Ladies and gentlemen, thank you for standing by. Welcome to the Fourth Quarter 2024 Comstock Resources earnings conference call. At this time, all participants After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star one one on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to your speaker today, Jay Allison, chairman and CEO. Please go ahead, sir.

Thank you, and good morning, everyone. You know, what a fantastic morning here in Frisco, Texas, with snowflakes coming down when I woke up. You know, I looked at the temperatures in Frisco. It was fifteen degrees feeling like a minus two. Now I scrolled and look at New York, it was nineteen, feeling like five. Chicago, four, feeling like a minus four. And in Boston, it was fifteen, feeling like two. So now let me tell you the story. The latest news about Comstock Resources, which is a pure natural gas company. We're excited to report today the great success we've had to date in our Western Ainsville play in Texas. Over the past five years, we have been acquiring acreage in the western Haynesville based on geologic data put together including well logs from the many producing vertical wells near area. Today, we hold five hundred and eighteen thousand net acres in our Western Angel area in addition to our three hundred and one thousand net acres in our legacy Haynesville area. There's five hundred and eighteen thousand net acres in the Western Haynesville a massive footprint that is fairly contiguous allowing us to drill two wells from a single pad to hold two separate units as we drill north and south from the same pad. Our initial Western Hainesville well, the Circle m well, was turned to sales in April of twenty twenty two. We waited five months before we splattered our second well evaluating the Circle Inn's performance. By the end of twenty twenty three, we had seven wells producing, and today we have eight Western Haynesville wells producing. During our leasing phase, our hardworking land team never lost perspective or focus as they built our position. With acquisitions and grassroots leasing we now have around…

Alright. Thanks, Jay. On slide five, we cover our fourth quarter financial results. Our production in the fourth quarter averaged one point three five DCFE per day, is twelve percent lower Then the fourth quarter of twenty twenty three reflected our decision to drop two rigs early in twenty four and drop and have that that frac holiday that we had in the third quarter. Only way we turn to sales in our legacy Haynesville area in the quarter was our Horseshoe well that we discussed last quarter. So oil and gas sales in the quarter declined five percent to three hundred thirty six million dollars due to the lower production level which is partially offset by better natural gas prices. EBITDAX for the quarter was two fifty two million dollars and we generated two twenty three million dollars of cash flow during the quarter. We reported adjusted net income of forty six million dollars for the quarter or zero point one six dollars per share, In the fourth quarter, we recognized the fifty two million dollars tax benefit related primarily to r and d credits and other credits. And also due to a reduction in Louisiana state corporate tax rate. A higher provision for depreciation, depletion, and amortization accounted for the loss before income taxes in the quarter. The higher amortization rate resulted from the decrease to our proved undeveloped reserves which were determined under SEC rules where you have to use the first of the month average price looking back for the previous twelve months. Of course, that price was very low in twenty twenty four. On slide six, we recap the annual twenty twenty four financial results. Production for the full year averaged one point four Bcf per day, which is very comparable to the production we…

If you look at slide fifteen, this is our updated drilling inventory at the end of last year, twenty twenty four. Our total operated inventory year end stands at one thousand five hundred and forty eight gross locations and one thousand two hundred and eleven net locations quite still a seventy eight percent average working interest. Our non operated inventory, we have one thousand one hundred and ten gross locations or a hundred and thirty nine net locations, which represents a thirteen percent average working interest. The drilling inventory is split between Haynesville and Bossier wells. Divided into our four categories by length. Our short laterals are less than five thousand feet. Our medium laterals are between five thousand and eighty five hundred feet. Our long laterals are between eighty five hundred and ten thousand feet. And our extra long laterals or all laterals over ten thousand feet. In our gross operated inventory, we now have fifty three short laterals, three hundred and thirty seven medium laterals, Five hundred and seventy long laterals and five hundred and eighty eight extra long laterals. Our gross operated inventory is evenly split with fifty one percent in the Haynesville and forty nine percent in the Bossier. The up the updated drilling also includes the impact of identifying a hundred and thirteen horseshoe Locations. The average ladder length that our inventory is now at nine thousand six hundred and three. This is up from nine thousand two hundred and sixty one feet at the end of the third quarter. Due to converting more of our short laterals to the long lateral horseshoe wells. Seventy five percent of our inventory is now composed of laterals greater than ten thousand feet. And our inventory provides us with over thirty years of future drilling locations. Based on…

