UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): July 16, 2018
COMSTOCK RESOURCES, INC.
(Exact Name of Registrant as Specified in Charter)
| STATE OF NEVADA | 001-03262 | 94-1667468 | ||
| (State or other jurisdiction incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification Number) |
5300 Town and Country Boulevard
Suite 500
Frisco, Texas 75034
(Address of principal executive offices)
(972) 668-8800
(Registrant’s Telephone No.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 7.01 Regulation FD Disclosure
On July 16, 2018, Comstock Resources, Inc. (the “Company”) is filing certain material attached as Exhibit 99.1 to this Form 8-K which is being provided to potential investors in connection with a private placement of new senior notes.
The information in this Current Report on Form 8-K regarding the presentation materials is included in this report solely for informational purposes. The information reported in this Item 7.01, including the materials attached as Exhibits 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended.
Item 9.01 Financial Statements and Exhibits
| Exhibit 99.1 | Presentation Materials. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| COMSTOCK RESOURCES, INC. | ||||||
| Dated: July 16, 2018 | By: | /s/ ROLAND O. BURNS | ||||
| Roland O. Burns | ||||||
| President and Chief Financial Officer | ||||||
Exhibit 99.1
July 2018 NYSE:CRK
Disclaimer Thispresentationincludes“forward-lookingstatements”withinthemeaningofSection27Aof theSecuritiesActof1933andSection21EoftheSecuritiesExchangeActof1934.Forward-looking statementsgiveourcurrentexpectationsorforecastsoffutureevents.Thesestatementsinclude estimatesoffuturenaturalgasandoilreserves,expectednaturalgasandoilproductionandfuture expenses,assumptionsregardingfuturenaturalgasandoilprices,budgetedcapitalexpenditures andotheranticipatedcashoutflows,aswellasstatementsconcerninganticipatedcashflowand liquidity,businessstrategyandotherplansandobjectivesforfutureoperations. Ourproductionforecastsaredependentuponmanyassumptions,includingestimatesofproduction declineratesfromexistingwellsandtheoutcomeoffuturedrillingactivity. Importantfactorsthatcouldcauseactualresultstodiffermateriallyfromthoseintheforward-lookingstatementshereinincludethetimingandextentofchangesinmarketpricesforoilandgas, operatingrisks,liquidityrisks,includingrisksrelatingtoourdebt,politicalandregulatory developmentsandlegislation,andotherriskfactorsandknowntrendsanduncertaintiesas describedinourAnnualReportonForm10-Kforfiscalyear2017filedwiththeSecuritiesand ExchangeCommission.Shouldoneormoreoftheserisksoruncertaintiesoccur,orshould underlyingassumptionsproveincorrect,ouractualresultsandplanscoulddiffermateriallyfrom thoseexpressedintheforward-lookingstatements.
TheNewComstock • Comstock’sHaynesvilleandBossierShaleassetsprovideconsistent,high-return andlow-riskdrillingopportunity Comstockhasdrilled~230horizontalwellsintheplaysince2007 • Enhancedcompletiondesignandregionalpriceadvantagehavetransformedthe HaynesvilleintooneofNorthAmerica’shighestreturnnaturalgasbasins • Extensiveacreagepositionunderpinsover850grosslocations • BakkenShaleoil-weightedproductioncontributedbyJerryJonesprovides leveragetooilprices • Assetcontributionrepresentsa$620millionequityinvestmentintotheCompany • SubstantialcashflowgeneratedbyBakkenpropertiestoberedeployedinHaynesvilleand EagleFord • EagleFordjointventureacross~23,000acrestargets327potentiallocationsandadds futureoilgrowth • Combinationstrengthensbalancesheet,withcommitmenttoimprovefurther withgoalof<2.0xnetleverage • PFNetDebt/LQAEBITDAXis2.9x • 50%to60%ofnexttwelvemonthexpectedproductionhedgedonrollingbasis • Disciplinedgrowthwhilespendingwithinoperatingcashflow Our Strategy: Disciplined Growth and Value Creation Within Cash Flow 2
