Comstock Resources (CRK) Q3 2025: Western Hainesville Inventory Surges to 2,559 Net Locations, Shifting Growth Trajectory
Comstock Resources’ Q3 2025 marks a structural pivot with the disclosure of 2,559 net locations in the Western Hainesville, signaling a multi-decade drilling runway and an explicit shift in capital allocation. Recent asset divestitures and midstream expansions further reposition the company for exposure to LNG and AI-driven gas demand growth. Balance sheet flexibility and operational cost discipline underpin the company’s ability to capitalize on this evolving demand landscape.
Summary
- Western Hainesville Inventory Unlocked: Management unveiled 2,559 net locations in the Western Hainesville, establishing a new core growth platform.
- Balance Sheet Repositioned: Divestitures and disciplined spending strengthen liquidity and reduce leverage, enhancing financial flexibility.
- Midstream Control as Strategic Lever: Expanded gas treating capacity and direct market access position Comstock to capture value from LNG and power demand.
Performance Analysis
Comstock’s Q3 2025 results reflect a decisive shift toward growth in the Western Hainesville, underpinned by both operational execution and portfolio rationalization. The company’s natural gas and oil sales rose, supported by improved commodity prices and higher average realized prices, with hedging further boosting price realizations. Production averaged 1.22 BCFE per day, and segment EBITDAX margins remained robust at 74%, underscoring the cost discipline that continues to differentiate Comstock within the basin.
Capital spending was concentrated on expanding the Western Hainesville footprint and optimizing drilling efficiency. The company turned three new Western Hainesville wells online, bringing the 2025 total to eight, with strong initial production rates averaging 32 million cubic feet per day. In the legacy Hainesville, 28 wells were turned to sales, with average lateral lengths increasing, reflecting a move toward longer, more capital-efficient wells. The quarter also saw the completion of key asset sales, including the Shelby Trough divestiture, which will further reduce net debt and free up capital for core development.
- Drilling Efficiency Gains: Drilling and completion costs per lateral foot in the legacy Hainesville dropped to $1,229, an industry-leading figure.
- Midstream Expansion: The new Marquet gas treating plant more than doubled treating capacity, supporting future production growth.
- Cost Structure Stability: Operating costs per MCFE improved to $0.77, with lifting and gathering expenses down sequentially, reinforcing margin resilience.
Comstock’s capital allocation now clearly favors Western Hainesville development, leveraging both operational learnings and infrastructure investments to drive future growth and margin expansion. The company’s flexible rig allocation and midstream ownership offer a unique platform for capturing premium market opportunities adjacent to LNG and power generation demand centers.
Executive Commentary
"We are really excited to update our stakeholders on the company's progress so far this year. Comstock and our bold move to create the western extension of the Hainesville Shell have been the subject of several news stories recently, as the interest in natural gas has never been greater. I don't believe we have ever seen a broader future for natural gas."
Jay Allison, Chairman and CEO
"Our last 12 months leverage ratio has improved to three times and will continue to improve as we get away from the 2024 results, which are weighed down by low natural gas prices. The sale of our Shelby trough assets that's expected to close in December will improve the leverage ratio and enhance our liquidity since the cash flow that's associated with the properties being sold was minimal."
Roland Burns, President and CFO
Strategic Positioning
1. Western Hainesville as the New Growth Engine
The Western Hainesville now forms the cornerstone of Comstock’s long-term growth thesis. With 2,559 net locations disclosed, management frames this as a “multi-decade runway,” shifting capital and operational focus from legacy assets. The area’s higher pressures and pay thickness promise greater resource recovery per section, and the company’s contiguous acreage enables the drilling of longer laterals, which drive capital efficiency.
2. Portfolio Rationalization to Fund Core Expansion
Recent divestitures, including the Shelby Trough and Cotton Valley assets, are explicitly designed to fund Western Hainesville development and deleverage the balance sheet. Management views these sales as “win-win” transactions, monetizing non-core assets while reducing leverage and freeing up capital for higher-return projects. This disciplined approach to capital recycling is central to Comstock’s strategy of building scale where it has competitive advantages.
3. Cost Leadership and Drilling Innovation
Comstock continues to drive drilling and completion costs lower, particularly through the adoption of horseshoe lateral designs and operational learnings. The company reports industry-leading cost per lateral foot in the legacy Hainesville, and is actively transferring these learnings to the Western Hainesville. Management expects further efficiency gains as the Western Hainesville matures, with ongoing optimization of well design, pad size, and lateral lengths.
