Comstock Resources and EQT reported 4th quarter 2023 earnings and issued 2024 production guidance on February 13th. The 2 companies also issued 2024 activity guidance in terms of their planned rigs and frac crews. Comstock Resources is now clearly in retrenchment mode while EQT still remains in maintenance mode.
Comstock Resources
Comstock Resources released a frac crew in January 2024, they plan on releasing one rig this coming weekend of February 16th-18th and releasing another rig sometime in early March 2024. Hyperion data captured the frac crew released on January 13th, 2024, as seen in the graph below.
Comstock may shed another frac crew later in 2024 should market conditions warrant. The company will not drop any rigs in the Western Haynesville basin where they have been striking very productive wells with current IP rates of up to 31 MMcf/d. Comstock expects their overall production to only be higher by 2.5% year-on-year for 2024, which will imply a December 2023 to December 2024 exit-to-exit decline in production. Comstock expects their production to peak in the 1st quarter of 2024 and decline gradually throughout the rest of 2024. The company remains bullish on natural gas in 2025-2026 (due to the jump in LNG export demand) and will look to add back rigs during those years. For the time being, Comstock Resources stated that they need to be prudent and cut back on activity.
EQT
EQT is in a different mode than Comstock Resources. EQT for the time being stated that they are in production maintenance mode but may temporarily curtail or choke back production if prices go low enough. EQT said that they will keep their original pre-Tug Hill acquisition rigs and frac crews intact for now. They will cut one rig from their Tug Hill acquisition, but only because they are realizing synergistic efficiency gains from the buyout. Pumping hours per frac crew were up 15% year-on-year in 2023. The company anticipates overall production declines in the Northeast later in 2024. However, EQT’s own production guidance has their production up 0.7% year-on-year after adjusting for the acquisition of Tug Hill. Additionally, EQT expects the long-awaited Mountain Valley Pipeline to come online sometime in April 2024.
Production Shut-Ins
With prompt month NYMEX Henry Hub prices well into the $1 handle, record high production, record warm winter weather, and seasonally very high working gas storage inventories, more and more traders and analysts are now wondering what price levels are needed to shut-in or choke back production. While it is difficult to determine an exact shut-in price level, one can approximate it by using variable cost break-even price levels which public producers publish from their quarterly earnings reports. The most ideal basin to look at where the wells are practically 100% natural gas is Haynesville. The table below lists the variable costs by public producer in the Haynesville basin. Comstock Resources is the only pure Haynesville producer in the table since Chesapeake and Southwestern Energy have a lot of natural gas and natural gas liquids production in the Northeast. Since natural gas liquids prices are much higher than natural gas prices, the natural gas liquids production significantly lowers the break-even levels for the wells that contain both natural gas and natural gas liquids in the Northeast. Wells in the Haynesville basin have practically no natural gas liquids in them. Therefore, our only real pure natural gas-based indicator of shut-in pricing in Haynesville is going to be Comstock Resources and their break-even price level is $.84 / MMBtu. 84 cents per MMBtu would be a shocker price level that NYMEX market participants would not expect to occur. Stay tuned for the next Hyperion update on shut-in price levels!