Business Context and Reporting Period
Company: Comstock Resources, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: July 15, 2005
Event: Announcement of drilling results for the BSMC Unit 'B' #1 well in Polk County, Texas, testing the "Big Sandy" prospect.
Key Financial Metrics
Exploratory Well Cost: Approximately $14 million.
Financial Impact: A $14 million charge for the write-off of the unsuccessful well will be included in the second quarter financial results.
Other Metrics: The filing does not provide specific values for revenue, profit, cash flow, margins, debt, or liquidity.
Material Changes and Operational Results
- Well Status: Drilling commenced December 1, 2004, and concluded July 11, 2005, reaching a measured depth of 19,093 feet.
- Production Findings: Logging of the Lower Woodbine (17,100 to 18,890 feet) identified some productive pay, but it was insufficient to justify completion costs. The lowest 203 feet could not be logged, though other indications suggested no hydrocarbons were present.
- Cost Overruns: The final project cost of $14 million was considerably higher than the initial estimate due to significant drilling problems encountered during the deep directional drilling process.
Outlook, Management Commentary, and Risks
Management Actions: Comstock is currently processing and evaluating data from the Upper and Lower Woodbine formations to improve geological interpretation of its Robin exploration prospect acreage.
Future Plans: Upon completion of the data evaluation, the company plans to re-assess drilling opportunities and risks associated with its Robin acreage.
Risks: The unsuccessful nature of the well and the associated $14 million write-off represent a material financial risk for the second quarter. The inability to log the deepest section of the well introduces uncertainty regarding the full geological profile of the prospect.
Investor Verification Checklist
- Verify the exact timing and magnitude of the $14 million charge in the upcoming Q2 2005 earnings release.
- Review the attached Press Release (Exhibit 99.1) for detailed technical data on the logging results.
- Monitor future announcements regarding the re-assessment of the Robin exploration prospect acreage.
- Assess the impact of the cost overrun on the company's overall capital expenditure budget for the fiscal year.