Comstock Resources is a leading independent natural gas producer with operations focused
on the development of the Haynesville Shale in North Louisiana and East Texas

News Releases Details

COMSTOCK RESOURCES, INC. REPORTS THIRD QUARTER 2022 FINANCIAL AND OPERATING RESULTS AND ANNOUNCES REINSTATEMENT OF QUARTERLY DIVIDEND

FRISCO, TX, Nov. 01, 2022 (GLOBE NEWSWIRE) -- Comstock Resources, Inc. ("Comstock" or the "Company") (NYSE: CRK) today reported financial and operating results for the quarter ended September 30, 2022.

Highlights of 2022's Third Quarter

  • Generated highest quarterly operating cash flow in the Company's history of $533 million or $1.92 per diluted share.
  • Free cash flow from operations was $286 million in the quarter.
  • Retired $250 million of debt in the third quarter and reduced leverage to under 1x.
  • Adjusted net income to common stockholders for the quarter was $326 million or $1.18 per diluted share.
  • Adjusted EBITDAX increased 93% in the quarter to a record high $598 million.
  • Oil and gas sales, including realized hedging losses, were $692 million, 76% higher than 2021's third quarter.
  • Strong results from Haynesville shale drilling program with 17 (15.2 net) operated wells turned to sales since our last update with an average initial production of 29 MMcf per day.
  • Board of directors approved reinstatement of a quarterly common stock dividend to commence in the fourth quarter.

Commenting on the quarter, Jay Allison, the Company's Chief Executive Officer said, "Comstock delivered record cash flow and free cash flow from operations in the third quarter. The record-setting financial results we have had so far this year have repositioned our balance sheet to be a strength of the Company and has allowed us to reinstate our quarterly cash dividend."

Financial Results for the Three Months Ended September 30, 2022

Comstock's revenues in the third quarter of 2022 totaled $692.4 million (after realized hedging losses of $304.5 million). Net cash provided by operating activities (excluding changes in working capital) generated in the third quarter was $532.9 million, and net income available to common stockholders for the third quarter of 2022 was $351.2 million or $1.28 per share. Reported net income in the quarter included a pre-tax $33.2 million unrealized gain on hedging contracts held for risk management. Excluding this item and certain other items, adjusted net income available to common stockholders for the third quarter of 2022 was $325.6 million, or $1.18 per diluted share.

Comstock's production cost per Mcfe in the third quarter averaged $0.82 per Mcfe, which was comprised of $0.35 for gathering and transportation costs, $0.22 for lease operating costs, $0.19 for production and other taxes and $0.06 for cash general and administrative expenses. Production cost was $0.74 per Mcfe in the second quarter of 2022 and $0.65 in the third quarter of 2021. The increase in production cost in the quarter is attributable to the higher natural gas prices realized this year which has resulted in higher production tax and higher gathering and transportation expenses. Comstock's unhedged operating margin was 89% in the third quarter of 2022 and 85% after hedging. Comstock's margin is one of the highest in the industry.

Financial Results for the Nine Months Ended September 30, 2022

Revenues for the nine months ended September 30, 2022 totaled $1.7 billion (after realized hedging losses of $679.0 million). Net cash provided by operating activities (excluding changes in working capital) generated during the first nine months of 2022 was $1.3 billion, and income available to common stockholders was $608.0 million or $2.24 per share. Net income during the first nine months of 2022 included a pre-tax $102.6 million unrealized loss on hedging contracts held for risk management and a $46.8 million loss on early retirement of debt. Excluding these items and certain other items, adjusted net income available to common stockholders for the nine months ended September 30, 2022 was $735.0 million or $2.68 per diluted share.

Comstock's production cost per Mcfe during the nine months ended September 30, 2022 averaged $0.75 per Mcfe, which was comprised of $0.31 for gathering and transportation costs, $0.22 for lease operating costs, $0.16 for production and other taxes and $0.06 for cash general and administrative expenses. Production cost was $0.61 per Mcfe for the nine months ended September 30, 2021. The higher 2022 production costs are attributable to higher 2022 realized natural gas prices. Comstock's unhedged operating margin was 88% during the first nine months of 2022 and 84% after hedging.

