Ladies and gentlemen, thank you for standing by. Welcome to the Fourth Quarter 2024 Comstock Resources earnings conference call. At this time, all participants have been placed in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star one one on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to your speaker today, Jay Allison, chairman and CEO. Please go ahead, sir.

Thank you, and good morning, everyone. You know, what a fantastic morning here in Frisco, Texas, with snowflakes coming down when I woke up. You know, I looked at the temperatures in Frisco. It was fifteen degrees feeling like minus two. Now I scrolled and look at New York, it was nineteen, feeling like five. Chicago, four, feeling like minus four. And in Boston, it was fifteen, feeling like two. So now let me tell you the story. The latest news about Comstock Resources, which is a pure natural gas company. We're excited to report today the great success we've had to date in our Western Haynesville play in Texas. Over the past five years, we have been acquiring acreage in the western Haynesville based on geologic data put together including well logs from the many producing vertical wells near the area. Today, we hold five hundred and eighteen thousand net acres in our Western Haynesville area in addition to our three hundred and one thousand net acres in our legacy Haynesville area. There's five hundred and eighteen thousand net acres in the Western Haynesville; a massive footprint that is fairly contiguous, allowing us to drill two wells from a single pad to hold two separate units as we drill north and south from the same pad. Our initial Western Haynesville well, the Circle M well, was turned to sales in April of twenty twenty-two. We waited five months before we spud our second well evaluating the Circle M's performance. By the end of twenty twenty-three, we had seven wells producing, and today we have eight Western Haynesville wells producing. During our leasing phase, our hardworking land team never lost perspective or focus as they built our position. With acquisitions and grassroots leasing, we now have around twenty thousand leases that make up the five hundred and eighteen thousand net Western Haynesville acres. Fortunately, eighty percent of this acreage is held by production from our acquisitions of deep rights. That leaves us around seventy wells to be drilled over the next five years to hold the entire footprint. At the beginning of our undertaking to derisk the Western Haynesville well by well, we made sure that one hundred percent of our team held no distorted view of reality. Reality is truth. There's an old cowboy saying: 'If the horse is dead, dismount.' I Western Haynesville horse looks to be very much alive and potentially a triple crown winner, even a Secretariat in the making. Given the success we saw, we decided to forego the M&A market and focus on organic growth. The challenge in the Western Haynesville was not geological, as we are confident the shale is there. The challenge was drilling ten thousand foot horizontal wells at vertical depths of nineteen thousand feet where temperatures can exceed four hundred degrees. As we will report today, our operations team, led by Dan Harrison, has met this challenge for the first eighteen successful wells. They've continued to get better and better as we hone in on the formula to drill and complete either Bossier or Haynesville wells in this area. We have substantially reduced the well cost, as Dan will review later today, which puts the returns from these wells superior to the returns we see in our legacy Haynesville area. We've been very cautious as we developed our Western Haynesville footprint. Twenty twenty and twenty twenty-one were mainly focused on leasing. In twenty twenty-three, we reached out to Quantum Capital Solutions to help us fund the mid-spring build-out for the new play. Quantum committed up to three hundred million dollars for the build-out of the gathering and treating systems in the Western Haynesville. In twenty twenty-four, we kept two rigs busy in the Western Haynesville and turned eleven new wells to sales, and now we have four rigs in the new play, and we'll drill twenty more wells this year. The creation of the Western Haynesville opportunity is quite a feat for a company of our size. This could not have happened without the total support of Jerry Jones and his family, who own seventy-one percent of Comstock. They saw the vision. They got in the weeds with us as we kept our focus to capture the prize, proving a vast natural gas reserves beneath our five hundred and eighteen thousand net acre footprint. Today, we feel the land grab is over. With us holding the five hundred and eighteen thousand net acres, we also own and control our midstream system with Quantum as our partner. Our Western Haynesville well results look very promising at a time when America needs more natural gas to meet the growing demand for LNG, AIF, and all the industrial growth along the Gulf Coast. Our Western Haynesville is located several hundred miles from the Gulf Coast where a hundred billion plus of LNG facilities are located. Our location is where LNG utilities, data centers, and industrial users are contacting us to be a future supplier. To have substantial natural gas reserves near the growing demand on the Gulf Coast will serve us well in the next decade. The golden age of natural gas is here, and we're on the leading edge of technology to unlock the value of the Western Haynesville. Today is the very first day we've shown the location of our five hundred and eighteen thousand net Western Haynesville acres as we have closed the large acquisitions we have been working on and captured much of the leases that we wanted. We are also providing specific well data on the first eight wells, as we now have a large enough sample size to evaluate the results. So now I'll open up this call with our standard introduction and disclaimer. If you would all go to slide one, welcome to the Comstock Resources fourth quarter twenty twenty-four financial and operating results conference call. You can view a slide presentation during or after this call by going to our website at www.comstockresources.com and downloading the quarterly results presentation. There, you'll find a presentation titled fourth quarter twenty twenty-four results. I'm Jay Allison, chief executive officer of Comstock, and with me is Roland Burns, president and chief financial officer, Dan Harrison, our chief operating officer, and Ron Mills, our VP of finance and investor relations. Please refer to slide two in our presentation to note that our discussions today will include forward-looking statements within the meaning of securities laws, where we believe the expectations and such statements to be reasonable. There could be no assurance that such expectations will prove to be correct. Now if you would flip over to page four, it's the Haynesville Shale footprint. Slide four is an overview, first time ever, of our acreage footprint position in the Haynesville Bossier shale in East Texas and North Louisiana. Note that this map is to scale; it's not distorted. We have a million ninety-nine thousand gross and eight hundred nineteen thousand net acres that are prospective for commercial development of the Haynesville and Bossier shales. On the left is our emerging Western Haynesville, and on the right is our legacy Haynesville area. Since the beginning of our leasing program in the Western Haynesville play in twenty twenty, we have grown our acreage position to five hundred and eighteen thousand net acres. We still have around one thousand three hundred net locations to drill on our three hundred and one thousand net acres in the legacy Haynesville, which currently has eight hundred and ninety-five net producing wells. The legacy Haynesville acreage is forty-eight percent developed for the Haynesville shale and eight percent developed for the Bossier shale. In comparison, our Western Haynesville has only eighteen net producing wells and is virtually undeveloped compared to our legacy Haynesville. We expect our Western Haynesville acreage to provide more inventory per acre versus the legacy Haynesville, given the higher pay thickness and pressures we encounter in the Western Haynesville. We expect the Western Haynesville to yield significantly more resource potential per section than our legacy Haynesville.