As all of you know, that's a lot of data when you include the the Wristman Hainesville. Roland Dana. Thank you for the transparency for the fourth quarter and the full Twenty twenty four. If everyone would go to slide twenty three. I direct you to slide twenty three where we summarize our outlook for twenty twenty five. But In twenty twenty five, we will remain primarily focused on building a great asset in the Western Haynesville that will position us to benefit from the longer term growth in natural gas demand. We currently have four operated rigs drilling into Western Hainesville, as Dan said, to continue to delineate the new play. We expect to drill twenty or nineteen point nine net wells and turn seventeen or sixteen point nine net wells to sales in the Western Hanover this year. We will continue to build out the West Mainesville midstream assets to keep up with the growing production from the area. Midstream expenditures are expected to be a hundred and thirty to a hundred and fifty million dollars. They will all be funded by our midstream partner. In the legacy Haines, we will run two or three rigs depending upon prices to build production back up by the fourth quarter. We expect to drill twenty six or twenty point four net wells and turn twenty nine or twenty two point eight net wells to sales a legacy angle this year. We anticipate funding our drilling program to roll instead out of operating cash flow and use any excess cash flow to pay down debt. We continue to have the industry's lowest producing call structure. And expect drilling efficiencies to continue to drive down D and C costs in twenty twenty five in both the Western and legacy Angel assets. We have strong financial liquidity totaling almost one point one billion dollars. Note on slides twenty four and twenty five, we provide for the rest of the year. We'll now turn the call back to the operator to ask a question from analysts who follow the company.

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. And our first question will come from Derek Whitfield with Tech Capital. Your line is open.

Well, good morning, all, and thanks for your time. Also, congratulations on the position you have assembled into Western Haynesville as your map is a dream scenario for anyone pursuing. Organic leasing program in a new basin?

Thank you.

I have two questions and they're both related to Western Haynesville. So reference in slide eighteen. You're drilling arguably the deepest and most complex parts of your today as we understand the geology. Do you have a view on reservoir quality as you move to the west to the shallower portions of the sub basin? Surely, D and C costs would decrease, but there's is there a chance that reservoir quality would support recoveries in the two and a half to three BCF?

Derek, this is Dan. I I think that that's a very good question. We are drilling the deeper the deepest, hottest stuff know, if you look at where the well locations are across the acreage. We haven't drilled anything, you know, up there on that part of the acreage. A lot of that stuff is HBP acreage. So, you know, we're drilling the stuff that we've leased in the hole, and so that'll kinda keep us down in that general area. And as we stand up to the northeast, for the kind of the near term activity in the next couple of years. But kind of to answer your question, I think, you know, as you get up in that acreage, you're talking about, it does get shallower. The TBDs get shallower and a little bit cooler. So, you know, I think it just remains to be seen what the URs are gonna look like, but You know, I would certainly think maybe, you know, a hairless just if you just correlate it to depth, But we also expect our DNC cost are gonna be a lot lower, you know, when we drill up there in the future. And, you know, I think our DNC cost are gonna be a lot lower just drilling where we're at now in the future. We're You know, we're still kinda going up the learning curve. We haven't plateaued yet on even the lower cost that we're at today.

You know, and to your point, I think it's really good. We didn't start out with the easy. Depths. We started out with the deeper depths, the hottest depths, And, you know, we we we we we looked at what reality looked like, and they look really good. And that's where we ended up with these eighteen wells. There was a big enough dataset so that we could actually come out and talk about the cost and you know, in all major tier one plays, the more you drill the wells and complete them, typically, the cost structure comes down. Exactly like it did in the core of the Haynesville Bosch are going back to two thousand eight to two thousand eleven.

As my follow-up, I wanted to focus on the D and C cost compression you're highlighting on page Twenty two Specifically focused on the completion side. The degree of the step down in q four suggests there's more opportunity there, which is kinda what Dan suggested as well. But in comparison to your legacy Hainesful, is the added cost largely associated with higher treating pressures? Are there or are there other considerations? And I guess more broadly, how much lower could you drive that?

I think we have more room to probably lower our cost On on the drilling side, I mean, we've seen we've seen a bigger drop on the drilling side than the completion I think we have room to lower the completion cost a little bit further. I think that q four cost we have in there at thirteen hundred and fifteen dollars a foot, that's kind of a number that we're Planning with for the future wells just for forecasting. Kinda you know, you asked about treating pressures. Yes. So as far as compared to the legacy Haynesville the treating pressures are definitely much higher down here just based on the depth. And the frac gradients. The beauty is in the western high zone, the fracs very consistently. So it's been really it's been really kinda trouble free, but it's a lot more horsepower. And we do pump slightly bigger jobs in the Western Hainesville. On average, we pump about four thousand pounds per foot, and then the core, we pump about three thousand five hundred pounds per foot. So that's also part of it.

