false0000023194COMSTOCK RESOURCES INC00000231942024-02-132024-02-13

 

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): February 13, 2024

 

 

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. ☐

 

---

Item 2.02 Results of Operations and Financial Condition.

On February 13, 2024, Comstock Resources, Inc. ("Comstock" or the "Company") announced financial results for the quarter and year ended December 31, 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 February 13, 2024

 

---

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:	February 13, 2024	By:	/s/ ROLAND O. BURNS
			Roland O. Burns President and Chief Financial Officer

 

---

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

FOURTH QUARTER 2023 FINANCIAL AND OPERATING RESULTS

FRISCO, TEXAS, February 13, 2024 – Comstock Resources, Inc. ("Comstock" or the "Company") (NYSE: CRK) today reported financial and operating results for the quarter and year ended December 31, 2023.

Highlights of 2023's Fourth Quarter

Financial Results for the Three Months Ended December 31, 2023

Comstock's natural gas and oil sales in the fourth quarter of 2023 totaled $353.5 million (including realized hedging gains of $4.1 million). Operating cash flow (excluding changes in working capital) generated in the fourth quarter of 2023 was $206.9 million, and net income available to common stockholders for the fourth quarter was $108.4 million or $0.39 per share. Net income in the quarter included a pre-tax $107.3 million unrealized gain on hedging contracts held for natural gas price risk management. Excluding this item, adjusted net income for the fourth quarter of 2023 was $27.9 million, or $0.10 per share.

Comstock's production cost per Mcfe in the fourth quarter averaged $0.81 per Mcfe, which was comprised of $0.33 for gathering and transportation costs, $0.23 for lease operating costs, $0.23 for production and other taxes and $0.02 for cash general and administrative expenses. Comstock's unhedged operating margin was 67% in the fourth quarter of 2023 and 68% after hedging.

---

Financial Results for the Year Ended December 31, 2023

Natural gas and oil sales for the year ended December 31, 2023 totaled $1.3 billion (including realized hedging gains of $80.3 million). Operating cash flow (excluding changes in working capital) generated during the year was $774.5 million, and net income available to common stockholders was $211.9 million or $0.76 per share. Adjusted net income excluding unrealized gain on hedging contracts for the year ended December 31, 2023 was $132.7 million or $0.47 per share.

Comstock's production cost per Mcfe during the year ended December 31, 2023 averaged $0.83 per Mcfe, which was comprised of $0.35 for gathering and transportation costs, $0.25 for lease operating costs, $0.18 for production and other taxes and $0.05 for cash general and administrative expenses. Comstock's unhedged operating margin was 65% during 2023 and 68% after hedging.

2023 Drilling Results

Comstock drilled 67 (55.5 net) operated horizontal Haynesville/Bossier shale wells in 2023, which had an average lateral length of 10,796 feet. Comstock also turned 74 (55.7 net) operated wells to sales in 2023, which had an average initial production rate of 25 MMcf per day.

Since its last operational update in November, Comstock has turned an additional 22 (16.5 net) operated Haynesville/Bossier shale wells to sales. These wells had initial daily production rates that averaged 24 MMcf per day. The completed lateral length of these wells averaged 11,966 feet. Included in the wells turned to sales since the last operational update was the eighth successful Western Haynesville well – the Neyland MMM #1, which was drilled to a total vertical depth of 16,752 feet with a 10,438 foot completed lateral. The well is currently producing 31 MMcf per day and has not reached its maximum initial production rate.

2023 Proved Oil and Gas Reserves

Comstock also announced that proved natural gas and oil reserves as of December 31, 2023 were estimated at 4.9 trillion cubic feet equivalent ("Tcfe") as compared to 6.7 Tcfe as of December 31, 2022. The reserve estimates were determined under SEC guidelines and were audited by the Company's independent reserve engineering firm. The 4.9 Tcfe of proved reserves at December 31, 2023 were substantially all natural gas, 56% developed and 98% operated by Comstock. The decrease is the result of lower natural gas prices used in the determination. The present value, using a 10% discount rate, of the future net cash flows before income taxes of the proved reserves (the "PV-10 Value"), was approximately $2.5 billion using the Company's average first of month 2023 prices of $2.39 per thousand cubic feet of natural gas and $72.63 per barrel of oil. The natural gas and oil prices used in determining the December 31, 2023 proved reserve estimates were 56% lower for natural gas and 14% lower for oil as compared to prices used at December 31, 2022. Comstock's proved reserves would have been 6.6 Tcfe with a PV-10 Value of $5.2 billion using NYMEX reference prices of $3.50 per Mcf for natural gas and $75.00 per barrel of oil less the Company's differentials.