Alright. Thanks, Jay. On slide five, we cover our fourth quarter financial results. Our production in the fourth quarter averaged one point three five billion cubic feet equivalent per day, which is twelve percent lower than the fourth quarter of twenty twenty-three, reflecting our decision to drop two rigs early in twenty-four and have the frac holiday that we had in the third quarter. The only way we turned to sales in our legacy Haynesville area in the quarter was our Horseshoe well that we discussed last quarter. So oil and gas sales in the quarter declined five percent to three hundred thirty-six million dollars due to the lower production level, which is partially offset by better natural gas prices. EBITDAX for the quarter was two hundred fifty-two million dollars, and we generated two hundred twenty-three million dollars of cash flow during the quarter. We reported adjusted net income of forty-six million dollars for the quarter, or zero point one six dollars per share. In the fourth quarter, we recognized a fifty-two million dollars tax benefit related primarily to R&D credits and other credits, and also due to a reduction in Louisiana state corporate tax rate. A higher provision for depreciation, depletion, and amortization accounted for the loss before income taxes in the quarter. The higher amortization rate resulted from the decrease to our proved undeveloped reserves, which were determined under SEC rules where you have to use the first of the month average price looking back for the previous twelve months. Of course, that price was very low in twenty twenty-four. On slide six, we recap the annual twenty twenty-four financial results. Production for the full year averaged one point four Bcf per day, which is very comparable to the production we had in twenty twenty-three. Natural gas prices that we realized in twenty twenty-four fell by seven percent, resulting in our oil and gas sales decreasing seven percent to one point three billion dollars. EBITDAX in twenty twenty-four totaled eight hundred fifty million, and we generated six hundred seventy-five million of cash flow. With weaker natural gas prices and the higher DDA expense, we were in twenty twenty-four or zero point two four dollars per share compared to the one hundred thirty-three million dollars net income we had in twenty twenty-three.

