Comstock Resources (CRK) Q3 2026 earnings review
Comstock sells $1.65 billion of assets while gas output rises
Comstock Resources, a Texas and Louisiana natural gas producer, pumped more gas while signing a major deal to pay down debt. Third-quarter production rose 9% from a year ago as 22 new wells came online, but lower gas prices and rising well write-offs cut profit excluding one-offs to $6 million. Meanwhile, heavy drilling spending pushed long-term debt up to $3.36 billion.
| Total production | 122.4 Bcfe +9.5% from a year ago |
|---|---|
| Natural gas and oil sales (with hedges) | $359.3M +7.3% from a year ago |
| Profit per share, excluding one-offs | $0.02 $0.07 a year ago |
| Asset sale proceeds announced | $1.65B closes by year-end |
⚖️ Verdict: 🟢 Bullish
The story got better because the company agreed to sell minority stakes in its gas fields and pipelines to Azerbaijan's state oil company for $1.65 billion in cash. That payment equals nearly half of Comstock's debt and unlocks a bank credit extension to 2031, easing our biggest balance-sheet concern. One caution: the core business still burned $200 million of cash in the quarter, and unit depletion and pipeline costs both topped the company's plan.
The question now is whether the remaining gas fields can fund their own drilling once the asset sale closes. Either the new $450 million drilling partnership with majority owner Jerry Jones and wider well bores cut capital spending enough to generate cash, or high deep-well costs keep the company burning cash unless gas prices climb above $3.50. Fourth-quarter free cash flow and updated 2027 drilling budgets will tell.
🐂 Bull Case
$1.65 Billion Asset Sale Solves Debt Overhang
Comstock Resources, a natural gas producer in Texas and Louisiana, carries $3.36 billion in long-term debt after quarters of heavy drilling spend. The company said its new deal with the State Oil Company of the Republic of Azerbaijan (SOCAR) "will substantially enhance Comstock's balance sheet".
On November 4, Comstock signed a definitive agreement to sell SOCAR a 20% working interest in its Legacy Haynesville wells, plus 15% stakes in its newer Western Haynesville play and its Pinnacle Gas Services pipeline unit. The buyer will pay $1.65 billion in cash when the deal closes by year-end. Once the producer uses that cash to pay down debt, banks will extend its $1.5 billion credit line maturity from 2028 to November 2031.
This cash infusion eases our standing concern over high debt and bank credit limits because $1.65 billion equals nearly half of the firm's long-term debt. Selling a slice of the properties brings in cash to pay down borrowings without issuing new stock, and SOCAR's Western Haynesville stake drops in half to 7.5% after five years once it earns a 15% return.
What to watch: the closing of the SOCAR sale by year-end and the exact amount of debt retired. Closing the deal on time will lock in the 2031 bank maturity extension and lower annual interest bills.
New Wells Push Gas Output Up 9%
After output shrank in early 2026 from fewer drilling rigs and asset sales, Comstock aimed to rebuild volume. In the third quarter, total production rose 9.5% from a year ago and 8.2% from the second quarter to 122.4 billion cubic feet equivalent (Bcfe), "driven by our drilling program", the company said.
- Average daily output: 1,331 million cubic feet equivalent per day (MMcfe/d), inside the 1,300 to 1,400 MMcfe/d plan
- Western Haynesville wells connected: 6 wells, averaging 33 million cubic feet per day (MMcf/d) of initial output
- Legacy Haynesville wells connected: 16 wells (including 6 U-shaped horseshoe wells), averaging 25 MMcf/d
Higher volume helped lift natural gas and oil sales including hedges by 7.3% from a year ago to $359.3 million, even though gas prices fell. However, the 1,331 MMcfe/d rate fell slightly short of the 1,340 to 1,390 MMcfe/d pace implied by our math from last quarter's call for an even two-quarter step-up.
What to watch: fourth-quarter daily production, where the full-year plan points to roughly 1,630 MMcfe/d at the middle of the range by our math, or 1,440 to 1,530 MMcfe/d before the SOCAR sale adjustment. Hitting that target would prove the nine-rig drilling program can deliver the promised year-end volume.
Positives this quarter didn't test
Two standing drivers for the business received no new information in the third-quarter earnings release.
- Western Haynesville drilling equipment: no update in the release on the deployment of the first 10,000-pound-pressure rig or high-temperature drilling motors; the conference call will show whether they arrived in October as planned.
- Local power plant demand: no mention of the planned 5.2-gigawatt NextEra power hub in Anderson County; management commentary on the call will show if commercial talks have progressed.
🐻 Bear Case
Heavy Drilling Spend Keeps Cash Flow Negative
Comstock highlighted growing cash flow from operations and plans to strengthen its balance sheet. In reality, its drilling budget still consumes far more cash than its wells bring in.