The following table reflects the changes in the SEC proved reserve estimates since the end of 2022:

	Total (Bcfe)
Proved Reserves:
Proved Reserves at December 31, 2022		6,700.9
Production		(524.9	)
Extensions and discoveries		571.4
Revisions		(1,803.9	)
Proved Reserves at December 31, 2023		4,943.5

 

---

Despite the lower prices used in determining proved reserves, Comstock replaced 109% of its 2023 production excluding revisions, which were related to the lower prices used in the determination.

2024 Budget

In response to weak natural gas prices, Comstock plans to suspend its quarterly dividend until natural gas prices improve. In addition, the Company plans to reduce the number of operating drilling rigs it is running from seven to five. Two of the five drilling rigs will continue to be deployed in the Company's Western Haynesville play. As a result, Comstock plans to spend approximately $750 million to $850 million in 2024 on its development and exploration projects to drill 46 (35.9 net) operated horizontal wells and to turn 44 (38.2 net) operated wells to sales in 2024. Comstock expects to spend $125 million to $150 million on its Western Haynesville midstream system, which will be funded by its midstream partnership.

Earnings Call Information

Comstock has planned a conference call for 10:00 a.m. Central Time on February 14, 2024, to discuss the fourth quarter 2024 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/BI9aed23e8af74454f89bd226e82af31c9

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/jx7owzgq.

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 February 14, 2024. The replay of the conference can be accessed using the webcast link: https://edge.media-server.com/mmc/p/jx7owzgq.

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 December 31,								Year Ended December 31,
		2023				2022				2023				2022
Revenues:
Natural gas sales		$	348,385			$	740,320			$	1,259,450			$	3,117,094
Oil sales			1,050				1,273				5,161				7,597
Total natural gas and oil sales			349,435				741,593				1,264,611				3,124,691
Gas services			61,148				180,791				300,498				503,366
Total revenues			410,583				922,384				1,565,109				3,628,057
Operating expenses:
Production and ad valorem taxes			31,912				17,837				91,803				77,917
Gathering and transportation			46,925				41,882				184,906				155,679
Lease operating			31,678				31,261				132,203				111,134
Exploration			—				4,924				1,775				8,287
Depreciation, depletion and amortization			185,558				134,456				607,908				489,450
Gas services			57,733				159,773				282,050				465,044
General and administrative			6,000				11,954				37,992				39,405
Gain on sale of assets			—				(319	)			(125	)			(340	)
Total operating expenses			359,806				401,768				1,338,512				1,346,576
Operating income			50,777				520,616				226,597				2,281,481
Other income (expenses):
Gain (loss) from derivative financial instruments			111,449				119,132				187,639				(662,522	)
Other income			304				410				1,771				916
Interest expense			(47,936	)			(38,888	)			(169,018	)			(171,092	)
Loss on early retirement of debt			—				—				—				(46,840	)
Total other income (expenses)			63,817				80,654				20,392				(879,538	)
Income before income taxes			114,594				601,270				246,989				1,401,943
Provision for income taxes			(6,217	)			(81,451	)			(35,095	)			(261,061	)
Net income			108,377				519,819				211,894				1,140,882
Preferred stock dividends			—				(2,925	)			—				(16,014	)
Net income available to common stockholders			108,377				516,894				211,894				1,124,868
Net income attributable to noncontrolling interest			(777	)			—				(777	)			—
Net income attributable to Comstock		$	107,600			$	516,894			$	211,117			$	1,124,868
Net income per share:
Basic		$	0.39			$	2.08			$	0.76			$	4.75
Diluted		$	0.39			$	1.87			$	0.76			$	4.11
Weighted average shares outstanding:
Basic			276,999				247,543				276,806				236,045
Diluted			276,999				277,032				276,806				277,465
Dividends per share		$	0.125			$	0.125			$	0.50			$	0.125

 

---

COMSTOCK RESOURCES, INC.

