Comstock Resources, Inc. (CRK) | The Buildout — AI Infrastructure
The Verdict
Comstock Resources produces natural gas from the Haynesville and Bossier shales in North Louisiana and East Texas. It sits on the fuel side of the AI buildout: data centers need power, power plants burn gas, and Comstock's acreage is close to the Gulf Coast markets where that demand is forming. The company owns Pinnacle Gas Services, a midstream arm that gathers and treats its Western Haynesville gas and connects it to premium markets. Management's pitch is that the Western Haynesville and a proposed Anderson County power hub are how its molecules reach power and LNG demand.
| Market Cap | — |
| Revenue (TTM) | $1.9B |
| Revenue Growth | +13.8% |
| EBITDA Margin (TTM) | 52.3% |
| Net Debt | $3.1B |
| Earnings Beats | 5 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Proved reserves of 7.0 Tcfe with a PV-10 value of $4.5 billion, 41% developed and an average reserve life of about 16 years.
- Western Haynesville inventory of 3,280 gross / 2,530 net locations, with no laterals shorter than 5,000 feet.
- Horseshoe wells delivered 35% drilling cost savings versus two 5,000-foot lateral wells and added 114 locations management called previously uneconomic.
- Sixth Street's $600 million for 27% of Pinnacle implies a $2.2 billion enterprise value, retires Pinnacle's debt, and saves $40 million in annual fixed charges.
- The SOCAR LOI would bring $1.65 billion in cash for working interests in the legacy and Western Haynesville and 15% of Comstock's Pinnacle stake.
What We’re Watching
- The 2027 drilling program is explicitly price-contingent; management will decide activity late in 2026 and wants stronger prices it can hedge into.
- Western drilling efficiency slipped in Q2 — 59 days per well (up 2) and 769 ft/day (down 2%) — on deeper, hotter wells.
- The big-hole lateral is proven on only one well; the second and third are being drilled to show repeatability.
- Both flagship catalysts are not definitive: SOCAR is an LOI targeting execution by October 31, 2026, and the power hub awaits definitive agreements.
Comstock's thesis is intact but unproven. Q2 answered the Q1 miss — production returned to growth and the Pinnacle financing closed as flagged — yet weak gas prices pulled revenue and profit down, and leverage rose to 3x. The demand story sits ahead of the company: the power hub is not contracted and the 2027 program is undecided. The open question is whether Comstock can convert its Western Haynesville position and power-hub relationship into contracted demand before weak prices force it to slow spending.
Earnings Beat
Comstock's Q2 2026 revenue was $351.7 million with a 12.1% gross margin. Production rose 16% sequentially to 1.2 Bcfe/d, which management called the return of production growth. The gain did not carry to the bottom line: a realized gas price of $2.54 per Mcf before hedges, down from $4.27 in Q1, pulled profit to $9 million. Unit operating cost improved $0.16 to $0.77 per Mcfe.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $352M | $586M | $470M | −25.2% |
| Gross margin | 12.1% | 34.3% | 21.6% | -950bps |
| EBITDA | $188M | $315M | $248M | −24.0% |
| EPS | $0.03 | $0.37 | $0.42 | −92.9% |
| Production | 1.2 Bcfe/d | 1.1 Bcfe/d | n/a | +1% |
| Realized gas price (pre-hedge) | $2.54/Mcf | $4.27/Mcf | n/a | — |
We have to have the midstream to provide that gas to what NextEra sees as a huge role for U.S. shale gas to power AI hyperscalers and data centers.— M. Jay Allison, CEO, 2026-05-06
Management tone: Management's tone shifted from defensive on the May 6 Q1 call to more constructive on the July 30 Q2 call. In Q1 the CEO volunteered the production and capex miss and acknowledged that 'cash burn and slow pace of resource delineation is a little taxing.' By Q2, management pointed to the 16% sequential production increase as delivery on the prior guide. On the 2027 program, management did not commit to growth, saying it will decide activity late in the year and wants stronger, hedgeable gas prices.
Management Guidance
Comstock issued no formal annual production guidance on either call. The 10-Q states the company expects to spend an additional $1.1 billion to $1.2 billion in the remaining nine months of 2026 on drilling, completion, infrastructure and other activity. On the Q2 call, management reaffirmed a 2026 program of 48 legacy Haynesville wells drilled and turned to sales, 22 Western Haynesville wells drilled and 21 turned, and 16 Horseshoe wells drilled and 17 turned. It said Q3 and Q4 production should each grow by a similar amount sequentially, with Q4 returning to first-half 2024 levels.
Trajectory
Revenue has tracked gas prices more than volumes. Across the last four quarters it ran $450M, $498M, $587M, then $353M, the Q2 drop following a realized gas price of $2.54 per Mcf before hedges, down from $4.27 in Q1. Unit operating cost improved to $0.77 per Mcfe from about $0.93, and management cited a 74% EBITDAX margin. Production rose 16% sequentially to 1.2 Bcfe/d and is guided higher in both Q3 and Q4, though the 2027 program is explicitly price-contingent.
The Model
The model projects FY+1 revenue of $1,889 million and EBITDA of $1,065 million, a 56.4% margin, rising to FY+2 revenue of $2,354 million and EBITDA of $1,467 million at a 62.3% margin. The near-term figure sits around current trailing revenue, so the FY+2 step up carries the growth case — it depends on Western Haynesville delineation wells converting into production and on the power-hub demand path beginning to show up in volumes. Across the model's five runs, FY+2 revenue dispersion is 16%.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $1.9B | $1.9B | $2.4B |
| YoY Growth | — | −2.0% | +24.6% |
| EBITDA | $1.0B | $1.1B | $1.5B |
| EBITDA Margin | 53.1% | 56.4% | 62.3% |
Projections are the median of 5 independent model runs. The model’s revenue sits 17.7% below analyst consensus.
