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Comstock Resources (CRK)
Q4 2010 Earnings Call
February 08, 2011 10:30 am ET
Mack Good - Chief Operating Officer
Roland Burns - Chief Financial Officer, Principal Accounting Officer, Senior Vice President, Secretary, Treasurer and Director
Miles Allison - Chairman, Chief Executive Officer and President
Dan McSpirit - BMO Capital Markets U.S.
Leo Mariani - RBC Capital Markets, LLC
Kim Pacanovsky - McNicoll, Lewis & Vlak LLC
Jack Aydin - KeyBanc Capital Markets Inc.
Ronald Mills - Johnson Rice & Company, L.L.C.
Raymond Deacon - Pritchard Capital Partners, LLC
Brian Corales - Howard Weil Incorporated
Amir Arif - Stifel, Nicolaus & Co., Inc.
Michael Bodino - Global Hunter Securities, LLC
Noel Parks - Ladenburg Thalmann & Co. Inc.
Previous Statements by CRK
» Comstock Resources CEO Discusses Q3 2010 Results - Earnings Call Transcript
» Comstock Resources, Inc. Q2 2010 Earnings Call Transcript
» Comstock Resources, Inc. Q1 2010 Earnings Call Transcript
I would now like to turn the call over to your host for today, Mr. Jay Allison, Chairman, CEO and President. Please proceed.
Carmen, thank you. I want to welcome everybody to the Comstock Resources Fourth 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'll find a presentation entitled Fourth 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 fourth quarter and 2010 annual financial and operating results, as well as updated results of our 2011 drilling program and our outlook for this year.
If you'll turn to Slide 2, please refer to Slide 2 in our presentation 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.
On Slide 3, we have our 2010 highlights. Please refer to Page 3 of the presentation where we will summarize our 2010 results. Continued low natural gas prices created a difficult backdrop for the company in 2010. With higher production and slightly stronger natural gas prices, we were able to grow our oil and gas sales, 19% to $349 million and we generated EBITDAX of $249 million and operating cash flow of $220 million or $4.66 per share.
We reported a net loss of $20 million or $0.43 per share for 2010, an improvement from the net loss we had in 2009 of $36 million. Most of 2010's loss was due to a $17 million after tax loss we recognized from the sale of our Mississippi properties that we closed in the fourth quarter. Without that loss, we would have been very, very close to a breakeven year.
Despite the financial results, we had a very successful year with the drill bit. We drilled 78 successful wells in 2010, all but two were horizontal wells and 72 were Haynesville or Bossier Shale wells. Our drilling program grew our proved reserve base by 45%, as we added 431 Bcfe of proved reserves at a very attractive all-in finding cost $1.26 per Mcfe. The Haynesville program accounted for 402 Bcfe of new reserves at a finding cost of $1.01 per Mcfe. The drilling program provided 12% production growth in 2010. Our production growth was stymied in the second half of 2010 due to limited access to frac services. As a result, more than half the wells we drilled in 2010 were not completed and will be carried over to 2011. And lastly, we're maintaining our strong balance sheet and liquidity position despite the low natural gas price environment that we are currently in.
I'll turn it over to Roland to review our financial results in more detail. Roland?
Thanks, Jay. On Slide 4, we break out our production by quarter and by each of our operating regions, and we highlight the production from the Haynesville shale wells in red.
In the fourth quarter of 2010, our production averaged 188 million cubic feet of natural gas equivalent per day, which is just slightly higher than our production in the third quarter of 2010. Haynesville production increased to 94 million per day, as compared to 84 million per day in the prior quarter. Much of that gain, however, was offset by lower production from our other properties. We had 46 million coming from our Cotton Valley wells, 37 million from our South Texas region and 6 million from our other regions. We also had another 5 million a day related to our Mississippi properties which were sold on December 10 and which will no longer be part of our production in the first quarter of 2011.
Production in the quarter was adversely impacted by the shut-in of producing wells for mechanical repairs and the new practice of shutting in producing Haynesville wells, while wells nearby are being fraced. The impact of these shut-ins was approximately 5 million a day to our average rate in the fourth quarter. Our production at the end of January was running around 207 million per day. However, in early February, there have been a number of production interruptions due to pipeline or plant downtime due to the extreme cold weather that we had last week. We do expect production in 2011 to approximate 85 to 90 Bcfe, which would represent a 16% to 23% growth over our 2010 production. And it would be up to a 27% increase if you exclude the production from the properties that we sold in 2010.
On Slide 5, we show our average natural gas price. Our average gas price declined 16% in the fourth quarter, to $3.73 per Mcf as compared to $4.43 in the fourth quarter of 2009. For all of 2010, our average gas price increased 5% to $4.35 per Mcf as compared to $4.16 per Mcf in 2009. Our realized gas prices averaged about 99% of the NYMEX Henry Hub gas price in 2010. We did have 9% of our gas production hedged in 2009 and none of our production was hedged in 2010.
Our realized oil prices are shown on Slide 6. Our realized average oil price increased 15% in the fourth quarter of 2010 to $74.75 per barrel as compared to $64.76 per barrel in 2009. For all of 2010, our average oil price was $68.35, which was 34% higher than our average oil price of $50.94 in 2009. Our realized oil price averaged 86% of the average benchmark NYMEX WTI price in 2010. This discount to the NYMEX WTI will improve this year with the divestiture of our Mississippi properties.