Thursday, February 12, 2015

More on Comstock Quarterly Report

After the post on Comstock the other day, I had the chance to review the transcript of the quarterly conference call and wanted to elaborate on a couple of points.

First, Comstock announced back in December that it was moving two operated rigs from the Eagle Ford to the Haynesville.  Since then, natural gas prices have dropped and have been hovering in the upper-mid $2/MMBtu range.  If gas prices continue to stay low, Comstock might drop one of those two rigs.  It wouldn't happen until mid-year when the first lease expires and it wouldn't be until after the company has had a chance to evaluate its first run of drilling with the new completion methods.

Second, in looking at the slide with the old and new drilling configurations, one will note that Comstock will be producing its rigs with an unrestricted choke (probably in the mid-20's/64").  If so, the company would be swimming against the school when it comes to restricting choke.  Most of the other producers have found religion in restricted chokes, but here is what Comstock's COO and VP of Operations had to say on the subject:
"We have had much more time now to gather the data since we did the program in '09 and 2010 and we looked at the data in our Logansport wells and really haven’t seen the benefit from the restricted choke program that we saw early. You take a really early time data and project it out and you think you see something and then you get three years of data and go back and look it again and you say, well, it really didn’t work out that way. So, we saw very little benefit from the restricted break program and you see a significant benefit to rate of return by going unrestricted, so that’s why we’re going that way now."
I will be interested to see how that plays out.  While Comstock has collected a lot of data from its own wells and from other public information, it has not had the chance to test the success of the enhanced drilling techniques in the Haynesville.  Maybe they know something others don't know.  Maybe it's something location-specific to the geology they are targeting.  We will find out.

Some quick nuggets:

  • Comstock has targeted an all-in cost of $11-13 million to drill and complete the wells.  On a sample $12 million job, it works out to around $4 million to drill and $8 million to complete.  
  • Comstock's gas production is not hedged.  
  • If oil gets back to $70 per barrel and gas stays flat, look for Comstock to switch gears and move its operations back to the Eagle Ford to hunt oil.  

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