Q3 2024 Comstock Resources Inc Earnings Call
Good day and thank you for standing by. Welcome to the third quarter 2024, Comstack Resources earnings call. This time, all participants are in a listen only mode.
For the speaker's presentation, there will be a question and answer session. So ask a question during the session. You will need to press star 1-1 on your telephone. You will then hear an automated message, advising that your hand is raised.
Speaker Change: Who withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jay Allison, Chairman and CEO, please go ahead.
Jay Allison: Perfect, welcome everyone, this listening in, welcome for the John Stock Resources.
3rd quarter, 2024 financial and operating results conference call. You can do a slide presentation during our half of this call by going to our website at www.suckresources.com and downloading the quarterly results presentation.
and Daniel Pond, a presentation entitled, third quarter 2024 results.
I am Jay Allison, Chief Executive Officer of Comps Falk and with me, his Roland Burns, our president and chief and angel officer, the inheritance our chief operating officer and Ron Mills, our VP of finance and investigation.
If you would please refer to slide two, and our presentations and notes at our discussions today will include forward-looking statements, but then a meaning of securities laws. While we believe the expectations and state statements will be reasonable.
There could be no sure since expectations will prove to be correct. If you would turn the slide three before we start going over this slide, I don't want to make a few comments.
On Tuesday, I was watching Bloomberg News in the headline was quote, Big Oil, says, Hey, I'm Boom driving crazy demand for US natural gas. Now, not a way I love that word crazy.
and then on Wednesday I read in the journal, quote Wall Street Giants to make $50 billion bet on a and power project.
with the quotes, quote, guess is going to be at the forefront of this quote. Thatro gas can back up those intermittent renewables are very nicely encroached. Thatro gas fired plants will be critical in supplying around the clock power to data centers. Now.
Since those headlines came out on Tuesday, Wednesday, I know there are not trick or treat headlines So today is Halloween everyone, so happy Halloween
He had done his own small little bit having a pure natural gas company report results on Halloween.
Jay Allison: I told someone I was hoping to not, I see you get a my front door dresses of flame
How though that or is a horseshoe you either once could have made any of the good news that
or the Treat for Natural Gas Companies is that America and the world needs more natural gas. The very near future is the man for an additional 15 BCF of LNG feed gas gets nearer.
Jay Allison: The long with growth in power to man being driven by the growth in data centers in AI.
The question is, here's the question.
His word has come thought fed into this puzzle and how did we position ourselves over the past four years to be a difference maker in the U.S. hydro gas market?
has won Analyst State's own Monday, quote, the producing basins are facing inventory exhaustion and a quote.
You either had inventory by M&A or exploratory drilling.
Comps thought has chosen four years ago to grow inventory to exploration and our new Western Ainsville play.
Jay Allison: Since 2020 we have secured 450,000 net acres.
Speaker Change: and a Western Angel, a drill 18 wells over an area of 26 miles to give birth to a major natural gas field close to the LNG demand corridor, which could potentially.
Speaker Change: had decades of additional drilling inventory.
Speaker Change: I thought someone that is like a dog chasing a car and catching it. That's what we did in Western Hazel. We talked to 450,000 editors and now we're learning how to drive the car or in our case to develop the Western Hazel well by will.
The results of the day look very, very promising so the future looks very bright. In fact, the day day and here is our COO, where report...
on our 13th Western Hazelwell and give you cost per foot, yes.
Speaker Change: [inaudible]
on slide three, we summarized the highlights of the third quarter. Our financial results continue to be heavily impacted by the continued week natural gas prices, as our average realized gas price before hedging with a dollar nine each for the quarter.
has resolved our oil and gas sales, including hedging, for 305 million in the quarter, and we generate a gas flow from operations of 152 million for 52 cents per share and adjust it to e-badacts.
A $200 million are just in net loss for 17 cents per share for the quarter given the lower completion activity that was planned for this quarter. We had only eight operated well starting to sell since the company's last update.
These wells had an average initial production of 21 making keeping feet per day. One of those was our first course few Hainesville will, which had an initial IP rate of 31 making per day, which then we'll talk about later.
We're continuing to advance our Western Angelage Floor Torrey Blake. Our acreage in the emerging play is now up to 453,881 net acres.
Most importantly, we have substantially reduced the well cost and the Western Agnes will our 13th will recently completed at a cost of approximately $2,814 per level for it.
This was a single well with an 11,400 per ladder which did not get the cost savings that we see on a two-wheel pad.
Speaker Change: The next five wells in the western and the north-spectative returned to sales in late 2024 to early 2024. Four of those are owned two well-pads.
Now I give it over to Roland to go to the third quarter of the next result, Roland. Alright, thanks Jay.
and slide four, recover our third quarter, financial results. Our production is third quarter average, one point four.
Roland Burns: BCT per day, which was 2% higher than third quarter of 2023.
and continued low natural gas prices resulted in our only gas sales in the quarter declining 3% to $305 billion.
Speaker Change: EBITDAX for the quarter was $200 and 2 million in we generated 152 million of cash flow in the third quarter. We reported in adjusted loss of $49 million for the third quarter or 17 cents per share.
Higher depreciation depletion and amresation in the quarter really accounted for the loss.
the higher embersation rate, driving.
The increase in our DNA was caused by a decrease in proved und developed reserves, which had to be determined under SEC rules based on the low natural gas prices we've had over the last 12 months.
and it's not five we cover our year to date financial results. Production in this period average 1.5 BCF E per day and that was 5% higher than the same period in 2023.
again, Leonardo Natural Gas prices caused a rolling gas sales in the first time months of the year to decrease 7% to 990 million as compared to 2023.
Are you a bit dacked for the first time months of this year?
is 598 million and we generated 452 million of cash flow. We reported that in that loss of 121 million for the first time last year or 42 cents per year as compared to income of 105 million in the same period in 2023.
Speaker Change: and Slot 6, we break down our natural gas price realization in the quarter.
