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Comstock Suspends Drilling In Eagle Ford Due To Plunging Oil Prices

Tyler Durden's picture




 

Shale 0 - Saudi Arabia 1

Following one after another major and shale company announcing plans to trim capex (even as they miraculously still get to keep their revenue and EPS projections intact, for now), the latest victory handed to Saudi Arabia on a silver platter comes courtesy of Comstock Resources (Total Debt/EBITDA 2.4x, EBITDA $421MM, CapEx $674MM) Comstock Resources said earlier today that in response to low oil prices, plans to suspend oil directed drilling activity in its Eagle Ford shale properties and in Tuscaloosa Marine shale.

It was not immediately clear how many high-paying oilfield jobs would be promptly terminated as a result of this unambiguously good development.

Full press release:

Comstock Resources, Inc. ("Comstock" or the "Company") (NYSE:CRK) announced that it has budgeted $307 million in 2015 for its drilling and completion activities.  In response to low oil prices, the Company plans to suspend its oil directed drilling activity in its Eagle Ford shale properties in South and East Texas and in the Tuscaloosa Marine shale in Mississippi.  Comstock has released its rig in the Tuscaloosa Marine shale and will postpone its drilling activity there until oil prices improve.  Comstock currently has four operated rigs drilling on its Eagle Ford shale properties.  The Company will release two of these rigs in early 2015 and will move the other two rigs to North Louisiana to start up a drilling program on its Haynesville shale natural gas properties. Comstock believes that improved completion technology, including longer laterals, will provide strong returns on drilling projects at current natural gas prices.

 

Comstock has budgeted to drill 19 (18.6 net) horizontal wells in 2015.  The Company expects to spend $161 million for drilling 14 (14.0 net) Haynesville/Bossier shale natural gas wells and $34 million for drilling five (4.6 net) wells on its East Texas and South Texas Eagle Ford shale acreage.  The 2015 budget includes $49 million for completion costs of 13 (11.9 net) Eagle Ford shale wells that were drilled in 2014 but will be completed in 2015 and $63 million on facilities, recompletions and for other capital projects.  Comstock plans to refrac ten of its existing Haynesville shale producing wells as part of the 2015 program.

 

Comstock estimates that the drilling program will generate Company-wide oil production of 3.5 to 3.9 million barrels in 2015 and natural gas production of 55 to 60 Bcf. 

The punchline:

After three years of natural gas production declines, 2015 will mark a turnaround for the Company's natural gas production.  The Company will continue to assess the oil and natural gas markets throughout 2015 and will adjust its drilling program to reflect the appropriate mix of oil and natural gas wells in order to maximize returns.

Good luck.

 

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Thu, 12/18/2014 - 17:32 | 5570108 HedgeAccordingly
HedgeAccordingly's picture

Crüde rreally acted like shyt today. Seriously.
Http://hedgeaccordingly.com

Thu, 12/18/2014 - 17:34 | 5570126 Bullionaire
Bullionaire's picture

Can we please delete this troll's acct?

Thu, 12/18/2014 - 18:12 | 5570290 Stackers
Stackers's picture

the natural gas shale guys are uneffected. "wet" gas is still in high demand. This is much of the big shale plays in texas pennsylvania and louisiana

Thu, 12/18/2014 - 18:27 | 5570355 disabledvet
disabledvet's picture

Say hello to free oil.

 

And I am being serious. 40% of electricity for Cali is generated by natural gas and I think the same is true in New York.  Absolutely ridiculous in my view but hey...that is money on the sidelines.  "There's no regulation like no regulation" as they say.  Considering that the entire City of Chicago actually uses natural gas as their heating fuel...

Thu, 12/18/2014 - 18:43 | 5570414 Stackers
Stackers's picture

and with "wet" gas you get so much more from it than just power. Wet gas has ethane in it. Which can be cracked into ethylene, which is one of the key feed stocks for making all kinds of plastics and synthetics, from PVC plastic to anti-freeze and brake fluid

 

Already building billion dollar + large cracker plants in Texas and else where

http://www.ogj.com/articles/2014/12/construction-under-way-for-texas-eth...

