SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
[X] THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended March 31, 1996
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) 05/07/96 13,670,242
COMSTOCK RESOURCES, INC.
QUARTERLY REPORT
FOR THE QUARTER ENDED MARCH 31, 1996
INDEX
PART I. Financial Information Page No.
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1996 and December 31, 1995................................4
Consolidated Statements of Operations -
Three Months ended March 31, 1996 and 1995..........................5
Consolidated Statement of Stockholders' Equity -
Three Months ended March 31, 1996...................................6
Consolidated Statements of Cash Flows -
Three Months ended March 31, 1996 and 1995..........................7
Notes to Consolidated Financial Statements............................8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................11
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K................................... 13
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
3
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1996 1995
------------- -------------
(Unaudited)
Cash and Cash Equivalents $ 657,816 $ 1,916,648
Accounts Receivable:
Oil and gas sales 6,780,000 5,385,000
Gas marketing sales 11,325,600 8,450,794
Joint interest operations 1,448,177 1,230,403
Prepaid Expenses and Other 615,980 172,093
Inventory 91,005 92,139
------------- -------------
Total current assets 20,918,578 17,247,077
------------- -------------
Property and Equipment:
Oil and gas properties, successful efforts method 156,918,688 154,843,663
Other 2,776,143 2,717,625
Accumulated depreciation, depletion
and amortization (58,025,109) (55,445,097)
------------- -------------
Net property and equipment 159,694,831 157,561,288
------------- -------------
Other Assets 933,768 735,398
------------- -------------
$181,547,177 $175,543,763
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Portion of Long-term Debt $ 10,260,566 $ 18,677,181
Accounts Payable and Accrued Expenses 18,958,008 16,511,219
------------- -------------
Total current liabilities 29,218,574 35,188,400
------------- -------------
Long-term Debt, less current portion 59,505,625 53,133,751
Deferred Revenue 322,501 430,000
Other Noncurrent Liabilities 1,185,071 1,218,742
Stockholders' Equity:
Preferred stock - $10.00 par, 5,000,000 shares
authorized, 3,100,000 shares outstanding at
March 31, 1996 and December 31, 1995 31,000,000 31,000,000
Common stock - $.50 par, 30,000,000 shares authorized,
13,120,242 and 12,926,672 shares outstanding
at March 31, 1996 and December 31, 1995, respectively 6,560,122 6,463,336
Additional paid-in capital 38,861,759 38,182,398
Retained deficit (43,067,990) (45,444,055)
Less: Deferred compensation - restricted stock grants (63,594) (73,906)
------------- -------------
Total stockholders' equity 33,290,297 30,127,773
------------- -------------
$123,522,068 $120,098,666
============= =============
The accompanying notes are an integral part of these statements.
4
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31,
(Unaudited)
1996 1995
------------ ------------
Revenues:
Oil and gas sales $ 9,555,141 $ 3,816,083
Gas marketing sales 25,425,901 10,500,071
Gas gathering and processing 153,611 190,745
Other income 129,945 81,928
------------ ------------
Total revenues 35,264,598 14,588,827
------------ ------------
Expenses:
Oil and gas operating 2,523,187 1,485,100
Natural gas purchases 24,793,593 10,214,663
Gas gathering and processing 56,946 47,240
Depreciation, depletion and amortization 2,621,358 1,797,594
General and administrative, net 411,833 499,160
Interest 1,848,470 976,633
------------ ------------
Total expenses 32,255,387 15,020,390
------------ ------------
Income (loss) before income taxes 3,009,211 (431,563)
Provision for income taxes - -
------------ ------------
Net income (loss) 3,009,211 (431,563)
Preferred stock dividends (633,146) (289,110)
------------ ------------
Net income (loss) attributable
to common stock $ 2,376,065 $ (720,673)
============ ============
Net income (loss) attributable
to common stock per share -
Primary $ 0.18 $ (0.06)
============ ============
Fully diluted $ 0.15 $ (0.06)
============ ============
Weighted average number of common and common
stock equivalent shares outstanding -
Primary 13,552,330 12,344,733
============ ============
Fully diluted 19,928,710 12,344,733
============ ============
The accompanying notes are an integral part of these statements.
