much tighter Chad.
Speaker Change: They're very comparable.
Speaker Change: As far as returns, especially where we see the costs getting to now that we're kind of getting into.
Speaker Change: <unk> development stage, so and we're very pleased with that.
Speaker Change: So I don't think to add on to that if you look at this inventory depletion, which will happen.
Speaker Change: If you run out of tier one you go to tier twos.
Speaker Change: The Bang for the Buck is not quite there in tier two or three because you run out of tier ones. So far western haynesville is compared to tier one and we have all this acreage and we derisk it.
Speaker Change: Inventory is going to be materially stronger than you would have if you did a big M&A M&A is just acquiring more of the same area.
Speaker Change: Thank you team.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: Comes from the line of Phillips Johnston.
Phillips Johnston: Capital one securities.
Speaker Change: Yeah.
Phillips Johnston: Hey, Thanks for taking the question, it's really a follow up to <unk> question. The 25 and is obviously very much TBD, but.
Speaker Change: If you do stay at five rigs for the balance of the year.
Speaker Change: Can you bring that Frac crew back in Q4 as you look out into the first few months of next year just from a momentum perspective would you expect your.
Speaker Change: Volumes to be Directionally flat up or down versus Q4 levels.
Speaker Change: That would definitely be up with those western Haynesville wells coming on.
Speaker Change: Yes, yes.
Speaker Change: Okay.
Ron: That's all thanks Ron.
Phil: Thank you Phil.
Speaker Change: Thank you our next question.
Speaker Change: Comes from the line of no parks of Toy Brothers investment research.
No: Hey, it's no.
No Parks: Good to talk to you just have a couple.
Speaker Change: I wanted to run by <unk>, So in terms of the.
Speaker Change: The western Haynesville.
No: The greater depths in the heat and pressure and so forth.
Speaker Change: Was wondering if you could talk a bit about where things stand with.
Speaker Change: The instruments and tools.
Speaker Change: I understand that had had some adaptation to be able to work at those levels. Just where are you is any of that youre doing.
Speaker Change: Proprietary.
Speaker Change: Anything new that you're.
Speaker Change: Going to be implementing in the next slate of wells.
Speaker Change: This is Dan so we basically use the setting tools and the western Haynesville that we use in the core.
Speaker Change: We basically how we apply them.
Speaker Change: A little bit differently, but.
Speaker Change: As far as our MW details our motors.
Speaker Change: Essentially the same providers for the western Haynesville that we have that we have in the core now theres. Some theres some theres some of our providers up in the core of that.
Speaker Change: Kent.
Speaker Change: It doesn't have the full breadth of tools to be able to work in the western Haynesville, but.
Speaker Change: The same guys, we have working down their work in the call so same tools.
Speaker Change: Got it.
Speaker Change: Just mentioned.
Speaker Change: Dysfunctions.
Speaker Change: How you produce the western Haynesville wells.
Speaker Change: In fact that might have on the client and so forth.
Speaker Change: Just wondering what are your thoughts where have you learned so far about.
Speaker Change: Choking and how that might influence.
Speaker Change: Production rates shape of the curve et cetera.
Speaker Change: Well, we definitely started off in the western Haynesville being much more conservative with how we were producing the wells compared to how we produce them in the core.
Speaker Change: Honestly, we've got years and years and years of history in the core and we know how we can produce them and how hard we can pull them, but in the western Haynesville were just on the tip of that learning curve. So we we started out very conservative.
Speaker Change: Very low drawdowns and so.
Speaker Change: We've kind of just.
Speaker Change: We're slowly kind of starting that might be pull on them, just a little bit harder and get a little bit better production rates, which they can definitely do it. We just want to be we just want to watch the drawdowns and make sure.
Speaker Change: We don't we don't get ahead of ourselves a source trying to pull them too hard but.
Speaker Change: Everything looks really good we're just kind of taken our time in that process and we produced a tubing over that yes, we do everything that we have everything that we complete up in the core we flow up casing for.
Speaker Change: Quite a long time, we don't come back and tell you about those wells for.
Speaker Change: In some cases may be a couple of years later, but in the western Haynesville, just because of the very high initial flowing pressures and what the wellhead.
Speaker Change: With the KC Neal the burst pressure rating yields on our casing strings, we tube goes up while we're completing the wells. So the day that they turn to sales all of those wells are flowing up to me.
Speaker Change: So it's a little bit different production profile, you get a lot more pressure drop.
Speaker Change: Downhole before you reach the surface so.
Speaker Change: The pressures, obviously would be a lot higher if we're flowing up casing the surface pressures awards, but that's that's probably the biggest difference as far as.
or proprietary, anything new that you're going to be implementing in the next slate of wells.
Dan: No, this is Dan. So, you know, we basically use the same tools in Western Hainesville that we use in the core. You know, we basically, how we apply them, you know, is a little bit differently, but, you know, as far as our MWD tools, our motors, essentially the same providers, you know, for the Western Hainesville that we have, you know, that we have in the core. Now, there's some, you know, there's some of our providers up in the core that, you know, can't, you know, don't have the full breadth of tools to be able to work in Western Highsville, but You know, the same guys we have working down there working the coral, so same tools.
Dan: This is Dan. So, you know, we basically use the same tools in the Western Hainesville that we use in the Corps.
Speaker Change: Downhole, although western Haynesville wells are teamed up all the core wells flow up casing.
Speaker Change: And you're asking about the drilling if you look at it our efficiencies in Dan's right I mean, some of the tools in the casing.
Dan: You know, we basically, you know, how we apply them, you know, is a little bit differently, but, you know, as far as our MWD tools, our motors.
We do use that in the core but it's how you use it.
Dan: you know, essentially the same providers, you know, for the Western Hainesville that we have, you know, that we have in the core. Now there's some, you know, there's some, there's some of our providers up in the core that, you know, can't, you know,
Speaker Change: What type of intermediate you sit Youtube the wells.