Speaker Change: before late 9x7, my price average $2.16 in the third quarter, and the average canary have spot price average $2.9.
Rilla's gas price turned the third quarter average to $1.90, reflecting that 26th differential to the price.
Speaker Change: and the third quarter we were 28% hedged, which improved our realize gas price to $2.28.
has been looking ahead to the fourth quarter will be 50% had.
Speaker Change: and slide seven, we detail our operating costs for MCFC in our EVADX margin.
or operating cost for MCFE average 77 cents in the third quarter at the 7th and improvement from the second quarter rate. And then our margin increased 67% in the third quarter compared to 61% in the second quarter.
Speaker Change: A lot that was driven by lower production and had the alarm taxes which were down five cents.
Reflecting a reduction in the statutory rate in Louisiana. Our lifting costs were also down 5 cents in the quarter.
are gathering costs for up three since the quarter, but this is the only data-sum prior period of adjustments from some of our transport agreements. So we expect to see that back to the kind of normal rate in the fourth quarter.
and our DNA cost were unchanged from the second quarter.
and John Lewis.
and Sloddake, we recap our spending on our drilling and other development activity. We spend a total of $184 million on development activities in the third quarter.
and all of the first time, much this year, we've drilled 23 or 18.6 net, handsome wells, and 12 or 11.1, the exposure level. We've also turned 41 or 35.9 net operated wells to sales.
Speaker Change: So far this year, they had an average op rate of 24 million per day.
Speaker Change: So, I'd now recap, sir, a capitalization at the end of the third board. We end of the quarter with $415 million of borrowings outstanding in our credit facility, given us $3 billion of total debt including our outstanding senior notes.
Yesterday, our bank group unanimously reaffirmed our borrowing base $2 billion in our electric commitment still remains at 1.5 million under the bank credit facility.
and given the extended period of low natural gas prices that we've had, our bank group approved an amendment to...
Speaker Change: and the Covenant leverage ratio that we had. The new leverage ratio and an amendment increases to less than four times.
Speaker Change: through the first quarter of next year, and steps back down to 3.75 times, and the second quarter of 2025, and then to less than 3 to half times by the third quarter of 2025.
Speaker Change: At the end of the third quarter, we ended the quarter with $1.1 billion of liquidity. Now turn the caller to Dan to discuss the operations.
Dan: Okay, thanks, Roland. If you were to go over on slide 10, this is an updated slide from our last call, which outlines the new development plan we have utilizing the horseshoe lateral concepts.
The test to concept, we have successfully drilled and completed our first single horse you will, the Sebastian 11.5, this is located in the Soto Perish, Louisiana. And it's located on one of our isolated single section, take this box.
We turned the world of sales early last week and we just recently reached an op-era to 31 May and keep it for you today from a 9,382-foot completed library that is in the Hanksville Shell.
Dan: Building upon this successful test, we will be pursuing additional horseshoe well projects in the future.
The technology allows us to develop acres that before presented more challenging economics by being limited to drilling short ladles.
Dan: The section we had depicted on this slide represents the project we have scheduled for late next year. This section would have originally been developed by drilling four or five thousand foot ladders from two well paths with a forty million dollar capital cost.
Dan: This same section will now be developed from a single two-wheel pad, drilling two horse-wheel paddles with a 32 million dollar capital cost.
Dan: and this is based on the DNC calls to $1,740 a foot and I recently completed the best well calls came in slightly lower than this.
The project will deliver cost savings of 23% or $8 million which substantially improves all our key economic performance metrics.
We expect the well performance from the horseshoe wells will match that of our regular 10,000 foot ladders.
and with this success we have also optimized our drilling inventory by converting 57% of our short times of locations to 64 future or core shield locations.
We're still in the process of evaluating our short-bosero locations for additional horsey locations.
and Slot 11 is our current drilling in the tour, as it stands at the end of the third quarter.
our total operating inventory is 167 gross locations.
and so 1,252 met locations which equates to a 78% average working interest.
Dan: The non-operated inventory now stands at 1,199 of those locations at 158 net locations which represent 13 cent average working interest.
Dan: The drawing of the course split between painful and unboser locations broken down into our four different categories by lateral length.
The short labels, the less than 5,000 foot, the medium labels, up to 25,000 and 8,500 foot.
and the Long Lauders, in the 1985-110,000 foot and our extra Long Lauders that go past 10,000 feet.
and I wrote a software at an emitter, we now have 180 short ladders.
Dan: 331 medium laddles, 482 long laddles, and 614 extra long laddles. And the inventory is split, evenly, basically between the hangs of the buzzer.
The updated inventory numbers include the impact of the identifying 64 horsey locations in the hands full-shail.
Speaker Change: 2.4% are 68% of the gross operated inventory has a lot of the 538% of the gross operated inventory have loudels longer than 10,000 feet.
The Avers louder awake, Miles stands at 9,261 foot and this is up slightly from our 9,77 feet, which we had in the end of the second quarter.
This is a story for Bob's over 30 years of future drawing locations based on this year's activity.
and Fly 12 is the Charter Outlining our average ladder link, drill, based on wheels that we've turned to sales.
During the third quarter we turned 11 wheels to sales with an average of length of 12,587 feet.
and David Jolice raised for a 8,912 feet to 15,333 feet.
Our record longest live will still stay as at 15,726 feet.
All the wells we've turned to cells during the third quarter had a lot of us along with the 8500 feet.
Dan: and furthermore, 90-11 wells that turned the scales during the quarter-war extra-long laddles that wrote the 10,000 feet.
and we mentioned earlier we did not turn to fails, any wells on our western hays of the lake that's during the third quarter.
However, we do have six additional wells in the western high school that we plan to turn to sales by the end of the year or early January, 2025.
The first of these six wells was turned to sales last week and we're currently being float tested.
Looking ahead, we have several extra-orinal levels slated to turn to sales over the remainder of the year and we expect our average ladder length for all of 2024 will be approximately 10,100 feet on a total of 48 wells turned to sales.