Thu, 12/18/2014 - 18:57 | 5570477 Freddie
Freddie's picture

I wish Tyler's had a thing where if someone gets endless downvotes that their posts are hidden and you have to click on them to see them. 

Fri, 12/19/2014 - 01:35 | 5571516 junction
junction's picture

I'll know its bad when Ben Cartwright at Ponderosa Petroleum has to lay off Little Joe.

Thu, 12/18/2014 - 17:32 | 5570112 AmericasCicero
AmericasCicero's picture

Could it be time for some regime change?  Good ol' fashioned Amurican fun right thur!

Thu, 12/18/2014 - 17:34 | 5570120 divingengineer
divingengineer's picture

Those fracking companies don't have much staying power.  

Been what, a couple months?  If they can't live like hogs in the fathouse they just shut down?

Huh.

Thu, 12/18/2014 - 17:36 | 5570132 Philo Beddoe
Philo Beddoe's picture

And people laughed at Herbalife. Jeez. 

Lose money now ask me how. 

Thu, 12/18/2014 - 17:38 | 5570144 Barnaby
Barnaby's picture

When oil's at $140 they hire at a level just below Police Officer, so the bottom of our social strata. What disgusting dregs are they operating now?

Thu, 12/18/2014 - 17:45 | 5570176 Philo Beddoe
Philo Beddoe's picture

A lot of guys with neck tatoos and girlfriends named Candy. 

Thu, 12/18/2014 - 22:11 | 5571086 americanspirit
americanspirit's picture

And boyfriends named Bubba

Thu, 12/18/2014 - 19:54 | 5570672 wrs1
wrs1's picture

another one who didn't read the article nor notice what a nothing player comstock is.

Fri, 12/19/2014 - 03:20 | 5571592 sleestak
sleestak's picture

No, they're not big. But as with most of even the PXDs and EOGs, the frac business is a well by well model. Incidentally, KKR is a partner with Comstock on much of their Eagle Ford acreage (they big enough for you?). I think this decision tells you the payback on EF wells is not robust enough at these oil prices to justify the investment, and it doesn't really matter the scale of the operator. Yes, CRK is more levered than those mentioned above, but you can see across all basins a dramatic reduction in capex. This frac stuff is great if capital is flowing for free, but that gig is over. Several high yield investors are wishing they'd never heard of fracking, and they won't be coming back to finance it again for a long time. Another credit bubble brought to you by U.S. cap markets desks.
The pending decline in production will take hold after hedges expire and after that, the incremental barrel will be still harder to produce now that capital has been stung. I don't think demand is wicked strong or anything, but even at no-growth we burn a lot of oil globally. It won't stay down forever and the next rally will be one of true scarcity.

Thu, 12/18/2014 - 17:36 | 5570130 Barnaby
Barnaby's picture

Comstock Lode in my pants thinking about all the domestic oil and gas peckerwoods out of work.

With any luck, it's permanent.

Thu, 12/18/2014 - 17:35 | 5570135 SilverIsMoney
SilverIsMoney's picture

Really stretching for your doom plays eh Tyler?

I'm starting to think this bullshit will never end no matter how fucking terrible the fundamentals of anything are...

Thu, 12/18/2014 - 17:40 | 5570158 Philo Beddoe
Philo Beddoe's picture

I'm starting to think this bullshit will never end no matter how fucking terrible the fundamentals of anything are

With that pearl of wisdom you are more informed than most. 

Thu, 12/18/2014 - 17:47 | 5570191 The Shape
The Shape's picture

If people haven't clued into that by now...

This is an entertainment site these days. You can beat off to the prospect of the end but the climax is forever delayed.

Thu, 12/18/2014 - 17:57 | 5570229 Never One Roach
Never One Roach's picture

Sounds Bullish to me.