OPERATING RESULTS

(In thousands, except per unit amounts)

 

 

		Three Months Ended December 31,								Year Ended December 31,
		2023				2022				2023				2022
Natural gas production (MMcf)			140,565				132,858				524,467				500,616
Oil production (Mbbls)			13				16				70				82
Total production (MMcfe)			140,649				132,955				524,890				501,107
Natural gas sales		$	348,385			$	740,320			$	1,259,450			$	3,117,094
Natural gas hedging settlements (1)			4,107				(183,677	)			80,328				(862,715	)
Total natural gas including hedging			352,492				556,643				1,339,778				2,254,379
Oil sales			1,050				1,273				5,161				7,597
Total natural gas and oil sales including hedging		$	353,542			$	557,916			$	1,344,939			$	2,261,976
Average natural gas price (per Mcf)		$	2.48			$	5.57			$	2.40			$	6.23
Average natural gas price including hedging (per Mcf)		$	2.51			$	4.19			$	2.55			$	4.50
Average oil price (per barrel)		$	80.77			$	79.56			$	73.73			$	92.65
Average price (per Mcfe)		$	2.48			$	5.58			$	2.41			$	6.24
Average price including hedging (per Mcfe)		$	2.51			$	4.20			$	2.56			$	4.51
Production and ad valorem taxes		$	31,912			$	17,837			$	91,803			$	77,917
Gathering and transportation			46,925				41,882				184,906				155,679
Lease operating			31,678				31,261				132,203				111,134
Cash general and administrative (2)			3,141				10,262				28,125				32,795
Total production costs		$	113,656			$	101,242			$	437,037			$	377,525
Production and ad valorem taxes (per Mcfe)		$	0.23			$	0.12			$	0.18			$	0.16
Gathering and transportation (per Mcfe)			0.33				0.32				0.35				0.31
Lease operating (per Mcfe)			0.23				0.24				0.25				0.22
Cash general and administrative (per Mcfe)			0.02				0.08				0.05				0.07
Total production costs (per Mcfe)		$	0.81			$	0.76			$	0.83			$	0.76
Unhedged operating margin			67	%			86	%			65	%			88	%
Hedged operating margin			68	%			82	%			68	%			83	%
Gas services revenues		$	61,148			$	180,791			$	300,498			$	503,366
Gas services expenses			57,733				159,773				282,050				465,044
Gas services margin		$	3,415			$	21,018			$	18,448			$	38,322
Natural Gas and Oil Capital Expenditures:
Proved property acquisitions		$	—			$	295			$	—			$	500
Unproved property acquisitions			21,907				16,724				98,553				54,120
Total natural gas and oil properties acquisitions		$	21,907			$	17,019			$	98,553			$	54,620
Exploration and Development:
Development leasehold		$	8,818			$	5,429			$	27,905			$	13,727
Exploratory drilling and completion			65,079				14,517				244,129				63,520
Development drilling and completion			233,856				281,653				974,664				901,026
Other development costs			6,262				1,193				25,130				53,693
Total exploration and development capital expenditures		$	314,015			$	302,792			$	1,271,828			$	1,031,966

 

 

---

COMSTOCK RESOURCES, INC.

NON-GAAP FINANCIAL MEASURES

(In thousands, except per share amounts)

 

		Three Months Ended December 31,								Year Ended December 31,
		2023				2022				2023				2022
ADJUSTED NET INCOME:
Net income available to common stockholders		$	108,377			$	516,894			$	211,894			$	1,124,868
Unrealized gain from derivative financial instruments			(107,342	)			(302,809	)			(107,311	)			(200,193	)
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			—				4,924				1,775				8,287
Gain on sale of assets			—				(319	)			(125	)			(340	)
Adjustment to income taxes			26,868				68,970				26,450				39,011
Adjusted net income (1)		$	27,903			$	287,660			$	132,683			$	1,022,647
Adjusted net income per share (2)		$	0.10			$	1.05			$	0.47			$	3.73
Diluted shares outstanding			276,999				277,032				276,806				277,464
ADJUSTED EBITDAX:
Net income		$	108,377			$	519,819			$	211,894			$	1,140,882
Interest expense			47,936				38,888				169,018				171,092
Income taxes			6,217				81,451				35,095				261,061
Depreciation, depletion, and amortization			185,558				134,456				607,908				489,450
Exploration			—				4,924				1,775				8,287
Unrealized gain from derivative financial instruments			(107,342	)			(302,809	)			(107,311	)			(200,193	)
Stock-based compensation			2,861				1,692				9,867				6,610
Loss on early extinguishment of debt			—				—				—				46,840
Gain on sale of assets			—				(319	)			(125	)			(340	)
Total Adjusted EBITDAX (3)		$	243,607			$	478,102			$	928,121			$	1,923,689

 

---

COMSTOCK RESOURCES, INC.

