1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NO. 0-16741
COMSTOCK RESOURCES, INC.
(Exact name of registrant as specified in its charter)
NEVADA 94-1667468
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5005 LBJ Freeway, Suite 1000, Dallas, Texas 75244
(Address of principal executive offices)
Telephone No.: (214) 701-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.
Yes X No
--------- --------
Date Shares
------- ----------
Outstanding Common Stock ($0.50 par value) 5/15/95 12,477,192
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2
COMSTOCK RESOURCES, INC.
QUARTERLY REPORT
FOR THE QUARTER ENDED MARCH 31, 1995
PART I. FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations -
Three Months ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statement of Stockholders' Equity -
Three Months ended March 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows -
Three Months ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2
3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
3
4
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1995 1994
------------- --------------
(Unaudited)
Cash and Cash Equivalents $ 936,890 $ 3,425,248
Accounts Receivable:
Oil and gas sales 2,202,000 2,616,086
Gas marketing sales 5,739,444 5,558,418
Joint interest operations 1,019,354 619,063
Prepaid Expenses and Other 464,460 250,397
Inventory 93,150 93,728
------------- --------------
Total current assets 10,455,298 12,562,940
------------- --------------
Property and Equipment:
Oil and gas properties, successful efforts method 113,854,701 113,269,341
Other 1,292,720 1,371,517
Accumulated depreciation, depletion and amortization (38,327,236) (36,651,750)
------------- --------------
Net property and equipment 76,820,185 77,989,108
------------- --------------
Other Assets 984,556 1,018,665
------------- --------------
$ 88,260,039 $ 91,570,713
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Portion of Long-term Debt $ 7,077,227 $ 7,009,864
Accounts Payable and Accrued Expenses 6,606,417 8,368,639
Accrued Natural Gas Purchases 3,512,247 3,120,114
------------- --------------
Total current liabilities 17,195,891 18,498,617
------------- --------------
Long-term Debt, less current portion 28,864,242 30,922,479
Deferred Revenue 430,000 -
Other Noncurrent Liabilities 880,463 944,860
Stockholders' Equity:
Preferred stock - $10.00 par, 5,000,000 shares authorized,
1,600,000 shares outstanding at March 31, 1995
and December 31, 1994 16,000,000 16,000,000
Common stock - $.50 par, 30,000,000 shares authorized,
12,477,192 and 12,342,811 shares outstanding
at March 31, 1995 and December 31, 1994, respectively 6,238,596 6,171,406
Additional paid-in capital 36,850,460 36,523,602
Retained deficit (18,094,769) (17,375,095)
Less: Deferred compensation - restricted stock grants (104,844) (115,156)
------------- --------------
Total stockholders' equity 40,889,443 41,204,757
------------- --------------
$ 88,260,039 $ 91,570,713
============= ==============
The accompanying notes are an integral part of these statements.
4
5
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31,
(Unaudited)
1995 1994
------------ -----------
Revenues:
Oil and gas sales $ 3,816,083 $ 4,268,683
Gas marketing sales 10,500,071 -
Gas gathering and processing 190,745 -
Other income 81,928 76,438
------------ -----------
Total revenues 14,588,827 4,345,121
------------ -----------
Expenses:
Oil and gas operating 1,485,100 1,443,048
Natural gas purchases 10,214,663 -
Gas gathering and processing 47,240 -
Depreciation, depletion and amortization 1,797,594 1,691,781
General and administrative, net 499,160 273,876
Interest 976,633 622,029
------------ -----------
Total expenses 15,020,390 4,030,734
------------ -----------
Income before income taxes (431,563) 314,387
Provision for income taxes - -
------------ -----------
Net income (loss) (431,563) 314,387
Preferred stock dividends (289,110) (126,000)
------------ -----------
Net income (loss) attributable to common stock $ (720,673) $ 188,387
============ ===========
Net income (loss) attributable to common stock
per share $ (0.06) $ 0.02
============ ===========
Weighted average number of common and common
stock equivalent shares outstanding 12,344,733 12,349,042
============ ===========
The accompanying notes are an integral part of these statements.