Thu, 12/18/2014 - 18:00 | 5570245 Philo Beddoe
Philo Beddoe's picture

If people haven't clued into that by now...

You are underestimating the stupididty of your neighbours. 

This is an entertainment site these days. You can beat off to the prospect of the end but the climax is forever delayed.

Everybody is too busy looking for a saviour rather than a mirror. 

Thu, 12/18/2014 - 18:05 | 5570262 Barnaby
Barnaby's picture

They call it the come line for a reason.

Isn't that the definition of Craps? We do our little parts to load the die. (Puns intended.)

Thu, 12/18/2014 - 23:12 | 5571266 Chad_the_short_...
Chad_the_short_seller's picture

OAS went from 58 to 10 in 3-4 months. WLL went from 92 to 24. KOG went from 16 to 5. TPLM went from 16 to 3. That's enough to make any man or woman rich and set for life had they bought puts. What more could you ask for?

Thu, 12/18/2014 - 17:47 | 5570184 Bell's 2 hearted
Bell's 2 hearted's picture

dunno ... everything lining up for my 'US recession start no later than Q1 2015' call

 

i think Q4 earnings reports will not be good ... and worse for Q1

 

a lot of slashing in the next 6 months

Thu, 12/18/2014 - 17:38 | 5570146 Rainman
Rainman's picture

Soon a whole coalmine of canaries will begin to drop.

Thu, 12/18/2014 - 17:41 | 5570156 Ewtman
Ewtman's picture

"Comstock Resources said earlier today that in response to low oil prices, plans to suspend oil directed drilling activity..."

 

As was talked about here...

http://www.globaldeflationnews.com/plummeting-oil-prices-spur-deflation-...

 

and here...

http://www.globaldeflationnews.com/oil-light-sweet-crudeelliott-wave-upd...

 

Thu, 12/18/2014 - 17:43 | 5570167 colorfulbliss
colorfulbliss's picture

Hey, I have a question. If the shale industry goes tits up, and the drilling fields get abandoned, just how much of an environmental nightmare is this going to be?

Thu, 12/18/2014 - 18:18 | 5570317 BlindMonkey
BlindMonkey's picture

Clearly the only thing keeping N Dakota from falling in on itself is all that pressurized, steamy, oily water.

Thu, 12/18/2014 - 19:25 | 5570560 cossack55
cossack55's picture

Probably like all the western miners who leached the countryside then declared BKR so the taxpayers Superfund could clean up all the cyanide lakes.

Thu, 12/18/2014 - 17:43 | 5570168 Bell's 2 hearted
Bell's 2 hearted's picture

"Good luck"

 

and Good Night

Thu, 12/18/2014 - 17:50 | 5570177 cowdiddly
cowdiddly's picture

Well, If you can't make in the Eagle Ford, some of the best shale low cost fields in the country, where your drilling crews job resumes look like a menu from a cheap mexican restaurant; You better throw in the towel for good and be looking for a buyer asap.

Thu, 12/18/2014 - 18:24 | 5570344 wrs1
wrs1's picture

another non reader of the article

Thu, 12/18/2014 - 18:38 | 5570400 The Shape
The Shape's picture

I don't think is as big as it seems. If you don't have to drill to hold the leases next year, why would you bother if there's somewhere else you can better allocate the coin?

Thu, 12/18/2014 - 22:00 | 5571055 sun tzu
sun tzu's picture

Where are all these magical profitable wells at $55 they are going to drill that nobody has leased yet? These companies all went after the low hanging fruit first. They leased the fields, borrowed the money to lease or purchase the equipment. Now the fields are not profitable. They can only hope they can sell the oil for enough money to pay the operating expenses and interest on the debt. The banks don't want unprofitable well operations. The equipment is practically worthless when oil is at $55. 

Thu, 12/18/2014 - 22:28 | 5571137 The Shape
The Shape's picture

Surely some of them can ride it out if they're on a cost cutting drive. The ones with huge debt and expiring leases, well they're fucked.