5
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 1996
(Unaudited)
Deferred
Additional Retained Compensation-
Preferred Common Paid-In Earnings Restricted
Stock Stock Capital (Deficit) Stock Grants Total
------------ ------------ ------------ ------------- ------------ ------------
Balance at December 31, 1995 $31,000,000 $ 6,463,336 $38,182,398 $(45,444,055) $ (73,906) $30,127,773
Issuance of common stock - 96,786 679,361 - - 776,147
Restricted stock grants - - - - 10,312 10,312
Net income (loss) attributable
to common stock - - - 2,376,065 - 2,376,065
------------ ------------ ------------ ------------- ------------ ------------
Balance at March 31, 1996 $31,000,000 $ 6,560,122 $38,861,759 $(43,067,990) $ (63,594) $33,290,297
============ ============ ============ ============= ============ ============
The accompanying notes are an integral part of these statements.
6
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31,
(Unaudited)
1996 1995
------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,009,211 $ (431,563)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Compensation paid in common stock 153,312 123,311
Depreciation, depletion and amortization 2,621,358 1,797,594
Deferred revenue (107,499) 430,000
Gain on sales of property - (1,175)
------------ -------------
Working capital provided by operations 5,676,382 1,918,167
Increase in accounts receivable (4,487,580) (167,231)
Increase in other current assets (442,753) (213,485)
Increase (decrease) in accounts payable
and accrued expenses 2,446,789 (1,370,089)
------------ -------------
Net cash provided by operating activities 3,192,838 167,362
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,406,929) (738,959)
Proceeds from sales of properties - 81,175
------------ -------------
Net cash used for investing activities (2,406,929) (657,784)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock issuance costs - (7,062)
Borrowings 149,671 103,139
Principal payments on debt (2,194,412) (2,094,013)
------------ -------------
Net cash used for financing activities (2,044,741) (1,997,936)
------------ -------------
Net decrease in cash and cash equivalents (1,258,832) (2,488,358)
Cash and cash equivalents, beginning of year 1,916,648 3,425,248
------------ -------------
Cash and cash equivalents, end of period $ 657,816 $ 936,890
============ =============
The accompanying notes are an integral part of these statements.
7
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and 1995
(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, 1996 and the related results of
operations and cash flows for the three months ended March 31, 1996 and 1995.
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, 1995.
The results of operations for the three months ended March 31, 1996 and
1995, are not necessarily an indication of the results expected for the full
year.
Supplementary Information with Respect to the Statements of Cash Flows -
The Company paid cash for interest of $1,848,470 and $976,633 during the
three months ended March 31, 1996 and 1995, respectively. No cash for income
taxes was paid in the three months ended March 31, 1996 and 1995.
The following is a summary of the significant noncash investing and
financing activities:
For the Three Months
Ended March 31,
1996 1995
--------- --------
Common stock issued for director compensation $ 143,000 $113,000
Common stock issued for preferred stock dividends $ 633,146 $289,110
8
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Earnings Per Share -
Net income (loss) attributable to common stock represents net income (loss)
less preferred stock dividend requirements of $633,146 and $289,110 for the
three months ended March 31, 1996 and 1995, 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. Fully diluted net income (loss) attributable to
common stock per share includes the dilutive effect of the Company's convertible
preferred stock using the "if converted" method and dilutive stock options and
warrants using the treasury stock method.
(2) LONG-TERM DEBT -
At March 31, 1996, the Company had $59.4 million outstanding under a $100
million bank revolving credit facility. Amounts outstanding under the bank
credit facility bear interest at the agent bank's prime rate plus 1 1/2% (9.75%
at March 31, 1996) and cannot exceed a borrowing base determined semiannually by
the banks. The borrowing base at March 31, 1996 was $62.6 million and reduces by
$1,060,000 each month until the next redetermination. The Company also had $10
million outstanding under a bridge loan payable to the banks. The bridge loan
matures at July 31, 1996 and bears interest at the agent bank's prime rate plus
4% (12.25% at March 31, 1996). Current amounts outstanding under the bank credit
facility at March 31, 1996 have been reclassified in the accompanying balance
sheet according to the terms of the new bank credit facility (See Note 3).