Speaker Change: What type of completions that you have.
Speaker Change: What kind of drill pipe do you have I mean, there is a lot of ingredients to the kitchen and not everybody produces the same panel product. So it can be very difficult.
Dan: It doesn't have the full breadth of tools to be able to work in the Western Hinesville, but, you know, the same guys we have working down there working the coral. So, same tools.
Speaker Change: You're you're drilling your first 19000 foot vertical and 10000 foot lateral well to come in there and have the success that we've had when you got a really good operations group and it took them 85 days for the first time.
Roland: Got it. And you just mentioned, Roland just mentioned, how you produce the Western Hayesville wells and the effect that might have on declines and so forth. I don't know, have you, just what are your thoughts? What have you learned so far about, you know, choking and how that might influence, you know, production rates, shape of the curve, etc.
Speaker Change: We will now Youre at 54 days.
Speaker Change: So a lot of that skill set.
Speaker Change: To spend a lot of money to perfect.
Speaker Change: Perfect and you can lower those costs and you create real well.
Dan: Well, we definitely started off in Western Hainesville being much more conservative with how we were producing the whales compared to how we produce them in the Corps. Obviously, we've got years and years and years of history in the Corps.
Speaker Change: And you have to have the footprint to do that in and we captured a footprint.
Dan: We know how we can produce them and how hard we can pull them, but in Western Hainesville, we're just on the tip of that learning curve. So we started out very conservative, very low drawdowns, and so we're slowly kind of starting to maybe pull them just a little bit harder and get a little bit better production rates, which they can definitely do. We just want to watch the drawdowns and make sure.
Speaker Change: At very low cost.
Speaker Change: With most of it being held by production.
Speaker Change: The difference in this play.
Speaker Change: Great. Thanks, a lot.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Paul.
Paul Diamond: Paul Diamond of Citi.
Paul Diamond: Hi, Good morning, Thanks for taking my call just a quick one I wanted to drill down on the opportunity set across these.
Dan: You know, we don't get ahead of ourselves as far as trying to pull them too hard, but everything looks really good. We're just kind of taking our time, you know, in that process.
Speaker Change: Theoretical horseshoe wells.
Speaker Change: Inventory at about call it 16%.
Dan: We don't get ahead of ourselves as far as trying to pull them too hard, but everything looks really good. We're just kind of taking our time in that process. And we produce the tubing for that. Yeah, and we do. Everything that we complete up in the core, we fill up the casing for.
Speaker Change: Below 5000 foot.
Dan: And we produce the tubing, if you want to go over that. Yeah, and we do.
Speaker Change: Just trying to understand how much of the how much of those.
Dan: Everything that we complete up in the core, you know, we flow off the casing for... quite a long time. We don't come back and tube up those wells for, you know, in some cases, maybe a couple of years later, but in Western Hinesville, just because of the very high initial flowing pressures and what the wellhead with the casing, the burst pressure rating is on our casing strings, we tube those up while we're completing the well.
Speaker Change: Given current expectations do you think you might be able to convert and where that were placed in kind of an and.
Paul Diamond: And the larger production cadence.
Paul Diamond: Our drilling cadence.
Speaker Change: That's really good question. So you're right. We did have about 15 or 16% of our total inventory is the short laterals and we're actually currently working through that process right now of how many of those we think we can convert over to long laterals.
Speaker Change: The majority of them that we can I don't really have a real fix.
Dan: So the day that they turn to sales, all those wells are flowing up tubing. So it's a little bit different production profile; you get a lot more pressure drop, you know, downhole before you reach the surface. So, you know, the pressures obviously would be a lot higher if we're flowing up casing the surface pressure forward. So, but that's probably the biggest difference, you know, as far as you know downhole. All the Western Hainesville wells are tubed up, all the Coral Wells flow up case. You know, and you're asking about the drilling, if you look at
Dan: With the casing, you know, the burst pressure rating is on our casing strings. We tube those up while we're completing the well. So the day that they turn to sales, all those wells are flowing up tubing.
Speaker Change: Fixed number I can probably give you today, but.
I'd say the majority of them were looking at moving over.
Speaker Change: And.
Speaker Change: Like I said, we're the only reason that we could not would just be because I mean, obviously you have to have two <unk>.
Speaker Change: To have two of the five K laterals kind of side by side right to have the horseshoe opportunity some of our short six in our inventory you just got one stick basically so obviously that wouldn't be a horse she candidate, but other than that I think every if you've got two of them side by side every one of those is a horseshoe candidates.
Dan: You know, and you were asking about drilling efficiency, and Dan's right, I mean, some of the tools and the casing, we do use that in the core, but it's how you use them. What type of intermediate do you set? Do you tube the wells up? What type of completions do you have? What kind of drill pipe do you have?
Dan: You know, and you were asking about the drilling, if you look at our efficiencies, and Dan's right, I mean, some of the tools and the casing, we do use that in the core, but it's how you use it, what type of intermediate do you set, do you tube the wells up?
Speaker Change: So we're working through that process, right and IFC and which one of those we can.
Speaker Change: Convert they will go into our long lateral bucket, what's right now that's about 26% of our inventory.
Speaker Change: So we will significantly boost that up above.
Speaker Change: 25, 26%.
Dan: I mean, there are a lot of ingredients in the kitchen, and not everybody produces the same final product, so it can be very difficult if you're drilling your first 19,000 foot vertical and 10,000 foot lateral well to come in there and have the success that we have had when you've got a really good operations group and it took them 85 days the first time. Well, now you're at 54 days.
Speaker Change: Well that sure that percentage in the short laterals, we get a lot lower.
Speaker Change: Which will be great I mean that that opens up a lot more wells that has really good economics that we can basically.
Speaker Change: If I had to put on our drill schedule or should we.
Dan: 19,000 foot vertical and 10,000 foot lateral well to come in there and have the success that we've had when you've got a really good operations group and it took them 85 days the first time.