The recap on our long collateral activity today, we've now built 100 man wheels.
Dan: The laughter was longer than 10,000 feet and we had drill 40 wells with loudels over 14,000 feet.
Dan: Slide 13 outlines are new well activity since we last provided the well results at the end of July.
and the last call we have eight new wells that have turned to fields.
Dan: The individual opi rates on these range from 10 million cubic feet a day up to 31 million cubic feet a day with an average test rate of 21 million cubic feet a day.
Dan: The average louder weight was 12,391 feet, but the individual louder was 9,382 feet up to 15,272 feet.
Dan: This last includes our first four shoe well, the Sebastian 11 number five. Turned a sales last week that it's an IP rate of 31 May and cubic feet a day.
Dan: Recap and our activity levels were currently running five rigs and two-fright crews, our second-fright crew returned in late September following a 70-day fri-coloné during the third quarter.
Dan: We currently have two of the five of rigs drilling in the western Heismel.
We also have both of our fractalates currently working in the western hands of where we're in the process of racking our first two well pads.
Dan: Both two well-pads will be completed in the fourth quarter and turn to sales at year-end.
Dan: In addition to these two 12 hours we also have two single wells that turn to cells by year in which generates the total six western, high, 12, turning to cells to bring now on your own.
and slide 14 is the summary of our DNC calls through the third quarter for our Mint Smart Long Latter Wells and our located on our core East Texas and North Louisiana Anchorage.
This covers our wells with our little graders and 8500 feet long.
Dan: and during the quarter, all 11 wells that we've turned to sales were located.
on our Corey Sexes, North Louisiana, because it all 11 will fell into our bitch mark, alarm 11 will group.
We're now providing the drilling cost per foot based on the weight the well's reached TD. This provides a better view of the current drilling environment and the drilling cost environment. And just to be better aligned with the timing of when the drilling dollars are actually being spent.
The completion cost for foot continues to use the turn to sell today.
Dan: So in the third quarter, our Drilling Thulls average $642, this is a 3% increase compared to the second quarter.
Our third quarter completion cost came in a $776 preferred which represents a 6% decrease compared to the second quarter.
When we kind of look out ahead to the next couple of quarters we do see our agency calls for remaining flat to go in slightly lower.
and I'm now turning the call back over to Jay to somewhere as the 2024 Outlook.
and I roll. Thank you, Dan. Thank you. If you would address you slide 15, where we summarise our outlet for 2024.
Dan: and we've taken a number of steps in response to the significantly low natural gas prices this year.
Dan: During the first quarter, we released two of our operative drilling rigs. Reducing a rig count to five rigs, and we also released one of our fractures, Reducing our fractal aid to two spreads.
Dan: We no longer have any long-term commitments for pressure pumping services.
with those steps are 20, 24 kf expected to be down 25 to 35% from the 20, 23 level. We suspended our quarterly dividend saving approximately $140 million of dividend payments.
Dan: and late-marked Tom Adjordy's shareholder Jerry Jones and invested in additional $100,000,000,000,000,000 to the company.
Dan: Stephen equity profit twice food.
Starting in late February we have had it significantly to our head position.
Starting in the fourth quarter of 2024 and extending through the end
Dan: of 2026, we're targeting a hedge level of 50% of our expected production level.
Dan: and early April we further enhanced out the Quitteding Position for the $400 million senior notes offering.
We are evaluating our planned activity level of in 2025, based on the outlook for natural gas demand, and we'll adjust our drilling program as needed to a response to the natural gas prices.
for continuing to maintain our very strong financial activity, which started just under 1.1 billion at the end of the third quarter.
Dan: Our industry-leading lowest cost structure is an asset and the current low-natal gas price environment, as our cost structure is substantially lower than the other public natural gas producers.
We remain very focused on putting up our Western Handful Play and continuing to add to our extensive accret position and this exciting play, our Western Handful Acret position totals over 450,000 net accrets.
Dan: We believe that we are building a great asset in a Western Angel that will be well positioned to benefit from the substantial growth in demand for natural gas and our region is on the horizon driven by the growth in LNGX ports.
David Gens, to show up in the second half of next year. I will now have Ron provide some specific guidance for the rest of your Ron. Thanks, Jay. On 516, we provide our fourth quarter guidance. The fourth quarter production, expected to ring.
Ron Mills: Rumin in the 1325 to 1375 Mayan cubic feet per day range which
Ron Mills: is down approximately 10% from the fourth quarter of 2023 as expected and has been discussed on prior calls. That's related.
to the impact of the timing of dropping the two rigs in late in the first quarter. The DNC, CapEx guidance for the quarter is $225 to $275.
Due to the timing of bringing wells online, we now expect 43 net wells to be turned to sales in 2024 versus the original expectation of 38 to 39 wells when we provided our original guidance.
Those wells are coming on at the very end of the year so there's not much production impact but we do bear the full brunt of that capital expenditure. We continue to anticipate leasing cap X of 2 to 5 million dollars per quarter.
and CapEx related to pinnacle gas services which is funded by our partner Quantum is expected to be $50 to $90 million during the quarter.
Ron Mills: On the cost side, LAW is expected to average 24 to 28 cents per MCFE, while GTC costs are expected to average 34 to 40 cents per MCFE.
Production and AdValoram taxes expected to average 14 to 18 cents while the DDA is expected to remain in the 140 to $1.55 range.
and Gene E.S.E.C.E.A. is remains in the $68 million for quarter range with about $3 to $4 million of non-cached.
Dan: and GNA expenses expected.
Dan: with the current sofa rates in the April notes offering we now anticipate our cash interest.
6.5 million dollars during the quarter.
and our non-cash interests in the quarter will be three to four million dollars. Effective tax rate remains in the 22 to 25 percent range and we still expect to defer roughly almost 100 percent of those taxes. I'll turn the call back over to Jill to answer questions.