Yeah. And Dan, I'd I'd add too just yeah. You look at comparing the Western Haynesville to the legacy Haynesville, I mean, we are having to build all the infrastructure, the new pads, I mean, you know, we're really starting from scratch there. And the legacy Haynesville, you've got a lot of infrastructure that we built long time ago and very often using pads we built a long time ago So, you know, there's a there's a huge difference in the the up upfront cost. These early wells are bearing all that cost know, in the numbers. And then as you come back and infill drill and and continue to develop it, you know, you'll have less and less of that cost Yeah. The future wells would be able to utilize that investment we're making today.

Yeah. I'll just add to what Roland said. We are building larger pads in the western high school to be able to come back and drill future wells.

Great update, guys.

Thank you. Thanks.

And the next question comes from Carlos Escalante with Wolfe Research. Your line is open.

Hey. Good morning, gentlemen. I wanted to first congratulate you all on the incremental caller on the Western Angel. It's it's really encouraging to see the results. Me start with a follow-up to the last question, but more geared toward the development plan. Could you speak this is perhaps for Dan. Could you speak to what a typical development plan would look like for your average Western Hazel pad? In in terms of how many wells you would expect on on any given pad, and what your general assumption for spacing would be. Knowing, of course, that it's it's probably too early to know what the the right spacing is.

Yeah. I'll the last piece of that is definitely too early drilling the whole acreage. The wells are spread out. So we haven't really honed in on what the spacing is going to be. I think we're going to have to accumulate a lot of data in the future to hone in on what the optimum spacing will be in the Bozier versus in the Hinesville you know, areas where it's thicker versus thinner, I think we're gonna all yield different answers. So I don't have a direct answer to that question. But as far as future development, we we strive to drill everything with two well pads that we can. We're, you know, we're drilling and we're holding acreage. In some places, you just Yeah. Just don't the acreage doesn't give you the opportunity to drill to two laterals, you know, two wells on a pad. So I think we're probably looking at about, you know, half, fifty, maybe sixty percent of our wells any given year will be on two well pads and the others will be singles. You know, we strive to make as many two well pads as we can, but that's probably gonna be our mix for the next couple of years.

And one thing we try to do you look, we derisk maybe twenty six miles of this plate. We show that on the map. And our goal is by the end of twenty twenty five, drilling twenty more wells And, hopefully, all of those are to hold acreage, maybe one or two. We just have to drill outside of holding acreage. But the goal is to drill all of those wells to delineate what this footprint really looks like, what the value is, what the resource potential is. And along with our partner with Quantum, you know, we will build the the the gathering treating in in the midstream to complement the program at twenty five twenty six. I think by the end of twenty five, definitely by the end of twenty six, I will have fully derisked this whole five hundred and eighteen thousand net acre play know, Dan had mentioned a lot of this HPP so we don't get plan on drilling on the HPP acreage until we hold maybe seventy more wells we need to drill in the next several years. To HPP our entire footprint.

Gotcha. Thanks for the call, Jake. My second question is on the CapEx trend on a per well basis. I think that it's very encouraging to see that you've saved on both fronts the drilling and completion completion side. But given that the Western Hainesville is materially hotter and deeper than legacy Hainesville, you'd almost think that your your drilling savings will be will hit a a plateau soon, if you will, whereas on the completion side, you might you you haven't reap the the full benefits of a full development cycle. So I was wondering if you can perhaps speak to how on the completion side, You you'll achieve greater savings. What what are you doing specifically in terms of your completion design? And and how much headroom do you see on the drilling side as a whole?

I mean, so kind of alluded to that a little bit earlier. I think you know, we'll see we haven't we haven't reached a plateau on the calls, first of all, in the Western Haynesville. Mean, obviously, with all the thousands of wells and we drilled up in the legacy area, you know, it is. It's just small little tweaks here and there. It's, you know, it's minor things. It's it's great execution, you know, just saves off just, you know, a day here and a day there. That's not the case in the Western Haynesville. In the Western Haynesville, you know, we've been going up a steep learning curve. We've cut off a lot of days. We haven't reached a plateau yet. I think we're gonna drive these costs you know, lower. We're gonna knock more days off. You know, in the future. More of that I see more of a just a percent Reduction in cost on the drawing side and on the completion side. We are pumping the same, you know, the same frac job right now on all the Western Haynesville wells. I will make one note, you know, on slide twenty two, there was a there in in q two, showed a high completion cost of Nineteen hundred and seventy bucks a foot, and that is we just had one well that quarter and we popped know, what we call our big frac. We pumped we pump six thousand pounds per foot on that well for a data point just to monitor how that well produces in the future. Compare to all our others, which is well, that one stands out. But We've had really great execution on the completion side, you know, really today. So that's why I don't see the completion cost coming down. As much as the drilling on a percentage basis.

