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Comstock Gives a Reason to be Bullish on Haynesville

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The Daley Note: November 20, 2023

How far can the Haynesville grow? Comstock Resources (CRK) is giving a reason to be bullish on future gas supply from the shale play to meet market growth.

CRK has laid out plans for major growth from its Western Haynesville exploratory play in East Texas, including a significant expansion of gathering and treating capacity on its Pinnacle system. But the producer plans to dial back some of its other drilling in the ArkLaTex, which could impact several midstream names.

In 2022 Comstock acquired the Pinnacle gathering system from Legacy Reserves. The assets in Freestone, Robertson and Leon counties in East Texas include the Bethel gas processing plant. On CRK’s 3Q23 earnings, management reported system handling capacity of 500 MMcf/d, and said it expects to fill that capacity by 2025.

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CRK is partnering with Quantum Capital Solutions to expand Pinnacle’s treating capacity up to 2 Bcf/d. Quantum will contribute 100% of the capital required, up to $300MM, to build the system. Comstock will operate the venture as Pinnacle Gas Services.

Thus far, CRK has turned 7 wells to sales in the exploratory play since April 2022. Wells have been drilled in the Bossier shale with initial production (IP) rates averaging 30 MMcf/d, well above the average of 12.5 MMcf/d for other East Texas wells. In comparison, core Haynesville wells post an average IP rate of 25 MMcf/d.

East Daley Analytics can create custom producer profiles as part of Advisory Services so clients can evaluate the impacts of rig changes by operator or midstream system. The figure forecasts CRK’s production in East Texas based on company guidance.

Comstock is currently running 2 rigs in East Texas and 5 in its core Haynesville acreage in northern Louisiana. In 2024, CRK plans to move 1 rig onto the Western Haynesville play in East Texas while maintaining 7 total rigs on its core acreage in the ArkLaTex. With an additional rig add in 2025 (4 total on the play), Comstock models production on the Pinnacle system nearing gathering capacity of 2 Bcf/d by 2028.

As Comstock moves rigs out of the core Haynesville acreage onto its own system, other gatherers will lose out on production. Most of CRK’s rig activity in 2023 has been on Energy Transfer’s (ET) Louisiana gathering system, according to East Daley’s rig allocations. Since early September, CRK has also been running 2 rigs on Aethon’s Ibex Haynesville system. For these legacy gatherers, management said it will be difficult for CRK to hold production flat with just 4 rigs in 2024. – Oren Pilant Tickers: CRK, ET.



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