false0000023194COMSTOCK RESOURCES INC00000231942023-10-302023-10-30

 

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): October 30, 2023

 

 

COMSTOCK RESOURCES, INC.

(Exact name of Registrant as Specified in Its Charter)

 

 

Nevada			001-03262	94-1667468
(State or Other Jurisdiction of Incorporation)			(Commission File Number)	(IRS Employer Identification No.)
5300 Town and Country Blvd. Suite 500
Frisco, Texas				75034
(Address of Principal Executive Offices)				(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (972) 668-8800

 

(Former Name or Former Address, if Changed Since Last Report)

 

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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.50 (per share)		CRK		New York Stock Exchange

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. ☐

 

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Item 2.02 Results of Operations and Financial Condition.

On October 30, 2023, Comstock Resources, Inc. ("Comstock" or the "Company") announced financial results for the quarter ended September 30, 2023. A copy of the press release announcing Comstock's earnings and operating results for these periods and other matters is attached hereto as Exhibit 99.1.

The earnings press release contains financial measures that are not in accordance with generally accepted accounting principles in the United States ("GAAP"). Comstock has provided reconciliations within the earnings release of the non-GAAP financial measures to the most directly comparable GAAP financial measures. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, measures of financial performance prepared in accordance with GAAP that are presented in the earnings release.

The information in this Form 8-K and the Exhibit attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or otherwise subject to the liability of that section, and shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

Exhibit No.	Description
99.1	Press Release dated October 30, 2023

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			COMSTOCK RESOURCES, INC.
Date:	October 30, 2023	By:	/s/ ROLAND O. BURNS
			Roland O. Burns President and Chief Financial Officer

 

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Exhibit 99.1

	5300 Town and Country Blvd., Suite 500
	Frisco, Texas 75034
	Telephone: (972) 668-8834
	Contact: Ron Mills
	VP of Finance and Investor Relations
	Web Site: www.comstockresources.com
NEWS RELEASE

For Immediate Release

COMSTOCK RESOURCES, INC. REPORTS

THIRD QUARTER 2023 FINANCIAL AND OPERATING RESULTS

FRISCO, TEXAS, October 30, 2023 – Comstock Resources, Inc. ("Comstock" or the "Company") (NYSE: CRK) today reported financial and operating results for the quarter ended September 30, 2023.

Highlights of 2023's Third Quarter

Financial Results for the Three Months Ended September 30, 2023

Comstock's natural gas and oil sales in the third quarter of 2023 totaled $315.8 million (including realized hedging gains of $10.3 million). Operating cash flow (excluding changes in working capital) generated in the third quarter of 2023 was $167.2 million, and net income available to common stockholders for the third quarter was $14.7 million or $0.05 per share. Net income in the quarter included a pre-tax $3.9 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 2023 was $11.7 million, or $0.04 per diluted share.

Comstock's production cost per Mcfe in the third quarter averaged $0.85 per Mcfe, which was comprised of $0.36 for gathering and transportation costs, $0.24 for lease operating costs, $0.20 for production and other taxes and $0.05 for cash general and administrative expenses. Comstock's unhedged operating margin was 64% in the third quarter of 2023 and 65% after hedging.

 

 

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Financial Results for the Nine Months Ended September 30, 2023

Natural gas and oil sales for the nine months ended September 30, 2023 totaled $991.4 million (including realized hedging gains of $76.2 million). Operating cash flow (excluding changes in working capital) generated during the first nine months of 2023 was $567.6 million, and net income available to common stockholders was $103.5 million or $0.37 per share. Adjusted net income available to common stockholders for the nine months ended September 30, 2023 was $104.8 million or $0.38 per diluted share.

Comstock's production cost per Mcfe during the nine months ended September 30, 2023 averaged $0.85 per Mcfe, which was comprised of $0.36 for gathering and transportation costs, $0.26 for lease operating costs, $0.16 for production and other taxes and $0.07 for cash general and administrative expenses. Comstock's unhedged operating margin was 65% during the first nine months of 2023 and 67% after hedging.