Yeah. The other thing, we have managed the wells a little different. You know, each well, is like a prototype. And we learn how to manage all the wells. You know, we go back and and we preview what Circle m looked like, what we we could do or didn't do, and how well it's performed. And I think, you know, Dan wants to comment on just well, management, we're getting better and better and better. Which is a learning curve from having the eighteen wells.

Yeah. I'd say we we definitely have been conservative on how we're drawing the wells down and

you know, based on a lot of the things we're seeing, we're we're just making adjustments you know, on how we on how we do that, manage the drawdown how hard we pull the wells when we flow them back and clean them up, turn on the sales, And then know, where we set the rate after that.

And what that'll do, they'll give more predictability, give more stability, It'll give us, you know, what the the real top curve may look like. What the draw downs may look like, but the wells have been producing one or two or three years. You know, we hadn't gotten to that point yet. But I think the goal today was when, you know, you trusted us for five years and we haven't given you all the data, And today, the goal was to tell you that we think the Land Grab is over. So we can give you the footprint We think that the the mid frame is secure. So we can tell you a little more about it. And particularly, the dataset is big enough so that you can at least look at that as a beginning point to see what we can improve from there. I would tell you that if you go back and you look at the first eighteen wells ever drilled in the core, The Haynesville, Bossier and o eight, can you compare those to the wells we drilled today? Ours are like life sounds better. So

And our next question comes from Charles Meade with Johnson Rice. Your line is open.

Good morning, Jay Rowan and Dan. And I'll I I have my voice to the course of of of congratulations, not just on assembling this, position, but also the the great progress you've made. Screaming and yelling for us

and you've lost your voice. I know. I understand.

That's that's that's the least of my problems, Jake. Jay, you already anticipated one of my or my my first question when you started talking about the the de risking the position. You you talked about the you you your first wells here, you've you've derased along a kind of a twenty six mile southwest northeast access. If I'm just eyeballing your map there on what is I think it's page eighteen. Yeah. I just eyeballed. I would say that's maybe derisked don't know, twenty, thirty percent of your position. I I'm wondering if you could you could give an opinion on that and then maybe also wrap in as you, you know, as you go up dip or you you go north, what what are the risks? Is it is it formation thickness or is it just is it is it porosity that that is the risk that that's gonna you know, determine exactly how much of this five eighteen really works. Well,

if if what you noticed on the slide or or or kind of my introduction, I said that this file I'm paid for, it it is to scale because sometimes there's trickery. You know, you don't have many acres, but you don't put it to scale. You compare it to your other acreage, and it looks it looks skewed. So we we said you we just wanna make sure, you know, it's not distorted footprint. Because you would think it could be distorted because there's so much of it. Because our our legacy Hinge will I mean, it's some of the most valuable acreage in North America, we believe, because where it's located, in all the locations that we have left to drill in the Haynesville as well as only eight percent of those years developed So when you when you go back to the beginning, in in, you know, twenty twenty, twenty twenty one, too, you can see we've tried to outline the patients that we had That's why I gave the dead horse scenario. In other words, we're looking to see if this thing works. If it doesn't, then we're we're gonna get off of it. But if it continues to work and quite frankly, Jerry Jones and his family allow us to derisk this thing, which is very hard to do. It takes months and, you know, some bad days, some good days, but you add it all up. What we try to do is we try to say, how many acres do we have that we have to drill wells right now in twenty twenty one, twenty two in order to hold leases that we had inherited from acquisitions. That's number one. And number two, we looked at you know, how many how many logs do…

If yeah. If you look on the in the If in our core acreage, Jeffrey, you know, some of our best wells are And the areas that are not as thick, like, up around, like, you know, the Elm Grove area. So I, you know, I as far as just speculating, you know, if it's something standard or thicker on how it's gonna perform, I don't think there's any correlation there at all, really. Yep.

Yeah. Is it is it really more just a, you know, gas fill porosity is the is the biggest determinant then? Yeah. I mean, thicker I mean, obviously, more gas in place. Right? Thicker rot. But Yeah.

Definitely, that does not correlate to the to you know, how prolific it'll be.

And we have many cool model cold pressure differences.