During the third quarter, the driller generated $180.2 million in operating cash flow, but spent $382.9 million on drilling and completing wells plus $17.1 million on unproved land. By our math, that left a free cash flow deficit of $199.7 million for the quarter and $663.7 million across the first nine months of 2026.
Because the business spent more than double its operating cash flow on capital projects, it had to borrow more. Long-term debt climbed by $258.2 million in the single quarter to $3.36 billion, up from $2.81 billion at the end of 2025. While the upcoming SOCAR sale will bring in cash by year-end, the underlying drilling operation still burns roughly $200 million a quarter at current gas prices.
What to watch: fourth-quarter capital spending and free cash flow. The company said its $450 million drilling venture with majority owner Jerry Jones is "expected to generate free cash flow in the fourth quarter to further strengthen the balance sheet".
Low Gas Prices and Depletion Erase Profit
As a pure natural gas producer, Comstock relies on commodity prices to cover its fixed well depletion and interest costs. In the third quarter, its realized gas price before hedges fell 5.1% from a year ago to $2.61 per thousand cubic feet (Mcf), and edged down 2.0% after hedges to $2.93 per Mcf.
At the same time, cost lines rose against a 14.1% drop in total revenue. Depreciation, depletion and amortization (non-cash well write-offs) jumped by 13.1 percentage points of revenue to 48.3%, or $1.52 per unit of gas by our math, topping the $1.40 to $1.50 plan. Gathering and transportation fees (pipeline charges) also rose 4.1 percentage points of revenue to $0.41 per unit, above the $0.34 to $0.40 forecast.
Higher depletion and pipeline fees combined with $58.3 million in interest expense to squeeze operating margin down 5.3 percentage points to 6.0%. Excluding a $35.1 million paper hedging gain from the "change in future natural gas prices since the second quarter of 2026" and exploration costs, profit excluding one-offs fell 71.9% from a year ago to $5.9 million, or $0.02 per share.
What to watch: fourth-quarter realized gas prices and depletion per unit. If depletion stays above $1.50 per unit, the company will struggle to earn a profit whenever unhedged gas prices sit below $3.00.
Risks this quarter didn't answer
Four standing concerns could not be tested because the press release does not include presentation slides or call remarks.
- Western Haynesville drilling cost per foot: not in the release after rising four straight quarters to $1,738 per foot; the quarterly presentation will show if big-hole well designs lowered costs.
- Lease-holding drilling obligations: no update on how many Western Haynesville wells remain mandatory to hold acreage before mid-2028.
- NextEra gas-supply contract terms: no disclosure on volume, pricing or start dates for supplying the planned Texas power hub.
- 2027 gas hedges: no update in the release on whether management added protection above the 400 MMcf/d of collars held last quarter.
👓 Other Themes
Jerry Jones Drilling Venture Announced
In its release highlights, Comstock announced a $450 million Haynesville shale drilling venture with majority shareholder Jerry Jones. The company expects the partnership to generate free cash flow in the fourth quarter to help strengthen its balance sheet. The release gave no details on fee structures, working interest splits or well counts, leaving the financial mechanics for the conference call and quarterly filing.
💲 Other KPIs
Gas services — Comstock's midstream pipeline and gas-trading unit — generated a $5.1 million profit in the third quarter, reversing a $0.4 million loss a year ago and rising from $0.5 million in the second quarter. Segment revenue dropped 54.4% from a year ago to $64.5 million, but segment expenses fell faster by 58.1% to $59.4 million.
Cash generated from operations before timing swings in bills and receivables rose 9.3% from a year ago and 10.3% from last quarter to $208.0 million, or $0.71 per share. That reversed a 10.1% year-over-year drop in the second quarter, helped by 9.5% higher gas production and $39.5 million in cash hedging settlements.
Diluted shares dipped 0.7% from a year ago and stayed nearly unchanged from 291.6 million in the second quarter. Because profit excluding one-offs dropped to $5.9 million, fewer unvested stock awards counted as dilutive compared with last year.
❓ Key Questions
How will the SOCAR sale change fourth-quarter production targets?
Selling 20% of Legacy Haynesville and 15% of Western Haynesville carries a July 1 effective date and closes by year-end. Investors need to know how much volume leaves Comstock's books and what the updated fourth-quarter production outlook is.
What are the terms of the $450 million Jerry Jones venture?
The highlights mention a $450 million drilling venture with majority owner Jerry Jones that should bring in fourth-quarter free cash flow. Management has not yet explained how costs, wells and cash flows are split between Comstock and Jones.
Did Western Haynesville drilling costs per foot fall in Q3?
Drilling costs in the deeper Western Haynesville climbed for four straight quarters to $1,738 per lateral foot in the second quarter. The release did not include per-foot cost figures for the six new wells turned to sales.
Which debt tranches will the $1.65 billion cash retire?
Comstock ended September with $3.36 billion in long-term debt across its bank credit line and senior notes due in 2029 and 2030. Retiring higher-interest bonds versus paying down the bank line will determine how much interest expense falls in 2027.