If you look at slide fifteen, this is our updated drilling inventory at the end of last year, twenty twenty-four. Our total operated inventory year-end stands at one thousand five hundred and forty-eight gross locations and one thousand two hundred and eleven net locations, which represents a seventy-eight percent average working interest. Our non-operated inventory consists of one thousand one hundred and ten gross locations or a hundred and thirty-nine net locations, which represents a thirteen percent average working interest. The drilling inventory is split between Haynesville and Bossier wells, divided into our four categories by length. Our short laterals are less than five thousand feet, our medium laterals are between five thousand and eight thousand five hundred feet, our long laterals are between eight thousand five hundred and ten thousand feet, and our extra-long laterals are all laterals over ten thousand feet. In our gross operated inventory, we now have fifty-three short laterals, three hundred thirty-seven medium laterals, five hundred seventy long laterals, and five hundred eighty-eight extra-long laterals. Our gross operated inventory is evenly split with fifty-one percent in the Haynesville and forty-nine percent in the Bossier.

As all of you know, that's a lot of data when you include the Western Haynesville. Roland, Dan, thank you for the transparency for the fourth quarter and the full twenty twenty-four. If everyone would go to slide twenty-three, I direct you to slide twenty-three where we summarize our outlook for twenty twenty-five. In twenty twenty-five, we will remain primarily focused on building a great asset in the Western Haynesville that will position us to benefit from the longer-term growth in natural gas demand. We currently have four operated rigs drilling into Western Haynesville, as Dan said, to continue to delineate the new play. We expect to drill twenty or nineteen point nine net wells and turn seventeen or sixteen point nine net wells to sales in the Western Haynesville this year. We will continue to build out the West Haynesville midstream assets to keep up with the growing production from the area. Midstream expenditures are expected to be a hundred and thirty to a hundred and fifty million dollars, and they will all be funded by our midstream partner.

Well, good morning, all, and thanks for your time. Also, congratulations on the position you have assembled into Western Haynesville as your map is a dream scenario for anyone pursuing an organic leasing program in a new basin? I have two questions, and they're both related to Western Haynesville. So referencing slide eighteen. You're drilling arguably the deepest and most complex parts of your play today as we understand the geology. Do you have a view on reservoir quality as you move to the west to the shallower portions of the sub-basin? Surely, drilling and completion costs would decrease, but is there a chance that reservoir quality would support recoveries in the two and a half to three Bcf?

Derrick, this is Dan. I think that that's a very good question. We are drilling the deepest, hottest stuff; you know, if you look at where the well locations are across the acreage. We haven't drilled anything, you know, up there on that part of the acreage. A lot of that stuff is HBP acreage. So, you know, we're drilling the stuff that we've leased in the hole, and so that'll kinda keep us down in that general area. And as we stand up to the northeast for the kind of the near-term activity in the next couple of years. But kind of to answer your question, I think, you know, as you get up in that acreage, you're talking about, it does get shallower. The temperatures get shallower and a little bit cooler. So, you know, I think it just remains to be seen what the ultimate recoveries are gonna look like, but I would certainly think maybe, you know, they might be a little less than if you just correlate it to depth. But we also expect our drilling and completion costs are gonna be a lot lower as we drill up there in the future.

You know, and to your point, I think it's really good. We didn't start out with the easy depths. We started out with the deeper depths, the hottest depths, and, you know, we looked at what reality looked like, and they look really good, and that's where we ended up with these eighteen wells. There was a big enough dataset so that we could actually come out and talk about the cost. You know, in all major tier one plays, the more you drill the wells and complete them, typically, the cost structure comes down. Exactly like it did in the core of the Haynesville Bossier going back to two thousand eight to two thousand eleven.