Yeah. Interesting. And then one follow-up, Jay, you already you touched on this also. I think, Dan, you touched on this A lot of focus on these these newest batch of wells and rightfully so. But you you continue to watch these other older vintage wells, and I'm more wondering if you can talk about what you've learned from them whether about the right way to manage the pressure drawdown, the, you know, the landing zones within these formations or or the right completion jobs. I I I know there's you know, every day that ticks by, you you add to the data pile from those older finches as well. So can you just tell us what you've learned in that respect?

I think, you know, we we we obviously have been really laser focused on the cost. Just getting the wells down in TD, The landing zones, I think, you know, a lot of these where we where we drill are in the You know, relatively thicker you know, part of the place. So we haven't We haven't really you know, got real specific on, you know, the landing zone should be a little higher, a little lower, just wanted to get the wells down, you know, and basically just feeding these things as fast as we could. And far as the drawdown and and, you know, we've been pretty conservative. You know, I think we'll probably tweak that a little bit in the future. You know, these last few wells, we we like to IP them you know, pull them a little bit harder and get the wells cleaned, make sure they're getting clean before we get flow back off of them, and then, you know, pull the rates back and start them, you know, basically on the type curve rate and just basically, you know, let them go from there.

No. Charles, tell me Thank you for the added detail. You, but Some of these wells we two buck, some we don't. It's a big cost variance too. We figure out what we need to do or not do. As we drill more of these wells.

Got it. Thank you, Dan and Jay.

Thank you.

And the next question will come from Colly with Bank of America. Your line is open. Hey. Good morning, guys. Jay Rillan.

I think the update here is being received well, so I'm gonna keep it quick here. Any early thoughts on twenty twenty six on maybe holding activity here at Seven rigs seems like the industry is falling in a rhythm with demand, and that's a really good place to be.

Right. No. I think that's the key. You know, one thing we we wanted to make sure is that we don't produce too much gas, especially in one region area. We've been, you know, been looking at that. We think seven rigs was always a really when we dropped to five rigs, good level for the company to kinda maintain, I think, you can see the impact of that. That's really too low of an activity level, but it was needed to help balance the market So, you know, we're gonna get very comfortable with seven. We're gonna balance sheet Yeah. Back to like it was in twenty twenty two. That's our biggest goal. And I think twenty six will be a year that will have the level of production and good gas prices to drive the get the balance sheet and and perfect shape, but and I think, you know, it's twenty five, you know, That level we're running now, you know, we won't we won't add any debt, most slowly pay them down. But then next year, we'll be able to really reduce debt significantly.

Brilliant. As far as the year end twenty six bogey, you think somewhere under one and a half times is where the balance sheet would end up.

Well, I I think you'll first, you'll see the leverage ratio improve rapidly as we can start to count the twenty five results and and and take off the results of last year, we had to so low of gas prices Yeah. But but, yeah, we definitely wanna get it down as quickly as possible to the one and a half times leverage area. It's probably that's probably something that we achieve in twenty six But I think we'll be you know, way in the very low Two times leverage numbers as we kinda work our way through twenty five. So so a lot will depend on, you know, how strong gas prices are and then how know, we do have to rebuild our production a little bit to kinda get that leverage ratio, you know, to us more optimal

You know, that that's a really good point though. I mean, we said this but other than COVID, gas price last year was was the lowest it's been in thirty years. So if you look at that and you look at us getting rid of two roofs, you look at us having a frack Holiday. You And then you look at us adding two hundred and sixty five thousand net acres in the Western Angle, you can see that we we we really, really monitor our leverage and our balance sheet We do that even in a very, very difficult year, and at the same time, Instead of m and a, we we said we'd like to to see if we can grow organically. And and typically, that's what these companies used to do. And because of the Joneses, they kinda uncut this We could go in and you know, as we were one of the first several companies to derisk and discover the core angel, we're we we just picked the same group down to the Western Angle, knowing what we were looking for. And and it it took five years for it to turn out to which turned out right now. Still preliminary. But if we're right, the these reserves will be there'd be massive Our footprint is massive, and we're in the exact bright part of North America for all this demand, particularly for LNG. So it's it's gonna be a really beautiful story.

That's right. It's it's exciting to watch. Jay Roland, I'll see you guys in a couple weeks.

Yep. We look forward to it.

And our next question will come from Bertrand Donnes with Truist Your line is now open.

Hey. Morning, team. I just wanna follow-up on that on that M and A topic Not necessarily on the on the western side, but with higher gas prices, you'd think most of the the private owners are probably thinking about, you know, potentially selling or you know, maybe does that incentivize you to to look more aggressively, or are those sellers seeing the strip move up and and maybe they're already seeing a five dollar price that they wanna see or or something like that. And then the the second part of that would just be on the oil side, most of these these private equity shops normally ramp up production before a sale. Do do you see that happening, or or that's not exactly how it would work on a gas side?