Speaker Change: For some reason for a leasehold reason or whatever we kind of need to drill it.
Speaker Change: It'll still.
Speaker Change: Will still fit in with what we normally would be drilling.
Dan: So, a lot of that skill set, you have to spend a lot of money to perfect it, and when you can perfect it, then you can lower those costs, and you create real wealth. And you have to have the footprint to do that on, and we captured a footprint at a very low cost with most of it being held by production. So that's the difference in this play.
Speaker Change: Good economics.
Speaker Change: Understood that actually kind of pretension to my follow up.
Dan: Well, now you're at 54 days, so a lot of that skill set, you have to spend a lot of money to perfect it, and when you can perfect it, then you can lower those costs and you create real wealth.
Speaker Change: Assuming or under current assumptions you guys are working wins, how would a court shoes to 5000 foot compare economically to an existing 10000 foot.
Speaker Change: So yes, it's substantial.
Speaker Change: Have the numbers in front of me, but yes substantial rate of return <unk>.
Speaker Change: Substantial improvement I mean, youre going to say 8 million Bucks 4 million Bucks per basically off those five laterals.
Dan: So that's the difference in this flight.
Operator: Our next question comes from the line of Paul Diamond of Citi.
Paul Michael Diamond: Great. Thanks a lot.
Speaker Change: So.
Speaker Change: Just drives all of the key parameters significantly higher like I said that the.
Operator: Our next question comes from the line of Paul Diamond of Citi.
Paul Michael Diamond: Hi, good morning. I'll just take my call. It's just a quick one.
Speaker Change: Cost so the cost to draw a straight 10-K.
Speaker Change: To drill a horseshoe wells essentially the same set of 1% to 2% premium, but I mean thats within the plus modest of any well, we drill on kind of where our costs are going to end up.
Dan: I want to drill down on the opportunity set across these theoretical horseshoe wells. When you're in the tour, you get about, call it, 69% of those below 5,000 feet. I'm just trying to understand how much of those, given current expectations, you think you might be able to convert, and where that would place them kind of in the larger production cadence.
Speaker Change: So.
Speaker Change: We look at the economics for a Hershey will be essentially the same as all of our other 10-K laterals.
Dan: Just trying to understand how much of those, given current expectations, do you think you might be able to convert, and where that would place them in the larger production cadence.
Speaker Change: Understood. Thanks for the card.
Speaker Change: Thank you.
Dan: Yeah, that's a really good question. So you're right, we do have about 15 or 16% of our total inventory are the short laterals. And we're actually currently working through that process right now of how many of those we think we can convert over to long laterals. I think the majority of them that we can, I don't really have a real, you know, fixed number I can probably give you today, but I'd say the majority of them we're looking at moving over.
Speaker Change: Our next question comes from the line of Gregg Brody Bank of America.
Dan: [inaudible]
Speaker Change: Yeah, that's a really good question. So you're right, we do have about 15 or 16 percent of our total inventory is, you know, the short laterals.
Speaker Change: Yes.
Gregg Brody: Hey, good afternoon guys. Thank.
Speaker Change: Thanks.
Guy: As far as the credit Guy I start.
Dan: And we're actually currently working through that process right now of how many of those we think we can convert over to long laterals. I think the majority of them that we can, I don't really have a real, you know, fixed number I can probably give you today, but
Speaker Change: To see these horizontal wells pop ups, a few places and I realize there is some data theres been a number of them in other basins Im just curious is there.
Speaker Change: Is there something that we should think about that is tricky about these are.
Dan: And, you know, like I said, the only reason that we could not would just be because, I mean, obviously, you have to have two, you know, you have to have two of the 5k laterals kind of side by side, right, to have the horseshoe opportunity. And some of our short sticks in our inventory, you know, you just got one stick, basically. So, obviously, that wouldn't be a horseshoe candidate. But, you know, other than that, I think every, you know, if you got two of them side by side, every one of those is a horseshoe candidate.
Speaker Change: I'd say the majority of them we're looking at moving over.
Speaker Change: It really is just showing a lot of collateral.
Dan: And, you know, like I said, we're the only reason that we could not would just be because, I mean, obviously, you have to have two.
Speaker Change: And a U shape that seems like.
Speaker Change: Suggests we can do that now.
Speaker Change: Sometimes.
Speaker Change: They will say necessity is the mother of invention.
Dan: You know, you have to have two of the 5K laterals kind of side by side, right, to have the horseshoe opportunity. Some of our short sticks in our inventory, you know, you just got one stick, basically. So, obviously, that wouldn't be a horseshoe candidate. But, you know, other than that, I think every, you know, if you got two of them side by side, every one of those is a horseshoe candidate.
Speaker Change: We.
Speaker Change: <unk> drilled a 90 or 90 degree turn to drill these laterals already right. So you do the 90 day return Youre drilling the lateral so.
Mike: So <unk> is the same motors that we run and you just Mike.
Dan: So we're working through that process right now, seeing which one of those we can, you know, convert. They'll go into our long lateral bucket, which right now is about 26% of our inventory. So we'll significantly boost that up above, you know, 25, 26% and, you know, we'll, that short, that percentage in the short line will get a lot lower. Which will be great. I mean, that opens up a lot more wells that have really good economics that we can basically, you know, decide to put on our drill schedule or should we, you know, for some reason, for a leasehold reason or whatever, we kind of need to drill it, it'll still, you know, it'll still fit in with, you know, what we normally would be drilling with good economics.
Mike: Mike Another tire and you just did stay you just stay with it until it goes all the way around 180 degrees now.
Dan: So we're working through that process right now, seeing which one of those we can, you know, convert. They'll go in our long lateral bucket, which right now, you know, that's about 26% of our inventory.
Speaker Change: And I'll tell you kind of have to do it.
Speaker Change: Or.
Speaker Change: Youre looking at your inventory.
Speaker Change: <unk>.
Dan: So, we'll significantly boost that up above, you know, 25-26%, and, you know, we'll, that short, that percentage in the short levels will get a lot lower.
