Comstock Resources, Inc. ("Comstock" or the "Company") (NYSE: CRK) today reported financial and operating results for the quarter ended June 30, 2022.

Highlights of 2022's Second Quarter

  • Generated free cash flow from operations of $190 million in the quarter.
  • Retired $271 million in senior notes and reduced annualized leverage ratio to 1.2x.
  • Adjusted net income to common stockholders was $274 million for the quarter or $1.00 per diluted share.
  • Adjusted EBITDAX increased 105% to $515 million.
  • Operating cash flow (excluding working capital changes) increased 133% to $458 million or $1.65 per diluted share.
  • Oil and gas sales, after realized hedging losses, were $604 million, 86% higher than 2021's second quarter.
  • Strong results from Haynesville drilling program with 16 (14.4 net) operated wells turned to sales with an average initial production of 26 MMcf per day.
  • Completed an attractive bolt-on acquisition which included approximately 60,000 net acres prospective for the Haynesville and Bossier shale in East Texas and a 145 mile high pressure pipeline and natural gas treating plant for $36 million.
  • Achieved independent certification for natural gas production under the MiQ standard during the quarter.

Financial Results for the Three Months Ended June 30, 2022

Revenues in the second quarter of 2022 totaled $604.0 million (including realized hedging losses of $257.4 million). Net cash provided by operating activities (excluding changes in working capital) generated in the second quarter was $457.9 million, and net income available to common stockholders for the second quarter of 2022 was $372.5 million or $1.36 per share. Reported net income in the quarter included a pre-tax $184.5 million unrealized gain on hedging contracts held for risk management and a $46.8 million loss on early retirement of senior notes in the quarter. Excluding these items and certain other items, adjusted net income available to common stockholders for the second quarter of 2022 was $273.6 million, or $1.00 per diluted share.

Comstock's production cost per Mcfe in the second quarter averaged $0.74 per Mcfe, which was comprised of $0.30 for gathering and transportation costs, $0.20 for lease operating costs, $0.18 for production and other taxes and $0.06 for cash general and administrative expenses. Production cost was $0.69 per Mcfe in the first quarter of 2022 and $0.59 in the second quarter of 2021. The increase is due to higher production taxes resulting from higher natural gas prices in the quarter. Comstock's unhedged operating margin was 89% in the second quarter of 2022 and 85% after hedging.

Financial Results for the Six Months Ended June 30, 2022

Revenues for the six months ended June 30, 2022 totaled $1.0 billion (including realized hedging losses of $374.5 million). Net cash provided by operating activities (excluding changes in working capital) generated during the first six months of 2022 was $754.5 million, and income available to common stockholders was $256.8 million or $0.96 per share. Net income during the first six months of 2022 included a pre-tax $135.8 million unrealized loss on hedging contracts held for risk management and a $46.8 million loss on early retirement of debt. Excluding these items and certain other items, adjusted net income available to common stockholders for the six months ended June 30, 2022 was $409.4 million or $1.50 per diluted share.

Comstock's production cost per Mcfe during the six months ended June 30, 2022 averaged $0.71 per Mcfe, which was comprised of $0.29 for gathering and transportation costs, $0.21 for lease operating costs, $0.15 for production and other taxes and $0.06 for cash general and administrative expenses. Production cost was $0.59 per Mcfe for the six months ended June 30, 2021. Comstock's unhedged operating margin was 88% during the first six months of 2022 and 83% after hedging.

Drilling Results

Comstock drilled 18 (16.5 net) operated horizontal Haynesville/Bossier shale wells in the second quarter of 2022 which had an average lateral length of 9,924 feet. The Company also participated in an additional 13 (1.9 net) non-operated Haynesville shale wells in the second quarter of 2022. Comstock turned 16 (14.4 net) wells to sales in the second quarter of 2022 and currently expects to turn an additional 14 (13.2 net) wells to sales in the third quarter of 2022.