5
6
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 1995
(Unaudited)
Deferred
Additional Retained Compensation-
Preferred Common Paid-In Earnings Restricted
Stock Stock Capital (Deficit) Stock Grants Total
------------ ----------- ------------ -------------- ---------- -------------
Balance at December 31, 1994 $ 16,000,000 $ 6,171,406 $ 36,522,603 $ (17,374,096) $ (115,156) $ 41,204,757
Issuance of common stock - 67,190 334,919 - - 402,109
Restricted stock grants - - - - 10,312 10,312
Stock issuance costs - - (7,062) - - (7,062)
Net income (loss) attributable
to common stock - - - (720,673) - (720,673)
------------ ----------- ------------ -------------- ---------- -------------
Balance at March 31, 1995 $ 16,000,000 $ 6,238,596 $ 36,850,460 $ (18,094,769) $ (104,844) $ 40,889,443
============ =========== ============ ============== ========== =============
The accompanying notes are an integral part of these statements.
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COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31,
(Unaudited)
1995 1994
------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (431,563) $ 314,387
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Compensation paid in common stock 123,311 123,312
Depreciation, depletion and amortization 1,797,594 1,691,781
Deferred revenue 430,000 (561,463)
Amortization of discounts - 82,550
Gain on sales of property (1,175) (9,360)
------------- --------------
Working capital provided by operations 1,918,167 1,641,207
(Increase) decrease in accounts receivable (167,231) 731,627
Increase in other current assets (213,485) (135,874)
Decrease in accounts payable and accrued expenses (1,370,089) (2,964,874)
------------- --------------
Net cash provided by (used for) operating activities 167,362 (727,914)
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of properties 81,175 12,524
Capital expenditures (738,959) (446,416)
------------- --------------
Net cash used for investing activities (657,784) (433,892)
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from preferred stock issuance - 6,000,000
Proceeds from common stock issuance - 116,750
Stock issuance costs (7,062) (144,539)
Borrowings 103,139 83,966
Principal payments on debt (2,094,013) (1,402,775)
------------- --------------
Net cash provided by (used for) financing activities (1,997,936) 4,653,402
------------- --------------
Net increase (decrease) in cash and cash equivalents (2,488,358) 3,491,596
Cash and cash equivalents, beginning of year 3,425,248 754,970
------------- --------------
Cash and cash equivalents, end of period $ 936,890 $ 4,246,566
============= ==============
The accompanying notes are an integral part of these statements.
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COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1995 and 1994
(Unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES -
Basis of Presentation -
In management's opinion, the accompanying consolidated financial
statements contain all adjustments (consisting solely of normal recurring
adjustments) necessary to present fairly the financial position of Comstock
Resources, Inc. and subsidiaries (the "Company") as of March 31, 1995 and the
related results of operations and cash flows for the three months ended March
31, 1995 and 1994.
The accompanying unaudited financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made are adequate to make the
information presented not misleading. These financial statements should be
read in conjunction with the Company's financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
The results of operations for the three months ended March 31, 1995 and
1994, are not necessarily an indication of the results expected for the full
year.
The Company periodically reviews the carrying value of its proved oil
and gas properties for impairment in value on a company-wide basis by comparing
the net capitalized costs of proved oil and gas properties with the undiscounted
future cash flows after income taxes attributable to proved oil and gas
properties. Under this policy, no impairment in carrying value has been
required during 1995 and 1994. However, in March 1995 the Financial Accounting
Standards Board issued Standard No. 121, "Accounting for the Impairment of
Long-Lived Assets." Beginning in 1996, this standard requires an assessment of
fair value of oil and gas properties to be performed using certain groupings of
property costs. Fair value is to be measured by market value, if an active
market exists. If the market value is not readily determinable, discounted
future net cash flows, after income taxes, are to be used to estimate fair
value. The impact of adoption of this standard on the consolidated financial
statements of the Company has not been determined.
Supplementary Information with Respect to the Statements of Cash Flows -
The Company paid cash for interest of $976,633 and $555,715 during the
three months ended March 31, 1995 and 1994, respectively. No cash for income
taxes was paid in the three months ended March 31, 1995 and 1994.