Speaker Change: And a lot of people, probably just got pushed together, but.
Speaker Change: Really I mean.
Speaker Change: Look there is a little bit more risk to drill on a horseshoe well and.
Dan: Which will be great. I mean, that opens up a lot more wells that has really good economics that we can basically, you know, decide to put on our drill schedule, or should we, you know, for some reason, for a leasehold reason or whatever, we kind of need to drill it, you know.
Speaker Change: You got to get casing around the curve you have to get.
Speaker Change: When you are complete and pumping your perforating guns down and plugs for all your frac stages.
Speaker Change: Those have to get pumped around the curve.
But really I mean, thats I think the risk of that is pretty small.
Dan: It'll still, you know, it'll still fit in with, you know, what we normally would be drilling with good economics.
Dan: Understandable that actually kind of pertains to my follow-up. Assuming or under the current assumptions you guys are working with, how would a horseshoe, you know, two 5000 foot paths compare economically to an existing 10,000 foot path?
The industry kind of already has shown it in the Permian and I think the Eagle Ford. So these other areas but.
Dan: Understood. That actually kind of portends into my follow-up. Assuming or under current assumptions you guys are working with, how would a horseshoe, you know, two 5,000 foots compare economically to an existing 10,000 foot?
Speaker Change: Yes, I think you've just got to prove it out and you just basically got to show people the results and I think.
Speaker Change: After you do more of them it becomes a little bit more routine and the risk is.
Dan: So yes, substantial. I don't have the numbers in front of me, but yes, substantial rate of return, substantial improvement. I mean, you're gonna save 8 million bucks, 4 million bucks a year, basically off those 5K laterals.
Greatly diminished by example on our first well, we're pretty close to TD and it will last night I know, where we're probably within 500 show to TD and we have had zero problems drilling the first well no problems, where then 500 pages <unk>.
Dan: So, yes, substantial. I don't have the numbers in front of me, but yes, substantial, you know, rate of return, substantial improvement. I mean, you're going to save 8 million bucks, 4 million bucks per, basically off those 5K laterals.
Dan: So, you know, it just drives all the key parameters significantly higher. Like I said, the cost, so the cost to drill a straight 10k and drill a horseshoe well is essentially the same. You know, I said a one to two percent premium, but I mean, that's within the plus or minus of any well we drill on kind of where our costs are going to end up. So, you know, we look at the economics for Horseshoe Well to be essentially the same as all of our other 10K laboratories.
Dan: So, you know, it just drives all the key parameters significantly higher. Like I said, the cost, so the cost to drill a straight 10K, to drill a horseshoe well is essentially the same. You know, I said a 1 to 2 percent premium.
And Thats when I look at you were being asked earlier about how much potential.
Speaker Change: Yes.
Speaker Change: Of your locations can be converted should we think that it's just the ones that in the up to 5000 feet or is it should we think also about the 5880 500 feet that could be converted.
Dan: I mean, that's within the plus-minus of any well we drill and kind of where our costs are going to end up.
Speaker Change: So we're trying to get.
Speaker Change: And just trying to get a sense of how much of that you didn't quantify it I know it's early days, but.
Dan: So, you know, we look at the economics for Horseshoe Well to be essentially the same as all of our other 10K Laberals.
Paul Michael Diamond: Understood, thanks for the card.
Speaker Change: I'm curious if you have if you have a range that you would think about there.
Operator: Our next question comes from the line of Greg Brody of Bank of America.
Speaker Change: Understood. Thanks for the card.
Speaker Change: Well, that's a really good question and we've already kind of have some internal discussions about that can you.
Gregg William Brody: Thank you.
Speaker Change: Take a 7500 foot lateral and turned it into a 15 K horseshoe now, we're not ready to jump out there and do that yet but.
Operator: Our next question comes from the line of Gregg Brody of Bank of America.
Gregg William Brody: Hey, good afternoon, guys. Thanks for all the help. As the credit guy, I've started to see these horseshoe wells pop up in a few places, and I realize there's some data, there's been a number of them in other basins. I'm just curious, is there something that we should think about that is tricky about these, or is it really just showing a lower lateral in a U-shape that seems like physics suggests we can do that?
Gregg William Brody: Hey, good afternoon, guys. Thanks for all the update.
Speaker Change: The industry gets better with time, they get faster they get longer tools get better.
Gregg William Brody: As the credit guy, I've started to see these horseshoe wells pop up in a few places and I realize there's some data. There's been a number of them in other basins. I'm just curious.
Speaker Change: If you have the demand for tools into the demand for certain services in time, they show up and they get developed and they get refined. So I think in time I think yes, I think the industry will maybe go there and when you look at 7500 foot lateral has a lot better economics on a five case, though.
Gregg William Brody: Is there something that we should think about that is tricky about these, or it really is just really a lower lateral in a U-shape that seems like physics suggests we can do that now?
Dan: You know, sometimes, you know, the old saying, necessity is the mother of invention. I mean, we drill a 90-degree turn to drill these laterals already, right? So, you know, you do the 90-degree turn, you're drilling the laterals.
The rush to start doing 15, K horseshoes is not really going to be there right now but.
Dan: You know, sometimes, you know, you know, the old saying, necessity is the mother of invention. I mean, we, you know, you drill a 90, a 90 degree turn to drill these laterals already, right? So, you know, you do the 90 degree turn, you're drilling the lateral. So.
Speaker Change: I do see in us.
Speaker Change: What your acreage, it's how it's laid out and what your options are.
Dan: It's the same tools, it's the same motors that we run; you just make another turn, and you just stay with it until it goes all the way around 180 degrees. You know, until you kind of have to do it, you know, or, you know, you're looking at your inventory. How can I improve it? You know, a lot of people probably just kind of don't push to go there, but really, but I mean, look, there is a little bit more risk to drilling a horse, you will.
Speaker Change: I mean, if you can drill up.