Since its last operational update in May, Comstock has turned 14 (12.6 net) new operated Haynesville/Bossier shale wells to sales. These wells had initial daily production rates that averaged 26 MMcf per day. The completed lateral length of these wells averaged 9,577 feet. Included in the reported drilling results was Comstock's successful Circle M well drilled in Robertson County, Texas in the Western Haynesville area. The well was completed with a 7,900 foot lateral and was tested at 37 MMcf per day.

During the second quarter, Comstock completed an acquisition which included approximately 60,000 net acres prospective for the Haynesville and Bossier shale in East Texas, a 145 mile high pressure natural gas pipeline and a natural gas treating plant for $35.6 million.

Natural Gas Certification

Comstock announced it has achieved certification for its operated natural gas production under the MiQ standard for methane emissions measurement and management. The MiQ Standard scores production, based on how well operators deploy integrated technologies to detect, measure, and abate emissions while also including a detailed assessment of policies and work practices that evaluate an operator's preparedness to prevent future methane emissions. The certification highlights Comstock's ongoing commitment to produce natural gas under strict environmental standards and deliver differentiated, independently certified gas based on methane intensity to both domestic and international markets. Comstock received the certification in June 2022 and the first block of the Company's certified natural gas is available for trading. The certificates, which can be traded bundled (combined with natural gas delivery) or unbundled, will be available on MiQ's Digital Registry in the coming weeks. The certification covers all the Company's facilities in North Louisiana and East Texas, which currently produce approximately 2.0 billion cubic feet per day of natural gas.

Earnings Call Information

Comstock has planned a conference call for 10:00 a.m. Central Time on August 2, 2022, to discuss the second quarter 2022 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/BI2b5f1d27974644e3bb8e3cae9a36c3c1. 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/cjhpy3va.

If you are unable to participate in the original conference call, a web replay will be available for twelve months beginning at 10:00 a.m. CT on August 2, 2022. The replay of the conference can be accessed using the webcast link: https://edge.media-server.com/mmc/p/cjhpy3va.

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 EndedJune 30,   Six Months EndedJune 30,
    2022       2021       2022       2021  
   
Revenues:              
Natural gas sales $         858,838             $         321,520             $         1,381,795             $         645,480          
Oil sales           2,504                       22,173                       4,388                       38,698          
Total oil and gas sales           861,342                       343,693                       1,386,183                       684,178          
Gas services           84,912                       —                       129,485                       —          
Total revenues           946,254                       343,693                       1,515,668                       684,178          
Operating expenses:              
Production and ad valorem taxes           21,729                       10,141                       35,549                       19,793          
Gathering and transportation           36,964                       31,736                       69,057                       61,194          
Lease operating           25,079                       26,011                       51,265                       50,574          
Exploration           2,342                       —                       3,363                       —          
Depreciation, depletion and amortization           119,201                       121,446                       225,929                       230,574          
Gas services           82,778                       —                       123,453                       —          
General and administrative           9,063                       7,872                       17,286                       15,900          
Gain on sale of assets           (19 )             (9 )             (21 )             (79 )
Total operating expenses           297,137                       197,197                       525,881                       377,956          
Operating income           649,117                       146,496                       989,787                       306,222          
Other income (expenses):              
Loss from derivative financial instruments           (72,826 )             (223,958 )             (510,319 )             (245,707 )
Other income           182                       530                       450                       811          
Interest expense           (44,320 )             (56,880 )             (90,811 )             (120,691 )
Loss on early retirement of debt           (46,840 )             (114,060 )             (46,840 )             (352,599 )
Total other expenses           (163,804 )             (394,368 )             (647,520 )             (718,186 )
Income (loss) before income taxes           485,313                       (247,872 )             342,267                       (411,964 )
(Provision for) benefit from income taxes           (108,422 )             68,177                       (76,800 )             98,144          
Net income (loss)           376,891                       (179,695 )             265,467                       (313,820 )
Preferred stock dividends           (4,363 )             (4,363 )             (8,678 )             (8,678 )
Net income (loss) available to common stockholders $         372,528             $         (184,058 )   $         256,789             $         (322,498 )
               