8
9
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The following is a summary of the significant noncash investing and
financing activities:
For the Three Months
Ended March 31,
----------------------------
1995 1994
------------- ------------
Common stock issued for director compensation $ 113,000 $ 113,000
Common stock issued for preferred stock dividends $ 289,000 $ 126,000
Earnings Per Share -
Net income (loss) attributable to common stock represents net income
(loss) less preferred stock dividend requirements of $289,110 and $126,000 for
the three months ended March 31, 1995 and 1994, respectively. Net income
(loss) attributable to common stock per share is computed by dividing net
income (loss) attributable to common stock by the weighted average number of
common shares and common stock equivalents outstanding during each period.
Common stock equivalents include, when applicable, dilutive stock options and
warrants using the treasury stock method.
(2) LONG-TERM DEBT -
At March 31, 1995, the Company had $35,555,000 outstanding under a $50
million five year revolving credit agreement with two banks. Amounts
outstanding under the bank credit facility bear interest at the agent bank's
prime rate plus 1 1/2% and cannot exceed a borrowing base determined
semiannually by the banks. The borrowing base at March 31, 1995 was
$36,775,000 and will reduce by $675,000 each month until the next
redetermination.
(3) SUBSEQUENT EVENTS -
On April 13, 1995, the Company entered into an agreement to acquire
certain producing offshore oil and gas properties located in Louisiana state
waters in the Gulf of Mexico for $8,199,000. The acquisition includes
interests in fourteen producing oil and gas wells, (3.5 net wells). The
Company estimates that the interests being acquired have proved oil and gas
reserves of approximately 1,044,000 barrels of oil and 1.1 billion cubic feet
of gas as of November 1, 1994, the effective date of the purchase.
On April 21, 1995, the Company entered into a letter of intent to acquire
certain producing oil and gas properties and gas gathering systems located in
East Texas and North Louisiana for $51.25 million. The acquisition is subject
to the parties executing a mutually agreeable purchase and sale agreement,
clearance by the Federal Trade Commission and Board of Directors' approval by
the Company and the Seller. The Company would be acquiring interests in 330
(180 net) oil and gas wells and would operate 248 of these wells. The Company
estimates that the interests being acquired have proved oil and gas reserves of
approximately 102 billion cubic feet of natural gas and 855,000 barrels of oil
as of March 1, 1995, the proposed effective date of the acquisition. The
acquisition includes 78 miles of gathering systems serving 126 gas wells. The
systems have a capacity of 65,000 Mcf per day and a current throughput of 23,000
Mcf per day.
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10
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Financial Position -
Total assets at March 31, 1995 were $88.3 million as compared to total
assets at December 31, 1994 of $91.6 million. At March 31, 1995, the Company
had a working capital deficit of $6.7 million, as compared to a working capital
deficit of $5.9 million at December 31, 1994. Working capital at March 31,
1995 includes $6.9 million in current maturities under the Company's bank
credit facility which will be repaid out of cash flow from the Company's oil
and gas properties.
In March 1995, the Financial Accounting Standards Board issued Standard
121, "Accounting for the Impairment of Long-Lived Assets." Beginning in 1996,
this standard requires an assessment of fair value of oil and gas properties to
be performed using certain groupings of property costs. Fair value is to be
measured by market value, if an active market exists. If the market value is
not readily determinable, discounted future net cash flows, after income taxes,
are to used to estimate fair value. The impact of adoption of this standard on
the consolidated financial statements of the Company has not been determined.
On April 13, 1995, the Company entered into an agreement to acquire
certain producing offshore oil and gas properties located in Louisiana state
waters in the Gulf of Mexico for $8,199,000. The acquisition includes
interests in fourteen producing oil and gas wells, (3.5 net wells). The
acquisition will be funded by borrowings under the Company's bank credit
facility.
On April 21, 1995, the Company entered into a letter of intent to acquire
certain producing oil and gas properties and gas gathering systems located in
East Texas and North Louisiana for $51.25 million. The acquisition is subject
to the parties executing a mutually agreeable purchase and sale agreement,
clearance by the Federal Trade Commission and Board of Directors' approval by
the Company and the Seller.
Sources and Uses of Capital Resources -
During the three months ended March 31, 1995, the primary sources of funds
for the Company were cash generated from operations of $167,000. Primary uses
of funds for the Company for the three months ended March 31, 1995 were capital
expenditures of $739,000 and principal payments on debt of $2.1 million.