Thank you Ron. At this time we will conduct the question and answer session. As a reminder, to ask the question you will need to press star-1-1 on your telephone and wait for your name to be announced. So with straw your question, please press star-1-1 again. Please stand by while we compile the Q&A roster.
First question comes from Kelly. I'm Colleen with Bank of America. Please go ahead. Your line is open.
Hey, good morning guys. Thanks for getting me on.
I guess I'd like to start with the elephant in the room, which is the planned outspin for forke you.
The Pring it up a little bit, I think we're all pleased to see that you guys have the waiver.
But I think some of the market thought that's ripping the coming in will lead you back to more of a free cash priority.
from our perspective. I think we get it. We see you trying to stabilize production and division for maybe a better 25. Just hoping that you can kind of talk through your motivations to outspan through this solve pricing. And then maybe articulate your plans to manage the balance sheet in 25.
and that's a good question. I think you'd really love it.
and the first one is the first one.
when we originally had the plant in place and the time he kind of execute the plan. You know, the prices were a little bit stronger and we figured it would really cover that.
and I think they only have...
There's a little higher expenditure level only because the drilling days have been quicker in the Western Hainesville, so a lot of the completion work that was going to cross over, some of those are going to cross over into 2025.
Dan: is kind of now expected to be mostly in the quarter. So other than looking at an individual quarter, I think if you looked at it on a longer period, there hasn't really been much change at all in the plans. It's just how the cost end up being reported.
Dan: So, you know, our goal for 2025 is again to, you know, with a higher hedge level, I think it'll be easier to, to achieve and take some of the risk out of gas prices is to try to, to balance, you know, to balance, you know, to.
Dan: and the capital we invest back into with the cash flow we generate from operations.
I've got a so it's really timing and your plan to keep activity continue to progress forward.
and maybe my next question and answer.
Speaker Change: really on the Western Haynesville. Maybe this is for Dan. Cops for per foot on the Hodges is better than our high end estimate, and it's just one well. You've got a too well pad coming up, so maybe those costs are getting better.
and maybe as in the side if you can just discuss those drilling costs, we'll take that, but more broadly, with the amount of well said you'll have online the data points on cost, maybe you have an event cap ahead, went to we expect more full sum updates on the Western Hainesville in 25.
Well, I think we're going to be probably next year, early next year, on the next call, we're going to be coming forward with, you know, I see a lot more information on the Western Hainesville.
You're right, this 284-ton foot, which is a big milestone for us. What's a single well? In a bottle of wells, we drilled a night, of course, this is the third thing to well. We start part of the sales. This was the fastest one we drilled the TD 51 days.
Speaker Change: and I know if you go back a few years, we started out, you're going to need some things and...
Speaker Change: 75, 70 to 80 days.
Speaker Change: and now this one comes in at 51 days, you know, a massive improvement and we're kind of still working a few days off.
We had really good execution on this particular well, the Hodges number one, drilling, you know, just all phases of the operation went really well.
Speaker Change: You know, we've got some pretty good, fracking and place also right now, the well for act really good. You know, and I'll also point out, you know, one of the big drivers is the latter length and the length on this one was 11,400 for that, or 400 for that.
So that obviously is very important in that cost-perfitting number. Now the numbers that we typically, the numbers that we're kind of putting out on kind of our targets, you mentioned $3,000 a foot.
Speaker Change: is all kind of normal hours to a 10,000 foot level. So anytime you have a 11 to 12,000 foot level, it's going to generate a little bit better cost-perfect and vice-versely, you know, if you're at 8,500 and 9,000 foot level, it's going to be a little bit higher cost-perfect.
Thanks for that, we are watching with interest guys.
Thank you. One moment for our next question.
The next question comes from Carlos Escalanti with Wolf Research. Go ahead, Carlos, your line is open.
Take good morning guys, thank you for taking my call.
Well first of all, I like to start with the horseshoe results because they are certainly encouraging and I think they're actually, this is what the investment community wants to see. Now I do think that
We need to rationalize how this translates into free cash flow generation So my question and bearing in mind because you guys know this better than I do that not all acreage is created equal
Speaker Change: What's the geographical spread of the 64 locations that you think are candidates for this? Of course, your hands will locations.
Speaker Change: Thanks.
Speaker Change: Good question, so that is 64 just in the hands full and you're right, I'll just start off. We are very happy with the results on the Sebastian Will.
Speaker Change: We didn't have no issues in the world, I'm going to say maybe two extra days, if you compare that to just Roland a straight 10,000 foot ladle.
Justin, have any issues and the fracket fracket, if you didn't know.
Speaker Change: and it was a horseshoe, you can't tell any difference in the strike in 1000 foot, lateral and the horse-eat.
Speaker Change: The Well did for accurately good again, so results look fantastic, so we're super excited about it. As far as the spread of the locations, I feel pretty evenly kind of spread across if you look at that acreage.
Speaker Change: position in discounted from South to North. I think we've got them, they're just pretty much all across the basin. So, you know, we've got them in, we've got them in 1-6B per thousand. We've got them in the 1-8B per thousand type of areas up to the 2.
I think, kind of the answer for you is really a sister to spread out across all the eggplants. It's not really an any specific degree of effort. Spot.
Speaker Change: Sure, that certainly helps. I guess you're answering it.
Provider my with another question if you will on that same topic and maybe this is a bit too early.
because the Western Angels will still buy all means and exploration play. But do you feel like you will come across geometry, at least line issues that you have in the handsville, in the traditional handsville. In the Western handsville, and then just to finish up my second question, which is also in the Western handsville.
What do you expect to be the average lateral length for your program going forward? Bear in mind that you have a harder reservoir and it's more difficult to drill.
Okay, so I think your first question might be as...
Speaker Change: Maybe Hocken-Fond will be with Leaflands.
Speaker Change: and the Western Hinesville's arses Louisiana. You know, the really the big difference between us.
and Louisiana, we deal with square-mile sections, right, and every section, a unit. So we're usually either confined to drill in a 5,000 foot, a 10,000 foot, or a 15,000 foot.