Hey. Good morning, gentlemen. I wanted to first congratulate you all on the incremental collar on the Western Haynesville. It's really encouraging to see the results. Let me start with a follow-up to the last question, but more geared toward the development plan. Could you speak—this is perhaps for Dan—could you speak to what a typical development plan would look like for your average Western Haynesville pad? In terms of how many wells you would expect on any given pad, and what your general assumption for spacing would be. Knowing, of course, that it's probably too early to know what the right spacing is.

Yeah. I'll say the last piece of that is definitely too early as we're still drilling the whole acreage. The wells are spread out, so we haven't really honed in on what the spacing is going to be. I think we're going to have to accumulate a lot of data in the future to hone in on what the optimum spacing will be in the Bossier versus in the Haynesville; you know, areas where it's thicker versus thinner, I think we're gonna all yield different answers. So I don't have a direct answer to that question. But as far as future development, we strive to drill everything with two well pads that we can. We're drilling and we're holding acreage. In some places, you just don’t have the acreage that gives you the opportunity to drill two laterals, you know, two wells on a pad. So I think we're probably looking at about, you know, half, fifty, maybe sixty percent of our wells any given year will be on two well pads and the others will be singles. You know, we strive to make as many two well pads as we can, but that's probably gonna be our mix for the next couple of years.

And one thing we try to do—look, we derisked maybe twenty-six miles of this play. We show that on the map. And our goal is by the end of twenty twenty-five, drilling twenty more wells and, hopefully, all of those are to hold acreage, maybe one or two we just have to drill outside of holding acreage. But the goal is to drill all of those wells to delineate what this footprint really looks like, what the value is, what the resource potential is. And along with our partner with Quantum, you know, we will build the gathering and treating midstream to complement the program at twenty-five, twenty-six. I think by the end of twenty-five, definitely by the end of twenty-six, I will have fully derisked this whole five hundred and eighteen thousand net acre play. You know, Dan had mentioned a lot of this HBP, so we don't plan on drilling on the HBP acreage until we hold maybe seventy more wells we need to drill in the next several years to HBP our entire footprint.

Hey. Good morning, guys. Just a quick note: any early thoughts on twenty twenty-six? Maybe holding activity here at seven rigs seems like the industry is falling into a rhythm with demand, and that's a really good place to be.

Right. No, I think that's the key. You know, one thing we wanted to make sure is that we don't produce too much gas, especially in one region area. We've been looking at that. We think seven rigs was always a really good level for the company to maintain. I think you can see the impact of that. That's really too low of an activity level, but it was needed to help balance the market. So, you know, we're gonna get very comfortable with seven. We're gonna balance sheet back to like it was in twenty twenty-two. That's our biggest goal. And I think twenty-six will be a year that will have the level of production and good gas prices to drive the balance sheet into perfect shape, but I think, you know, in twenty-five, that level we're running now, you know, we won't add any debt and most slowly pay it down. But then next year, we'll be able to really reduce debt significantly.

Hey, guys. Just as we think about midstream for next year, what type of capital should we pencil in? And then when do you think you will exhaust the midstream joint venture, and how do you think about funding it after that?

Well, and you can even say the first quarter, you know, we give guidance down. We're not gonna overproduce, period. And that guidance is a result of dropping those rigs. And, you know, we're not adding the rigs in the Western Haynesville to increase production right now. We're adding those rigs because that's the best place for us to drill. We need to drill more wells to HBP more of the footprint. So that's why we're doing that even if we don't see any E&P company out there out of control on their production rates. None of them. I wanna thank all of you. It's a much longer call than normal—it's almost an hour and a half. We knew it would go longer. We didn't want to cut anybody off, but I wanna thank you. There's probably two hundred and fifty plus men and women who make up the Comstock team, and a lot of them listen to the call. I wanna thank all of you as well. I wanna thank our loyal banks. I mean, the banks have believed in us. The bondholders have believed in us. The equity owners have believed in us. The analysts have believed in us. And I wanna say again, especially thanks to Jerry Jones and his family, who are the backbone support to unlocking the Western Haynesville value. You know, I gave an old cowboy saying: 'If you climb up on the saddle, you better be ready to ride.' And we at Comstock are ready, and you can take that to the bank.