COMSTOCK TEMPORARILY PULLS OUT OF TMS; WILL DRILL HAYNESVILLE/BOSSIER SHALE INSTEAD

COMSTOCK RESOURCES, INC. ANNOUNCES
2015 EXPLORATION AND DEVELOPMENT BUDGET

FRISCO, TEXAS, December 18, 2014 - Comstock Resources, Inc. ("Comstock" or the "Company") (NYSE: CRK) announced that it has budgeted $307 million in 2015 for its drilling and completion activities.  In response to low oil prices, the Company plans to suspend its oil directed drilling activity in its Eagle Ford shale properties in South and East Texas and in the Tuscaloosa Marine shale in Mississippi.  Comstock has released its rig in the Tuscaloosa Marine shale and will postpone its drilling activity there until oil prices improve.  Comstock currently has four operated rigs drilling on its Eagle Ford shale properties.  The Company will release two of these rigs in early 2015 and will move the other two rigs to North Louisiana to start up a drilling program on its Haynesville shale natural gas properties. Comstock believes that improved completion technology, including longer laterals, will provide strong returns on drilling projects at current natural gas prices.

Comstock has budgeted to drill 19 (18.6 net) horizontal wells in 2015.  The Company expects to spend $161 million for drilling 14 (14.0 net) Haynesville/Bossier shale natural gas wells and $34 million for drilling five (4.6 net) wells on its East Texas and South Texas Eagle Ford shale acreage.  The 2015 budget includes $49 million for completion costs of 13 (11.9 net) Eagle Ford shale wells that were drilled in 2014 but will be completed in 2015 and $63 million on facilities, recompletions and for other capital projects.  Comstock plans to refrac ten of its existing Haynesville shale producing wells as part of the 2015 program.

Comstock estimates that the drilling program will generate Company-wide oil production of 3.5 to 3.9 million barrels in 2015 and natural gas production of 55 to 60 Bcf.  After three years of natural gas production declines, 2015 will mark a turnaround for the Company's natural gas production.  The Company will continue to assess the oil and natural gas markets throughout 2015 and will adjust its drilling program to reflect the appropriate mix of oil and natural gas wells in order to maximize returns.

http://phx.corporate-ir.net/phoenix.zhtml?c=101568&p=irol-newsA...

 

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You're welcome, Steve.  At one half the modern royalty rate the rock doesn't necessarily have to be Core/Tier 1 to be profitable with current drilling and completion efficiencies.  All the HS operators have to maintain cash flow so they will continue to drill where they get the best ROR. 

Skip,

  Do you think that is why there are so many Elm Grove field permits?  Or is it a combination of good royalty rates and decent rock?

I don't know the royalty rates for Elm Grove lessors but it is entirely possible they have older leases and lower royalty fractions.  I don't think Tier 3 rock is sufficiently profitable even at an eighth.

well, the 1/8th hurts me, but my guess is that BP is holding the other 1/8th, or close to it, and Comstock is still at 75% operating interest.  If this was a "farm-out" wouldn't that be how things generally work?  Perhaps my knowledge is too dates and there isn't a "how things usually work" formula any longer.

Joint Operating Agreements and farm out/in agreements can be quite complex and the terms can change over time and/or under certain specific circumstances.  Too complicated to hazard a guess as it is far above my pay grade.

Steve,

The working interest is the ownership of the lease and/or the right to operate, and is not the same as a revenue interest. WI will add up to 100%, even if it is split among different companies that own an interest in your lease, but the WI will get less than 100% of revenue because it still has to pay royalty (i.e. your 1/8th). A farmout is simply a way of transferring a working interest to another company. 

I don't know the specifics of your situation or a transaction between BP and Comstock, but here's a possible scenario that illustrates the difference:

From what you've described it sounds like you have a 1/8th royalty interest, or in other words, you own minerals that are leased at a 1/8th royalty. If so, and Comstock is the sole owner of your lease, then Comstock would have a 100% working interest and a 75% revenue interest. You would have a 0% working interest and a 12.5% (1/8th) revenue interest. If BP has 1/8th of something, it is most likely that BP has a 1/8th overriding royalty, which comes out of the WI owner's share of the revenue, not yours.

   

 

Skip, if memory serves me, I recall that most of the Comstock Haynesville acreage is in the Logansport area.  If so, I'm not sure that Comstock's acreage is either core or Tier one.  Your opinion?

Spider, Benson, Converse and Logansport in LA.  I think they have some E TX acreage also.

It's unclear whether their leasedhold has CV liquids.  Those plays are conventional and limited in size.  The fields I list above are far south of the Indigo CV wet gas play.  I think it's much more likely that they will pad drill both Haynesville and Bossier shale CUL wells.

I'll be the first to post it if Comstock starts drilling CV wells, Kathy.  Merry Christmas to you and your family.

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