Speaker Change: If you got a two sections are three sections.
Dan: It's the same tools, it's the same motors that we run, you just make another turn and you just stay with it until it goes all the way around 180 degrees.
Speaker Change #100: Typically we'll just drove a 50 K straight lateral we're not going to do a bunch of 7500 foot horseshoe <unk> laterals.
Speaker Change #101: So, but it's a very good question and our slate, yes, I think in time in the future I think there'll probably be some people that will probably try to push the.
Dan: You know, until you kind of have to do it, you know, or, you know, you're looking at your inventory, how can I improve it?
Dan: You know, a lot of people probably just kind of don't push to go there, but
Speaker Change #101: <unk> links a little bit further.
Dan: And, and, you know, you got to get casing around the curve; you have to get, you know, when you're completing and pumping your perforating guns down and plugs, you know, for all your frack stages, you know, all those have to get pumped around the curve. But really, I mean, that's, I think the risk of that's pretty small. The industry kind of already has shown it in the Permian and, I think, the Eagle for these other areas, but I think you just have to prove it out, and you just basically have to show people the results. I think, after you do more of them, it becomes a little bit more routine, and the risk is, you know, greatly diminished.
Speaker Change #101: But they do have a little bit more torque and drag I mean, obviously when youre pushing in Poland pipe around the 180 degree band.
Dan: Really, I mean, look, there is a little bit more risk to drilling a horseshoe well, and you know, you got to get casing around the curve, you have to get, you know, when you're completing and pumping your perforating guns down and plugs, you know, for all your frack stages, you know, all those have to get pumped around the curve.
Speaker Change #101: That adds more drag pushed tripping in and out of the hole.
Speaker Change #101: So.
Speaker Change #101: A.
Speaker Change #101: A 10000 foot horseshoe well, maybe just kind of maybe more like the equivalent of a 15000 foot straight lateral when you look at the drag going in and out of the hole that makes sense.
Dan: I mean but really I mean that's I think the risk of that's pretty small.
Dan: The industry kind of already has shown it in the Permian and I think the Eagle for these other areas, but I think you just got to prove it out and you just basically got to show people the results. And I think.
Speaker Change #103: That does and then just to come back to my credit risks just a few follow ups.
Speaker Change #104: You might get personal credit guys.
Speaker Change #105: I don't do you see you're getting three four today.
Dan: You know, after you do more of them, it becomes a little bit more routine, and the risk is...
Dan: Well, example on our first well, I mean, we're pretty close to TD, and last night I knew we're probably within 500 feet of TD, and we have had zero problems drilling. Yeah, that's my point. First well, no problems. We're within 500 feet of TD.
Speaker Change #105: For next quarter to get into the three to five or not that's going to the three five.
Dan: you know greatly diminished. Well example on our first well I mean we're pretty close to TD in that well. Last night I know we're we're probably within 500 feet of TD and we have had zero problems drilling. That's my point first well no problems we're within 500 feet of TD in it.
Speaker Change #106: Is that fair and if not is it just.
Speaker Change #107: Is it just a pretty easy amendment that you would get and then just as part of that I know the dividend suspended this year just as you look out in the future. How do you think about that today.
Gregg William Brody: And that's, when I looked at, you were being asked earlier about how much potential, um, of your locations could be converted. Should we think that it's just the ones that are up to 5,000 feet, or should we think also about the 5,800 to 8,500 feet that could be converted?
Speaker Change #108: Yes, Greg I think Chrysler, obviously that the gas prices are.
Gregg William Brody: And that's, when I looked at, you were being asked earlier about how much potential, um,
Speaker Change #107: Yes.
Speaker Change #109: If we knew exactly what they were we could answer the question exactly that.
Gregg William Brody: of your locations could be converted. Should we think that it's just the ones that are up to 5,000 feet, or should we think also about the 5,800 to 8,500 feet that could be converted?
Speaker Change #109: The gas prices and where they end up being we will be a big driver in the EBITDAX, which is the biggest part of that ratio and.
Gregg William Brody: Thanks a lot. Bye. Bye. It's just trying to get a sense of how much of that you didn't quantify. I know it's early days, but I'm curious if you have a range that you would think about there.
Speaker Change: It's just trying to get a sense of how much of that, you didn't quantify it, I know it's early days, but I'm curious if you have a range that you would think about there.
Speaker Change #109: It's also kind of remember it.
Speaker Change #110: Kind of a fault.
Speaker Change #111: Four quarter calculation assessor in one quarter, but yes.
Dan: Well, that's a really good question, and we've already kind of had some internal discussions about that. Take a 7,500 foot lateral and turn it into a 15K horseshoe. But we're not ready to kind of jump out there and do that yet.
We stay pretty close to that level, we do think it's a week.
Dan: But look, the industry gets better with time. They get faster. They get longer.
Dan: Well, that's a really good question. And we've already kind of had some internal discussions about that. You know, can you.
Speaker Change #112: We can now get a temporary way.
Speaker Change #113: Flavor, if we needed it that we didn't need it so we didn't go out and get it.
Dan: Take a 7,500 foot lateral and turn it into a 15k horseshoe. Now, we're not ready to kind of jump out there and do that yet, but Look, the industry gets better with time. They get faster. They get longer. Tools get better.
Speaker Change #113: So if things kind of came in exactly as.
As we thought they would we knew we're going to get to that three four.
Dan: Tools get better. If you have the demand for tools and the demand for certain services, in time, they show up, and they get developed, and they get refined. So I think in time, I think, yes, I think that the industry will maybe go there.
But luckily we stayed there so we will.
Speaker Change #113: Well monitor it in the third quarter.
Dan: If you have the demand for tools and the demand for certain services, in time they show up and they get developed and they get refined.
Speaker Change #113: As hard as we market in the second quarter.
Speaker Change #113: Okay, and then on the dividend, obviously I think we are.
