Comstock Resources (CRK) Q4 2025 earnings review
De-levered and Ready to Drill: Pivot to Aggressive Growth
Comstock closed FY25 by executing a critical strategic pivot. By selling non-core Shelby Trough assets for $417M, the company slashed debt and cleared the runway for a massive ramp-up in the Western Haynesville. While Q4 production declined 10% YoY due to prior activity cuts, the 2026 guidance signals a sharp reversal: rig count is increasing from 8 to 9, and D&C CapEx is jumping ~40% to ~$1.45B. Financials stabilized with Adjusted Net Income of $46M (flat YoY) and improved margins (77% unhedged), driven by higher natural gas prices ($3.27 realized vs $2.70 YoY).
🐂 Bull Case
The Shelby Trough sale ($417M net proceeds) was successfully applied to debt, dropping Long-Term Debt from $3.12B in Q3 to $2.81B in Q4. This liquidity injection allows Comstock to fund its ambitious 2026 drilling program without stressing the balance sheet.
Unhedged operating margins hit 77% in Q4, up significantly from 69% a year ago and 50% in 25Q2. Cost discipline remains strong with production costs averaging $0.77/Mcfe.
🐻 Bear Case
Q4 Western Haynesville wells (4 turned to sales) averaged an initial production (IP) rate of 29 MMcf/d. This is a deceleration compared to the full-year 2025 average of 33 MMcf/d and the 38 MMcf/d rates seen in late 2024. As the company bets its future here, variability is a risk.
Total production fell to 111 Bcfe in Q4, down 10.5% YoY and down sequentially from 112 Bcfe in Q3. The company is fighting a steep decline curve; the new rig additions will take time to manifest in volume growth.
⚖️ Verdict: 🟢
Bullish. Comstock executed its 'shrink to grow' strategy perfectly: selling mature assets to fix the balance sheet just as gas prices improved. The 2026 guidance is aggressive, but fully funded. If Western Haynesville well results hold up, the volume inflection in 2026 could be substantial.
Key Themes
Aggressive 2026 Ramp-Up
Management is shifting from defense to offense. Plans to increase operating rigs from 8 to 9 in 2026 (4 dedicated to Western Haynesville) and spend $1.4-1.5B on development. This is a massive acceleration compared to the $1.05B spent in 2025, signaling high confidence in the asset base and gas price outlook.
Western Haynesville Variability
While the Western Haynesville play is the crown jewel, data suggests potential variability. Q4 IP rates averaged 29 MMcf/d vs 32 MMcf/d in Q3 and higher rates in 2024. Additionally, drilling costs in this high-pressure zones remain a watch item, though not explicitly detailed in the release text beyond general capex guidance.
Natural Gas Price Realization
Realized gas prices (including hedges) improved to $3.27/Mcf in Q4 from $2.70 a year ago. More importantly, the unhedged price realization gap is closing ($3.29 unhedged vs $3.27 hedged), meaning the company is finally capturing the upside of the market recovery after being weighed down by hedges or low spot prices in early 2025.
Reserve Replacement Strength
Despite a lower production year, Comstock reported robust reserve numbers. Proved reserves jumped to 7.0 Tcfe (up from 3.8 Tcfe in 2024), driven largely by higher SEC pricing ($3.07 vs $1.84). They replaced 823% of 2025 production, significantly extending the visible runway of the company.
Service Cost / Inflation Risk
With the rig count increasing and a 40% jump in budgeted Capex, capital efficiency comes into focus. 2025 production costs were stable ($0.79/Mcfe), but ramping activity in a rising gas price environment typically invites service cost inflation, which could erode the margin gains seen in Q4.
Other KPIs
Accelerating. Up from $249M in Q3 25 and $252M in Q4 24. The combination of stabilized production and improved pricing is flowing through to cash flow metrics.
Reversing. In Q4, operational cash flow ($222M) did not cover the CapEx ($269M + $18M acquisitions). While the asset sale covered this deficit and reduced debt, the 2026 plan implies a continued outspend of organic cash flow unless gas prices rise further.
Stabilizing. Down 10% YoY due to 2024 rig cuts, but effectively flat vs Q3 (111.7 Bcf). The decline has been arrested, and the new rig adds in 2026 are required to return to growth.
Guidance
Accelerating. This represents a ~40% increase over the $1.05B spent in 2025. Management is aggressively reinvesting to delineate the Western Haynesville.
Stable/Accelerating. Continued investment in the Western Haynesville system to support the volume ramp. This is separate from the drilling budget.
Accelerating. Up from 8 rigs currently. 4 rigs explicitly dedicated to Western Haynesville, indicating a split focus between maintaining legacy volumes and exploring the new play.
Key Questions
Western Haynesville IP Rate Trend
Average IP rates for Western Haynesville wells dropped to 29 MMcf/d in Q4 from 32 MMcf/d in Q3 and ~38 MMcf/d in FY24. Is this variability due to choke management, geology in specific zones, or a structural revision of expectations?
2026 Cash Flow Neutrality
With a budget of $1.5B+ (incl. midstream), what natural gas price is required to fund this program within operating cash flow, or are you comfortable re-leveraging slightly to fund growth?
Shelby Trough Divestiture Impact
The sale provided great liquidity, but what is the impact on 2026 base production guidance? How many flowing Bcfe/d were lost in the transaction?