Drilling Results

Comstock drilled thirteen (10.2 net) operated horizontal Haynesville/Bossier shale wells in the third quarter of 2023 which had an average lateral length of 11,644 feet. Comstock turned 21 (18.1 net) operated wells to sales in the third quarter of 2023.

Since its last operational update in August, Comstock has turned 21 (18.1 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 10,460 feet.

Included in the wells turned to sales were the sixth and seventh successful Western Haynesville wells – the Cazey MS #1 and the Lanier CW #1. The Cazey MS #1 well was drilled to a total vertical depth of 15,986 feet and has a 10,028 foot completed lateral. The well's initial production rate was 34 MMcf per day. The Lanier CW #1 well was drilled to a total vertical depth of 17,309 feet and has a 9,577 foot completed lateral. The well's initial production rate was 35 MMcf per day.

Declaration of Quarterly Dividend

On October 30, 2023, Comstock's Board of Directors declared a quarterly dividend of $0.125 per common share. The dividend will be payable on December 15, 2023 to stockholders of record at the close of business on December 1, 2023.

Midstream Partnership

Comstock is forming a midstream partnership for its Western Haynesville acreage with Quantum Capital Solutions ("QCS"), an affiliate of Quantum Capital Group. As part of this transaction, Comstock will contribute its Pinnacle gathering and treating system, which is comprised of 145-mile high pressure pipeline and the Bethel natural gas processing plant to the partnership in exchange for a total capital commitment by QCS of $300 million to fund the future build-out of the Western Haynesville midstream system over the next several years. Comstock will control and operate the midstream system. "The new partnership with QCS is expected to fund the needed expansion for our Western Haynesville midstream development program over the next five years," stated M. Jay Allison, Chief Executive Officer of Comstock.

 

 

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Earnings Call Information

Comstock has planned a conference call for 10:00 a.m. Central Time on October 31, 2023, to discuss the third quarter 2023 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/BIfc74a143ead8420db183d8bae 061d4c9. 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/5d543ov4.

If you are unable to participate in the original conference call, a web replay will be available for twelve months beginning at 1:00 p.m. CT on October 31, 2023. The replay of the conference can be accessed using the webcast link: https://edge.media-server.com/mmc/p/5d543ov4.

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.

 

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COMSTOCK RESOURCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

 

 

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Revenues:
Natural gas sales		$	304,141			$	994,979			$	911,065			$	2,376,774
Oil sales			1,309				1,936				4,111				6,324
Total natural gas and oil sales			305,450				996,915				915,176				2,383,098
Gas services			71,287				193,090				239,350				322,575
Total revenues			376,737				1,190,005				1,154,526				2,705,673
Operating expenses:
Production and ad valorem taxes			25,386				24,531				59,891				60,080
Gathering and transportation			47,012				44,740				137,981				113,797
Lease operating			31,664				28,608				100,525				79,873
Exploration			—				—				1,775				3,363
Depreciation, depletion and amortization			148,190				129,065				422,350				354,994
Gas services			67,632				181,818				224,317				305,271
General and administrative			9,586				10,165				31,992				27,451
Loss on sale of assets			—				—				(125	)			(21	)
Total operating expenses			329,470				418,927				978,706				944,808
Operating income			47,267				771,078				175,820				1,760,865
Other income (expenses):
Gain (loss) from derivative financial instruments			14,276				(271,335	)			76,190				(781,654	)
Other income			409				56				1,467				506
Interest expense			(43,624	)			(41,393	)			(121,082	)			(132,204	)
Loss on early retirement of debt			—				—				—				(46,840	)
Total other expenses			(28,939	)			(312,672	)			(43,425	)			(960,192	)
Income before income taxes			18,328				458,406				132,395				800,673
Provision for income taxes			(3,608	)			(102,810	)			(28,878	)			(179,610	)
Net income			14,720				355,596				103,517				621,063
Preferred stock dividends			—				(4,411	)			—				(13,089	)
Net income available to common stockholders		$	14,720			$	351,185			$	103,517			$	607,974
Net income per share:
Basic		$	0.05			$	1.50			$	0.37			$	2.61
Diluted		$	0.05			$	1.28			$	0.37			$	2.24
Weighted average shares outstanding:
Basic			276,999				232,482				276,741				232,170
Diluted			276,999				277,715				276,741				277,605
Dividends per share		$	0.125			$	—			$	0.375			$	—

 

 

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COMSTOCK RESOURCES, INC.

