Comstock Resources reports Q1 2026 results, highlighting a 5.2 GW power hub deal and Western Haynesville progress despite weather-related production declines.
Comstock Resources (NYSE: CRK) reported a challenging first quarter for 2026, characterized by lower production levels and increased operating costs. The company cited significant winter weather events as the primary driver for the production shortfall, which resulted in natural gas and oil sales of $339 million for the period. Adjusted net income for the quarter was $44 million, or $0.15 per share, a figure that excludes a $83 million pretax unrealized hedge gain. Operating costs per Mcfe rose to $0.93, an increase of $0.16 from the fourth quarter of 2025, largely due to fixed field costs being spread over lower production volumes.
Management acknowledged the "headline miss" on production but emphasized that the company has turned a corner. President and CFO Roland Burns noted that production is expected to increase by 13% to 15% in the second quarter. The company maintained a disciplined capital approach, spending $343 million on its drilling program while avoiding M&A activity and equity dilution. Comstock ended the quarter with approximately $1.3 billion in liquidity and a leverage ratio of 2.9 times over the last 12 months.
Comstock’s long-term thesis rests on its 806,980 net acres in the Haynesville and Bossier shales, with a specific focus on the Western Haynesville footprint, which has grown to over 540,000 net acres. The company has drilled 44 wells in the Western Haynesville to date. While the basin offers high pressure and significant resource potential, management is prioritizing a measured pace of development to avoid the historical pitfalls of over-drilling seen in the Legacy Haynesville play circa 2008-2011.
Operational performance in the Western Haynesville remains variable due to the vast geographical spread of the acreage and differences in vertical depth and temperatures. The company is actively testing new technologies, including rotary steerable drilling systems and larger hole designs, to improve drilling speeds and reduce costs. A record lateral length of 14,800 feet was achieved in the Western Haynesville, demonstrating the potential for improved efficiency as the company refines its completion techniques.
On March 19, 2026, the U.S. Department of Commerce selected Comstock’s Western Haynesville site to host a 5.2 gigawatt natural gas-fired power generation hub in Anderson County, Texas. This project, which is part of a broader U.S.-Japan trade initiative, will be developed and operated by NextEra Energy Resources. Comstock is positioned to be the primary gas supplier for the facility, which could require nearly 1 billion cubic feet of natural gas per day by 2031. This development aligns with the company’s goal of serving the growing demand from AI hyperscalers and data centers.
Simultaneously, Comstock is working to optimize its midstream subsidiary, Pinnacle Gas Services. The company is currently in the process of seeking a new equity partner to replace its existing preferred equity arrangement with Quantum. Management expects this transition to provide more visibility into the midstream company’s value and support infrastructure growth without requiring additional equity dilution from the parent company.
Investors should monitor the company’s ability to maintain its drilling cadence while managing cash burn. The current strategy involves running nine rigs—five in the Legacy Haynesville and four in the Western Haynesville—along with four full-time frac fleets. The primary risk to this thesis is the continued volatility in natural gas prices and the potential for further operational delays if weather or geological complexities persist.
Success in the Western Haynesville will be confirmed by consistent improvements in drilling days and initial production rates as the company implements more conservative drawdown protocols. Conversely, if the company fails to demonstrate improved well performance or if the midstream equity partnership process stalls, the market may continue to pressure the stock’s valuation. Comstock remains committed to its current business plan, emphasizing that the "slow pace of resource delineation" is a deliberate choice to protect the long-term value of its assets rather than a sign of operational weakness.
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