Good day, ladies and gentlemen. Welcome to the second quarter 2019 Comstock Resources Incorporated earnings conference call. At this time, all participants are in listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will follow at that time. If anyone should require operator assistance, please press star on the zero key on your touch-tone telephone. As a reminder, this call will be recorded. I would now like to introduce you to our host for today's conference, Mr. Jay Allison. Please go ahead.
Chris, thank you, and good morning. Good morning, everyone. I would be remiss this morning not to open this call with a thank you to the equity and debt holders and our sponsors at Comstock for really walking with us the past 12 months to create the second quarter results that we'll present today. I would extend a very special thanks to Denham Capital for selling us Covey Park and becoming a 16% stakeholder, and to Jerry Jones, who in the past 12 months has personally invested around $1.1 billion in Comstock, including purchasing 50 million newly issued shares of Comstock common stock at $6 per share about three weeks ago. That's a $300 million purchase. The Jones family now own a 75% stake in Comstock, and without their backing, we wouldn't have had the results today. Thanks to all of you.
Welcome to the Comstock Resources second quarter 2019 financial and operating results conference call. Today, we will review our second quarter 2019 earnings and drilling results, as well as update you on our acquisition of Covey Park Energy, which closed on July 16th. You can view the slide presentation during or after this call by going to our website at www.comstockresources.com and downloading the quarterly results presentation. There you'll find a presentation titled "Second Quarter 2019 Results." I am Jay Allison, Chief Executive Officer of Comstock, and with me is Roland Burns, our President and Chief Financial Officer, and Dan Harrison, our Chief Operating Officer. Please refer to slide two in our presentation and note that our discussions today will include forward-looking statements with meaning of securities laws.
While we believe the expectations in such statements to be reasonable, there can be no assurance that such expectations will prove to be correct. Now if everyone return to slide three, the 2019 second quarter summary. On slide three, we cover some of the highlights of the second quarter. For much of the first half of this year, we have been very, very focused on the transformative Covey Park Energy acquisition, which we closed on July 16th. Combining Comstock and Covey Park created the basin leader in the Haynesville Shale, which is a premier natural gas basin in North America with superior economics given its geographic proximity to the Gulf Coast. The operations of Covey Park will be included for 77 days of the third quarter. Our Haynesville Bossier Shale drilling program continues to deliver strong production growth.
Comstock and Covey Park have drilled and completed a combined 174 operated wells since 2015, which have an average IP rate of 23 million cubic feet per day. Our Haynesville Shale production in the second quarter was up 83% from the second quarter of last year and up 19% from the first quarter of this year. We've also been driving down our well cost in the Haynesville. To date, our well costs for lateral foot are down 9% from 2018 costs. Our strong natural gas production growth was offset by weaker natural gas prices in the second quarter. For the quarter, we reported oil and gas sales of $130 million, adjusted EBITDAX of $93 million, operating cash flow of $66 million or $0.63 per share, and adjusted net income of $12.7 million or $0.12 per share. If you would flip over to slide four.
Slide four is a good summary of the Covey Park Energy acquisition. The combination of the two companies creates a company with substantial scale in the Haynesville. We produced over 1.2 billion cubic feet of natural gas equivalent per day in the second quarter and generated annualized pro forma second quarter EBITDAX of $926 million. We'll have 5.4 TCFE of SEC-approved reserves and 290,000 net acres in the Haynesville. We'll have 2,000 net drilling locations, which gives us over 20 years of inventory. Our second quarter pro forma unit cost structure is only $0.72 per MCFE, which is one of the lowest in the industry, and our second quarter pro forma EBITDAX margins of 78% is one of the highest in the industry. With the merger, we have changed our leadership team, with half of our department heads coming from each company.
Our department heads are selecting best practices from each company and has put together their team with a focus on creating an efficient, low-overhead company. With favorable proximity to the Gulf Coast demand and over 500 mi of our own gathering infrastructure, we have higher natural gas price realizations. The Covey Park assets have higher gas price realizations than Comstock's. We're currently negotiating new gathering contracts and marketing agreements to give us greater access to the premium Gulf Coast markets. We are currently consolidating the Dallas area corporate offices and are implementing a 41% reduction to the combined corporate staff. We are targeting go forward annual G&A of $30 million, which is about half of the combined annual G&A of the two companies of $61 million in 2018.
With the merger, we are adding data scientists to the staff and implementing tailored drawdown for every new well, which we feel will further improve the economics of the Haynesville wells. Lastly, we are very focused on the balance sheet. Our leverage metrics immediately improved as a result of the transaction. As Roland will go over later, we plan to reduce the planned drilling activity by releasing one to two operated rigs in the near term. This will protect our balance sheet and liquidity and ensure we can hit our target to generate free cash flow in 2020 of approximately $100 million. We'll also consider potential divestitures of our non-core assets in order to pay down our debt and improve our current liquidity. Now I'll have Roland cover the financial results in more details. Roland?
