Comstock Resources, Inc. (NYSE:CRK) Q3 2023 Earnings Call Transcript

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Paul Diamond: And is that something we should expect to continue going forward? Or is that still kind of being felt out as the — on how the wells perform?

Daniel Harrison: I mean, obviously, how the wells perform will play a role in that. I think you’ll see a mix. We — when we first kind of entered the play, we knew obviously that this is a high bottom hole temp play. We specifically targeted the Bossier early on just to kind of increase our chances of success. And we’ve leaned in — since that time, we’ve got a lot better at dealing with the temperature. So we’ve leaned in more on drilling the Haynesville. I think — it’s still early, but I think you’ll see the Haynesville will be a better — it’s going to be a better performer than the Bossier just like up in the core. We like the Bossier, these Bossier wells look fantastic. But just like up there, we expect the Haynesville to be a little better performer. And so if you can get your cost basically the same, the Haynesville wells are going to beat the better performing wells just …

Paul Diamond: Understood. Just 1 quick follow-up. Is the lateral length in the Western Haynesville are kind of sitting around 10,000 feet. I know there’s been efforts to kind of extend that in the core. Over in Western Haynesville, given the higher pressure, how about — I guess, where is your kind of back of the envelope, where do you guys think you can get to as far as lateral length in the next 18 months?

Daniel Harrison: Well, so we’ve already drilled 1 out to 12,700 feet. Maybe, that was the third well we drilled in the play that was the Bossier well. So if you look at the first 7, our average lateral length right now looks — is about 9,400 feet. And if you look at the wells that we got planned to turn the sales next year, that group of 10, we’re going to probably be at 10,000 to 10,500 feet average lateral length on those wells. So I don’t really see us getting a whole lot longer out here just due to the temperature. But you never know where you can end up sometimes, you get 3, 4 years down the road with the technology improvement. So I wouldn’t totally roll it out. But I think that 10,000-foot mark is pretty much going to be our target.

Operator: And our next question comes from Noel Parks from Tuohy Brothers Investment Research.

Noel Parks: So I wanted to ask a bit about one of the big factors that’s changed in this cycle and that’s the interest rate environment. So I was curious, thinking about negotiation process you went through with Quantum. Just curious as they were looking at their returns and you’re looking out fairly long term. What did you do for scenarios with interest rates? And if we have greater volatility in gas prices as a result of LNG coming to the mix. I wonder if you’ve given any thought to just how that might affect your returns or your planning or even your own leverage longer term?

Roland Burns: Well, that is a good comment on that interest rate environment. The interest rates are up a lot, that’s showing up in both long-term rates and then obviously, the floating rates have been up a lot this year raising the cost of debt across the board. We’re very fortunate to have so much of our interest rates fixed at a very attractive rates. And then we have — in the new midstream, we have a low rate that’s also kind of fixed. So we don’t think the company — the Comstock is too exposed to the higher interest rates as we kind of look forward at least over the next 3 to 4 years. And hopefully, we’ll get to an environment sometime after that period where rates kind of come back down.

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