Natty producers still deploying capital above small run off, good lord

Comstock announced they are suspending their dividend and dropping two rigs - down to five total.

$750-$850 of CAPEX in 2024. They ran negative FCF of $500mil in 2023. Not good at all.

Comstock has been on the naughty list. I do not think 2 rigs is enough. I could theoretically see a forced sale if natty market is not in a better spot in 12 mths.


Dat EBTIDA geux to zero really quick at field pricing.

Doesn't Jerry still control Comstock? Will be interesting to see where his ego takes things.

The Western Haynesville is their biggest growth prospect and it comes at a terrible time for them. Looking at my notes from CRK 3Q23 earnings call they have a 500MMcf/d target by mid 2025 in this area. I'm think the YE23 call could have a slightly different tune.

There was no market reason to grow to that.

24 and 25 strip looked a hell of a lot better 6 months ago if they wanted to sell into LNG demand. It's going to be an uphill battle for them with these wells costing probably 2X of a regular Haynesville well.

AgLA06 said:

---

Cyp0111 said:

---

There was no market reason to grow to that.

---

There's often not a market reason for business plans. If you're waiting on the market to create your business strategy, you're just lagging behind competition. Many really successful businesses didn't wait for a market, let alone a market reason to become the market leaders that "revolutionized" an industry.

Sometimes it means being the first and market leader. Sometime it means filling a chapter.

---

I would caveat this in many ways, one is you have to have some compelling data to support sinking that much capital, especially with the volatility the gas markets have had the last few years. This to me is more "go big or go home" mentality.

You can still thrive successfully being reactive to gas prices, you just need to be nimble and quick.

AgLA06 said:

---

Cyp0111 said:

---

There was no market reason to grow to that.

---

There's often not a market reason for business plans. If you're waiting on the market to create your business strategy, you're just lagging behind competition. Many really successful businesses didn't wait for a market, let alone a market reason to become the market leaders that "revolutionized" an industry.

Sometimes it means being the first and market leader. Sometime it means filling a chapter.

---

I wouldn't recommend businesses to ignore market forces. It's not a coin flip at that point... More like 90/10 you drill yourself out of business.

Gordo14 said:

---

AgLA06 said:

---

Cyp0111 said:

---

There was no market reason to grow to that.

---

There's often not a market reason for business plans. If you're waiting on the market to create your business strategy, you're just lagging behind competition. Many really successful businesses didn't wait for a market, let alone a market reason to become the market leaders that "revolutionized" an industry.

Sometimes it means being the first and market leader. Sometime it means filling a chapter.

---

I wouldn't recommend businesses to ignore market forces. It's not a coin flip at that point... More like 90/10 you drill yourself out of business.

---

People made fortunes ignoring market forces and drilling through the covid downturn with rock bottom service pricing and TIL in the upswing

I've been saying the carry in the market was too much red meat for the gas guys. Drilled their brains out.

I can get that, in oil and gas, not sure that theory hunts. Maybe something with a ground leasing game but drilling bangers into an oversupplied market hoping for weather isn't a business strategy.

Yes- that is much different than what comstock has done with their program.

AgLA06 said:

---

https://fortune.com/2024/02/12/who-is-autry-stephens-endeavor-energy-billionaire-oil-wealthiest-man/

Nice write up by Fortune on Autry and Endeavor.

This caught my eye after my last posts on "synergies"

"Endeavor employs 1,200 people and guaranteeing no layoffs was important for the founder, as was keeping the company in Midland, the person said."

I'm glad he gets to ride off into the sunset a legend on his own terms, if that's how this ends up.

---

Good story, but Autry doesn't have the best rep in the basin. Specifically with land owners or other oil companies (which I get), and I've seen lease provisions where the lease expires if it is assigned to Autry Stevens or Endeavor.

That's pretty direct of them. What a time. I've heard people say things like that about other groups but never seen it in writing.

BCG Disciple said:

---

AgLA06 said:

---

https://fortune.com/2024/02/12/who-is-autry-stephens-endeavor-energy-billionaire-oil-wealthiest-man/

Nice write up by Fortune on Autry and Endeavor.

This caught my eye after my last posts on "synergies"

"Endeavor employs 1,200 people and guaranteeing no layoffs was important for the founder, as was keeping the company in Midland, the person said."

I'm glad he gets to ride off into the sunset a legend on his own terms, if that's how this ends up.

---

Good story, but Autry doesn't have the best rep in the basin. Specifically with land owners or other oil companies (which I get), and I've seen lease provisions where the lease expires if it is assigned to Autry Stevens or Endeavor.