Speaker Change: or you know later on in the play we did 7,500 foot laddles.
Speaker Change: and now we've got the ability to turn the will bar around and then horseshoe and so we deal, you know, the least lines are the section lines.
Speaker Change: and Texas, you don't have sections. Abstract surveys, you pretty much can build your units more customized.
Moore, much more regular and shape and size and so.
We're gonna have ladles and textures that are kind of any different links between say 5,000, 10,000 feet you can have some at 9, you can be at 8, 6,500, 11,500, not really.
Speaker Change: and I was kind of a specific 5 to 15 or 7500 foot groupings.
Speaker Change: So really that's kind of the difference in drilling and you know once the light versus the other. As far as the average, the lateral length and the western hazel, we're looking at about 10,000 foot average.
We've got a lot better at handling the bottom of temperatures, so that's really not an issue. I think probably the bigger driver there is not the temperature.
You know there are some minor faults here and there so there's just certain there's some z-o-hazards in certain places you just where you can't drill across and have to stop.
Speaker Change: and so that's really kind of the only driver there. Obviously we're trying to drill the longest labels we can now that we're holding an acreage.
I see, you know, I think 10,000 is a pretty good, a pretty good number.
You know, looking out ahead of one average louder link will be. So, you know, we drill a 12,700-met max already. And I think our shortest louder right now is on a say 7800 feet.
So, you know, we're not having issues drilling these.
11,000, 500 foot laddles, it's just limited by like a sad. See your hazards or other factors.
Speaker Change: Wonderful, thank you guys.
Speaker Change: Thank you and bye for our next question.
Speaker Change: The next question comes from Charles Meade with Johnson Rice. Go ahead, Charles, your line is open.
and the whole of Compsock team there. I want to go back to the Sebastian Well. I can't help but notice that it's the shortest lateral with the highest IP on the quarter.
Charles Meade: You know what's early, but do you think this is just luck of the draw? Or is there something else going on here perhaps?
It's not luck of the draw. I'd say, you know, all of the horses we do and Louisiana are pretty much going to be about this same lateral length unless we...
I think someday we'll probably reach out to the tent to do a horse you know that's maybe 7,500 feet and 7,500 feet. That's way out.
and we're getting out ahead of ourselves. But, you know, this is kind of about what we would expect from a well in the area where we drilled this well on this acreage.
So we're not surprised at all. I mean, we totally expected this was going to be the result.
and I see this being very, very repeatable.
Got it, got it, that's good, that's good to have your opinion on that and then going back to the Western Hainesville, I think you've discussed this a bit. It's great to see what you've done with that Hodges well but but as you think of repeating that or trying to deliver repeat on that.
I'll leave it aside, the lateral length. What are the pieces of the whole well construction and completion? Suppose that you're going to be most focused on to try to get a repeat of that.
Charles Meade: and Dauer Puffett-Metri.
Well, you know, I think first of all we got to be in we have become more consistent. We've had some really good showings, but we have in the early wells, we've been had the consistency.
We're becoming much more consistent at basically the really good performance.
Charles Meade: You know, we figured we always get a 5% cost reduction on a pad grown versus a single well pad. So this is a pretty good number for a single well pad.
This will, you know, on the longer ladder, like I mentioned, you know, just a little bit ago, helps with that number. That's going to always move the number down a little bit when you start doing over 10,000 feet. Okay, and this one was 11,400 feet.
Charles Meade: So had this exact same oil, like I said, we had great execution across all phases. If this would have been a night, that was a flat ladle, this would have been the cost of foot would have been a little bit higher. And if we had been 12,000 foot, it would have a little bit lower than this.
So we definitely see the cost we start doing pad drilling with this performance. You know, we're going to generate numbers lower than this $2,800 per foot.
That's great detail, thank you.
Thank you, standby for our next question.
The next question comes from Jacob Roberts with TPH and Co. Jacob, go ahead, your line is open.
Charles Meade: Gordon.
Good morning. I believe I...
You've all previously contemplated adding a few rigs next year and I know understand it might feel a little bit early to talk about 2020.
25, but given where the commodity price is today, how are you thinking about the timing of those rigged, if at all, and then maybe as well if I could tack on what you might consider a balanced program in terms of those rigged at current commodity prices.
Speaker Change: Yes, a good question, it's kind of early because we will really be watching this.
Gasmarket, how if we have a winner or not, those are a lot of factors, especially driving gas prices in the...
Charles Meade: 1st half of 2025.
Yeah, it's the second half of a twenty-five we kind of see some increased demand. So yeah, that's something we're looking at really hard in deciding, you know, when we bring back the two rigs that we dropped in the first quarter of this year. And as we,
We do have a lot of flexibility and when we do that we take we can lot up the services we need it and we have a lot of services we can with short notices you know drops. So again, we want to be very responsive to whatever environment we have in 2025.
you know target you know having higher hedge percentage in 2025 that 50% level is kind of what we are going to target for 40% almost hedge now for 2025 so we have a little work to do there but that should help.
That should help us stay more on track than we're this year. If the first three quarters, we were a little bit less than 30% had.
Speaker Change: Thank you, I appreciate the color. Maybe if we could look at the Western Handfill and particularly the the midstream, can you frame the current runway you have what the Q225 edition will add that runway, maybe in terms of quarters or wells that you ultimately see being able to handle being able to be handled.
Speaker Change: Good question, you know, as we, with these six wells coming on that will go into our pinnacle system there.
and we had a pretty good rate by the January. We start to really hit the treating capacity, not the pipeline capacity of our Bethel treating plant. And we do have...
We do have quite a bit of backup capacity where we could offload to...
to a couple other midstream companies that we have contracted capacity and a good rate on. So we can definitely do that. We just would prefer to have it in our own facility.
So that's where the key, a lot of the expenditures that we are incurring now, especially in the fourth quarter.