NewConsolidatedAssetBase Bakken Shale NORTH DAKOTA EastTexas/NorthLouisiana BakkenShale ProvedReserves–2.0Tcfe ProvedReserves–31MMBoe Q1’18NetProduction– 234.8MMcfe/d Q1’18NetProduction– 13,170Boe/d Haynesville/ Bossier Shale OtherAssets ProvedReserves–3.9Bcfe TEXAS Q1’18NetProduction–3.4MMcfe/d LOUISIANA Eagle Ford Shale CompanyOverview ProvedReserves–2.3Tcfe EagleFord 27%-proveddeveloped ProvedReserves–18MMBoe 10%-oil ProductionwassoldinQ2’18 90%-gas Q1’18NetProduction(1) – 317.5MMcfe/d Note:ReservedataasofApril1,2018. (1) ProFormaforthesaleofEagleFordandtheJerryJonesassetcontribution. 3
ComstockAcreageintheCoreofthe Haynesville Haynesville/Bossier Shale NetAcres: 68,700 AverageNRI: 80.5% Average WI: 78.0% GrossDrillingLocations: 864 ResourcePotential: 8.4Tcf Source: 1Derrickandpubliccompanydisclosure. 4
Gen2 HaynesvilleCompletion • Newcompletiondesignincreasesthetotalstagesfora7,500 lateralfrom30at250feetapartto50at150feetapart • Totalclustersincreasefrom150to250 • Sandloadingincreasesfrom2,800poundsperfootto3,800 poundsperfoot • Totalsandperwellincreasesfrom21millionpoundsto28.5 millionpounds 3Stages=750feet 250’ 250’ 250’ Gen1 50’ 5Stages=750feet 150’ 150’ 150’ 150’ 150’ Gen2 30’ 5
ComstockCompletionDesignContinues toDeliverResults Holmes29-20 Gamble4-33 Headrick 14-11#1 24MMcf/d 24MMcf/d 33MMcf/d Harrison30-19 Gen1 24MMcf/d 14-11#2 MMcf/d Holmes29-32 28MMcf/d Headrick 1 Derrick21#3 26 30MMcf/d Harrison30-31 Gen2 24MMcf/d Derrick21#2 30MMcf/d Headrick 14-23#2 21MMcf/d 35MMcf/d Shahan5-8 22MMcf/d Nash19-18#2 Ramsey4-9 25MMcf/d 23MMcf/d 26MMcf/d Ramsey7-18 Billingsley25-24 23MMcf/d Furlow 25-24 DeSoto 25MMcf/d Horn8-17 Grantham30-31 Parish, 21MMcf/d 25-36 20MMcf/d aybrook 15 MMcf/d Caraway20-29 MMcf/d 24MMcf/d Louisiana Halsey14 Roberts26-35#2 Powell28 21MMcf/d 28MMcf/d 20MMcf/d Bogle36-1 Roberts26-35#1 16MMcf/d BSMCLA12-1#1 27MMcf/d 17MMcf/d LA18-7#1 MMcf/d BSMCLA13-24#3 Jordan16-21 6 20MMcf/d 22MMcf/d
Best-InClassWellPerformance NewHaynesville/BossierWellResultsExceedingExpectations day per MMcf TypeCurve Daysonproduction 7
BakkenAssetsProvideSubstantial CashFlow BakkenShale Properties BakkenPlay Gross/NetProducing 348/55.1 Wells: Gross/NetDUCs: 85/11.8 Gross/NetPUDs: 7/2.6 WillistonBasin Net1PReserves (ByOperator) • 348(55.1net)producingoilwells,85(11.8net)drilled uncompletedwellsand7(2.6net)undrilledlocations 20% • Inthefirstquarterof2018,producedonaverageapprox.~13,170 47% Boe/d 4% Total: 4% ~31 MMBoe(1) • Provedreservesof22.8millionbarrelsofoiland49.3billion 4% cubicfeetofnaturalgas(1) 10% 11% • TheBakkenShalePropertiesgenerated$155.1millionof revenuesinexcessofoperatingcosts,excludingdepreciation, Whiting Oasis depletion,amortization,in2017 Continental Enerplus Rimrock XTO Other Note:MapillustratesthecountieswhereBakkenwellscontributedbyJerryJonesarelocated. 8 (1) Reservesasof4/1/2018preparedbyLeeKeelingandAssociates,Inc.