Net income (loss) per share:              
Basic $         1.60             $         (0.80 )   $         1.10             $         (1.39 )
Diluted $         1.36             $         (0.80 )   $         0.96             $         (1.39 )
Weighted average shares outstanding:              
Basic           232,045                       231,428                       232,011                       231,403          
Diluted           277,614                       231,428                       277,485                       231,403          

COMSTOCK RESOURCES, INC.OPERATING RESULTS(In thousands, except per unit amounts)

  Three Months Ended June 30,   Six Months Ended June 30,
        2021           2021  
    2022     ProForma (3)   As Reported     2022     Pro Forma (3)   As Reported
Gas production (MMcf)           123,950                       122,324                       124,083                       238,856                       234,128                       237,376          
Oil production (Mbbls)           24                       29                       362                       45                       46                       688          
Total production (MMcfe)           124,092                       122,496                       126,260                       239,127                       234,404                       241,506          
                       
Natural gas sales $         858,838             $         317,160             $         321,520             $         1,381,795             $         639,955             $         645,480          
Natural gas hedging settlements (1)           (257,363 )             (16,879 )             (16,879 )             (374,549 )             (24,369 )             (24,369 )
Total natural gas including hedging           601,475                       300,281                       304,641                       1,007,246                       615,586                       621,111          
Oil sales           2,504                       1,792                       22,173                       4,388                       2,743                       38,698          
Oil hedging settlements (1)           —                       —                       (1,965 )             —                       —                       (2,883 )
Total oil including hedging           2,504                       1,792                       20,208                       4,388                       2,743                       35,815          
Total oil and gas sales including hedging $         603,979             $         302,073             $         324,849             $         1,011,634             $         618,329             $         656,926          
                       
Average gas price (per Mcf) $         6.93             $         2.59             $         2.59             $         5.79             $         2.73             $         2.72          
Average gas price including hedging (per Mcf) $         4.85             $         2.45             $         2.46             $         4.22             $         2.63             $         2.62          
Average oil price (per barrel) $         104.33             $         61.79             $         61.25             $         97.51             $         59.63             $         56.25          
Average oil price including hedging (per barrel) $         104.33             $         61.79             $         55.82             $         97.51             $         59.63             $         52.06          
Average price (per Mcfe) $         6.94             $         2.60             $         2.72             $         5.80             $         2.74             $         2.83          
Average price including hedging (per Mcfe) $         4.87             $         2.47             $         2.57             $         4.23             $         2.64             $         2.72          
                       
Production and ad valorem taxes $         21,729             $         8,033             $         10,141             $         35,549             $         16,081             $         19,793          
Gathering and transportation           36,964                       31,736                       31,736                       69,057                       61,194                       61,194          
Lease operating           25,079                       22,807                       26,011                       51,265                       43,866                       50,574          
Cash general and administrative (2)           7,482                       6,073                       6,073                       14,210                       12,411                       12,411          
Total production costs $         91,254             $         68,649             $         73,961             $         170,081             $         133,552             $         143,972          
                       
Production and ad valorem taxes (per Mcfe) $         0.18             $         0.06             $         0.08             $         0.15             $         0.07             $         0.08          
Gathering and transportation (per Mcfe)           0.30                       0.26                       0.25                       0.29                       0.26                       0.25          
Lease operating (per Mcfe)           0.20                       0.19                       0.21                       0.21                       0.19                       0.21          
Cash general and administrative (per Mcfe)           0.06                       0.05                       0.05                       0.06                       0.05                       0.05          
Total production costs (per Mcfe) $         0.74             $         0.56             $         0.59             $         0.71             $         0.57             $         0.59          
                       
Unhedged operating margin   89 %     78 %     78 %     88 %     79 %     79 %
Hedged operating margin   85 %     77 %     77 %     83 %     78 %     78 %
                       