But there were companies drilling these wells in 2005-07 when the oil price was $50-60 and that was before anyone really perfected their fracking techniques.

Thu, 12/18/2014 - 19:02 | 5570488 Freddie
Freddie's picture

Isn't Eagle Ford one of the higher cost spots?

I think most shale areas lose money when oil is below $65 to 70 a barrel.

Thu, 12/18/2014 - 17:46 | 5570181 Al Huxley
Al Huxley's picture

Fuck you Comstock, nobody has time for shale, we're busy partying.

Thu, 12/18/2014 - 17:48 | 5570188 Pairadimes
Pairadimes's picture

Who could have predicted that? The international economy flatlines and OPEC refuses to protect their competitor's highly leveraged shale plays with supply reduction, thereby rescuing market share? Whoa.

Of course, the economic shock to the price of the world's most important commodity that will roll around the globe will destroy trillions in wealth in this shoddily propped up economy. Oops.

Thu, 12/18/2014 - 17:52 | 5570212 Bell's 2 hearted
Bell's 2 hearted's picture

agree ... my only quibble ... i'm not sure OPEC capable of united front for reduction ... bunch of backstabbers (how many would keep pumping full throttle anyways?)

Thu, 12/18/2014 - 19:16 | 5570534 I am a Man I am...
I am a Man I am Forty's picture

They are refusing to protect the price of their number one asset.  Kind of like someone selling their house at half price when you actually have control over the price.

Thu, 12/18/2014 - 22:03 | 5571062 sun tzu
sun tzu's picture

OPEC will fall apart because the Venezuelans and others have figured out that the Arabs are out to eliminate the competition.

Thu, 12/18/2014 - 17:48 | 5570193 Bell's 2 hearted
Bell's 2 hearted's picture

Dunkin' Donuts got hammered today for poor performance ... and guidance

Thu, 12/18/2014 - 18:19 | 5570319 ebworthen
ebworthen's picture

They dared to suggest that the economy still sucks ass and is getting worse.

Thu, 12/18/2014 - 18:21 | 5570325 BlindMonkey
BlindMonkey's picture

Did the cops stop beating all the black people here? It is the only way to work up a proper appetite.

Thu, 12/18/2014 - 19:39 | 5570619 EastCoast90
EastCoast90's picture

I find their sausage, egg, and cheese croissants with hashbrowns to be absolutely delightful.

Thu, 12/18/2014 - 17:50 | 5570196 I am a Man I am...
I am a Man I am Forty's picture

Right, Saudi Arabia kicking ass and taking names by selling oil at half price, got it.

Thu, 12/18/2014 - 19:56 | 5570336 wrs1
wrs1's picture

yeah, real smart.  Oil now at $55 and this pathetic nothing of a company is just moving production from Eagleford to Haynesville.  How much did it cost them to get this amazing result?

Thu, 12/18/2014 - 17:50 | 5570200 Not Goldman Sachs
Not Goldman Sachs's picture

Ah, crude has nothing to do with the "markets".  Crude down 2.5%, Dow/SP up 2.5%. Can't wait for the decoupling chart.

 

No s/ needed...just a frontal lobe.

Thu, 12/18/2014 - 17:52 | 5570211 Bunghole
Bunghole's picture

How's the drop in oil prices similar to a tornado?

Somebody is losing a double wide.

I guess Cletus and Billy Bob will have to cash out their 401k for their next round of tatoos.

Pity

 

 

Thu, 12/18/2014 - 18:08 | 5570276 negative rates
negative rates's picture

All bitches still die in the end, tick tock can you see the clock.

Thu, 12/18/2014 - 18:24 | 5570338 ebworthen
ebworthen's picture

Think the executive officers are going to take a paycut?  The dividend to be reduced?  Buybacks to be stopped?  Hell no!  Shut down production, lay off workers.  Amurika!

Thu, 12/18/2014 - 22:04 | 5571066 sun tzu
sun tzu's picture

It doesn't work too well when they're leveraged to the hilt and have to make interest payments on the debt.