Speaker Change: and early in the first quarter next year is really to open up a new gas treating plan at Mark K, which will be on the other end of our Western Hainesville footprint.
and then that's going to add 400 million a day of tree capacities. So then we'll have a lot of capacity to handle the growth out there. So as that one comes online, we do have the ability to...
to offload in process under these arrangements we put in place. So we definitely won't have any...
Speaker Change: and the constraints as far as actually producing what we do. And then as we evaluate the program and add more rigs, that's where we're continue to look inside the week. You know, want to build out additional capacity for the play.
Speaker Change: Great appreciate the time.
Thank you, stand by for our next question.
The next question comes from Greta Droski with Goldman Sachs, Greta Go ahead, your line is open.
Hi, good morning and thank you for taking my question. I was just wondering if you could spend a bit more time on the horseshoe wells and the benefit you're realizing there. Is there a proportion of your overall operations that you hope to apply this technique to over time and do you see potential for any upside tier 64 horseshoe locations that you've outlined? Thank you.
Speaker Change: Good question. We do definitely see an upside of the source of the number of locations that we can get converted.
Speaker Change: So the 64 that we've got converted in the inventory so far is just only the hazel side. We're still working through the boger, all of our boger sticks and we'll probably have a number on that. I'm going to sometime in the first quarter.
As far as the number of course used, you know, kind of pushing into our development program.
I mean, being at this news is pretty fresh. We obviously are going to do more and want to do more for right now and are doing program. Obviously we've got a lot of things in place and it takes a lot of time. Obviously to get things you're already in to move around, you know, just a lot of lead time.
and we have a single horseshoe that's coming up early. Next summer is the next project we got on.
Speaker Change: We got a two-wheel pad horseshoe which is the one we talked about on the slide here that is later next year than well. So we have a triple. We got a triple horseshoe well pad that will come up behind that in 2026.
Speaker Change: So, you know, like I said, we love the results.
It's just that it's hard to add push a bunch of these into our Gillian program that's already been set for a long while. You know, I'm short notice, but I can see more than what we have scheduled now, maybe get pushed into the program as we get a little bit more data on this well.
Speaker Change: and I have some time to just get the virulent program, you know, revives a little bit, which takes a little bit of work.
Speaker Change: and John Miller. We'll allow it to come to you. If you get, you know, we always high grade our inventory, our 1400 locations, etc. And now the horseshoe will be celebrated to the front of that as Dan is said. So that's a good thing, but, upon the recent results, we just have in this page a little little.
And again, we might have, you know, that menu or more in the buzzer. So as we keep looking at that in the first quarter of 25. Some of the other indirect.
Speaker Change: and Paul Smith, from the Horses University, especially as we get through the Bozure inventory. Yeah, and our deserves, you know, we will move these up with much higher.
Speaker Change: Economic Results and so even in low prices some of these can come very, very economic. And so yeah we see the ours on the horseshoe wells being two to three times better than a short lateral Haynesville well.
Speaker Change: says three times better. So that's a, that's a, it begs a lot more that inventory, you know, very economic at lower gas prices. So you'll see some impact and the improved, you know, just be able to bring some, you know, a lot more of that inventory and improved on developers.
Speaker Change: and I think I didn't really answer that part of your question. So many as far as the performance versus the single 5K's, you know, our return rate, it basically triples, you know, the return on the wells, our payouts will be less in half.
Speaker Change: If you just look at two, you know, the two single five days versus the horses, you're going to generate five and a half to six million dollars. This will be 10 value. And so, you know, pretty, pretty substantial.
Well we got, yeah we up the rope.
Speaker Change: We continue to keep a good aspect on the Western Hainesville where we've had great opportunity to partner with other companies that want the shallow production or the existing production and we can have a good acquired on the deep right.
and actually have acre child by production. So those opportunities interest us a lot in that area and there's been, you know, it's a fairly the older.
Vertical Wells are fairly matures, so they are being divided by the larger companies that own them and so we can continue to work that part of the M&A cycle and there are still private operators or...
that you know have a plan to invest so we expect to see those private companies probably over time.
you know, be consolidated, you know.
over the next several years and probably the gas prices get to more attractive levels. It's probably what kind of fuels that start up again in earnest.
Speaker Change: Thanks for the time, thank you.
Thank you one moment for our next question.
Speaker Change: The next question comes from Noel Parks with two A Brothers Investment Research. Go ahead. Your line is open.
Hi, good morning, I just had a couple. I was just wondering,
You mentioned Doug.
Speaker Change: It's been important to avoid faulting in the western hemsill. As wondering, you know, to what degree you can anticipate those out of it's seismic or leprosy penetrations or anything. So just curious on how you're handling that.
We do have 3D seismic over almost the entire acreage position that we have and so we've got a really good look on mapping of where everything is and got everything pretty much identified.
Speaker Change: So I don't see, we don't really see that as an indicator of an issue for us. It's just something that we do when we plan where we're going to lay out our sticks and the development. Obviously that's...
You know, very important factor but we do have 3D, good data so we got a pretty good picture, what it looks like.
and Greg, thanks. And you know I am sort of a macro.
Speaker Change: Copic. In short, he's using another gas producer sort of a firm appointed, you've made in the past, which is that lower for longer, neck-ass pricing and therefore lower level of activity.
It is likely to make for a tougher ramp-up of industry activity and then possibly get back at reflux.
and I have a higher peak in gas prices when we see them come back. So we just another quarter I grew up out with.
Speaker Change: and the places where they are a little better heading into winter, but just wonder about your perception of that.
and maybe a week winner versus normal winner perspective on maybe where that plate might occur.
Speaker Change: Yeah, that's a great question. That's the challenge of the natural gas industry. There's a lot of demand on the rise and that comes in pretty large increments.
Speaker Change: and but you know it's not here today.
and so near-term gas prices are going to be really dependent on what's the demand for heating in the winter and that's the...