Drilling Results

Comstock drilled 21 (14.8 net) operated horizontal Haynesville/Bossier shale wells in the third quarter of 2022 which had an average lateral length of 10,275 feet. The Company also participated in an additional seven (0.7 net) non-operated Haynesville shale wells in the third quarter of 2022. Comstock turned 17 (15.2 net) operated wells and 18 (0.6 net) non-operated wells to sales in the third quarter of 2022 and currently expects to turn an additional 11 (8.7 net) operated wells to sales in the fourth quarter of 2022.

Since its last operational update in August, Comstock has turned 17 (15.2 net) operated Haynesville/Bossier shale wells to sales. These wells had initial daily production rates that averaged 29 MMcf per day. The completed lateral length of these wells averaged 9,899 feet.

Reinstatement of Quarterly Dividend

Comstock's Board of Directors approved the reinstatement of the Company's quarterly cash dividend, with the first dividend to be paid in the fourth quarter of 2022, at an annual dividend rate of $0.50 per share ($0.125 per quarter). Comstock last paid a common dividend in 2014. The fourth quarter dividend will be payable on December 15, 2022 to stockholders of record at the close of business on December 1, 2022.

Earnings Call Information

Comstock has planned a conference call for 9:00 a.m. Central Time on November 2, 2022, to discuss the third quarter 2022 operational and financial results. Investors wishing to listen should visit the Company's website at www.comstockresources.com for a live webcast. Investors wishing to participate in the conference call telephonically will need to register at https://register.vevent.com/register/BI39ce5cb8026c4144ae9a888f217e28ae. Upon registering to participate in the conference call, participants will receive the dial-in number and a personal PIN number to access the conference call. On the day of the call, please dial in at least 15 minutes in advance to ensure a timely connection to the call. The conference call will also be broadcast live in listen-only mode and can be accessed via the website URL: https://edge.media-server.com/mmc/p/uhgfab48.

If you are unable to participate in the original conference call, a web replay will be available for twelve months beginning at 12:00 p.m. CT on November 2, 2022. The replay of the conference can be accessed using the webcast link: https://edge.media-server.com/mmc/p/uhgfab48.

This press release may contain "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties which could cause actual results to differ materially from those described herein. Although the Company believes the expectations in such statements to be reasonable, there can be no assurance that such expectations will prove to be correct. Information concerning the assumptions, uncertainties and risks that may affect the actual results can be found in the Company's filings with the Securities and Exchange Commission ("SEC") available on the Company's website or the SEC's website at sec.gov.

Comstock Resources, Inc. is a leading independent natural gas producer with operations focused on the development of the Haynesville shale in North Louisiana and East Texas. The Company's stock is traded on the New York Stock Exchange under the symbol CRK.

COMSTOCK RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2022       2021       2022       2021  
   
Revenues:              
Natural gas sales $         994,979             $         488,303             $         2,376,774             $         1,133,783          
Oil sales           1,936                       22,873                       6,324                       61,571          
Total oil and gas sales           996,915                       511,176                       2,383,098                       1,195,354          
Gas services           193,090                       —                       322,575                       —          
Total revenues           1,190,005                       511,176                       2,705,673                       1,195,354          
Operating expenses:              
Production and ad valorem taxes           24,531                       16,675                       60,080                       36,468          
Gathering and transportation           44,740                       35,402                       113,797                       96,596          
Lease operating           28,608                       26,576                       79,873                       77,150          
Exploration           —                       —                       3,363                       —          
Depreciation, depletion and amortization           129,065                       128,739                       354,994                       359,313          
Gas services           181,818                       —                       305,271                       —          
General and administrative           10,165                       8,052                       27,451                       23,952          
Gain on sale of assets           —                       (14 )             (21 )             (93 )
Total operating expenses           418,927                       215,430                       944,808                       593,386          
Operating income           771,078                       295,746                       1,760,865                       601,968          
Other income (expenses):              
Loss from derivative financial instruments           (271,335 )             (510,319 )             (781,654 )             (756,026 )
Other income           56                       197                       506                       1,008          
Interest expense           (41,393 )             (49,954 )             (132,204 )             (170,645 )
Loss on early retirement of debt           —                       —                       (46,840 )             (352,599 )
Total other expenses           (312,672 )             (560,076 )             (960,192 )             (1,278,262 )
Income (loss) before income taxes           458,406                       (264,330 )             800,673                       (676,294 )
(Provision for) benefit from income taxes           (102,810 )             (23,976 )             (179,610 )             74,168          
Net income (loss)           355,596                       (288,306 )             621,063                       (602,126 )
Preferred stock dividends           (4,411 )             (4,411 )             (13,089 )             (13,089 )
Net income (loss) available to common stockholders $         351,185             $         (292,717 )   $         607,974             $         (615,215 )
               