(3) SUBSEQUENT EVENTS -
On May 1 and May 2, 1996, the Company acquired 100% of the capital stock of
Black Stone Oil Company and additional interests held by other working interest
owners in certain producing oil and gas properties as well as interests in
undeveloped oil and gas leases located in East Texas for total cash
consideration of approximately $104 million. Black Stone Oil Company is the
operator of the producing oil and gas properties which are located in the Double
A Wells field in Polk County, Texas. The estimated net proved oil and gas
reserves acquired are estimated at 98.5 billion cubic feet of natural gas and
5.3 million barrels of oil as of January 1, 1996, the effective date of the
acquisition. Such reserves have estimated pretax future net cash flows of $249
million and estimated pretax discounted future net cash flows of $149 million.
The acquisition was financed under a new $176 million bank credit facility
provided by two banks consisting of a $166 million revolving credit facility and
a $10 million bridge loan. The Company financed the $104 million acquisition and
refinanced $58.7 million outstanding under its existing revolving credit
facility and an existing $10 million bridge loan which was to mature on July 31,
1996 with borrowings under the new bank credit facility. Amounts outstanding
under the new revolving credit facility bear interest at the agent bank's base
rate plus 1/2% and are subject to a borrowing base
9
COMSTOCK RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
determined semiannually by the banks. The new revolving credit facility converts
to a two year term loan on May 1, 1999. Amounts outstanding under the new bridge
loan bear interest at the agent bank's base rate plus 3% and are payable in full
on December 31, 1996.
In April 1996, the Company entered into letters of intent with two
unrelated parties to sell certain oil and gas properties of aggregate proceeds
of approximately $9.5 million. The properties to be sold include interests in
145 producing wells located in Oklahoma, Arkansas, Nebraska and Kansas as well
as certain nonproducing acreage in South Texas. The sales are expected to close
during the second quarter of 1996. The proceeds of the sales will be used to
retire the new $10 million bridge loan discussed above.
10
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
In the first quarter of 1996 oil and gas sales increased $5.7 million
(150%), to $9.6 million from $3.8 million in 1995's first quarter due primarily
to a 90% increase in gas production and a 66% increase in oil production as well
as increased oil and gas prices. The production increases related primarily to
production from the 1995 oil and gas property acquisitions. The production
increases combined with a 44% increase in the Company's average gas price and a
14% increase in the Company's average oil price account for the 150% increase in
oil and gas sales.
The following table reflects the Company's oil and gas production and its
average oil and gas prices for the three months ended March 31, 1996 and 1995:
Three Months
Ended March 31,
1996 1995
--------- --------
PRODUCTION:
Oil (MBbls) 105 64
Gas (MMcf) 3,109 1,635
AVERAGE PRICES:
Oil (per Bbl) $18.73 $16.48
Gas (per Mcf) $ 2.44 $ 1.69
Gas marketing net margins (revenues less expenses) increased $347,000
(122%) to $632,000 in 1996 from $285,000 in 1995 due primarily to the increase
in natural gas prices in the first quarter of 1996.
Gas gathering and processing net margins (revenues less expenses)
decreased $47,000 (33%) to $97,000 in the first quarter of 1996 from $144,000 in
1995's first quarter due primarily to the sale of the Wharton gas processing
plant in the third quarter of 1995.
Other income increased $48,000 (59%) to $130,000 in the first quarter of
1996 from $82,000 in first quarter of 1995.
Lease operating expenses, including production taxes, increased $1 million
(70%) to $2.5 million in the first three months of 1996 from $1.5 million in the
first three months of 1995 due primarily to the 85% increase in oil and gas
production (on an equivalent Mcf basis) resulting from the property acquisitions
previously discussed. Lease operating expenses per Mcfe produced decreased 9% to
$.67 in 1996 from $.74 in 1995 due to the lower lifting costs associated with
the properties acquired in 1995.
General and administrative expenses decreased $87,000 (17%) to $412,000 in
first quarter of 1996 from $499,000 in 1995's first quarter. The decrease is an
result of an increase in well operating income received in 1996 which is netted
against general and administrative expenses.