EagleFordShaleJointVenture • FollowingthesaleofitsEagle Fordshaleproperties,Comstock retainedallundeveloped acreageof~8,400netacres prospectivefortheEagleFord shaleinAtascosa,Karnes,La SalleandMcMullenCountiesin SouthTexas • ComstockandUSGareforminga jointdevelopmentventureon ~23,000combinedacres • Theacreageiscontributed fortherighttoparticipate witha50%to55%working EagleFordShale interestinthe327potential Properties drillinglocationsacrossthe JVAcres: 23,000 JVacreage DrillingLocations: 327 • Comstockexpectsdrillingon theacreagetostartinthe thirdquarterof2018 9
Over10YearsofDrillingInventory Haynesville/Bossier Haynesville/Bossier Haynesville/Bossier Total EagleFordJV Total <5,000’(1) >5,000’-<8,500’(1) >8,500’(1) Haynesville/Bossier ResourcePlay ComstockisContinuouslyGrowingandHigh-gradingItsInventory ThroughAcreageSwaps,LeasingandAcquisitions Note: Excludes285horizontalCottonValleylocations. (1) Laterallength. 10
PremiumOilandGasMarkets Bakken(1) ($2.99) Marcellus(2) ($0.59) WTI Cushing Haynesville(3) Permian(4) ($0.11) ($14.75) $5.01 Henry EagleFord(5) Hub (Discount)/PremiumtoWTI($/Bbl) (Discount)/PremiumtoHenryHub($/Mcf) ExportstoMexico LNGExports +3.5Bcf/dby2020 +6.3Bcf/dby2020 GulfCoastIndustrial Demand +2.7Bcf/dby2020 Source:WoodMackenzie. (1) BasedontheaveragedifferentialofBakkenpeersOASandWLLforQ12018. (2) BasedonthebasisforDominionSouthperBloombergasofJuly10,2018. (3) BasedonthebasisforColumbiaGulfMainlineperBloombergasofJuly10,2018. 11 (4) BasedonthebasisforMidlandCushing,perBloombergasofJuly10,2018. (5) BasedonthebasisforCorpusChristi,perBloombergasofJuly10,2018.
ProFormaReserveBase Oil Gas Total MBbls Bcf Bcfe ProvedReserves asof4/1/2018: Producing 16.8 442.4 543.5 Non-Producing/Behind Pipe 4.0 58.2 82.2 Total Developed 20.8 500.7 625.7 Undeveloped 17.3 1,580.5 1,684.5 TotalProvedReserves 38.2 2,081.1 2,310.3 SECPV10Value(000s)(1) $1,318.5 Reservesby ReservesbyType ReservesbyRegion PV-10byRegion CommodityMix 10% 5% 2% 8% 27% Total: Total: Total: 33% ~2.3 ~2.3 ~2.3 Total: 65% Tcfe Tcfe Tcfe ~$1.3Bn 73% 90% 87% Haynesville Bakken Haynesville Bakken Developed Undeveloped Oil Gas EagleFord Other EagleFord (1) SECpricingasofApril1,2018of$49.70/Bbl and$2.89/Mcf. 12
HaynesvilleWellEconomics Gen 2 Completion Design- Refrac 4,500’L 7,500’L 10,000’L EstimatedWellCosts($millions) $4.5 $6.8 $10.3 $12.7 24Hr.IP(Mmcf perday) 12 17 22 26 DeclineBFactor 0.99 0.99 0.99 0.99 InitialDecline(%) 72 72 65 61 Proppant(Pounds perlateralft.) 3,800 3,800 3,800 3,800 EUR(Bcf) 7.8 11.2 18.6 24.8 Rate of Return Net Present Value at 10% (%) (Million $) 160% $30 $28 140% $26 $24 120% $22 $20 100% $18 millions) 80% $16 (in $14 $12 60% $10 @10 $8 40% NPV $6 20% $4 $2 0% $0 $2.00 $2.50 $3.00 $3.50 $4.00 $2.00 $2.50 $3.00 $3.50 $4.00 $/MCF $/MCF Refrac 4,500 ft. 7,500 ft. 10,000 ft. 13