Net income (loss) per share:              
Basic $         1.50             $         (1.26 )   $         2.61             $         (2.66 )
Diluted $         1.28             $         (1.26 )   $         2.24             $         (2.66 )
Weighted average shares outstanding:              
Basic           232,482                       231,747                       232,170                       231,519          
Diluted           277,715                       231,747                       277,605                       231,519          

COMSTOCK RESOURCES, INC.
OPERATING RESULTS
(In thousands, except per unit amounts)

  Three Months Ended September 30,   Nine Months Ended September 30,
        2021           2021  
    2022     Pro
Forma (3)
  As Reported     2022     Pro
Forma (3)
  As Reported
Gas production (MMcf)           128,902                       127,121                       128,896                       367,758                       361,248                       366,272          
Oil production (Mbbls)           21                       29                       346                       66                       75                       1,034          
Total production (MMcfe)           129,025                       127,296                       130,968                       368,152                       361,700                       372,474          
                       
Natural gas sales $         994,979             $         484,012             $         488,303             $         2,376,774             $         1,123,967             $         1,133,783          
Natural gas hedging settlements (1)           (304,489 )             (114,538 )             (114,538 )             (679,038 )             (138,907 )             (138,907 )
Total natural gas including hedging           690,490                       369,474                       373,765                       1,697,736                       985,060                       994,876          
Oil sales           1,936                       1,941                       22,873                       6,324                       4,684                       61,571          
Oil hedging settlements (1)           —                       —                       (2,606 )             —                       —                       (5,489 )
Total oil including hedging           1,936                       1,941                       20,267                       6,324                       4,684                       56,082          
Total oil and gas sales including hedging $         692,426             $         371,415             $         394,032             $         1,704,060             $         989,744             $         1,050,958          
                       
Average gas price (per Mcf) $         7.72             $         3.81             $         3.79             $         6.46             $         3.11             $         3.10          
Average gas price including hedging (per Mcf) $         5.36             $         2.91             $         2.90             $         4.62             $         2.73             $         2.72          
Average oil price (per barrel) $         92.19             $         66.93             $         66.11             $         95.82             $         62.45             $         59.55          
Average oil price including hedging (per barrel) $         92.19             $         66.93             $         58.58             $         95.82             $         62.45             $         54.24          
Average price (per Mcfe) $         7.73             $         3.82             $         3.90             $         6.47             $         3.12             $         3.21          
Average price including hedging (per Mcfe) $         5.37             $         2.92             $         3.01             $         4.63             $         2.74             $         2.82          
                       
Production and ad valorem taxes $         24,531             $         14,508             $         16,675             $         60,080             $         30,589             $         36,468          
Gathering and transportation           44,740                       35,349                       35,402                       113,797                       96,543                       96,596          
Lease operating           28,608                       23,747                       26,576                       79,873                       67,613                       77,150          
Cash general and administrative (2)           8,323                       6,250                       6,250                       22,533                       18,661                       18,661          
Total production costs $         106,202             $         79,854             $         84,903             $         276,283             $         213,406             $         228,875          
                       
Production and ad valorem taxes (per Mcfe) $         0.19             $         0.11             $         0.13             $         0.16             $         0.08             $         0.09          
Gathering and transportation (per Mcfe)           0.35                       0.28                       0.27                       0.31                       0.27                       0.26          
Lease operating (per Mcfe)           0.22                       0.19                       0.20                       0.22                       0.19                       0.21          
Cash general and administrative (per Mcfe)           0.06                       0.05                       0.05                       0.06                       0.05                       0.05          
Total production costs (per Mcfe) $         0.82             $         0.63             $         0.65             $         0.75             $         0.59             $         0.61          
                       