That's something we all have to see how it plays out. So in the short term, especially the first half of 25, it's going to be really tied to that winner. You know, we, we, I think we have two factors, you know, that are in our favor there. One is there is, you know, start up of new.
of New Demand, Ellen G. Side, it's absorbed in winter, even today at the highest rate has been.
and two, you know, that the rig count has been very low and so production declines, you know, will also be there to help tighten the supply. You know, and as you can see even for Comstock, and we've actually had even though we cut our activity back.
and the first quarter, it's not really to the fourth quarter that we really start to see to decline. And we were one of the first...
to really cut back activity in the Hainesville. We weren't the last. And I think you'll see that a lot of especially the private operators follow several months later and you'll see that first quarter, just a lot of that decline really is showing up in the Hainesville.
So help, I'll take a help.
Helper's kind of balance that...
Speaker Change: Supply and demand during the period compared to last year when we had the opposite. Coming into this year we had the opposite situation we had a really high activity level.
You know, Anna Warm winner and the two, you know, the two kind of created, you know, the big drop in gas prices that we've suffered this year.
Speaker Change: It's going to be, I think, a more volatile gas market and I think you could have trying to balance the market, you know, they balance it with price, that's just how the gas market works.
So, there's a little bit too much gas, the price drops a lot, it goes up a lot and I think we're going to have a lot of volatility.
Speaker Change: and 2025 as different.
These different factors kind of play against each other.
Speaker Change: and then know a lot, I've got met on the Falting question. I mean, we have major control points for almost all of our 450,000 net acres. I mean, we do have those points and as Dan said, we've got 3D shots to come to the majority of it. And if you look at M&A,
Law of the MNA was done, you know, $4.5 gas price and the Holy Grail is inventory. It's typically doing MNA for inventory. Ever now, in its size, it's a bit small, but a lot of the MNA is inventory. The Holy Grail is inventory.
Speaker Change: So I think what we were able to do, we were able to go take an old gas field, which is now we call the Western Angels, we meant deeper, just like we did in the core of the hands of the
and we figured out that technically we can drill a complete disworld and make it competitive with our core.
So it's all about the ride view graphics plot. It's about the ride drill bit performance, it's about the ride EUR and it all said you throw in our horseshoe. It makes it a little bit more potting because it's...
and Roland Sidney, our arm, the horseshoe is 3000-better and your typical lane to a well. And you get to the bank, 17 bank, looking at us.
and they look at the whole company and they look at the future and that's why we had unanimous approval.
It all makes a lot of sense you just to your point, you have to weather this storm in order to be there when the broad light and sun comes back out and we're more than well positioned to do that.
Next question comes from Bertrand Donies with tourist. Please go ahead your line is open.
Bertrand Donies: Hey, Team, just want to follow up on the recount commentary. You did a great job of notifying your rigs late last year to get them dropped by, I think, at the end of the first quarter. So it seems like you have a pretty good flexibility on those. Do you have an update to the best moment on that? Maybe how many months it would take for you to drop or pick up rigs?
Speaker Change: Maybe just logistically, do you have to do it around December or is it just as easy for you to do it say, you know, summer or fall?
Yeah, there's no real timeframe, typically we've got to, you know, give about half the rigs that in our fleet that are really just required, 45 day notice.
So we have to plan around the other end and then obviously the...
Logistics of moving to rig out, obviously, I can just pull it out and then live a project or a middle of a multi-well pad. So it's really all about planning for it. So yeah, that's obviously something we look at at very hard as we as we're pondering or 2025 budget and the right activity level.
Speaker Change: and you know kind of see how things play out but it's typically you know December when we really make these make these final decisions like we did last year and and then hopefully have a good plan to get it in place quickly like we're able to do for the you know this in 2024 year.
Speaker Change: Now one thing that we've tried to do is we've tried to have all of our rigs that be capable of drilling in the West from Hazel. So even if they're drilling in the legacy area, we want them to be qualified if you need to move them over to the West from Hazel.
That makes sense and then switching gears to the land leasing program, it seems to continue to be strong. Seems like every time you think you have an idea of...
Speaker Change: How much is out there, you keep finding more attractive opportunities, is that because of the movement and gas prices or is the leasing team just kind of hitting their stride or is your view on the long-term value changing just, you know, what do you keep surprising to the upside on that?
Speaker Change: Well, you know, if you spent four years looking at 3D and at longs in a well-results in you have an area, you can like I said, it's like...
We were chasing this big footprint and we actually got it. So if there's a little bit of expert there, I mean you keep your land good busy.
The cleanup, you know, around where you're already leased.
and after anything else, you would need to expand a little bit.
You know, I'd give you a personality percent of our leasing program.
is in a rear view mirror and I thank you for that, our balance sheet, the depth that we've heard it.
and that's like a big M&A event. I mean we have acquired the A for now drilling it. We control the mid-frame with pinnacle and you see the well-caw for coming down and as I said the Holy Grill is inventory.
If we've got 14 other locations, the majority are those in our legacy. I mean, just think of the outside that we would have on 450,000 net acres and the western range book.
Speaker Change: That is the goal, so we just keep playing this up.
Speaker Change: You shouldn't expect any quarter where we spend this $50 million like we had done in the past. Those days are behind us and the reason we were successful in acquiring that acreage, just because gas fell out. Nobody was after doing this.
Speaker Change: Very well said, and then I just want to clarify something. I think I heard a triple horseshoe pad in 2026. Is that three horseshoe wells or is that three sets of two horseshoe wells for a total of six? Thanks guys.
Speaker Change: So that is three horses you wills, which would be, you know, the problem that would have been six, five thousand foot ladders.
Speaker Change: makes sense thanks.
Speaker Change: One moment for our next question.
Next question comes from the line of Jeff Jay with Daniel and Energy Partners. Please go ahead.
Hey guys, thanks for taking the question real quick for me.