OPERATING RESULTS

(In thousands, except per unit amounts)

 

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Natural gas production (MMcf)			130,528				128,902				383,902				367,758
Oil production (Mbbls)			17				21				57				66
Total production (MMcfe)			130,629				129,025				384,241				368,152
Natural gas sales		$	304,141			$	994,979			$	911,065			$	2,376,774
Natural gas hedging settlements (1)			10,344				(304,489	)			76,221				(679,038	)
Total natural gas including hedging			314,485				690,490				987,286				1,697,736
Oil sales			1,309				1,936				4,111				6,324
Total natural gas and oil sales including hedging		$	315,794			$	692,426			$	991,397			$	1,704,060
Average natural gas price (per Mcf)		$	2.33			$	7.72			$	2.37			$	6.46
Average natural gas price including hedging (per Mcf)		$	2.41			$	5.36			$	2.57			$	4.62
Average oil price (per barrel)		$	77.00			$	92.19			$	72.12			$	95.82
Average price (per Mcfe)		$	2.34			$	7.73			$	2.38			$	6.47
Average price including hedging (per Mcfe)		$	2.42			$	5.37			$	2.58			$	4.63
Production and ad valorem taxes		$	25,386			$	24,531			$	59,891			$	60,080
Gathering and transportation			47,012				44,740				137,981				113,797
Lease operating			31,664				28,608				100,525				79,873
Cash general and administrative (2)			6,931				8,323				24,985				22,533
Total production costs		$	110,993			$	106,202			$	323,382			$	276,283
Production and ad valorem taxes (per Mcfe)		$	0.20			$	0.19			$	0.16			$	0.16
Gathering and transportation (per Mcfe)			0.36				0.35				0.36				0.31
Lease operating (per Mcfe)			0.24				0.22				0.26				0.22
Cash general and administrative (per Mcfe)			0.05				0.06				0.07				0.06
Total production costs (per Mcfe)		$	0.85			$	0.82			$	0.85			$	0.75
Unhedged operating margin			64	%			89	%			65	%			88	%
Hedged operating margin			65	%			85	%			67	%			84	%
Gas services revenue		$	71,287			$	193,090			$	239,350			$	322,575
Gas services expenses			67,632				181,818				224,317				305,271
Gas services margin		$	3,655			$	11,272			$	15,033			$	17,304
Natural Gas and Oil Capital Expenditures:
Proved property acquisitions		$	—			$	—			$	—			$	205
Unproved property acquisitions			19,998				12,214				76,646				37,396
Total natural gas and oil properties acquisitions		$	19,998			$	12,214			$	76,646			$	37,601
Exploration and Development:
Development leasehold		$	5,369			$	3,011			$	19,087			$	8,298
Exploratory drilling and completion			74,737				18,606				179,049				49,003
Development drilling and completion			229,594				204,954				740,808				619,373
Other development costs			1,418				15,563				18,868				52,500
Total exploration and development capital expenditures		$	311,118			$	242,134			$	957,812			$	729,174

 

 

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COMSTOCK RESOURCES, INC.