Unhedged operating margin   89 %     84 %     83 %     88 %     81 %     81 %
Hedged operating margin   85 %     79 %     78 %     84 %     78 %     78 %
                       
Oil and gas capital expenditures:                      
Proved property acquisitions $         —             $         —             $         —             $         205             $         —             $         —          
Unproved property acquisitions           12,214                       5,248                       5,248                       37,396                       18,649                       18,649          
Total oil and gas properties acquisitions $         12,214             $         5,248             $         5,248             $         37,601             $         18,649             $         18,649          
Exploration and development:                      
Development leasehold $         3,011             $         721             $         733             $         8,298             $         6,759             $         6,794          
Exploratory drilling and completion           18,606                       —                       —                       49,003                       —                       —          
Development drilling and completion           204,954                       141,637                       141,637                       619,373                       454,524                       454,524          
Other development costs           15,563                       17,171                       18,719                       52,500                       22,511                       26,795          
Total exploration and development capital expenditures $         242,134             $         159,529             $         161,089             $         729,174             $         483,794             $         488,113          


 

(1)   Included in gain (loss) from derivative financial instruments in operating results.

(2)   Excludes stock-based compensation.

(3)   Excludes results of the Company's Bakken shale assets, which were sold in October 2021.

COMSTOCK RESOURCES, INC.
NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts)

  Three Months Ended September 30,   Nine Months Ended
September 30,
    2022       2021       2022       2021  
ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS:              
Net income (loss) available to common stockholders $         351,185             $         (292,717 )   $         607,974             $         (615,215 )
Unrealized (gain) loss from derivative financial instruments           (33,154 )             392,870                       102,616                       610,764          
Loss on early retirement of debt           —                       —                       46,840                       352,599          
Non-cash interest amortization from adjusting debt assumed in
acquisition to fair value
          —                       2,565                       4,174                       9,962          
Exploration expense           —                       —                       3,363                       —          
Gain on sale of assets           —                       (14 )             (21 )             (93 )
Adjustment to (provision for) benefit from income taxes           7,580                       (11,169 )             (29,959 )             (153,777 )
Adjusted net income available to common stockholders (1) $         325,611             $         91,535             $         734,987             $         204,240          
               
Adjusted net income available to common stockholders per share (2) $         1.18             $         0.35             $         2.68             $         0.79          
               
Diluted shares outstanding           277,715                       276,886                       277,605                       276,368          


ADJUSTED EBITDAX:              
Net income (loss) $         355,596             $         (288,306 )   $         621,063             $         (602,126 )
Interest expense (3)           41,393                       50,259                       132,204                       171,511          
Income taxes           102,810                       23,976                       179,610                       (74,168 )
Depreciation, depletion, and amortization           129,065                       128,739                       354,994                       359,313          
Exploration           —                       —                       3,363                       —          
Unrealized (gain) loss from derivative financial instruments           (33,154 )             392,870                       102,616                       610,764          
Stock-based compensation           1,842                       1,802                       4,918                       5,291          
Loss on early extinguishment of debt           —                       —                       46,840                       352,599          
Gain on sale of assets           —                       (14 )             (21 )             (93 )
Total Adjusted EBITDAX (4) $         597,552             $         309,326             $         1,445,587             $         823,091          


 

(1)   Adjusted net income available to common stockholders is presented because of its acceptance by investors and by Comstock management as an indicator of the Company's profitability excluding loss on early retirement of debt, non-cash unrealized gains and losses on derivative financial instruments, gains and losses on sales of assets and other unusual items.

(2)   Adjusted net income available to common stockholders per share is calculated to include the dilutive effects of unvested restricted stock pursuant to the two-class method and performance stock units and preferred stock pursuant to the treasury stock method.

(3)   Includes realized gains or losses from interest rate derivative financial instruments.

(4)   Adjusted EBITDAX is presented in the earnings release because management believes that adjusted EBITDAX, which represents Comstock's results from operations before interest, income taxes, and certain non-cash items, including loss on early retirement of debt, depreciation, depletion and amortization and exploration expense, is a common alternative measure of operating performance used by certain investors and financial analysts.

