Comstock — Eagle Ford Shale News — Eagle Ford Shale Play

Comstock Resources released its Q4 earnings report and confirmed their spending plan for 2015.

Comstock’s loss of $55.1 million in the last three months of the year are in contrast to a record 86% increase growth in oil production. Production in 2014 was at 4.3 million barrels, compared to 2.3 million barrels produced in 2013.

Looking to the new year, Comstock will be scaling back its drilling program due to the significant drop in oil prices.

“With the rapid fall in oil prices, we have shutdown our oil drilling program in late December, but we do have eight additional wells in our South Texas Eagle Ford and nine additional wells in our East Texas Eagle Ford area that we expect to put on production in the first quarter of 2015. So we do expect a little more oil growth in the first quarter, but then we expect oil to decline later in the year with no additional drilling budgeted. For all of 2015, we’re expecting oil production to average between 9,500 and 10,500 barrels per day.”

— CFO Roland Burns

2014 Eagle Ford highlights:

Successful drilling program in South Texas Eagle Ford shale drove oil growth in 2014

68 out of 68 wells drilled were successful

Placed 91 (61.3 net) new Eagle Ford shale wells on production

Four wells drilled in 2014 to be completed in 2015

Read more at crxfrisco.com

Comstock and KKR (Kohlberg, Kravis, Roberts & Co) have signed a participation agreement in the Eagle Ford. KKR will have the right to participate for 1/3 of Comstock's interest in 28,000 net acres across Atascosa, Frio, Karnes, La Salle, McMullen, and Wilson counties. In exchange, KKR will pay the equivalent of $25,000 per acre through a drilling carry for each acre acquired. Comstock plans for development with spacing of 80-acres per well.

KKR has committed to the drilling carry equivalent of $25,000 per acre for the next 100 wells in Comstock's planned development. The private equity partner will have the ability to participate in additional Comstock wells under the same terms.

Check my math, but if KKR participates across all of Comstock's acreage:

28,000 net acres x 33% x $25,000/acre = ~$233 million

While there is potential for as much as a $233 million dollar investment, the announcement indicates KKR has the "right" to participate. I assume that means they are not "obligated" to participate. If you consider the next 100 wells,

100 wells x 80-acres/well x 33% x $25,000/acre = $66 million

It sounds like KKR has committed to spending $66 million and will have an option on participating on additional acreage that could increase the company's commitment up to $230+ million.

Check my math and let me know your thoughts on the deal in the comments below.