Thu, 12/18/2014 - 18:09 | 5570274 Oil_City_News
Oil_City_News's picture

Great news for my area NWLA!! Thought the FSA were going to be the only ones left standing...

Thu, 12/18/2014 - 18:20 | 5570321 Herdee
Herdee's picture

The Fed was desperate to create increasing money velocity.Pimco explains its' theory;http://www.pimco.com/EN/Insights/Pages/A-Rising-Tide-Lifts-Most-Boats.as...

Thu, 12/18/2014 - 18:20 | 5570326 ebworthen
ebworthen's picture

If you don't do any long term planning and you're levered to the hilt this is what happens.

Thu, 12/18/2014 - 18:23 | 5570332 wrs1
wrs1's picture

you obviously didn't read the article

Thu, 12/18/2014 - 18:33 | 5570385 ebworthen
ebworthen's picture

What were they doing with profits when oil was $100+ per barrel?  Setting money aside?  Investing in storage to sell pumped oil later when the price goes back up? 

No, it's the "stop/start, open/close, hire/fire, boom/bust" approach at the expense of employees and suppliers.  And then companies turn around and complain about the lack of employee loyalty and "finding trained help". 

Thu, 12/18/2014 - 19:38 | 5570611 El Vaquero
El Vaquero's picture

That $550 billion in energy sector junk bonds didn't get issued overnight.  Some of them were issued when oil was $100/bbl.  There is some funny accounting going on with these companies.  Higher yields on their junk bonds are going to shake out the companies that used mark-to-unicorn accounting, and DRILL BABY DRILL! is going to be exposed as a tad bit more pricey than all of the hype would suggest.

 

Fucking ponzis.  

Thu, 12/18/2014 - 19:59 | 5570689 wrs1
wrs1's picture

what do you call a 1500 bbl/day well?

fountain of money

Thu, 12/18/2014 - 20:37 | 5570807 El Vaquero
El Vaquero's picture

What's the depletion rate on that well?  How many millions did it cost to drill?  And how many bpd does your average fracked well put out?  And if they're such a fountain of money, why did the frackers issue junk bonds just to stay in business?

Thu, 12/18/2014 - 20:55 | 5570867 wrs1
wrs1's picture

It's decline rate, fields deplete and the frac wells in the wolfcamp decline at about 40%-60% in the first year.  That particular well cost about $6m to drill and $3m to frac.  These questions you are asking indicate you don't know anything about the frac plays in Texas or ND, you just know the stuff you read here which is disinformation and generally limited in relevant facts.

Fri, 12/19/2014 - 00:09 | 5571386 El Vaquero
El Vaquero's picture

Funny, you knowing what I don't know.

 

Oh, wait, you didn't.  I already knew those costs.  And I also know that, if every well drilled and fracked were to produce 1500bpd, fracking companies wouldn't have issued $550 billion in junk bonds.  So, what's the average output of a horozontally drilled and fracked well?  

Fri, 12/19/2014 - 01:45 | 5571524 ebworthen
ebworthen's picture

4 Tablespoons and a lot of stock and junk bonds sold?

Bonus time!  "Next year will be better, we promise."

Thu, 12/18/2014 - 19:58 | 5570682 wrs1
wrs1's picture

This company probably doesn't have any profits becauset their wells are for shit and they only produce 6100 bbl/day.  There is plenty of this out there but none of the good companies are affected.  The few people that lose jobs here will find them elsewhere.  Only two rigs are being dropped, that is about 30 people total I would bet.

Thu, 12/18/2014 - 18:26 | 5570329 wrs1
wrs1's picture

suspend isn't the same as terminate but who cares when it's time to bash shale some more.  bet no one actually read the article.

Thu, 12/18/2014 - 18:29 | 5570362 homiegot
homiegot's picture

Gonna have to return my new F-350 diesel monster truck. No more hookers and blow.