4. Midstream Ownership and Market Access
Owning midstream infrastructure is a strategic differentiator, enabling Comstock to deliver gas directly to high-value end users and LNG export corridors. The recent expansion of treating capacity and proximity to Gulf Coast demand centers position the company to capture premium pricing and establish direct supply relationships with industrial, power, and LNG customers.
5. Capital Discipline and Activity Flexibility
Rig allocation remains dynamic, with four rigs dedicated to each of the Western and legacy Hainesville areas. Activity in the legacy area is flexed based on market conditions, while the Western Hainesville receives steady investment to secure acreage and drive delineation. This flexibility allows Comstock to optimize capital deployment as market signals evolve.
Key Considerations
This quarter’s developments set the stage for a new phase of growth, but also introduce novel execution and market risks. Investors should weigh the following:
Key Considerations:
- Inventory Depth as Competitive Moat: The disclosed 2,559 net Western Hainesville locations provide Comstock with a rare scale advantage, supporting long-term growth and optionality.
- Balance Sheet Leverage in Focus: Proceeds from asset sales are earmarked for debt reduction, but future capital requirements for Western Hainesville buildout remain substantial.
- Midstream Integration Enhances Margins: Direct control of gathering and treating infrastructure could unlock incremental value from premium Gulf Coast and industrial gas markets.
- Operational Learning Curve in New Play: Western Hainesville drilling and completion costs are expected to fall, but remain above legacy area levels, requiring sustained efficiency gains.
- Capital Allocation Flexibility: Management’s ability to shift rigs and capital between regions allows for rapid response to commodity price and demand shifts.
Risks
Execution risk remains elevated as Comstock transitions to large-scale Western Hainesville development, where drilling and completion costs are still normalizing and unitization is ongoing. Market risks include future natural gas price volatility, competition for LNG and power demand, and potential regulatory or infrastructure bottlenecks. Asset sales, while strengthening the balance sheet, reduce legacy production base and could pressure near-term cash flow if Western Hainesville ramp is slower than projected.
Forward Outlook
For Q4 2025, Comstock guided to:
- Turn four additional Western Hainesville wells to sales
- Continue running four rigs in both Western and legacy Hainesville areas
For full-year 2025, management reiterated:
- Drilling of 19 Western Hainesville wells and 33 legacy Hainesville wells
- Completion of the Shelby Trough asset sale, with proceeds to reduce debt
Management highlighted that Western Hainesville delineation and midstream expansion will drive production growth into 2026, with further cost reductions targeted as operational learnings accumulate. Key focus areas include:
- Optimizing lateral lengths and pad sizes as more acreage is unitized
- Direct marketing opportunities to LNG and industrial customers
Takeaways
Comstock’s Q3 2025 results fundamentally reposition the company for multi-year growth, anchored by Western Hainesville scale and midstream control.
- Inventory Depth Secured: The Western Hainesville now forms a credible, decades-long growth engine, with capital and operational focus decisively shifting to this asset.
- Balance Sheet and Margin Resilience: Asset sales and cost discipline reinforce liquidity and enable continued investment in core growth, while maintaining industry-leading margin structure.
- Watch for Execution in Western Hainesville: Investors should monitor cost normalization, unitization progress, and the pace of production ramp as key determinants of value realization in 2026 and beyond.
Conclusion
Comstock’s Q3 2025 marks a strategic inflection point, with Western Hainesville inventory depth and midstream integration setting the stage for exposure to next-generation natural gas demand. Execution on drilling efficiency and disciplined capital allocation will be critical as the company seeks to translate resource scale into cash flow growth and shareholder value.
Industry Read-Through
The Western Hainesville’s emergence as a core growth area underscores a broader industry pivot toward resource scale and direct market access in response to LNG and AI-driven power demand. Comstock’s midstream integration and inventory depth provide a template for basin peers seeking to capture premium pricing and secure long-term growth. The focus on operational efficiency, portfolio rationalization, and capital discipline reflects sector-wide imperatives as natural gas producers position for a structurally higher demand environment. Investors should expect increased competition for contiguous acreage, continued innovation in lateral design, and a premium on direct access to Gulf Coast and industrial end markets.