Well, it's it's hard to predict how, you know, what what they're looking at. But, obviously, I think there are sales some private companies out in the Haynesville that, you know, that have invested a lot of capital. And now that you're in a good gas price, you know, situation that there's their business plan is to, you know, sell that kinda like the same with the oil. The private companies in the Permian, and so net But we we do see a very low level of activity in the Haynesville, so we certainly haven't seen any type of effort to ramp up at all from from the public or private operators. We've we've seen great discipline you know, in the basin. And I think I think all the producers really wanna get very comfortable that, you know, that that the gas is really needed and We've seen very, very volatile gas prices And so I think everybody's been very cautious to say, hey, we're not going to oversupply this market. And maybe we under supply it because we're so cautious.

Well, and you can even say the first quarter, you know, we give guidance down We're not gonna overproduce, period. And that that guidance is a result of dropping those rigs. And, you know, we're not adding it. The rigs in the Western Angle to increase production right now. We're adding those rigs because that's the best place for us to drill because we need to we need to drill more wells to HPP more of the footprint. So that that's why we're doing that even. We don't see any e and p company out there out of control on their production rates. None of them.

That's great. And I I think the market is is happy to see that. And then for my my second question, you know, several of your peers have started talking about potentially locking in a percentage of their production. The contracts either data center or LNG, and and it seems like most are have fallen in at ten percent to twenty percent of their volumes. Is that where you guys feel like you'd fall, or or you potentially have a a larger app type? Maybe you lock up, you know, acreage dedication in the western Hainesville or or something like that. For a you know, to backfill a demand project. Thanks.

Yeah. That's a a good question. We we we would also wanna look at having a portfolio of of purchasers for our gas and not putting, you know, all our eggs in one basket. But but we see, yeah, both being a major supplier to several of the LNG shippers and potentially you know, looking at some power generation projects to back to But again, I think having a good balance of that activity, because you know, their demand comes at different times of the year. And so so so but there are great good opportunities for the gas producers now to start to directly you know, lock up with the industrial users, and the exporters. And I think it's a it's a good time for us to create, you know, good good relationships where we could have more stable prices and also, you know, know that we've got good you know, we've got that We've got we balance out our production to what we know the market needs.

So Well, particularly, you know, probably ninety percent of our Western Haynesville is completely in dedicated I mean, completely So it's it's it's pretty range out there. We can kinda do what we want to with it.

Alright. And just wanna clarify, so that an acreage dedication for a for a demand project, that's it is that coming back or are we we done with that?

Yeah. I'm not sure that, you know, acreage dedication probably, you know, out there. I mean, typically, that it kinda comes to backup, you know, large amount of infrastructure, you know, to to make it you know, for the infrastructure partner to be comfortable that, you know, they can get their capital out. But here, I think, you know, since we're gonna own our we way we structured things, we're gonna be able to own all that. And so, I think instead, we wanna kind of look out and say, hey, we can we wanna take up our portfolio of gas, but for the legacy and the Western Haynesville and and then want to portion it out to, you know, these these direct the you know, what's the best deal for CommSox. So who's gonna pay the higher premium? They all have kinda different needs and and so so so but it's a it's a very exciting time to be developing a new plate like the Western Hainesville, at the same time you know, there is a lot of market development opportunities that our gas industry hasn't seen in a long time. So it's a great combination of those two together.

You know, this is probably a good time to talk about too. The reason we were able to go look at the Western Angel is because the value of our core You know, we we don't want anyone to ever overlook that. That's three hundred and one thousand net acres in that inventory. With plenty of takeaway there. That that gave us the ability to come look at the Western Hansel, that along with the operational technical skill that we had But the but but the value of the legacy allowed us to do the Western Hainesville.

Perfect. Thanks for the answers, guys.

Thank you.

And our next question will come from Jacob Roberts with TPH and Company. Your line's open.

Morning.

Morning. Morning.

Just you know, I hate to ask about twenty twenty six plus, but thinking about the four three rigs split as we kind of progress through twenty twenty five, is that a level that can meet any HPP needs, any MVC needs with Quantum? Or are you contemplating a, you know, five two, a five three? Just just wondering you know, what are the commitments as we get into twenty six twenty seven that we might need to be thinking about.