Dan: I mean, look, a 7,500 foot lateral has a lot better economics than a 5K. So the rush to start doing 15K horseshoes is not really going to be there right now. I do see, you know, and it's what your acreage is, how it's laid out, and what, you know, your options are, you know, I mean, you, if you can drill up, if you got two sections, or three sections, like we'll typically just drill a 15k straight lateral; we're not going to do a bunch of 7500 foot horseshoe 15k laterals, you And I think, yes, I think in time in the future, I think there'll probably be some people that will probably try to push them.
Dan: I think, in time, I think, yes, I think that the industry will maybe go there. I mean, look, a 7,500-foot lateral has a lot better economics than a 5K, so the rush to start doing 15K horseshoes is not really going to be there right now.
Speaker Change #113: We're not really talking about a dividend until we kind of get the leverage way down and.
Speaker Change #113: Look it off in the future.
Speaker Change #113: Our first priority is to get back to generating good free cash flow.
Speaker Change #113: And.
Speaker Change #113: And then that will be used for some debt reduction to get the leverage ratio.
Dan: I do see, you know, and it's what your acreage, it's how it's laid out and what, you know, your options are.
Speaker Change #113: Fact that we'd like to get back to levels that we were seeing back in 'twenty two.
Dan: You know, I mean, you, if you can drill up, if you got two sections or three sections, you know, like we'll typically, we'll just drill a 15K straight lateral. We're not going to do a bunch of 7,500 foot horseshoe 15K laterals, you know what I mean?
Speaker Change #113: And.
Speaker Change #113: Equity got to enter in a closer to one times leverage we were really monitoring the second quarter and again, we did state bond in the third quarter.
Speaker Change #114: We didn't expect gas to be $1 90 on Monday.
Dan: So, but it's a very good question and I think, yes, I think in time in the future, I think there'll probably be some people that will probably try to push the
Speaker Change #114: You do look at that price and say well, okay. So you've got to really monitor the third quarter and in the fourth quarter.
Dan: Horseshoe Lakes is a little bit further. The one you know, they do have a little bit more torque and drag. I mean, obviously, when you're pushing and pulling pipe around a 180-degree bend, it adds more drag, you know, push, you know, tripping in and out of the hole. So, you know, a 10,000 foot horse, you will make this kind of maybe more like the equivalent of a 15,000 foot straight ladder when you look at the drag going in and out of the hole. If that makes sense.
Speaker Change #114: Expect a little price appreciation in the hedges come in at Hill.
Dan: Horseshoe Lake is a little bit further.
Dan: They do have a little bit more torque and drag. I mean, obviously, when you're pushing and pulling pipe around the 180 degree bend, it adds more drag, tripping in and out of the hole.
Speaker Change #114: For that I think we're going to have some big production growth.
Speaker Change #114: So that we're kind of go into that valley right now it's a good question.
Speaker Change #115: I appreciate the time guys and the education.
Dan: So, you know, a 10,000-foot horse, you will, is kind of maybe more like the equivalent of a 15,000-foot straight ladder when you look at the drag going in and out of the hole, if that makes sense.
Craig: Thank you Craig.
Speaker Change #117: Thank you our next question.
Craig: It comes from the line of Jeff J.
Gregg William Brody: That does. And then, just to come back to my credit roots, just a few follow-ups that you might get for some credit, guys. I don't see you getting – you're a 3-4 today. I think you're okay for next quarter to get into the 3-5 or not go through the 3-5. Is that fair? And if not, is it – This is a pretty easy amendment that you would get, and then just as part of that, you know, I know the dividend was suspended this year. Just as you look out into the future, how do you think about that today?
Speaker Change #118: Daniel Energy partners.
Gregg William Brody: That does. And then just to come back to my credit roots, just a few follow-ups.
Hey, guys just a real quick one for me earlier, you said you thought you would expect to see D&C.
Gregg William Brody: that you might get for some credit guys. I don't see you getting, you're a 3-4 today, I think you're okay for next quarter to get into the 3-5, or not going through the 3-5. Is that fair? And if not, is it?
Speaker Change #119: Costco down to something like normal levels, I guess I'm kind of forgotten what normal looks like given all the inflation, we've seen over the last year or so where do you think those will trend given the service cost deflation there that's out there in the <unk>.
Speaker Change #120: Patient sees you're achieving.
Gregg William Brody: Is this a pretty easy amendment that you would get? And then just as part of that, you know, I know the dividend was suspended this year. Just as you look out in the future, how do you think about that today?
Speaker Change #121: Well, we think our.
Speaker Change #122: Our legacy Haynesville.
Speaker Change #121: Main product will trend back to that.
Dan: Yeah, Greg, I think we look, obviously, that the gas prices are, or, you know, if we knew exactly what they were, we could answer the question exactly that, that, you know, that the gas prices and where they end up being will be a big driver of EBITDAX, which is the biggest part of that ratio. And, you know, it's also in a kind of, remember, it's a kind of full four quarter calculation. It's just in one quarter. But, you know, we stay pretty close to that level. We do think it's possible for us to get a temporary waiver if we need it, but we didn't need it.
Speaker Change #121: A little bit below 500 at that 514 to 1500 is kind of.
Dan: Yeah, Greg, I think we look, of course, obviously that the gas prices are, you know, we're, you know, we knew exactly what they were, we could answer the question exactly that that
Speaker Change #121: Area.
Speaker Change #121: <unk>.
Speaker Change #121: Hey, We report this is kind of when wells are completed.
Speaker Change #121: But it's not really a good indication of where things are now because some of the wells. We completed this quarter were actually finished drilled last year.
Speaker Change: The gas prices and where they end up being will be a big driver in the EBITDAX, which is the biggest part of that ratio. And, you know, it's also in a kind of member. It's a kind of a full.
Speaker Change #121: And so it.
Speaker Change #121: So it might be well come back and add some additional information here and show you here is that a real drilling costs being incurred each quarter and here's the completion costs being incurred there'll be on different wells, but that would be more.