Oil and gas capital expenditures:                      
Proved property acquisitions $         (69 )   $         —             $         —             $         205             $         —             $         —          
Unproved property acquisitions           21,551                       7,625                       7,625                       25,182                       13,401                       13,401          
Total oil and gas properties acquisitions $         21,482             $         7,625             $         7,625             $         25,387             $         13,401             $         13,401          
Exploration and development:                      
Development leasehold $         655             $         1,995             $         2,005             $         5,287             $         6,038             $         6,061          
Exploratory drilling and completion           18,840                       —                       —                       30,397                       —                       —          
Development drilling and completion           225,371                       157,648                       157,648                       414,419                       312,887                       312,887          
Other development costs           18,325                       2,951                       4,624                       36,937                       5,340                       8,076          
Total exploration and development capital expenditures $         263,191             $         162,594             $         164,277             $         487,040             $         324,265             $         327,024          
 

(1)   Included in gain (loss) from derivative financial instruments in operating results.

(2)   Excludes stock-based compensation.

(3)   Excludes results of the Company's Bakken shale assets, which were sold in October 2021.

COMSTOCK RESOURCES, INC.NON-GAAP FINANCIAL MEASURES(In thousands, except per share amounts)

  Three Months Ended June 30,   Six Months EndedJune 30,
    2022       2021       2022       2021  
ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS:              
Net income (loss) available to common stockholders $         372,528             $         (184,058 )   $         256,789             $         (322,498 )
Unrealized (gain) loss from derivative financial instruments           (184,537 )             204,822                       135,770                       217,894          
Loss on early retirement of debt           46,840                       114,060                       46,840                       352,599          
Non-cash interest amortization from adjusting debt assumed in acquisition to fair value           1,414                       2,470                       4,174                       7,397          
Exploration expense           2,342                       —                       3,363                       —          
Gain on sale of assets           (19 )             (9 )             (21 )             (79 )
Adjustment to (provision for) benefit from income taxes           35,050                       (87,875 )             (37,539 )             (142,608 )
Adjusted net income available to common stockholders (1) $         273,618             $         49,410             $         409,376             $         112,705          
               
Adjusted net income available to common stockholders per share (2) $         1.00             $         0.20             $         1.50             $         0.44          
               
Diluted shares outstanding           277,614                       275,211                       277,484                       275,153          
ADJUSTED EBITDAX:              
Net income (loss) $         376,891             $         (179,695 )   $         265,467             $         (313,820 )
Interest expense (3)           44,320                       57,172                       90,811                       121,252          
Income taxes           108,422                       (68,177 )             76,800                       (98,144 )
Depreciation, depletion, and amortization           119,201                       121,446                       225,929                       230,574          
Exploration           2,342                       —                       3,363                       —          
Unrealized (gain) loss from derivative financial instruments           (184,537 )             204,822                       135,770                       217,894          
Stock-based compensation           1,581                       1,799                       3,076                       3,489          
Loss on early extinguishment of debt           46,840                       114,060                       46,840                       352,599          
Gain on sale of assets           (19 )             (9 )             (21 )             (79 )
Total Adjusted EBITDAX (4) $         515,041             $         251,418             $         848,035             $         513,765          
 

(1)   Adjusted net income available to common stockholders is presented because of its acceptance by investors and by Comstock management as an indicator of the Company's profitability excluding loss on early retirement of debt, non-cash unrealized gains and losses on derivative financial instruments, gains and losses on sales of assets and other unusual items.

(2)   Adjusted net income available to common stockholders per share is calculated to include the dilutive effects of unvested restricted stock pursuant to the two-class method and performance stock units and preferred stock pursuant to the treasury stock method.

(3)   Includes realized gains or losses from interest rate derivative financial instruments.

(4)   Adjusted EBITDAX is presented in the earnings release because management believes that adjusted EBITDAX, which represents Comstock's results from operations before interest, income taxes, and certain non-cash items, including loss on early retirement of debt, depreciation, depletion and amortization and exploration expense, is a common alternative measure of operating performance used by certain investors and financial analysts.