The the real positive, the way we structure things is that we don't even need to maintain that type of activity to kinda meet you know, any NVCs or or other requirements. We've been, you know, very conservative as you build something out, you know, not to over not to get over committed. So I think it's a very comfortable level you know, the know, for the company? And so it's really gonna be, like, what is the market You know, where is the gas really needed? And I think we would adjust that, you know, based on kinda how we see these market go out. I think we're very comfortable with the activity level and running be able to run four rigs in the Haynesville will keep us on track to Six two. HBP in all of our acreage and easily meeting, you know, supporting, you know, The build out of the midstream.

Okay. Perfect. And then maybe just a quick follow-up. I appreciate some of the discussion about your understanding of the broader Western Hainesville acreage that you've disclosed. Can you just frame, you know, the amount of seismic, the amount of historical, work that's been done on this land that helps you understand that The way you do?

Yeah. It's like there's been a lot there's been a lot of three d seismic shot across all of this acreage. Just a lot of different different vintage data The South Third that can be bought that has been tremendously, you know, Helpful. We've got a planning out where we wanna drill and we've got we've got some future wells that we're gonna be drilling some some pilot holes on and getting, you know, drilling all the way through the section through the bottom of the Haynesville for well control purposes and geosteering. And, we've also got some future quoting in stuff we're gonna do as far as, you know, just doing some more sites you know, and to get the performance properties on the rock.

Excellent. I'll echo the sentiment of appreciating the update, guys.

Thank you.

And our next question will come from Greg Brody with Bank of America. Your line is open.

Hey, guys. Just as we think about Midstream, for next year, What type of capital should we should we pencil in? And then when do you think you will exhaust the the the midstream JV, and how do you think about funding it after that? Yeah. It's a great question. Yeah. We this is a you know, with building a new treating plant, this is a a big capital investment that we started making in the fourth quarter and, you know, through this first half of the year, then we're gonna have a lot of treating capacity that's gonna be available to us starting, you know, in the second quarter. And so you know, then we, you know, continue to, you know, look at our our volumes and then decide when we want to add additional trains know, to either either a new plan or adding to our north or south plan. So we also have some good partners nearby that we've secured additional capacity, you know, in order to to not have to build everything. So so we we feel really good about where that is. I think that we it it the the build out of the bid stream is amazingly fit almost perfectly with our five year plan for it so far. And so we've been really Please And I think our partner has been too. And So so I think that eventually, you know, there's the entity has now has a lot of volumes and it's gonna have a really good year this year. Gonna be able to maybe have you put in its own credit structure there so we can kinda kinda get less expensive capital to kinda fund some of its build out. But that's probably gonna be you know, more later in the year after, you know, after it's up and running and generating a very strong EBITDA. But very excited about what Pinnacle can become, and value it's gonna be adding. I think you look down the road, it's gonna be a very, very big asset. For the company. And under our structure, you know, once we Yeah. Return that capital with the preferred return, you know, that will revert a Yep. Seventy percent back to the company, and then we can buy out the minority interest if we'd like in the future also.

Yeah. The goal was we as we were acquiring all the sacred we wanted to control, midstream. We we trusted, you know, Quantum as a company, lending money, and Porting. Plays like this, which we really trusted them. We wanted to see if there was something that we were missing. So when Quantum came in, look at the acreage, look at the well results of that that point, which should only gotten better. I mean, they said we're, you know, we're exactly with three hundred million We we wanted to make sure that we would control that. And it wouldn't be sold to some third party? Which would then control what we'd be doing in the Western Hainesville. We didn't wanna lose control of that. And Quanta became the perfect partner. So it's fair to say that between

Quantum's equity and a potential credit facility at this at the JV It's That entity is self funding for the next several years.

Right. Right. We would see it, hopefully, transitioning in the next year. They really and as you get through twenty six, that probably where it know, it doesn't really need it'll start to be totally self funding. You know, and and we we all supposed to be maybe bringing in some of the nearby operators, you know, could also help accelerate that if if we can land some of those as customers. As we build the system out.

Great. Thanks for your time, Debs.

And our next question will come from Noel Parks with Tuohy Brothers. Your line is now open.

Hi. Good morning. You know, just thinking about the the drilling time improvements you've already been able to achieve. I just wondered, could you just talk a bit about maybe what assumptions you had going in in your Your earliest well and whether there's anything different now That you're this far in? Sort of, like, what Yo. Talked about some of the things you've you've preached. I'm just wondering you know, kinda what was your starting point like when you were approaching the play?

