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I’m not the best at reading presentations like this, but I find slide 11 and 12 to be the most interesting.  While Comstock clearly looks favorable compared to their competitors, slide 11 doesn’t seem to address actual drilling and completion costs.  That’s a huge part of the costs of drilling and opearting a well.  Maybe the cost of drilling is included and I just don’t recognize it.  I’m also fascinated by the one company that has extraordinary transportation costs - much higher than any of the other 9.  What’s the story there?

Steve, Rock Man sent me the Comstock presentation and called my attention to slide 9.  Natural gas prices were high and Drilling & Completion (D&C) costs were low in 2022.  That changed measurably in 2023 with lower natural gas prices and considerably higher D&C costs.  Slide 9 shows how drilling costs have gone down as a percentage of overall D&C costs (gold portion of the graph bars) as completion costs (blue) have gone up.  Drilling costs less per linear foot of wellbore the longer the well laterals become while the completion costs have gone up because of more frac stages and much higher proppant loads.  I ran numbers on a clients 2017 wells yesterday and the linear feet of sand per foot of perforated lateral was from 3,550# to 3,986#.  About double the average proppant loads on early wells.  As to Slides 11 & 12, it would make analysis easier if we knew the companies that Comstock is comparing their costs to but the one cost that stands out to me is Gathering and Transportation (G&T).  I have touched on the wide variance in G&T costs in past discussions owing to the sales of gathering systems from the operator to midstream companies. 

Before the Haynesville Shale sucked all the air out of O&G E&P in NW LA pre-2008, a number of companies had established leasehold and drilling programs for Cotton Valley reserves.  Both Chesapeake and Petrohawk were here but also smaller independents like Comstock and Questar for example.  Both Chesapeake and Petrohawk sold their large gathering systems to create cash to continue leasing and to fund drilling many more unit wells than originally proposed.  The play area kept growing and Chesapeake and Petrohawk to a lesser extent kept leasing and having to drill to hold those leases.  Both companies sold their gathering systems to generate cash and in so doing agreed to minimum volume commitments and guaranteed profit margins for the buyers.  That created much higher G&T costs.  Comstock didn't join in the major leasing frenzy but did acquire modest acres in their immediate operating areas.  Comstock did not sell their G&T systems at that time.  It was much later that Comstock became a much larger player with the funding provided by Jerry Jones.

The Petrohawk G&T sale was likely the worse at saddling successor operators and all their mineral owners with outrageous G&T costs.  I recently posted an example of this from an off the record conversation at a DUG Haynesville Shale convention in Shreveport some years ago.  An Aethon employee was discussing a situation where the company had a G&T cost in a specific field of $0.20 per mcf while right across the street from BHP and now BP where the G&T cost was $1.20 owing to being successors of Petrohawk that made the terrible deal to generate cash.

I meant to also comment on this last week, but forgot.

Comstock specifically separates their wells into Haynesville and Bossier Shale categories.  Interesting.

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