Dan: four quarter calculation. It's just in one quarter. But yeah, we're we stay pretty close to that level. We do think it's
Dan: So, you know, we didn't go out and get it. So, things kind of came in exactly as we thought they would. We knew we were going to get to that three, four. Luckily, we stayed there.
Dan: We can get a temporary waiver if we needed it, but we didn't need it, so, you know, we didn't go out and get it. So things kind of came in exactly as...
Speaker Change #121: Indicative of where cost versus the.
Speaker Change #121: The process here of scoring is as costs that were incurred in different periods than the one you are hearing about so and also if you have a certain group of wells.
Dan: So we'll monitor it in the third quarter, you know, as hard as we monitored it in the second quarter. And then the dividend, obviously, I think we're not really talking about a dividend until we kind of get the leverage way down and look forward. So it's much, I think our first priority is to get back to generating good free cash flow.
Dan: As we thought they would, we knew we were going to get to that 3-4, but luckily we stayed there. We'll monitor it in the third quarter as hard as we monitored it in the second quarter.
Speaker Change #121: That are different and they're more costly that happened to be the ones turned to sales they dominate the numbers.
Speaker Change #121: As the case this quarter you had these like best Nols that have a lot of it's a high cost area period and partially it has some drilling problems in in those wells kind of really distorted.
Speaker Change: And then at the divot end, obviously, I think we're, you know...
Dan: We're not really talking about a dividend, you know, until we kind of get the leverage way down and you're looking.
Dan: Look it off in the future. So it's much I think our first priority, you know is to get back to generating good free cash flow
Speaker Change #121: And just look pretty comparable to the other quarter if they werent in there we've got less wells averages down, but yes, we'll probably try to maybe provide some supplemental.
Dan: And then that will be used for some debt reduction to get the leverage ratio, you know, back to levels that we were seeing, you know, back in 22. And, you know, in fact, we got under, you know, closer to one times leverage.
Dan: And then that will be used for some debt reduction to get the leverage ratio, you know, back to, we'd like to get back to levels that we were seeing, you know, back in 22.
Speaker Change #121: Will allow you to see the current cost in the quarter, how they're trending.
Speaker Change #123: <unk> is seeing something that occurred maybe even last year.
Dan: You know, we were really monitoring the second quarter, and again, we did stay behind in the third quarter. We didn't expect gas to be $1.90 on Monday. So you look at that price and say, well, okay, so you really have to monitor the third quarter, and in the fourth quarter, we would expect a little price appreciation, and the hedges would come in and help. Then after that, I think we're going to have some big production growth. So that's it. We're kind of going through that valley right now. It's a good question.
Dan: And, you know, we got to under, you know, closer to one times leverage, you know, we were really monitoring the second quarter. And again, we did stay behind in the third quarter.
Speaker Change #124: Excellent well thank you for that.
Speaker Change #124: Thank you I would now like to turn the conference back to Jay Allison for closing remarks, Sir Alright. Thank you again.
Dan: We didn't expect gas to be $1.90 on Monday. So you do look at that price and say, well, okay, so you got to really monitor the third quarter. And in the fourth quarter, you know, we would expect a little price appreciation and the hedges come in and help. And then after that, I think we're going to have some big production growth.
Going over our hour but.
Speaker Change #124: Now as a company we've always had a vision I think Greg asked about the energy you drill. These first few wells that are 7500 foot type $2 15000 feet and the answer is we have a vision.
Gregg William Brody: I appreciate the time guys and the education.
Gregg William Brody: We're kind of going through that valley right now. It's a good question.
Speaker Change #124: And we had a vision to step out of a 100 miles and see if we could.
Speaker Change #124: <unk> major gas play, which is now the western Haynesville, we have a vision.
Gregg William Brody: I appreciate the time guys and the education.
Operator: Thank you. Our next question comes from the line of Jeff J, of Daniel Energy Partners.
And then we always monitor.
Jeff J: Thank you, Greg.
Speaker Change #124: Where where gas supply is look we've been looking for the last probably six or seven weeks.
Speaker Change: Thank you. Our next question.
Operator: It comes from the line of Jeff Jay.
Jeff J: Hey, guys, just a real quick one for me. Earlier, you said you expected to see DNC costs go down to something like normal levels. I guess I've kind of forgotten what normal looks like, given all the inflation we've seen over the last year or so. Where do you kind of think those will trend given the service cost deflation that's out there and the efficiencies you're achieving?
Speaker Change #125: In our gas storage level was about 38% above the five year average, while we kept a week after week has come down it's like 16% above the five year average so it's coming the right way, we're coming into the third.
Jeff J: of Daniel Energy Partners.
Jeff J: Hey guys, just a real quick one for me. Earlier you said you thought you see, you would expect to see D&G, uh,
Speaker Change: costs go down to something like normal levels. I guess I've kind of forgotten what normal looks like given all the inflation we've seen over the last year or so. Where do you kind of think those will trend given the service cost deflation that's out there and the efficiencies you're achieving?
<unk>.
Speaker Change #126: Or what we call real meat.
Dan: Well, we think our... Our legacy Hainesville main product will trend back to that, you know, a little bit below $1,500. That $1,500, $1,400 to $1,500 is kind of an area. You know, and I think the way we report this is kind of when wells are completed and they, but, you know, it's not really a good indication of where things are now because some of the wells we completed this quarter And so maybe we'll come back and add some additional information here and show you the real drilling costs being incurred each quarter.
Meat of the summer so.
Speaker Change #126: So we do see that we see.
Dan: And here are the completion costs being incurred. They'll be on different wells, but they'd be more indicative of where costs are versus the process here of scoring costs that were incurred in, you know, different periods than the one you're hearing about. Yeah, that are different and more costly that happen to be the ones turned to sales, they dominate the numbers. As in the case this quarter, you had these Lake Vista Doe wells that have a lot of, it's a high-cost area period, and plus you throw some drilling problems in, and those wells kind of really distorted, you know, what would have just looked pretty comparable to the other quarter if they weren't in there.
