Jones Family Consolidating Control of Comstock Amid Haynesville LNG Export Push

Jones Family Consolidating Control of Comstock Amid Haynesville LNG Export Push

By Andrew Baker December 2, 2022 .naturalgasintel.com

Dallas businessman Jerry Jones has expanded his ownership stake in Haynesville Shale pure-play Comstock Resources Inc. to 66% from about 60% and funded converting all outstanding preferred shares to common stock.

“Comstock’s outstanding performance since I made my initial investment in August 2018 and my confidence in the company’s future have led me to further increase my ownership stake in Comstock,” said Jones, who also owns the Dallas Cowboys. “I am very excited to continue to partner with Comstock’s management and stockholders as we enter 2023. 

“Comstock now has a very strong balance sheet and the largest acreage position in North America’s premier natural gas basin which supports decades of drilling and reserve growth.”

Frisco, TX-based Comstock is targeting production of 1.42-1.52 Bcfe/d for the fourth quarter. Its leasehold targeting the Haynesville and Bossier formations spans 372,000 net acres in East Texas and North Louisiana.

Other Haynesville producers including Chesapeake Energy Corp. and Southwestern Energy Co. have been seeking to maximize their exposure to premium international gas pricing along the Gulf Coast LNG corridor. Midstream operators including TC Energy Corp. have responded in kind with planned pipeline capacity expansions out of the Haynesville to serve liquefied natural gas export demand.

Comstock’s announcement on Wednesday came two days after a management shakeup aimed at finding new markets for its Haynesville gas production. The company hired Trey Newell as vice president of corporate development and Lori Kanaman as vice president of marketing. Newell has two decades of commercial, marketing and operations experience in the midstream sector, while Kanaman has more than 30 years of experience marketing natural gas.

“Clearly, there is a race among Haynesville producers to feed gas into the second wave of Gulf Coast LNG projects,” said NGI’s Patrick Rau, director of strategy and research. He cited the recent sanctioning of several midstream facilities to move gas from North to South Louisiana.

“We estimate those projects could add another 10 Bcf/d of takeaway capacity from the Haynesville, with most of that supply passing through the emerging Gillis Hub,” Rau said. 

Comstock management said as of Wednesday, all outstanding shares of the Series B Convertible Preferred Stock had been converted into 43.75 million shares of common stock, with funds provided by Jones. The Series B Convertible Preferred Stock had been issued in July 2019 in connection with Comstock’s acquisition of Covey Park Energy LLC.

Following the conversion, the Jerry Jones family owns 66% of all outstanding shares.

“We are unsurprised by the announcement,” said Tudor, Pickering, Holt & Co. (TPH) analyst Jake Roberts in a note to clients, citing that TPH had modeled the event taking place in the first quarter of 2023.

 

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Comstock filed a completion report today on their second Lower Bossier well in Robertson County, the Cazey Black A 1H.  Here are some stats:

TVD:  15,927 feet

Producing Interval:  7,912 feet

24-Hour Test Gas Volume:  42,215 MCF with choke at 30 (this production is about 15% higher than for their first well)

Shut In Pressure:  12,150 PSI

Test Run Pressure:  10,097 PSI

Shut In Temp:  100 degrees

Test Run Temp:  259 degrees

Bottom Hole Temp:  320 degrees

Good well. Impressive.  Thanks, Alan.

Cazey Black A production during its first 24 days:  711,908 MCF.  

29,663 MCF per day.

Any way to find out if Comstock is hedging gas out here?

Big drop in gas prices since they started producing up here / big impact on economics

Side comment - I have seen D&C costs for horizontal drilling really take off over the past few months

Cost of diesel, steel, crews, etc.

Rig rates running over $35,000 per day

Good crews at a premium

For both drilling as well as frac jobs and other operations 

An example is D&C on 12,500' laterals (TVD 7500') in the Eagle Ford - over $12,5 Millon

These deeper and higher-pressure wells will have higher costs too - and with dropping gas prices, what is the bottom price threshold for drilling?

Just putting this out there / open for all comments as usual

Are these good numbers, i.e. is it producing a large amount?

Great numbers in my opinion - especially when one considers the minimal apparent production decline.

Basically, no decline for first 6 months of production. 30 MMCF per day.

EUR's here may be larger than the HV in NE Tx / NW La.

Thanks

Rumor mill that I’ve been hearing deep bossier is 6bcf per 1,000’ of lateral.  No matter I still believe both Comstock and Aethon are going way over their capex for these wells.  

As a geologist, I believe that this is Lower Bossier target around 16,500' TVD. Some others think Haynesville section. Really a moot point - deep, high pressure, dry gas with huge volumes post frac.

I am sure their D&C numbers have changed dramatically since they started drilling out here.

Wonder if they are hedging their gas??

According to their Q3 2022 report, they have natural gas collar contracts in place for calendar year 2023:

Volume(MMBtu):  128,925,000

Average Price Per MMBtu:

   Ceiling  $9.85
   Floor  $2.98

This is an interesting evolving play but I wonder if those who are interested in it should start a new discussion thread with a title that more accurately describes it.

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