RESULTS OF OPERATIONS
Earnings -
The Company reported a net loss of $432,000 for the three months ended
March 31, 1995, before dividends of $289,000 to holders of the Company's
preferred stock. The 1995 first quarter results compare to net income of
$314,000 before preferred stock dividends of $126,000 for the three months
ended March 31, 1994. Net loss attributable to common stock per share for the
first quarter of 1995 was 6c. on weighted average shares of 12.3 million as
compared to net income attributable to common stock per share of 2c. on
weighted average shares of 12.3 million for the first quarter of 1994.
10
11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(continued)
Revenues -
Revenues for the three months ended March 31, 1995 were $14.6 million as
compared to $4.3 million in revenues for the same period in 1994. Revenues in
1995 include gas marketing sales of $10.5 million related to the Company's gas
marketing activities which commenced in June 1994 and $191,000 in gas gathering
and processing revenues. Oil and gas sales were $3.8 million for the three
months ended March 31, 1995 as compared to $4.3 million for the three months
ended March 31, 1994. The decrease in oil and gas sales primarily relates to
the decrease in prices received for natural gas sales during the first quarter
of 1995. Gas production for the first three months of 1995 was 1,635,000
thousand cubic feet ("Mcf") which was sold at an average price of $1.69 per
Mcf as compared to 1,644,000 Mcf sold at an average price of $2.00 per Mcf for
the first three months of 1994. Oil production for the first three months of
1995 was 63,600 barrels which was sold at an average price of $16.48 per barrel
as compared to 74,400 barrels sold at an average price of $13.12 per barrel
for the first three months of 1994.
Expenses -
Total expenses increased from $4 million for the three months ended March
31, 1994 to $15 million for the three months ended March 31, 1995. The
increase is primarily due to cost of gas purchased for the Company's gas
marketing activities of $10.2 million during the first quarter of 1995. Oil
and gas operating expenses for the quarter ended March 31, 1995 were $1.5
million, as compared to $1.4 million for the first quarter of 1994. Lifting
costs per equivalent unit of production for the first quarter of 1995 were
74c. per equivalent Mcf as compared to 69c. per equivalent Mcf for the first
three months of 1994.
Depreciation, depletion and amortization for the first three months of
1995 was $1.8 million as compared to the provision for the first three months
of 1994 of $1.7 million. Depletion and depreciation per equivalent unit of
production was 86c. per equivalent Mcf for the first three months of 1995 as
compared to 78c. per equivalent Mcf for the first quarter of 1994.
General and administrative expenses totaled $499,000 for the first quarter
of 1995 as compared to general and administrative expenses of $274,000 for
1994's first quarter. The increase relates to the increase in the Company's
staffing level. General and administrative expenses in 1995's first quarter
also include $162,000 related to the Company's gas marketing activities which
began in June 1994.
Interest expense for the first three months of 1995 was $977,000 as
compared to $622,000 for the first three months of 1994. The increase in
interest expense relates to the increase in debt outstanding under the
Company's bank credit facility as well as an increase in interest rates.
11
12
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27. Financial Data Schedule for the three months ended March 31,
1995.
b. Reports on Form 8-K
None.
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13
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, thereunto duly authorized.
COMSTOCK RESOURCES, INC.
Date May 15, 1995 /s/ M. JAY ALLISON
------------------- ------------------------------------------
M. JAY ALLISON, President and
Chief Executive Officer
(Principal Executive Officer)
Date May 15, 1995 /s/ ROLAND O. BURNS
------------------- ------------------------------------------
ROLAND O. BURNS, Senior Vice President,
Chief Financial Officer, Secretary, and
Treasurer (Principal Financial and
Accounting Officer)
13
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INDEX TO EXHIBITS
Exhibits Description
-------- -----------
27. Financial Data Schedule for the three months ended March 31, 1995.
5
3-MOS
DEC-31-1994
JAN-01-1995
MAR-31-1995
936,890
0
8,960,798
0
93,150
10,455,298
115,147,421
38,327,236
88,260,039
17,195,891
28,864,242
6,238,596
0
16,000,000
18,650,847
88,260,039
14,506,899
14,588,827
11,747,003
13,544,597
499,160
0
1,265,743
(720,673)
0
0
0
0
0
(720,673)
(.06)
0