2018DrillingProgram ($inmillions) Capital 2018 $GrossWells WINetWells Haynesville/BossierShale: DrillingandCompletion $126.8 36 15.6 Completionof2017Wells 22.0 ReFracs(7) 31.8 OtherNon-operated 0.5 5 0.1 EagleFordShale 4.8 4 1.1 TotalLegacyComstock $185.9 45 16.8 BakkenProperties 51.5 33(1) 7.2(1) TotalCapitalExpenditures $237.4 78 24 OperatedHaynesvilleLaterals: <=5,000ft. 5 7,500ft. 7 10,000ft. 24 Total 36 Average Lateral Length (1) IncludesDUCs. 14
HaynesvilleProductionGrowth Avg.Haynesville - 1 0/2 3 4/5 5 OperatedRigs: (Jan-15)* (Jun/Sep-16)* (Apr-17)* (Sep/Dec-18)* Avg.Haynesville Operated 38% 29% 59% >35% >50% YoYGrowth: . Avg Net Haynesville (MMcf/d) Production Haynesvilleproductiongrowthwilloffsetaverageyear-over-yearexpecteddecline intheBakkenpropertiesof2-5%for2017to2018and25-30%for2018to2019 Source: CompanyestimatesforHaynesville. 15 *OperatedComstockrigsasofthedatesshown.
LowCostStructure (Per Mcfe) OPERATINGCOSTS DD&A 79¢ProFormafor EagleFord Saleand BakkenAcquisition $1.47 Pro Formafor EagleFordSaleand BakkenAcquisition 16
OilandGasHedgingProgram NaturalgashedgepositionstosupportHaynesvilledrillingprogram Collarsfor Collarsfor Swapsat Total $2.50to $2.50to $3.00 (a) (a) (a) Hedged $3.30 $3.50 Mcfperday 2018–Q3 60,000 30,000 30,000 120,000 2018–Q4 60,000 30,000 30,000 120,000 2019–Q1 47,000 30,000 30,000 107,000 2019–Q2 - 30,000 30,000 60,000 (a)ContractsareperMMBtuatanindexpricebasedontheNYMEX-HenryHubmonthlyfutureprices Comstocktargetshaving50%to60%ofitsexpectedfuturetwelve monthsoilandgasproductionhedgedonrollingbasis 17
Commitmentto ConservativeFinancialStrategy • Funddrillingprogramsubstantiallyoutofoperatingcashflow • CashflowfromBakkenpropertiestofundadrillingprogram • ContributionofBakkenpropertiesstrengthensthebalance sheet,withcommitmenttoimprovefurther • ProFormaNetDebt/LQAEBITDAXis2.9x • Goalofnetleverage<2.0x • Maintainstrongliquidityfollowingrefinancing • •Proformaliquidityinexcessof$450million • Targetofhaving50%to60%ofitsexpectedfuturetwelve monthsoilandgasproductionhedgedonrollingbasis 18
Summary • HighqualityacreagepositionsintheHaynesville,Bossierand EagleFordshales • Leveragedtooil prices and strongcashflowsthroughthecontributedBakkenproperties • Proformanetleverageof2.9x,withgoaltoreducenetleverage <2.0x • Intenttomaintainliquidityofover$400million • Strategyofdisciplinedgrowthbyoperatingwithincashflow • Managementteamwithsignificantoperationalexperience IdealnewmajorshareholderinJerryJones: Patient,debt-averseandsharesourvisionfortheHaynesvilleshaleopportunity 19