Thanks, Jay. Slide five illustrates the production growth generated by our Haynesville Bossier Shale drilling program. In the second quarter of this year, production from our Haynesville Bossier wells is up 83% to 416 million cubic feet of gas per day as compared to the 227 million per day that we produced in the second quarter of 2018. Production this quarter was also up 19% from our first quarter production rate of 349 million per day. We put eight net wells on production in the quarter after adding 6.6 net wells in the first quarter. On the slide, we're also showing Covey Park's Haynesville Bossier production, in the second quarter, Covey Park's Haynesville Bossier wells produced 694 million per day, which is an increase of 43% over the 484 million per day that they produced in the second quarter of 2018.
Covey Park put 6.1 net wells to sales in the second quarter after adding 11.7 net wells in the first quarter. On a combined basis, we produced 1.1 billion cubic feet of net production in the Haynesville in the second quarter. In the third quarter, we expect to see the rate of growth slowing just a little bit as on a combined basis, we're going to put 10.5 net wells to sales in the third quarter. Slide six recaps what production we had shut in for the quarter. We were pleased to see that second quarter shut-in volumes decreased to 4%, and in most of the shut-in volumes are almost 80% related to pipeline curtailment for either maintenance activities or repair activities, or in a few instances, where we had limited capacity to flow our wells at full rate.
We are working to expand our options for our transportation, mainly in our Northern Haynesville operations, that will bring this percentage down further in the future. On slide seven, we detail our producing costs per MCFE produced. Operating costs per MCFE fell to $0.68 in the second quarter as compared to the first quarter rate of $0.74. Gathering costs were $0.23, production taxes averaged $0.13, and other field-level operating costs were $0.32. Looking ahead, our producing costs will improve further with the Covey Park operations combined in with ours. Pro forma for the Covey Park merger, operating costs fall to $0.65 in the second quarter, and that's before we get the benefit of the synergies and cost savings we expect to create from combining our field operations.
Breaking down the pro forma cost, gathering costs were $0.27, production taxes averaged $0.08, and field level costs were $0.30. We do expect some improvement to our gathering cost rate as new contracts that we've just finished up negotiating will create additional efficiencies, and give us a little bit lower overall gathering rates. We also hope to see some efficiencies in combining our field level offices where they make sense to combine. On slide eight, we detail our corporate overhead costs per MCFE. Our G&A cost per MCFE fell to $0.14 in the second quarter as compared to the second quarter of last year of $0.23 and our first quarter rate of $0.19. One of the more significant benefits of the merger is the improvement we'll have to this metric.
On a pro forma basis, with the overhead per MCFE in half to only $0.07 per MCFE with the reduction in the duplicate personnel from the two organizations in the two corporate Dallas offices. With this very low overhead rate, we will have one of the lowest cost structures in the industry. Our merger is a great example of the benefit of combining the two best shale operators in the same basin and the value that can be created from a combination. On slide nine, we detail the depreciation, depletion, and amortization per MCFE produced. This non-cash expense increased to $1.04 per MCFE in the second quarter as compared to $0.99 in the first quarter. On a pro forma basis, we see our DD&A rate coming back down, and we think it'll average somewhere around $0.86 for MCFE produced.
Slide 10 summarizes the second quarter financial results that we reported this morning. Our production in the second quarter was 45.1 BCFE, which includes 695,000 barrels of oil. This is 103% higher than our production in the second quarter of 2018, and it's 19% higher than what we reported for the first quarter of this year. Our oil and gas sales were $130 million, which was 108% higher than the second quarter of last year. Weaker oil and gas prices offset some of the impact of the higher natural gas production. In the quarter, our realized oil price was $52.12 per barrel, and our realized gas price was $2.29 per Mcf. Differentials for our natural gas prices continued to be wider this quarter than normal. For our natural gas, we sold more than half of our production in the quarter in the daily market.
The average day prices were $0.11 less than the first-of-the-month index reference price for Henry Hub gas. In the quarter, our EBITDAX came in at $93 million, which was 110% higher than the second quarter of last year. Operating cash flow was $66 million, which was up 151%. We reported net income of $21.4 million, or $0.20 per share. If you exclude the unrealized mark-to-market gain on our hedge contracts of $12.8 million in the quarter and the $1.4 million in costs we expensed relating to the merger, our adjusted net income per share was $0.12 per share for the quarter. On slide 11, we summarize our financial results for the first six months of this year. Our production for the first half of the year was 83 BCFE, including 1.5 million barrels of oil. That's 84% higher than the same period in 2018.