COMSTOCK RESOURCES, INC.
NON-GAAP FINANCIAL MEASURES
(In thousands)

  Three Months Ended September 30,   Nine Months Ended
September 30,
    2022       2021       2022       2021  
OPERATING CASH FLOW(1):              
Net income (loss) $         355,596             $         (288,306 )   $         621,063             $         (602,126 )
Reconciling items:              
Unrealized (gain) loss from derivative financial instruments           (33,154 )             392,870                       102,616                       610,764          
Deferred income taxes (benefit)           78,060                       16,339                       148,389                       (84,942 )
Depreciation, depletion and amortization           129,065                       128,739                       354,994                       359,313          
Loss on early retirement of debt           —                       —                       46,840                       352,599          
Amortization of debt discount and issuance costs           1,444                       4,012                       8,542                       17,587          
Stock-based compensation           1,842                       1,802                       4,918                       5,291          
Gain on sale of assets           —                       (14 )             (21 )             (93 )
Operating cash flow $         532,853             $         255,442             $         1,287,341             $         658,393          
Increase in accounts receivable           (155,682 )             (57,189 )             (359,600 )             (97,379 )
(Increase) decrease in other current assets           (15,494 )             (4,678 )             (25,214 )             850          
Increase in accounts payable and accrued expenses           156,873                       39,395                       301,956                       56,689          
Net cash provided by operating activities $         518,550             $         232,970             $         1,204,483             $         618,553          
               


  Three Months Ended September 30,   Nine Months Ended
September 30,
    2022       2021       2022       2021  
FREE CASH FLOW(2):              
Operating cash flow $         532,853             $         255,442             $         1,287,341             $         658,393          
Less:              
Exploration and development capital expenditures           (242,134 )             (161,089 )             (729,174 )             (488,113 )
Other capital expenditures           (603 )             (23 )             (713 )             (69 )
Preferred dividends           (4,411 )             (4,411 )             (13,089 )             (13,089 )
Free cash flow from operations $         285,705             $         89,919             $         544,365             $         157,122          
Acquisitions           (12,347 )             (5,248 )             (54,492 )             (18,649 )
Proceeds from divestitures           —                       50                       93                       261          
Free cash flow after acquisition and divestiture activity $         273,358             $         84,721             $         489,966             $         138,734          
               


 

(1)   Operating cash flow is presented in the earnings release because management believes it to be useful to investors as a common alternative measure of cash flows which excludes changes to other working capital accounts.

(2)   Free cash flow from operations and free cash flow after acquisition and divestiture activity are presented in the earnings release because management believes them to be useful indicators of the Company's ability to internally fund acquisitions and debt maturities after exploration and development capital expenditures, preferred dividend payments, proved and unproved property acquisitions, and proceeds from divestiture of oil and gas properties.

COMSTOCK RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)

  September 30,
2022
  December 31, 2021
ASSETS      
Cash and cash equivalents $         38,648           $         30,663          
Accounts receivable           627,338                     267,738          
Derivative financial instruments           2,368                     5,258          
Other current assets           40,470                     15,077          
Total current assets           708,824                     318,736          
Property and equipment, net           4,440,022                     4,007,146          
Goodwill           335,897                     335,897          
Operating lease right-of-use assets           99,622                     6,450          
  $         5,584,365           $         4,668,229          
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
Accounts payable $         617,463           $         314,569          
Accrued costs           150,327                     135,026          
Operating leases           38,024                     2,444          
Derivative financial instruments           285,713                     181,945          
Total current liabilities           1,091,527                     633,984          
Long-term debt           2,261,697                     2,615,235          
Deferred income taxes           345,806                     197,417          
Derivative financial instruments           —                     4,042          
Long-term operating leases           61,676                     4,075          
Asset retirement obligation           29,235                     25,673          
Other non-current liabilities           8                     24          
Total liabilities           3,789,949                     3,480,450          
Mezzanine Equity:      
Preferred stock           175,000                     175,000          
Stockholders' Equity:      
Common stock           116,879                     116,462          
Additional paid-in capital           1,098,605                     1,100,359          
Accumulated earnings (deficit)           403,932                     (204,042 )
Total stockholders' equity           1,619,416                     1,012,779          
  $         5,584,365           $         4,668,229          


Ron Mills
VP - Finance and Investor Relations
Comstock Resources
972-668-8834
rmills@comstockresources.com

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Source: Comstock Resources, Inc.