COMSTOCK RESOURCES, INC.NON-GAAP FINANCIAL MEASURES(In thousands)

  Three Months Ended June 30,   Six Months EndedJune 30,
    2022       2021       2022       2021  
OPERATING CASH FLOW (1):              
Net income (loss) $         376,891             $         (179,695 )   $         265,467             $         (313,820 )
Reconciling items:              
Unrealized (gain) loss from derivative financial instruments           (184,537 )             204,822                       135,770                       217,894          
Deferred income taxes (benefit)           95,117                       (71,131 )             70,329                       (101,281 )
Depreciation, depletion and amortization           119,201                       121,446                       225,929                       230,574          
Loss on early retirement of debt           46,840                       114,060                       46,840                       352,599          
Amortization of debt discount and issuance costs           2,873                       5,086                       7,098                       13,575          
Stock-based compensation           1,581                       1,799                       3,076                       3,489          
Gain on sale of assets           (19 )             (9 )             (21 )             (79 )
Operating cash flow $         457,947             $         196,378             $         754,488             $         402,951          
Increase in accounts receivable           (232,043 )             (33,158 )             (203,918 )             (40,190 )
(Increase) decrease in other current assets           (11,126 )             750                       (9,720 )             5,528          
Increase in accounts payable and accrued expenses           187,116                       28,341                       145,083                       17,294          
Net cash provided by operating activities $         401,894             $         192,311             $         685,933             $         385,583          
               
  Three Months Ended June 30,   Six Months EndedJune 30,
    2022       2021       2022       2021  
FREE CASH FLOW (2):              
Operating cash flow $         457,947             $         196,378             $         754,488             $         402,951          
Less:              
Exploration and development capital expenditures           (263,191 )             (164,277 )             (487,040 )             (327,024 )
Preferred dividends           (4,363 )             (4,363 )             (8,678 )             (8,678 )
Free cash flow from operations $         190,393             $         27,738             $         258,770             $         67,249          
Acquisitions           (39,539 )             (7,665 )             (43,466 )             (13,447 )
Proceeds from divestitures           48                       11                       93                       211          
Free cash flow after acquisition and divestiture activity $         150,902             $         20,084             $         215,397             $         54,013          
               
 

(1)   Operating cash flow is presented in the earnings release because management believes it to be useful to investors as a common alternative measure of cash flows which excludes changes to other working capital accounts.

(2)   Free cash flow from operations and free cash flow after acquisition and divestiture activity are presented in the earnings release because management believes them to be useful indicators of the Company's ability to internally fund acquisitions and debt maturities after exploration and development capital expenditures, preferred dividend payments, proved and unproved property acquisitions, and proceeds from divestiture of oil and gas properties.

COMSTOCK RESOURCES, INC.CONSOLIDATED BALANCE SHEETS(In thousands)

  As of
  June 30,2022   December 31, 2021
ASSETS      
Cash and cash equivalents $         32,272           $         30,663          
Accounts receivable           471,656                     267,738          
Derivative financial instruments           2,086                     5,258          
Other current assets           24,797                     15,077          
Total current assets           530,811                     318,736          
Property and equipment, net           4,313,201                     4,007,146          
Goodwill           335,897                     335,897          
Operating lease right-of-use assets           108,284                     6,450          
  $         5,288,193           $         4,668,229          
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
Accounts payable $         454,752           $         314,569          
Accrued costs           153,763                     135,026          
Operating leases           37,561                     2,444          
Derivative financial instruments           318,585                     181,945          
Total current liabilities           964,661                     633,984          
Long-term debt           2,510,253                     2,615,235          
Deferred income taxes           267,746                     197,417          
Derivative financial instruments           —                     4,042          
Long-term operating leases           70,797                     4,075          
Asset retirement obligation           28,433                     25,673          
Other non-current liabilities           24                     24          
Total liabilities           3,841,914                     3,480,450          
Mezzanine Equity:      
Preferred stock           175,000                     175,000          
Stockholders' Equity:      
Common stock           116,579                     116,462          
Additional paid-in capital           1,101,953                     1,100,359          
Accumulated earnings (deficit)           52,747                     (204,042 )
Total stockholders' equity           1,271,279                     1,012,779          
  $         5,288,193           $         4,668,229          
Ron MIlls
Vice President of Finance and Investor Relations
Comstock Resources
972-668-8834
rmills@comstockresources.com
Comstock Resources (NYSE:CRK)
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