Depreciation, depletion and amortization increased $824,000 (46%) to $2.6
million in the first quarter of 1996 from $1.8 million in the first quarter of
1995 due primarily to the 85% increase in oil
11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(continued)
and gas production (on an equivalent Mcf basis). Amortization per Mcfe produced
decreased by 22% to $.67 in 1996 from $.86 in 1995 due to the lower acquisition
costs associated with the properties acquired in 1995.
Interest expense increased $872,000 (89%) to $1.8 million for three months
ended March 31, 1996 from $977,000 for the three months ended March 31, 1995 due
primarily to an increase in the average outstanding advances under the Company's
bank credit facility. The average annual interest rate paid under the bank
credit facility decreased to 10.2% in 1996's first quarter as compared to 10.3%
in 1995's first quarter.
The Company reported net income of $3 million before preferred stock
dividends of $633,000 for three months ended March 31, 1996, as compared to a
loss of $432,000 before preferred stock dividends of $289,000 for three months
ended March 31, 1995. Net income per share for the first quarter was 18(cent)
(15(cent) fully diluted) on weighted average shares outstanding of 13.6 million
(19.9 million fully diluted) as compared to a net loss of 6(cent) per share for
the first quarter of 1995 on weighted average shares outstanding of 12.3
million.
Capital Expenditures
The following table summaries the Company's capital expenditure activity
for the three months ended March 31, 1996 and 1995 (in thousands):
Three Months Ended March 31,
1996 1995
----------- -----------
Acquisition of oil and gas reserves $ - $ -
Other leasehold costs 86 5
Workovers and recompletions 1,246 438
Development drilling 743 222
Acquisition of gas marketing,
processing and gathering assets 73 65
Other 259 9
----------- -----------
Total $ 2,407 $ 739
=========== ===========
Liquidity
On May 1 and May 2, 1996, the Company acquired 100% of the capital stock
of Black Stone Oil Company and additional interests held by other working
interest owners in certain producing oil and gas properties as well as interests
in undeveloped oil and gas leases located in East Texas for total cash
consideration of approximately $104 million. The acquisition was financed under
a new $176 million bank credit facility provided by two banks consisting of a
$166 million revolving credit facility and a $10 million bridge loan. The
Company financed the $104 million acquisition and refinanced $58.7 million
outstanding under its existing revolving credit facility and an existing $10
million bridge loan which was to mature on July 31, 1996 with borrowings under
the new bank credit facility. Amounts outstanding
12
under the new revolving credit facility bear interest at the agent bank's base
rate plus 1/2% and are subject to a borrowing base determined semiannually by
the banks. The new revolving credit facility converts to a two year term loan on
May 1, 1999. Amounts outstanding under the new bridge loan bear interest at the
agent bank's base rate plus 3% and are payable in full on December 31, 1996.
At March 31, 1996 the Company had a working capital deficit of
approximately $8.3 million due to the short-term $10 million bridge loan
outstanding. The Company anticipates retiring the new bridge loan from proceeds
of pending asset sales expected to close in the second quarter of 1996.
The timing of most of the Company's capital expenditures is discretionary
with no material long-term capital expenditure commitments. Consequently, the
Company has a significant degree of flexibility to adjust the level of such
expenditures as circumstances warrant. The Company uses borrowings under its
bank credit facility as well as internally generated cash flow to fund capital
expenditures other than significant acquisitions and anticipates that such
sources will be sufficient to fund its planned $12 million in developmental
capital expenditures during the remainder of 1996.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27. Financial Data Schedule for the three months ended March 31, 1996.
b. Reports on Form 8-K
None.
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 7, 1996 /s/M. JAY ALLISON
------------------
M. Jay Allison, President and
Chief Executive Officer
(Principal Executive Officer)
Date May 7, 1996 /s/ROLAND O. BURNS
------------------
Roland O. Burns, Senior Vice President,
Chief Financial Officer, Secretary, and
Treasurer (Principal Financial and
Accounting Officer)
14
5
3-MOS
DEC-31-1996
MAR-31-1996
657,816
0
19,553,777
0
91,005
20,918,578
159,694,831
(58,025,109)
123,522,068
29,218,574
59,505,625
21,000,000
10,000,000
6,560,122
(4,269,825)
123,522,068
35,134,653
35,264,598
24,793,593
5,201,491
411,833
0
1,848,470
3,009,211
0
3,009,211
0
0
0
3,009,211
.18
.15
