Drilling Results

Total expenditures in 2019 for drilling and development activities was $510.5 million.  Comstock spent $485.4 million to develop its Haynesville and Bossier shale properties, including $468.5 million on drilling and completing wells and an additional $16.9 million on other development activity.  Comstock drilled 82 (51.1 net) horizontal Haynesville or Bossier shale wells in 2019, which had an average lateral length of approximately 8,100 feet.  Comstock also completed 19 (7.3 net) wells that were drilled in 2018.  Fifty (36.0 net) of the wells drilled in 2019 were also completed in 2019.  The Company currently expects the remaining 32 (15.1 net) wells drilled in 2019 will be completed in 2020, of which 18 (12.6 net) are operated wells. Comstock also spent $25.1 million of development costs on its other properties primarily on completing four (2.2 net) Eagle Ford shale wells during the year. 
Since its last operational update, Comstock reported on an additional 20 Haynesville shale wells.  The average initial production rate of these wells was 24 MMcf per day. The wells had completed lateral lengths ranging from 4,337 feet to 10,191 feet, with an average completed lateral length of 6,926 feet.  Each well was tested at initial production rates of 15 to 45 MMcf per day.  Comstock currently has 15 (7.8 net) operated Haynesville shale wells that are in the process of being completed.

2020 Drilling Budget

The Company also announced its current drilling plans for 2020.  Comstock's planned capital expenditures for 2020 total $421.0 million and exclusively focused on the Haynesville/Bossier shale. Comstock is currently planning to operate five drilling rigs in 2020 and will drill 46 (34.3 net) operated horizontal wells and complete the 18 (12.6 net) wells drilled in 2019. 

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For those keeping score at home, that capex is more than 10x what Chesapeake plans to allow to the area.


Now CHK is resorting to a reverse split.  That is a last gasp effort.


Hurry, Jerry.  Buy that CHK Haynesville acreage!

Jerry has his own issues.  Comstock is down 50% from January.  


Buy low..........

I would think Comstock wants to make sure that it doesn't "over-pay" for CHK or it's Haynesville properties, and presumably there are no other suitors hovering around also waiting for the chance to swoop in and scoop up CHK.  thus Jerry can wait.  or maybe he's waiting because he doesn't have the cash, and doesn't want to go borrow more cash.

While the C-virus is hurting economies and industries across the board, this is a particularly bad time for domestic NG industries to be hit by a declining market to go along with over supply.  The majors seem to have no appetite right now for opening up their huge cash reserves to buy up domestic operators or properties on the cheap, with "cheap" always being a floating, relative term.

I think that the reason that Jerry is the only suitor for the CHK Haynesville assets is that he does not have to borrow to make the acquisition and has already made the decision to go long on natural gas.  There are a few stumbling blocks left for CHK to get over and the price may go down some more as Jerry holds onto his check book.  Stay tuned.

You got it Skip! CHK has no options. Bad current price, bad curve, no money to drill and only ONE potential buyer with a very low operating costs and few legacy GP&T contracts (which CHK monetized for cash and screwed royalty owners with years ago). The sooner CHK and its lawyers and consultants are gone from the Haynesville, the better it will be, BUT don't think Jerry Jones is a warm and fuzzy capitalists.

How could you have a 4Q con call and not mention a major deal that you previously disclosed. Welcome to a privately owned (85%) company.

CHK has some house cleaning to do before Jerry takes the shale off their hands.  You won't find that mentioned anywhere in a press release or corporate presentation.  The CHK/Aubrey legacy will live on but the lessors and UMIs will not be the only ones to feel the impact.  Operating companies that decided to disadvantage the private mineral owners in their units because CHK got away with it are in some jeopardy.  Could be a reckoning is in the works.

New investor presentation.  I suggest special attention to pages 8, 9, and 16.

Wow, bring costs down to 53¢ to 67¢ per Mcf in 2020? No wonder we continue to see drilling in these times of depressed prices. And hedge prices for 2021 and 2022 in the upper $2 range? I suppose this is the new normal - lower prices, lower production costs.

But their LNG forecast might be overly optimistic based on the recent events shared here on GHS.  

Still, I find their guidance encouraging. 

Comstock (Jerry) is betting on keeping D&C costs low enough to meet cash flow needs for the foreseeable future, two years at least.  Whenever you see impressive cost figures like this, think how it impacts field service companies.  More bankruptcies coming there.  If the Chesapeake acreage can be had cheap, this may look like a brilliant strategy come mid-2020s.  If not, then all companies with a product mix largely tilted to natural gas are toast.  No investor/bank will touch them and you can't live off cash flow forever and continue to grow.  Something has got to give but currently Jerry is  looking pretty smart in my book.  Comstock is a very capable Haynesville/Bossier Shale operator.


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