---

I don't have personal experience with him.

Just stories and opinions i've heard from others. Maybe he's an unethical ass. Maybe people don't like that he's been more successful doing things his way instead of there's. Maybe it's both.

Honestly can't tell you. What I know is to make it to this point and go out on his terms with that many zeros in his pocket generally requires a business aptitude that is a cut above. And it appears he went out of his way to protect his employees in the process when most just cash the check and run.

All that to say, I always love a good oil patch gossip session. Especially about the good ole days in the patch. Hopefully some of the guys on here will share their experiences and thoughts.

Anyone dig through the comstock or EQT releases. If prices don't recover by end of year, both could have pretty decent sized balance sheet problems.

AgLA06 said:

---

BCG Disciple said:

---

AgLA06 said:

---

https://fortune.com/2024/02/12/who-is-autry-stephens-endeavor-energy-billionaire-oil-wealthiest-man/

Nice write up by Fortune on Autry and Endeavor.

This caught my eye after my last posts on "synergies"

"Endeavor employs 1,200 people and guaranteeing no layoffs was important for the founder, as was keeping the company in Midland, the person said."

I'm glad he gets to ride off into the sunset a legend on his own terms, if that's how this ends up.

---

Good story, but Autry doesn't have the best rep in the basin. Specifically with land owners or other oil companies (which I get), and I've seen lease provisions where the lease expires if it is assigned to Autry Stevens or Endeavor.

---

I don't have personal experience with him.

Just stories and opinions i've heard from others. Maybe he's an unethical ass. Maybe people don't like that he's been more successful doing things his way instead of there's. Maybe it's both.

Honestly can't tell you. What I know is to make it to this point and go out on his terms with that many zeros in his pocket generally requires a business aptitude that is a cut above. And it appears he went out of his way to protect his employees in the process when most just cash the check and run.

All that to say, I always love a good oil patch gossip session. Especially about the good ole days in the patch. Hopefully some of the guys on here will share their experiences and thoughts.

---

At one point they WERE the largest employer in Midland. I've dealt with him and his people since 2005. Nothing wrong with his business ethics etc.

Birdbear said:

---

Gordo14 said:

---

AgLA06 said:

---

Cyp0111 said:

---

There was no market reason to grow to that.

---

There's often not a market reason for business plans. If you're waiting on the market to create your business strategy, you're just lagging behind competition. Many really successful businesses didn't wait for a market, let alone a market reason to become the market leaders that "revolutionized" an industry.

Sometimes it means being the first and market leader. Sometime it means filling a chapter.

---

I wouldn't recommend businesses to ignore market forces. It's not a coin flip at that point... More like 90/10 you drill yourself out of business.

---

People made fortunes ignoring market forces and drilling through the covid downturn with rock bottom service pricing and TIL in the upswing

---

A bit different chasing Natty in a normal market vs. Oil during COVID. Truth is Natural Gas is we have basically infinte reserves relative to infrastructure and demand.

BCG Disciple said:

---

AgLA06 said:

---

https://fortune.com/2024/02/12/who-is-autry-stephens-endeavor-energy-billionaire-oil-wealthiest-man/

Nice write up by Fortune on Autry and Endeavor.

This caught my eye after my last posts on "synergies"

"Endeavor employs 1,200 people and guaranteeing no layoffs was important for the founder, as was keeping the company in Midland, the person said."

I'm glad he gets to ride off into the sunset a legend on his own terms, if that's how this ends up.

---

Good story, but Autry doesn't have the best rep in the basin. Specifically with land owners or other oil companies (which I get), and I've seen lease provisions where the lease expires if it is assigned to Autry Stevens or Endeavor.

---

Endeavor used to be the "bottom of the barrel" as far as operating companies go. They didn't pay well which attracted people who couldn't get, or keep, a job elsewhere. A lot of the guys working for, and running, the Endeavor owned service companies were stealing from them. Endeavor was notorious among vendors for not paying their bills, and with landowners for not taking care of operations. Autry never set out to be the Permian Basin's slum lord, he just didn't care. His interest, job, hobby, and love is/was drilling wells. All he cared about was finding debt and land to keep drilling. Everything else was just background noise. I don't think he's ever cared about money either.

Around 2011, probably at his many creditors' urging, Autry hired a competent CFO and COO started to turn it around. They restructured their debt from a bird's nest of small loans to one large, syndicated credit facility. They hired a lot of good managers from XTO, Anadarko, and other companies, shut down or cleaned up the service companies, and drilled their way out of debt. I'm told they've had zero debt for about the last 3 years.

