Comstock Resources Inc. - Form 8-K Summary
Business Context and Reporting Period
This Form 8-K, dated November 2, 2004, reports the third-quarter 2004 operational and financial highlights for Comstock Resources, Inc. The Company, incorporated in Nevada, operates in the natural gas and oil exploration and production sectors. A key operational development is the consolidation of Bois d'Arc Energy, LLC (59.9% owned) into Comstock's financial statements, which began in July 2004.
Key Financial and Operational Metrics
- Production Volume: Total third-quarter production was 9.4 Bcf of natural gas and 554,000 barrels of oil, equating to 12.7 Bcf of natural gas equivalent.
- Daily Average: Production averaged 138.1 million cubic feet of natural gas equivalent per day.
- Bois d'Arc Contribution: Contributed 3.1 Bcf of natural gas and 447,000 barrels of oil (5.8 Bcf equivalent).
- Exploration Expenses: Total third-quarter exploration expense was $9.4 million.
- Organizational Costs: A $1.6 million charge was recorded for costs related to the formation of Bois d'Arc.
Material Changes and Operational Impacts
Production levels were materially impacted by external factors and operational challenges:
- Hurricane Ivan: Caused Bois d'Arc to shut in substantially all oil and natural gas production for part of September.
- Pipeline Repairs: Approximately 10.0 million cubic feet of natural gas equivalent per day remained shut in during October awaiting pipeline repairs, which were completed at the end of the month.
- Exploration Results: The $9.4 million exploration expense primarily relates to dry holes. Bois d'Arc accounted for $6.7 million of this, including three unsuccessful offshore wells (Ship Shoal Block 121, Ship Shoal Block 110, and South Pelto Block 25). Comstock's South Texas program incurred $2.7 million in expenses for three dry holes in Kenedy, Live Oak, and Brazoria counties.
Guidance, Risks, and Unusual Items
The filing does not provide specific forward-looking financial guidance or revenue projections. However, it highlights significant risks and unusual items affecting the quarter:
- Unusual Charges: The $1.6 million organizational charge and $9.4 million exploration expense are specific to this period's activities.
- Operational Risks: The Company faces risks related to weather events (Hurricane Ivan) and infrastructure dependencies (pipeline outages).
- Exploration Risk: A high rate of unsuccessful drilling (3 of 7 offshore wells for Bois d'Arc; 3 dry holes in South Texas) indicates elevated exploration risk in current programs.
Investor Verification Checklist
- Verify the exact impact of the $1.6 million organizational charge and $9.4 million exploration expense on net income and cash flow in the full quarterly report.
- Confirm the status of the pipeline repairs and the timeline for full production restoration of the 10.0 million cubic feet per day previously shut in.
- Review the detailed financial statements to assess the consolidated impact of Bois d'Arc Energy, LLC on the Company's balance sheet and liquidity.
- Assess the future capital allocation strategy given the high number of dry holes reported in both offshore and South Texas programs.