Comstock Resources' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Comstock Resources (CRK)

Q1 2012 Earnings Call

May 01, 2012 10:30 am ET

Executives

Miles Jay Allison - Chairman, Chief Executive Officer and President

Roland O. Burns - Chief Financial Officer, Principal Accounting Officer, Senior Vice President, Secretary, Treasurer and Director

Mark A. Williams - Vice President of Operations

Analysts

Brian M. Corales - Howard Weil Incorporated, Research Division

Kim M. Pacanovsky - McNicoll, Lewis & Vlak LLC, Research Division

John M. Selser - Iberia Capital Partners, LLC

Leo P. Mariani - RBC Capital Markets, LLC, Research Division

Michael A. Hall - Robert W. Baird & Co. Incorporated, Research Division

Ronald E. Mills - Johnson Rice & Company, L.L.C., Research Division

Michael Kelly - Global Hunter Securities, LLC, Research Division

Jack N. Aydin - KeyBanc Capital Markets Inc., Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2012 Comstock Resources, Inc. Earnings Conference Call. My name is Regina, and I will be your conference operator for today. [Operator Instructions] Today's event is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Jay Allison, President and Chief Executive Officer. Please go ahead, Mr. Allison.

Miles Jay Allison

Thank you, Regina. I want to welcome everybody to the conference call. And I really kind of want to give you a preview and tell you that the 30 slides that we all worked on in detail, that they really are in great detail in order to give you a detailed breakdown of our Eagle Ford play, as well as the Permian play, that we're actively drilling now for oil and to show you why we expect oil to grow by 200% over last year. That's the intent of the 30 slides that we're going to go over in detail.

Welcome to the Comstock Resources First Quarter 2012 Financial and Operating Results Conference Call. You can view the slide presentation during or after this call by going to our website at www.comstockresources.com and clicking Presentations. There, you'll find a presentation entitled First Quarter 2012 Results.

I am Jay Allison, President of Comstock. And with me this morning is Roland Burns, our Chief Financial Officer; and Mark Williams, our VP of Operations. During this call, we will review our 2012 first quarter financial and operating results, as well as update the results of our 2012 drilling program.

Please refer to Slide 2 in our presentations and note that our discussions today will include forward-looking statements within the meaning of securities laws. While 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 3 of the presentation, where we summarize our first quarter results. Our growing oil side of the company is helping offset the negative impact that the very weak natural gas prices are having on our financial results. We reported revenues of $110 million, generated EBITDAX of $79 million and had operating cash flow of $67 million or $1.39 per share. Gains from our divestitures allowed us to make a profit this quarter of $6.9 million or $0.14 per share.

This quarter had strong production growth as compared to the first quarter of 2011. More importantly, our oil production is growing. It's expected to increase 200% from our oil production last year.

Our 2012 drilling program is off to a very good start, especially in our newly acquired Wolfbone field in West Texas. Mark will report that some of our recent vertical wells are some of the best reported in the play to date. We drilled 22 successful wells, including 15 successful oil wells in our Eagle Ford and Wolfbone programs in the first quarter.

We continue to work on improving our balance sheet, which we used to give us an excellent inventory of oil projects to allow us to transition away from where we were a year ago, when 96% of our production was natural gas.

I'll now turn it over to Roland Burns to review the financial results for this quarter in more detail. Roland?

Roland O. Burns

Thanks, Jay. Starting with this presentation, we're going to talk about our oil and gas production separately, as the 50:1 relationship of gas prices to oil prices make an equivalent unit presentation, that we're so used to, meaningless to understanding the financial results, given the current situation we're in.

So on Slide 4, we show our crude oil production on a daily basis for the last 3 years by quarter, including the first quarter of this year. And you can see this year is the first year we're really going to start showing growth in our oil production. Our production this quarter grew by 267% to 5,600 barrels per day as compared to the first quarter of last year when we produced only 1,500 barrels per day.

Our Eagle Ford properties in South Texas, shown in light blue on this chart, increased to 4,100 barrels per day and will be the main driver of our oil growth this year. We had 1,000 barrels per day in the Eagle Ford this quarter as compared to the 3,100 barrels a day we averaged in the fourth quarter.

Our Wolfbone properties in West Texas contributed 800 barrels a day to the averagely -- average quarterly rate, and we expect that production for this area will grow substantially with the success we're now seeing with our recent Wolfbone wells. The West Texas production was a little light this quarter, due to transition issues we had to deal with, which were left over from the previous operator.

Looking ahead to the remainder of this year, with all of our drilling activity focused on oil, we are forecasting our oil production to grow 190% to 210% over last year's production to a total of 2.4 million to 2.6 million barrels. This forecast is slightly higher than our previous outlook and is driven by the results we're seeing in our Eagle Ford wells, which have had lower declines than what we've originally expected.

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