NON-GAAP FINANCIAL MEASURES

(In thousands)

 

 

		Three Months Ended December 31,								Year Ended December 31,
		2023				2022				2023				2022
OPERATING CASH FLOW (1):
Net income		$	108,377			$	519,819			$	211,894			$	1,140,882
Reconciling items:
Unrealized gain from derivative financial instruments			(107,342	)			(302,809	)			(107,311	)			(200,193	)
Deferred income taxes			15,423				79,928				44,301				228,317
Depreciation, depletion and amortization			185,558				134,456				607,908				489,450
Loss on early retirement of debt			—				—				—				46,840
Amortization of debt discount and issuance costs			1,984				1,713				7,964				10,255
Stock-based compensation			2,861				1,692				9,867				6,610
Gain on sale of assets			—				(319	)			(125	)			(340	)
Operating cash flow		$	206,861			$	434,480			$	774,498			$	1,721,821
(Increase) decrease in accounts receivable			(16,626	)			117,211				278,697				(242,389	)
(Increase) decrease in other current assets			1,369				(10,655	)			745				(10,296	)
Increase (decrease) in accounts payable and other accrued expenses			36,603				(72,704	)			(37,094	)			229,252
Net cash provided by operating activities		$	228,207			$	468,332			$	1,016,846			$	1,698,388

 

 

		Three Months Ended December 31,								Year Ended December 31,
		2023				2022				2023				2022
FREE CASH FLOW (2):
Operating cash flow		$	206,861			$	434,480			$	774,498			$	1,721,821
Less:
Exploration and development capital expenditures			(314,015	)			(302,792	)			(1,271,828	)			(1,031,966	)
Midstream capital expenditures			(14,098	)			—				(35,694	)			—
Other capital expenditures			(11	)			(147	)			(491	)			(803	)
Preferred stock dividends			—				(2,925	)			—				(16,014	)
Contributions from midstream partnership			24,000				—				24,000				—
Free cash flow (deficit) from operations		$	(97,263	)		$	128,616			$	(509,515	)		$	673,038
Acquisitions			(21,907	)			(18,044	)			(98,553	)			(72,593	)
Proceeds from divestitures			—				4,093				41,295				4,186
Free cash flow (deficit) after acquisition and divestiture activity		$	(119,170	)		$	114,665			$	(566,773	)		$	604,631

 

 

---

COMSTOCK RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

		December 31, 2023				December 31, 2022
ASSETS
Cash and cash equivalents		$	16,669			$	54,652
Accounts receivable			231,430				510,127
Derivative financial instruments			126,775				23,884
Other current assets			86,619				56,324
Total current assets			461,493				644,987
Property and equipment, net			5,384,771				4,622,655
Goodwill			335,897				335,897
Operating lease right-of-use assets			71,462				90,716
		$	6,253,623			$	5,694,255
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable		$	523,260			$	530,195
Accrued costs			134,466				183,111
Operating leases			23,765				38,411
Derivative financial instruments			—				4,420
Total current liabilities			681,491				756,137
Long-term debt			2,640,391				2,152,571
Deferred income taxes			470,035				425,734
Derivative financial instruments			—				—
Long-term operating leases			47,742				52,385
Asset retirement obligation			30,773				29,114
Total liabilities			3,870,432				3,415,941
Stockholders' Equity:
Common stock			139,214				138,759
Additional paid-in capital			1,260,930				1,253,417
Accumulated earnings			958,270				886,138
Total stockholders' equity attributable to Comstock			2,358,414				2,278,314
Noncontrolling interest			24,777				—
Total stockholders' equity			2,383,191				2,278,314
		$	6,253,623			$	5,694,255

 

---