Thu, 12/18/2014 - 18:39 | 5570409 The Shape
The Shape's picture

Here's another area with their neck on the block

http://www.bbc.com/news/business-30525539

 

Thu, 12/18/2014 - 19:31 | 5570577 cossack55
cossack55's picture

Good. Fuck Cameron. Limey bastard.

Thu, 12/18/2014 - 18:50 | 5570456 will ling
will ling's picture

why aren't shale patch , mostly out west, producers/employees/constituents threatenin' to string up their cong reps for slittin' their throats to appease SA and get putin - whatever one thinks of shale merits?

Thu, 12/18/2014 - 19:14 | 5570517 wrs1
wrs1's picture

ZZZZZZZZZZZZZZZZZZ

 

According to their website, these guys are a joke as a producer.

 

let me know when a big player suspends drilling.

Thu, 12/18/2014 - 19:18 | 5570539 wmh_ZH
wmh_ZH's picture

That's why they call it a commodity "cycle". The drilling will stop, the weak will fail, and the price will rise again. Nothing new here folks. Look for buying opportunites come springtime.

Thu, 12/18/2014 - 19:37 | 5570613 nmewn
nmewn's picture

Shale 0 - Saudi Arabia 1

And that was after O'Barry friended them on FaceSpook! ;-)

Thu, 12/18/2014 - 20:49 | 5570856 Slurm
Slurm's picture

Lets get those coal mines and coal power plants going!

Thu, 12/18/2014 - 21:46 | 5571028 Wahooo
Wahooo's picture

Best thing we could do to fuck the Saudis. Aw shit, just bomb the fucks.

Thu, 12/18/2014 - 21:19 | 5570947 anomalous
anomalous's picture

To those tossing less than complimentary remarks at the oil industry:

If the day ever comes that you find out that eggs aren't made at the grocery store and gas is not made at the station you then realize that Wall Street and not the Oil Industry is the problem.

Feel the shame as you fill your tank because some people (that you hold in low regard) worked hard to get that fuel out of the ground. And yes, some of them had tattoos - but are better people than most of those that criticize their work.

Thu, 12/18/2014 - 22:24 | 5571129 bid the soldier...
bid the soldiers shoot's picture

No bloodhounds snapping at the roughneck's butts?

 

No, it wasn't Wall Street or the Oil industry whose fault this is.  

It's either God's or chaos' fault, depending on your view of the creation of the universe.  (But that's another topic for another day.)

With an assist from the gentlemen who decided to go with the internal combustion engine and not Stanley's steamer.

 

Thu, 12/18/2014 - 22:19 | 5571100 americanspirit
americanspirit's picture

I absolutely love watching all these oil patch bubbas lose everything. And I'm not talking about the workers - I'm talking about the investors and their bankers. Only problem is its hard to commit suicide diving off the country club bar. Better break out those pearl handled 45s big guys.You ain't gonna be able to pay for your wife's next facelift and boob job and she's already in touch with her (boyfriend) lawyer.

Fri, 12/19/2014 - 00:38 | 5571437 e_goldstein
e_goldstein's picture

it's funny 'cause it's true.

Thu, 12/18/2014 - 22:18 | 5571101 ThirdCoastSurfer
ThirdCoastSurfer's picture

Linn CO, a multi-billion dollar driller, also announced delay of all 2015 spending, yesterday. Is it time for tracker like we had for mortgage brokers back in '09?

Thu, 12/18/2014 - 22:41 | 5571174 dirty belly
dirty belly's picture
111 - The Comancheria, Lost Homeland of a Warrior Tribe

http://bigthink.com/strange-maps/111-the-comancheria-lost-homeland-of-a-...

[F]rom around mid-18th century, they roamed an area known coinciding with present-day north-western Texas, western Oklahoma, parts of southern Kansas and Colorado and eastern New Mexico. This area, first called the Comancheria by the Spanish, coincided with the Southern Plains in which the buffalo roamed, and in such plentiful numbers that the Comanche’s numbers increased significantly as well. This was also due to Shoshone immigration and the capture of enemy women and children.

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