Oil and gas sales were $262 million, which was 92% higher than last year. Our oil prices for this period averaged $48.71 per barrel, and our realized gas price averaged $2.55 per MCFE. Adjusted EBITDAX was $190 million, or 94% higher than last year, and operating cash flow was $137 million, up 120% from 2018. We reported net income of $35 million for the first two quarters, or $0.33 per share. If you adjust that to exclude the unrealized mark-to-market loss on the hedges and the merger transaction cost, that number would've been $0.34 per share for the first two quarters of this year. On Slide 12, we cover the operating results, which are pro forma for the Covey Park acquisition. Pro forma production for the second quarter was 113 BCFE, with oil and gas sales of $312 million.
On a pro forma basis, our natural gas price improved to $2.54 per Mcf. For the first six months of this year, our pro forma production was 214 BCFE, with oil and gas sales of $622 million. The pro forma natural gas price for this period was $2.67 per Mcf. One of our major priorities is protecting and enhancing our natural gas price realizations, while at the same time looking to improve flow assurance for our growing production in the basin. On Slide 13, we outline some of the initiatives we're undertaking in marketing our gas. We just put new gathering contracts in place, covering almost 75% of our Haynesville production that will lower our current gathering costs, as well as providing for additional capacity to support the drilling plan.
We are also negotiating to improve our access to premium Gulf Coast markets and are looking to tie our sales to these indexes, which have much tighter correlation to Henry Hub than in-basin hubs at Perryville and Carthage. Two-thirds of the acquired Covey Park production is marketed off these premium Gulf Coast indexes, which is why their net realized gas price before hedging was $0.22 higher than Comstock's in the second quarter. Our pro forma natural gas price realization improved by $0.12 per Mcf in the quarter when we are combined with Covey Park. We also have a near-term goal to market more of our natural gas off first-of-the-month index pricing, which also will improve the correlation of our realized prices to our hedges. Speaking of hedges, on slide 14, we summarize the hedge position that we have in place for our oil and gas production.
For the rest of this year, we have about 717 million cubic feet per day of our gas production hedged and about 3,250 barrels of our oil hedged. Our plan is to continue to keep 50%-60% of our production hedged on a rolling 12-month basis. On slide 15, we recap our spending in the first six months on our drilling and development activity and what we expect to spend on drilling for all of this year, including drilling on the Covey Park assets. The first half of this year, we spent $182 million on development activities. $165 million was in the Haynesville Shale program. We drilled 20 or 15.3 net operated horizontal Haynesville wells. We also completed eight operated wells or [property] net wells that we drilled in 2018. We spent $16 million drilling four or 2.2 net Eagle Ford oil wells.
For the entire year, we're estimating that we'll spend $538 million on capital activity, which is basically running eight to nine operated rigs in the Haynesville. In response to the lower natural gas prices, we're now working on a new capital plan, and we expect to release one to two of these drilling rigs before the end of the year. For each rig we release, we can reduce capital expenditures next year by $75 million-$85 million, which would generate free cash flow of $40 million-$50 million for each rig that we release. Dropping two rigs would add $100 million of free cash flow to 2020 and will help offset the impact of the lower natural gas prices we're seeing right now.
With a smaller drilling program, our expected natural gas production growth in 2020, we're looking at this growth on a pro forma combined basis of the two companies, it would be dialed back from the 15% range that we discussed when we announced the Covey Park acquisition, to 10%-11% if we release two rigs. Again, we're going to optimize our drilling program, and then when we announce the third quarter, we'll have a new approved budget, which we suspect will be lower than the budget that we had announced back when we announced the Covey Park acquisition. On slide 16, we present our balance sheet at the end of the second quarter, and then also what it looks like pro forma for the closing of the Covey Park transaction, which happened 16 days after the end of the second quarter.
We had $47 million in cash at the end of the quarter and $1.3 billion in total debt, comprised of a five-year credit facility and the $850 million in senior notes. This was pretty much the same balance that we had outstanding at the end of the first quarter. We ended the quarter with $277 million in total liquidity. After closing the merger on July 16th, our pro forma debt is $2.7 billion, with $1.26 billion outstanding under a new five-year credit facility and $1.475 billion in senior notes. Our equity increased to almost $1.5 billion, including the $385 million of the new preferred equity that we issued. Our liquidity improved to $287 million. I'll now turn it over to Dan to report on the drilling results for the quarter.
Thanks, Roland. On slide 17, you'll see our new acreage map highlighting our new 293,000 net acre position as a result of the Covey Park acquisition. Since re-entering the play in 2015, the newly combined company has now drilled and completed a total of 174 operated wells with an average IP rate of 23 million cubic feet a day. To date, this year, the combined companies have drilled 44 gross operated wells and plans to drill a total of 79 gross operated wells by year-end, with an average lateral length this year of 8,000 ft. These wells have been, and continue to be very successful. Over on slide 18, you'll see the location of the 18 new operated wells from both companies that have been completed since our last update. This includes 10 new wells completed by Comstock and eight new wells completed by Covey Park.