Lance (Aggie), Shad, Lars (Aggie) - all amazing execs at Endeavor - wonder if they will stay?

Endeavor gets 4 board members at Diamondback after merger. Lance Robertson and Charles Meloy (former CEO) have been named. Diamondback and Endeavor have to agree on the remaining two open seats on the board to bring it to a total of 13.

Those 4 board members could be reduced if the Endeavor owners' ownership in Diamondback drops below certain thresholds.

Cyp0111 said:

---

Anyone dig through the comstock or EQT releases. If prices don't recover by end of year, both could have pretty decent sized balance sheet problems.

---

CHK is the one I worry about here…

Why CHK - post restructuring they have sold down quite a bit and should have a healthy balance sheet.

Gordo14 said:

---

Birdbear said:

---

Gordo14 said:

---

AgLA06 said:

---

Cyp0111 said:

---

There was no market reason to grow to that.

---

There's often not a market reason for business plans. If you're waiting on the market to create your business strategy, you're just lagging behind competition. Many really successful businesses didn't wait for a market, let alone a market reason to become the market leaders that "revolutionized" an industry.

Sometimes it means being the first and market leader. Sometime it means filling a chapter.

---

I wouldn't recommend businesses to ignore market forces. It's not a coin flip at that point... More like 90/10 you drill yourself out of business.

---

People made fortunes ignoring market forces and drilling through the covid downturn with rock bottom service pricing and TIL in the upswing

---

A bit different chasing Natty in a normal market vs. Oil during COVID. Truth is Natural Gas is we have basically infinte reserves relative to infrastructure and demand.

---

Good point.

EnglishElhew07 said:

---

Why CHK - post restructuring they have sold down quite a bit and should have a healthy balance sheet.

---

correct. CHK's balance sheet is not an issue. Debt/Equity is 0.20, as compared to 1.1 for Comstock and 0.42 for EQT.

"IEA and OPEC are engaged in a battle of the experts, but the market always gives more credence to OPEC since this is the group that actually produces and trades oil, and therefore has better market insight," Manish Raj, managing direct at Velandera Energy Partners, told CNBC.


For those concerned with supply/demand for 2024. I believe the IEA is always more politically driven than anyone else.

nu awlins ag said:

---

"IEA and OPEC are engaged in a battle of the experts, but the market always gives more credence to OPEC since this is the group that actually produces and trades oil, and therefore has better market insight," Manish Raj, managing direct at Velandera Energy Partners, told CNBC.


For those concerned with supply/demand for 2024. I believe the IEA is always more politically driven than anyone else.

---

At its base level, IEA doesn't gain anything by reporting accurately and doesn't suffer any consequences for being wrong. Your supermajors have their own internal models and trackers, your minor players are beholden to the price makers in trading and just use the commodity prices.

OPEC is incentivized to push numbers that increase the price of oil. IEA is incentivized to push numbers that decrease the price of oil. Being in oil is like being a landlord, whats good for you isn't seen as whats good for the largest swath of lowest information voters. Everyone always talks their book. IEA is allowed to be wrong in ways that reduce oil prices.

All oil producers are subject to the "price makers".

Cyp0111 said:

---

All oil producers are subject to the "price makers".

---

There are different approaches within trading strategy. Where do you think the spot and strip price comes from? There are companies who have shopping lists and just take the commodity price. There are companies who aggressively try to create or wait for favorable pricing action and create the best prices for themselves. All oil producers collectively create a market, not everyone has to behave the same within the market.

Source: Friends who are traders.

As a side note, this exhausts my friends list. I have M&A friends from one group and trader friends from a different group. I'm just an engineer pushing redlines trying to eek out a middle class living and living vicariously through them.

Traders (asset mgrs) at the Majors and a handful of other large independents play the game around optionality around market conditions, delivery point etc. all. Essentially, you have a lot of optimizers that I guess you could call traders. Can play with storage etc. all but those places are a small subset. The more traditional phys trading shops do this after puchasing.

I think you see larger independents on both the natty and liquids side push to get optimal pricing via scale and pipeline capacity to more premium markets.

However, at the end of the day, everyone is a price taker even after all the gymnastics.

Signed, someone that has spent 20 yrs on a floor.

We aren't in disagreeance. But if you're moving an extra tank of crude to a regional terminal from your pumpjack, you're gonna give a nice receipt that'll have the WTI spot price, the regional reduction price around area terminals, and the cost of transport. You're gonna say okay and they'll come haul it away.

If you're a supermajor its a bit different and more involved around negotiating the price of physical moving.