Comstock Resources, Inc. Q1 2010 Earnings Call Transcript

Comstock Resources, Inc. Q1 2010 Earnings Call Transcript
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Comstock Resources, Inc. (CRK)

Q1 2010 Earnings Call Transcript

May 04, 2010 09:30 am ET

Executives

Jay Allison - Chairman, President and CEO

Roland Burns - SVP and CFO

Mack Good - VP, Operations

Analysts

John Freeman - Raymond James

Leo Mariani - RBC

Noel Parks - Ladenburg Thalmann

Brian Corales - Howard Weil

Ray Deacon - Prichard Capital

Ron Mills - Johnson Rice

Richard Tullis - Capital One Southcoast

Jeff Robertson - Barclays Capital

Dan McSpirit - BMO Capital Market

Presentation

Operator

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Good day, ladies and gentlemen, and welcome to the first quarter 2010 Comstock Resources Inc. earnings conference call. My name is Lacy and I’ll be your coordinator for today. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator instructions). As a reminder this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today’s call, Mr. Jay Allison, Chairman and President. Please proceed.

Jay Allison

Thank you Lacey and welcome everybody. Welcome to the Comstock Resources first quarter 2010 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 clicking presentations. There you will find the presentation entitled first quarter 2010 results. I am Jay Allison, President of Comstock and with me this morning is Roland Burns our Chief Financial Officer and Mack Good our Chief Operating Officer. During this call we will review our 2010 first quarter financial and operating results as well as updates results of our 2010 drilling program.

Please refer to slide two in our presentation and note that our discussions today will include forward-looking statements within the meaning of securities laws. We believe the expectations in such statements to be reasonable, there can be no assurance that such expectations will prove to be correct. Please refer to page three of the presentation where we summarize the first quarter results, improved oil and gas process and strong production growth in the first quarter returned us the profitability.

In the first quarter our production increased to 18.8 Bcfe, 34% higher than production in the first quarter of 2009. With a higher process in production we reported revenues of $106 million, generated EBITDAX of $80 million and operating cash flow of $72 million or $1.57 per share. We reported net income of $7 million or $0.16 per share. We continue to have strong results in our Haynesville Shale drilling program, 44% of our companywide production is coming from the Haynesville Shale. We drilled 14 successful wells including 12 horizontal Haynesville Shale wells in the first quarter. One of these wells was drilled in our South Toldeo Bend area in Sabine Parish Louisiana. This well was successfully completed in the upper Haynesville or middle Bossier section with an initial production rate of 20 million cubic feet equivalent per day. This well has proved

much of our

acreage in Sabine Parish. We’re on track for another year of strong reserved growth driven by our Haynesville Shale drilling program. Our balance sheet continues to be very strong which will allow us to pursue our business plan this year without having to rely on the capital markets for any funding. I'll turn it over to Roland Burns to review the financial results for this quarter in more detail. Roland?

Roland Burns

Thanks Jay. On slide four we break out our average daily production by quarter and by each of our operating regions and we highlight the production from our Haynesville Shale wells in red on that chart. For the first quarter this year, our production averaged 209 million cubic feet of natural gas equivalent per day which is 34% higher than our production in the first quarter of 2009 of a 157 million per day. Production was also up slightly from our fourth quarter average rate of 208 million per day. Our East Texas, North Louisiana region averaged a 147 million per day with 54 million coming from our Cotton Valley wells and 93 million coming our Haynesville Shale wells. Haynesville Shale wells now make up 44% of our total production rate. Our South Texas region averaged 49 million per day and our other regions averaged 13 million per day in the quarter.

We’re leaving our production guidance intact this year and still expect production in 2010 to approximate 77 Bcfe to 82 Bcfe which would represent about a 18% to 25% growth over 2009’s production. Oil prices were very strong in the first quarter which we cover on slide five. Our realized average oil price increased 91% in the first quarter of 2010 to $67.08 per barrel as compared to $35.03 per barrel in the first quarter of 2009. Our oil price in the first quarter averaged 85% of the average benchmark NYMEX WTI price.

Slide six shows our average gas price which also improved in the first quarter. Our average gas price increased 12% in the first quarter to $5.30 per Mcf as compared to $4.75 in the first quarter of 2009. Our realized gas price came in right at the average NYMEX Henry Hub gas price for the quarter. We had 12% of our gas production hedged in the first quarter of 2009 and none of our production is hedged this year.

On slide 7, we cover our oil and gas sales. Improved oil and gas prices combined with the 34% production increase caused our sales to grow by 55% to $106 million in the first quarter. Our earnings before interest, taxes, depreciation, amortization and exploration expense and other non-cash expenses or EBITDAX grew by 77% to $80 million as shown on slide eight.

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