Speaker Change #126: LNG at over 13 Visa day right now so rich back Freeport is back and then.
Speaker Change: Well, we think our...
Dan: Our legacy Hainesville, you know, main product, we'll trend back to that, you know.
Dan: You've got less wills to average it down, but yeah.
Speaker Change #126: If we look past September October and you see the startups of Corpus stage three in <unk>. So we see a strong fourth quarter of 24 run.
Dan: a little bit below 1,500 that's 1,500 14 to 1,500 is kind of a area you know and I think you know the way we report this is kind of when wells are completed and they
Speaker Change #126: From the LNG fleet and that goes into <unk>.
Speaker Change #126: 2025.
Speaker Change #126: Four year committed to manage we're committed to.
Dan: But, you know, it's not really a good indication of where things are now because some of the wells we completed this quarter were actually finished, drilled last year.
Speaker Change #126: Two sharing everything that we can share.
Speaker Change #126: And all of our areas.
To protect our balance sheet.
joneses: And again I want to complement the joneses for writing $100 million check.
Dan: And so, maybe we'll come back and add some additional information here and show you here's the real drilling costs being incurred each quarter, and here's the completion costs being incurred. They'll be on different wells, but they'd be more...
Speaker Change #126: For the for the acreage that we've been acquiring.
Speaker Change #126: And acreage is worth a fortune and they were willing to.
Dan: indicative of where cost are versus the the process here of scoring is a is cost that were incurred and you know different periods than the one you're hearing about so and also if the you have a certain group of wells
Speaker Change #126: To backstop that Iran to check so where we're going to be a good shape. There. So thank you for your time.
Speaker Change #126: I appreciate it.
Speaker Change #126: Yes.
Speaker Change #128: This concludes today's conference call. Thank you for participating you may now disconnect.
Dan: Yeah, that are different and more costly that happen to be the ones that turn to sales. They dominate the numbers.
Dan: As the case this quarter, you had these Lake Vista No-Wells that have a lot of...
Dan: at the high cost area period and, and plus you throw some drilling problems in and those wells kind of really distorted, you know, what would have been just looked pretty comparable to the other quarter if they weren't in there. We got less wells averaged.
Jeff J: But yeah, we'll probably try to maybe provide some supplementary information that will allow you to see the current cost of the quarter, how they're trending, you know, versus seeing something that occurred maybe, you know, even last year.
Jeff J: But yeah, we'll probably try to maybe provide some supplemental, you know, that will allow you to see the current cost of the quarter, how they're trending, you know, versus seeing something that occurred maybe, you know, even last year.
Jeff J: Excellent. Well, thank you for that.
Operator: Thank you. I would now like to turn the conference back to Jay Allison for his closing remarks, sir. All right. Thank you again.
Speaker Change: Excellent. Well, thank you for that.
Operator: Thank you. I would now like to turn the conference back to Jay Allison for closing remarks, sir. All right. Thank you again.
Miles Jay Allison: All right, thank you again. We've gone over our hour, but as you know, as a company, we always had a vision. I think Greg asked about, you know, do you drill these horseshoe wells that are 7,500 feet x 2, 15,000 feet? And the answer is, we have a vision. And we had a vision to step out of 100 miles and see if we could rebirth a major gas play, which is now Western Ainsville.
Miles Jay Allison: We've gone over our hour, but...
Miles Jay Allison: As you know the company, we've always had a vision. I think Gregg asked about, you know, do you drill these horseshoe wells that are 7,500 foot x 2, 15,000 feet? And the answer is we have a vision.
Miles Jay Allison: And we had a vision to step out of 100 miles and see if we could rebirth a major gas play, which is now the Western Haines Court. We have a vision.
Miles Jay Allison: We have a vision. And then we always monitor where where the gas supply is. If you look, we've been looking for the last probably six or seven weeks. And that gas storage level was is about 38% above the five-year average. Well, week after week after week has come down. It's like 16% above the five-year average. So it's coming the right way. And we're coming into the, you know, the three, four, five weeks of what we call the real meat of summer. So we do see that. We see LNG at over 13 bees a day right now. So it's back. Freeport is back!
Miles Jay Allison: And then we always monitor where gas supply is. If you look, we've been looking for the last probably six or seven weeks.
Miles Jay Allison: And that gas storage level is about 38%.
Speaker Change: Above the five-year average. Well, week after week after week, that's come down. It's like 16% above.
Miles Jay Allison: The five-year average.
Miles Jay Allison: So it's coming the right way, and we're coming into the, you know, the three, four, five weeks of what we call real, the meat of the summer.
Miles Jay Allison: So we do see that. We see L and G at over 13 bees a day right now.
Miles Jay Allison: And then we look past September and October, and you see the startup of Corpus Stage 3 and Fleckman's. So we see a strong fourth quarter of 24 runs from the LNG fleet, and that goes into 2025. So we are committed to managing; we're committed to sharing everything that we can share in all of our areas and protecting the balance sheet. And again, I want to compliment the Joneses for writing the $100 million check for the acreage that we've been acquiring. I think that acreage is worth a fortune, and they were willing to backstop that and write the check. So we're, we're going to be in good shape there. So, thank you for your time.
Miles Jay Allison: So it's back, Freeport is back, and then we look past September , October , and you see the startups at the corpus.
Speaker Change: Stage 3 in five minutes.
Miles Jay Allison: So we see a strong fourth quarter of 24 run from the LNG fleet, and that goes into
Miles Jay Allison: So we are committed to manage, we're committed to sharing everything that we can share in all of our areas and to protect the balance sheet.
Miles Jay Allison: And again, I want to compliment the Joneses for writing the $100 million check for the acreage that we've been acquiring. I think that acreage is worth a fortune, and they were willing to...
Miles Jay Allison: to backstop that and write the check. So we're going to be in good shape there. So thank you for your time. We appreciate it.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.