Comstock issued no formal annual production guidance on either call. The 10-Q states the company expects to spend an additional $1.1 billion to $1.2 billion in the remaining nine months of 2026 on drilling, completion, infrastructure and other activity. On the Q2 call, management reaffirmed a 2026 program of 48 legacy Haynesville wells drilled and turned to sales, 22 Western Haynesville wells drilled and 21 turned, and 16 Horseshoe wells drilled and 17 turned. It said Q3 and Q4 production should each grow by a similar amount sequentially, with Q4 returning to first-half 2024 levels.
What Could Go Right — and Wrong
- SOCAR's $1.65 billion partnership reaches a definitive agreement by October 31, 2026 and closes by year-end, bringing cash and validating the acreage.
- The Anderson County power hub signs definitive agreements and a Comstock gas-sales contract, moving the potential ~1 Bcf/d by 2031 toward contracted demand.
- The second and third big-hole laterals repeat the first well's $1,310 per lateral foot cost, lowering the Western cost curve.
- Larger fracs — 25% to 50% higher proppant loads — prove EUR uplift, raising per-well economics.
- The 2027 program holds at nine rigs and four frac fleets, signaling confidence in demand arriving.
- Gas prices stay weak and the 2027 program is moderated — the price-contingency management already flagged.
- Further production or capex misses re-raise leverage above 3x and erode the credibility Q2 began to rebuild.
- Western drilling costs keep rising as wells get deeper and hotter, and the big-hole and rig upgrades do not offset it.
- SOCAR or the power hub slips past its stated targets, pushing the demand anchor further out.
- Big-hole repeatability fails, leaving the Western cost curve unresolved and the FY+2 step-up unsupported.
Looking Ahead
The next year centers on converting Comstock's Western Haynesville position into contracted demand. The company targets a definitive SOCAR agreement by October 31, 2026 and closing by year-end, and a first 10,000-psi rig is set to deploy in October. Production is guided to grow sequentially in Q3 and Q4, with a 2027 activity decision due late in the year. The Anderson County power hub's operations are expected in the latter part of 2027-2028.
- Next callTexas Horseshoe results — First Texas Horseshoe IP tests whether the program extends beyond Louisiana.
- Next 2-3 monthsHigher-temp motors — Delivery could save 2-3 days per trip and lift Western drilling speed.
- October 2026First 10,000-psi rig — Deployment tests faster Western drilling and wider rig upgrades.
- Oct 31, 2026SOCAR definitive deal — Target date to convert the $1.65B LOI into a signed agreement.
- Year-end 2026SOCAR closing — Closing awaits government and third-party approvals.
- Q4 2026Exit-rate recovery — Tests whether production returns to first-half 2024 peak levels.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $1.3B | $1.9B | $1.9B | +53.8% |
| Gross Margin | -12.3% | 22.7% | 23.6% | +3,500bps |
| EBITDA | $627M | $1.0B | $985M | +63.4% |
| EBITDA Margin | 50.0% | 53.1% | 52.3% | +312bps |
| Net Income | −$219M | $420M | $533M | +292.1% |
| Free Cash Flow | −$477M | −$450M | −$735M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)23.6%
- EBITDA Margin (TTM)52.3%
- Net Margin (TTM)28.3%
- ROIC5.0%
- FCF Conversion-74.6%
- SBC / Revenue1.1%
The Company
Comstock Resources is a pure-play independent natural gas producer concentrated in the Haynesville and Bossier shales of North Louisiana and East Texas. It reports as a single operating segment — natural gas and oil exploration and production, primarily in those plays. Its proved reserves are 7.0 Tcfe, 41% developed, with an average reserve life of about 16 years. The company also owns Pinnacle Gas Services, a midstream subsidiary that gathers and treats its Western Haynesville gas.
Comstock runs two development programs in one basin. The legacy Haynesville, just over 264,000 net acres, is the producing engine, drilled increasingly with cost-saving Horseshoe wells. The Western Haynesville, just over 545,000 net acres, is the delineation asset. The company operates nine rigs — five in the legacy, four in the Western — and four frac fleets. It formed Pinnacle in 2023; after a June 2026 investment by Sixth Street, Comstock holds 73% of Pinnacle, stepping to 80.5% after certain return hurdles.
Business Segments
Competitive Landscape
Comstock competes in natural gas production in the Haynesville and Bossier, including the emerging Western Haynesville. Management describes the dynamic as collegial: it says peer companies are now 'in the game' and calls itself their 'biggest cheerleader,' because collective delineation de-risks the play. The source lists Aethon Energy, MTDR, EXE and '8031.T' as competing in Western Haynesville or Haynesville-Bossier gas production. On the Q1 call, management said three other companies are actively drilling in the Western Haynesville basin.
- Aethon EnergyNamed in the relationship map as competing in Western Haynesville gas production; not discussed on calls or filings.
- MTDRListed as competing in Western Haynesville / Haynesville-Bossier gas production; not discussed.
- EXEListed as competing in Western Haynesville / Haynesville-Bossier gas production; not discussed.
- 8031.TListed as competing in Western Haynesville / Haynesville-Bossier gas production; not discussed.
Supply Chain
Comstock produces gas and sells it into Gulf Coast markets, with its own midstream arm gathering Western Haynesville volumes. It is a price-taker on a fungible commodity, and its top three customers are LNG- or export-facing. Neighbors like Energy Transfer and NextEra discuss the same demand but do not name Comstock.
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