The green markers denote the latest Comstock completions, and the red markers denote the latest Covey Park completions. All 10 Comstock wells were completed using our latest Gen 3 frac design, which is using 3,800 lbs per foot of sand loading at 15 ft-20 ft cluster spacing. The lateral lengths on these Comstock wells range from 4,426 ft - 11,319 ft, with an average lateral length of 6,970 ft. The initial production rates range from 22 million cubic feet-28 million cubic feet per day, with an average of 24 million cubic feet a day. The eight new Covey Park wells completed in the second quarter were completed using an average sand loading of 3,400 lbs per foot and at 24 ft-40 ft cluster spacing. The lateral lengths range from 5,209 ft - 9,320 ft, with an average length of 7,702 ft.
The initial production rates range from 12 million cubic feet-30 million cubic feet a day with an average IP of 21 million cubic feet a day. At this time, we have eight additional wells between both companies that are in the process of being completed. On slide 19. Slide 19 is a summary of our new expanded Haynesville Mid-Bossier drilling inventory. With the Covey Park acquisition, our total gross operated inventory has now increased to 2,387 locations with an average net interest of 76% or 1,823 net operated locations. This represents 30 years' worth of drilling based on our current drilling activity levels. The gross operated inventory consists of 866 10,000 ft laterals, 910 7,500 ft laterals, and 611 4,500 ft laterals. The 2,387 gross operated locations consist of 1,450 Haynesville locations and 937 Mid-Bossier locations.
In addition to the 2,387 gross operated locations, we have 1,535 gross non-operated locations with an average net interest of 13%, or 205 net non-operated locations. The company closed on a significant acreage trade at the beginning of the second quarter, which reduced our 4,500 ft well inventory by 25 wells and increased our 7,500 ft well inventory by 20 wells. We currently have another acreage trade in the works that will further add to our operated core inventory and increase our overall lateral lengths. In the future, we will continue to pursue acreage trades that will further consolidate our core acreage position and enhance our lateral lengths. I will now turn it back over to Jay to summarize our outlook for the rest of the year.
All right. Again, excellent reports from Roland and Dan. Thank you to both of you. If you look at the 2019 outlook, go to slide 20. We summarized our outlook for this year. For the rest of this year, our primary focus is to complete the integration of Covey Park into Comstock. Our goal is to have that substantially complete by year-end, and it is going very well, as I discussed earlier. We're confident that we'll deliver on the substantial value-adding synergies that the combination of the two Haynesville Shale operators can offer. Our Haynesville drilling program continues to generate economic returns even in the low natural gas price environment we're in today. Combined with Covey Park, Comstock now has the industry-leading low-cost structure and natural gas well economics. The drilling program is delivering production growth this year.
As Dan said, our natural gas production is expected to average 1.1 Bcf-1.2 Bcf per day in the second half of this year, with Covey Park's production being added for 77 days of the third quarter. Our oil production is expected to average 7,500 barrels-8,500 barrels per day in the second half of 2019, with new production from four new wells being added in the Eagle Ford starting in early July. These four wells had an average of per well IP rate of 1,034 barrels of oil equivalent. We'll put in a conservative operating plan in 2020, as Roland has described, that internally has funded the drilling program and will prioritize free cash flow generation over production growth. We are high-grading our drilling program now, and we'll look to drop one to two of our operated rigs in the Haynesville before the end of the year.
We will continue to maintain an active hedging program targeting the next 12 months of production. Lastly, we will protect our liquidity, which is currently $287 million, and we'll look to enhance it with non-core asset sales and free cash flow generation so we can pay down our bank debt. For the rest of the call, we'll take questions from the analysts who follow the company. Chris, turn it back over to you.
Thank you. Ladies and gentlemen, if you have a question at this time, please press the star and the one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. To prevent any background noise, listeners should please place your line on mute once your question has been stated. One moment for questions.
Chris?
Yes, sir.
Jay, it was such a complete report today that I think we answered all the questions.
We had a conference call two months ago, Jerry was on the call, and others were on the call when we announced the merger. Again, I want to thank you. It's a pretty heavy docket today at 10 :00 A.M. There are four or five other companies reporting. I want to tell you that we're going to continue to be consistent. We're going to continue to drill the low-risk wells that have high return. We're going to be consistently strong. We've got some great legacy advantages. Again, the market that we're seeking is the Gulf Coast, which is the market with the greatest demand. Thank you for listening to the call and for exposing yourself to Comstock's story. We're disciplined, and we don't plan on disappointing anybody. We're going to give you our best effort. Thank you for the morning.
Thank you. Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.