You know, it's a interesting question because when we you know, we looked at everything we had done in the legacy you know, on our legacy acreage in all of the years past, and kinda just one of the real general things, you know, we had seen was before we ever started in the western high school, You know, in general, in the core, you know, all the wells were were were being drilled twice as long, you know, say five k's to ten k's, and at the same time, they were getting twice as long, you know, they were being drilled at half the time. And there were a couple of, you know, there was a couple of Old wells that had been drilled, old horizontal that had been drilled back in twenty ten down here in the Western High School kinda provided some of the earliest data to take a look at, you know, that we looked at. They had a lot of just a Just a lot of mechanical issues, collapsed casing, and just you know, really was pretty ugly. But but, you know, we just looked at how many how many days it took them to drill those wells, and those were were essentially five k ish type wells. And so if you just applied the same industry progression You know, twice as long and half the days. That's kinda what we targeted you know, and it was around that seventy five to eighty eighty day time frame. And that's exactly where we landed. You know, on average, if you take out that sidetrack we had on our second well, we landed at about eighty days. Starting out. And the good thing is is that, you know, there's a lot of running room. These wells were deeper and harder, and we just have so much more room to run down here to get better. Versus we did up in the core. So

Well, on our confidence level group, you know, we were gonna drill the sixteen thousand foot vertical, and then As our conference crew was well after well after well, we did go to nineteen thousand feet. So we wouldn't have done that had we not had more confidence in the sixteen thousand foot vertical.

You know, you on anything you do, anywhere you drill, the longer if you can just you know, wells are good and you can keep drilling additional wells and you can increase your activity, You know, if you all practice makes perfect, the more you drill, the better you're gonna get. The more the industry drills, the better the industry gets. And, you know, that's know, that's what we're seeing.

Great. Thanks. And, you know, understandably, there's been so much attention to us seeing the the map for the first time and And results from the the newest slate of wells. So I just wondered if I could just talk a little bit about gas macro and looking at your hedges I was just wondering, is there anything particular about the three fifty mark as where your downside protection is that you've been gravitating toward. And I also, if you had any thoughts about What things are gonna look like or might look like as the LNG ramp up continues along? Well, you know, we look today, and I just looked this as a

US LNG fleet hit a new record high of sixteen point four seven b's You know, we we are very, very, very positive on that. Forget in latter part of twenty five, twenty six, even twenty seven. So when when we when we look at the Western Haynesville, not the Legacy I mean, we do need to drill the Legacy, of course, It provides us a a very dependable revenue stream. But what we wanna do, we wanna guarantee that we can drill all these wells that we need to drill in twenty five, twenty six. And still deliver the balance sheet. Our our big land grab and the and the lot of money we spent on that is we're we'll spend a little bit as we do even in the core cleaning it up all the time with be perpetual. But we don't see any big acreage at their positions that we're chasing that we don't have. So this is purely it's it's a protect of a balance sheet to get us back to have a dividend You know, if we could have a dividend in the latter part of twenty sixth, great. Early twenty seventh, whatever. But we want to delever the company now, drill these Well, is it stay true to the midstream partner with Quantum. And deliver this gas not when it's when it's needed, And the beauty of this is nobody tells us when to drill it, how to drill it, or we control it ourselves. It's it's it's something we bar we control. And where it is is is perfect. You could pick a map. If you would look at where our pipeline is, which we showed that while we went over it, We bought that a lot of that pipeline in one of our acquisitions It is the backbone of where our footprint is. You cannot have a better location for that pipeline and it's not there by mistake. Twenty years ago, that was the core of the core where they were drilling. That's why that pipeline was there. It just wasn't worth anything when we bought it. Somebody had to, you know, re rigorate it and and put some gas in it. We're the only ones willing to do it. So it has become a very valuable piece of the company.

The replacement cost for two hundred and and forty six miles of high pressureRoland Burns: pipeline and a treating plant. It would be unbelievable to have to put all that in from scratch. I mean, you're talking about the the amount of equity that's already there is is pretty phenomenal.

Great. Thanks. That's that's really helpful insight. That's all for me.

This is all the time that we do have for questions. I would now like to turn the call back to Jay Allison for closing remarks.

I wanna thank all of you. It's it's a much longer call than normal. It's almost an hour and a half. We knew it it would go longer. We didn't wanna cut anybody off, but know, again, I I wanna thank you. There's probably two hundred and fifty plus men and women who make up the Comstock team, and a lot of them listened to the call. I wanna thank all of you as well. I wanna thank our our loyal banks. I mean, the banks have believed in us. The bondholders have believed in us. The equity owners have believed in us. The analysts have believed in us. And I wanna say again, especially thanks to Jerry Jones in this family who are the backbone support. To unlocking the Western Hansel value. You know, I gave an old cowboy spear. I'll give you another one. It says if you climb up on the saddle, you better be ready to ride. And we at CommSpark are ready, and you can take that to the bank. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.