Detailed Narrative
Western Haynesville Strategic Development
Comstock continues its strategic, patient development of the Western Haynesville, aiming to avoid past mistakes of over-drilling seen in the legacy Haynesville. The company has acquired drilling rights on 728,000 gross acres over five years, identifying 2,546 net locations. This deliberate approach, focusing on cost efficiency and resource delineation, is intended to maximize long-term value despite potential near-term investor impatience regarding cash burn.
Power Generation Hub
The US Department of Commerce selected Comstock's Western Haynesville site in Anderson County, Texas, to host a new 5.2 gigawatt natural gas-fired power generation hub. This project, part of a US-Japanese trade deal, will be developed and operated by NextEra Energy Resources. Comstock will be the natural gas supplier, potentially providing up to 1 billion cubic feet per day by 2031, positioning the company as a key player in supplying gas to AI hyperscalers and data centers.
Drilling and Completion Optimization
Comstock is actively implementing new performance initiatives to reduce D&C costs and improve efficiency in both Legacy and Western Haynesville. This includes continued field testing of rotary steerable drilling systems, upgrading a Western Haynesville rig to a 10,000 PSI rating by late summer, and testing new higher-temperature rated drilling motors. A new "big hole" well design, which uses an 8.5-inch bit size in the lateral, has shown promising results in reducing drilling costs and improving predictability.
Horseshoe Well Program
The company's new horseshoe well design, which combines two shorter laterals into a single longer one, has demonstrated significant capital efficiency, achieving 35% savings in drilling costs for 10,000-foot wells compared to two 5,000-foot laterals. Comstock plans to drill a total of 16 horseshoe wells in 2026, with three of its five Legacy Haynesville rigs currently deployed on these wells.
Midstream Strategy (Pinnacle Gas Services)
Comstock formed Pinnacle Gas Services (PGS) in 2023 to gather and treat natural gas in the Western Haynesville, supporting its drilling program and enabling opportunities like the Power Generation Hub. PGS is pursuing a separate credit facility and is actively seeking an equity partner to fund its continued growth, aiming to redeem preferred units and bring in a long-term common equity investor. This strategy allows Comstock to control its midstream infrastructure, keep producing costs low, and capture future value.
Balance Sheet and Liquidity
The company maintains a strong financial position, ending the quarter with almost $1.3 billion of liquidity. This was supported by $445 million in asset divestitures in 2025 and a robust hedging program. The upstream credit facility has $350 million outstanding against a $2 billion borrowing base, with an elected commitment of $1.5 billion. The midstream credit facility for Pinnacle Gas Services had $47 million outstanding at quarter-end.