NON-GAAP FINANCIAL MEASURES

(In thousands, except per share amounts)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS:
Net income available to common stockholders		$	14,720			$	351,185			$	103,517			$	607,974
Unrealized (gain) loss from derivative financial instruments			(3,932	)			(33,154	)			31				102,616
Loss on early retirement of debt			—				—				—				46,840
Non-cash interest amortization from adjusting debt assumed in acquisition to fair value			—				—				—				4,174
Exploration expense			—				—				1,775				3,363
Gain on sale of assets			—				—				(125	)			(21	)
Adjustment to (provision for) benefit from income taxes			946				7,580				(418	)			(29,959	)
Adjusted net income available to common stockholders (1)		$	11,734			$	325,611			$	104,780			$	734,987
Adjusted net income available to common stockholders per share (2)		$	0.04			$	1.18			$	0.38			$	2.68
Diluted shares outstanding			276,999				277,715				276,741				277,605
ADJUSTED EBITDAX:
Net income		$	14,720			$	355,596			$	103,517			$	621,063
Interest expense			43,624				41,393				121,082				132,204
Income taxes			3,608				102,810				28,878				179,610
Depreciation, depletion, and amortization			148,190				129,065				422,350				354,994
Exploration			—				—				1,775				3,363
Unrealized (gain) loss from derivative financial instruments			(3,932	)			(33,154	)			31				102,616
Stock-based compensation			2,655				1,842				7,006				4,918
Loss on early extinguishment of debt			—				—				—				46,840
Gain on sale of assets			—				—				(125	)			(21	)
Total Adjusted EBITDAX (3)		$	208,865			$	597,552			$	684,514			$	1,445,587

 

 

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COMSTOCK RESOURCES, INC.

NON-GAAP FINANCIAL MEASURES

(In thousands)

 

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
OPERATING CASH FLOW (1):
Net income		$	14,720			$	355,596			$	103,517			$	621,063
Reconciling items:
Unrealized (gain) loss from derivative financial instruments			(3,932	)			(33,154	)			31				102,616
Deferred income taxes			3,608				78,060				28,878				148,389
Depreciation, depletion and amortization			148,190				129,065				422,350				354,994
Loss on early retirement of debt			—				—				—				46,840
Amortization of debt discount and issuance costs			1,989				1,444				5,980				8,542
Stock-based compensation			2,655				1,842				7,006				4,918
Gain on sale of assets			—				—				(125	)			(21	)
Operating cash flow		$	167,230			$	532,853			$	567,637			$	1,287,341
(Increase) decrease in accounts receivable			(20,887	)			(155,682	)			295,323				(359,600	)
(Increase) decrease in other current assets			(1,825	)			(522	)			(624	)			359
Increase (decrease) in accounts payable and accrued expenses			(73,753	)			156,873				(73,697	)			301,956
Net cash provided by operating activities		$	70,765			$	533,522			$	788,639			$	1,230,056

 

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
FREE CASH FLOW (2):
Operating cash flow		$	167,230			$	532,853			$	567,637			$	1,287,341
Less:
Exploration and development capital expenditures			(311,118	)			(242,134	)			(957,812	)			(729,174	)
Other capital expenditures			(10,563	)			(603	)			(22,076	)			(713	)
Preferred stock dividends			—				(4,411	)			—				(13,089	)
Free cash flow (deficit) from operations		$	(154,451	)		$	285,705			$	(412,251	)		$	544,365
Acquisitions of natural gas and oil properties			(19,998	)			(12,347	)			(76,646	)			(54,492	)
Proceeds from divestitures			—				—				41,295				93
Free cash flow (deficit) after acquisition and divestiture activity		$	(174,449	)		$	273,358			$	(447,602	)		$	489,966

 

 

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COMSTOCK RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

		September 30, 2023				December 31, 2022
ASSETS
Cash and cash equivalents		$	19,835			$	54,652
Accounts receivable			214,804				510,127
Derivative financial instruments			23,973				23,884
Other current assets			68,572				56,324
Total current assets			327,184				644,987
Property and equipment, net			5,219,961				4,622,655
Goodwill			335,897				335,897
Operating lease right-of-use assets			148,066				90,716
		$	6,031,108			$	5,694,255
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable		$	503,564			$	530,195
Accrued costs			103,666				183,111
Operating leases			52,731				38,411
Derivative financial instruments			—				4,420
Total current liabilities			659,961				756,137
Long-term debt			2,503,407				2,152,571
Deferred income taxes			454,612				425,734
Derivative financial instruments			4,540				—
Long-term operating leases			95,397				52,385
Asset retirement obligation			30,434				29,114
Total liabilities			3,748,351				3,415,941
Stockholders' Equity:
Common stock			139,214				138,759
Additional paid-in capital			1,258,069				1,253,417
Accumulated earnings			885,474				886,138
Total stockholders' equity			2,282,757				2,278,314
		$	6,031,108			$	5,694,255

 

 

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