Looking at the horseshoe DNC, about 1700 of foot versus counter by the traditional
and later on, you know, 14,500. Is there any reason that you're, as you do more of these and get better at them, that you couldn't, those two couldn't sort of get closer together? Or is there something about horse-feet drilling that's always going to be a little more expensive?
Speaker Change: Thanks.
We're only completion side, it's really not anymore expensive, so it's really on just the drilling side. You know, and it's really just the cost of, you know, if you have great execution, it's just the cost of drilling, you know, doing a 180 degree turn, obviously that...
If you just be quite that distance, it's going to take you long, longer to drill that distance.
You know, been in back around at 180 degrees, you're just constantly, you know, I mean, we're using conventional tools, you're just constantly sliding and turning back around. So that's going to take, you know, an extra dire tube, and that's really about the only difference.
Bob Dylan, thanks.
Speaker Change: is a special name.
under that number that's kind of reported on that spot. I think that's an fairly conservative estimate too. So this was what we projected you know before we drove us a baston well.
So the Sebastian Weller, right now, we got rejected coming in, you know, slightly less than $1,700 a foot.
and we had 1,700 and 40 is what we had modeled in what we had on this slide deck here.
and Ronald, thank you guys.
Speaker Change: Young that well, I mean literally it got our P.D. yesterday.
Speaker Change: Yep.
and that was a single, I mean that's a single horse you will. So really if you do two horse you wills you get that 5% to 7% additional savings from bad drilling, you know, really that you know, work for a say, $168 a foot on the Sebastian if you do a two well pad, you know, we should be able to drop that cost even lower.
Speaker Change: Got it.
Thank you. One moment further, last question.
Question comes from the line of Paul Diamond with City. Go ahead, your line is open.
Thank you for your time. I think I'm going to ask you a question for you on the 2025 Hedgehog book. It's currently breaking down, we even need to be a quarter. And with a car apparently sitting there around, you know, low threes. It's got to be a thing about timing and opportunity of kind of crunching in those. That last little bit to bring you up to the 50% target.
But in this, we will work diligently to bring that to get to the 50th level that's kind of our target and we added a little bit, post the third quarter, gas prices.
Speaker Change: and we care here late late so it's really up to, you know, kind of finding good spots to do that and they're got good structures, you know, to
Speaker Change: to do that, but potentially, you know, if we're going to really try to, like you said, we haven't evenly spread out, but our production next year will be potentially weighted more toward the end of the second half of the year, so potentially there's a point where we can, you know, kind of focus on the, you know,
the latter part of 2025 to hit our goals. Yeah, where there's a little bit stronger pricing available.
I think what we do, we advertise to you, whether you're a bank or a bondholder, an equity owner analyst, that our goal, if that window opens up for a week and age, 50% that's our goal, it will be leaning into that window.
Understood. Appreciate the clarity and that is another quick one. We talked about the 57% conversion of Hainesville occasions to horseshoe.
Speaker Change: I just want to get some idea of where the other 43% cassettes are those who have been ruled out or who have not gotten them yet or still under valuation.
Well, they're always under evaluation, but you know, we can't convert all of them to horseshoe wells because they're, you know, you have some things have to work out to be able to convert.
First of all, you have to have two sticks together, right? So if you have and a lot of places, we just have one stick and so you can't obviously can't do anything with that. But you also have to have...
And a lot of this is on these isolated sections where we still have some sticks left and it's also in areas where we've got quite a bit of development, maybe mostly developed and we have a few sticks kind of left to infill.
So the spacing has to be right so you can't have two of your sticks on opposite side of the section that are two four apart.
to be able to accomplish the horseshoe.
So when you got a factor in all of those different things that you have to have to make it work that's kind of a set way into that with just 57% of that in the store that got converted.
Dad, it's so a bit of a reason we'd through that you'd probably run into similar types of issues in the blow through.
Speaker Change: Baker as well.
That would be correct. And you know, on the bozier side, you know, if you just look at the acreagee in the layout, nothing but bozier sticks, we got a little bit more reclean slate to work with. I was like, it's not as thrilled up as the hangs will. So, you know, we'll still have a lot of ability to drill the long labors in the bozier.
and the Hainesville, we got a lot of those drilled in some of these course use are connecting the short. We skipped over and drilled the short lateral, so we were doing the development because just because of the economics. And so now that we can come back and you got two of them there, you can hook them up.
So, you know, maybe in the future we get a little bit more, you know, comfortable with maybe how wide we can space the horseshoe.
Speaker Change: We can maybe convert a few, we just need to get a little further down the road on what our abilities are going to be. I'm talking about how wide, you know, maybe right now there are 11, 1200 feet apart between each side.
You know, if we may be able to draw them, you know, 2000 feet apart.
Speaker Change: where you have two sticks that are left to be drilled, two thousand feet apart where you can do a big wide turn and hook them up. So I think that number will move and the future we just need to get a little bit further down the road on what kind of we can do.
and the scandal with him, Jason.
and got it. We're so appreciate the clarity I'll leave it there.
Thank you. I'm showing no further questions at this time, and I would now like to turn it back to J. Ellison for closing remarks.
First of all, I want to thank everybody for saying on the line for a little over an hour.
with natural gas prices ranging between $1.65 and $1.90 for the last six months. It's a difficult time for pure natural gas companies. That's just the fact.
Speaker Change: Well, what happens in those months really test to resolve? So I want to acknowledge three groups over the past six months that consistently has stood for a month.
First, our 255 employees to create the exceptional results in both our legacy and Western Hainesville area. Second.
our 17 banks who reaffirmed our $2 billion bar in base and gave us unanimous approval on our bank amendment to loosen the leverage companies.
Speaker Change: Bird
Jones family, through in a month of August made open market purchases of 13.5 million shares of our stock for $138 million.
Speaker Change: I want to thank each of you as well as our bond and our equity owners. I can assure you we are on the exact right path to be positioned for the growth and that's our best demand that is just around the corner.
Thank you for your time.
Thank you for your participation and today's conference. This does conclude the program you may now disconnect.