COMSTOCK RESOURCES, INC. REPORTS FOURTH QUARTER 2022 FINANCIAL AND OPERATING RESULTS

FRISCO, TX, Feb. 14, 2023 (GLOBE NEWSWIRE) — Comstock Resources, Inc. (“Comstock” or the “Company”) (NYSE: CRK) today reported financial and operating results for the quarter and year ended December 31, 2022.

Highlights

Generated free cash flow from operations of $673 million in 2022, including $129 million in the fourth quarter.
Production in the fourth quarter increased 7% from last year to 1,445 MMcfe per day.
Oil and gas sales, including realized hedging losses, were $2.3 billion in 2022 and $558 million in the fourth quarter and were 58% and 47% higher than 2021 and 2021’s fourth quarter.
Cash flow from operations in 2022 was $1.7 billion or $6.21 per diluted share, including $434 million in the fourth quarter or $1.57 per diluted share.
Adjusted EBITDAX in 2022 increased 72% to $1.9 billion and in the fourth quarter increased 61% to $478 million.
Adjusted net income to common stockholders in 2022 was $1.0 billion or $3.73 per diluted share and $288 million or $1.05 per diluted share in the fourth quarter.
Drilled 73 (57.0 net) successful Haynesville and Bossier shale operated horizontal wells in 2022 with an average lateral length of 10,044 feet and connected 66 (53.6 net) operated wells to sales with an average initial production rate of 26 MMcf per day.
Drilled two successful wells in Comstock’s Western Haynesville exploratory play.
2022 drilling program drove 9% reserve growth with 1.1 Tcfe of drilling related reserve additions achieving an overall finding cost of 95¢ per Mcfe.
Improved balance sheet with retirement of $506 million of debt and conversion of preferred stock.
Resumed quarterly dividend of $0.125 per share in December 2022.

Financial Results for the Three Months Ended December 31, 2022

Comstock’s natural gas and oil sales in the fourth quarter of 2022 totaled $557.9 million (after realized hedging losses of $183.7 million). Net cash provided by operating activities (excluding changes in working capital) generated in the fourth quarter was $434.5 million, and net income available to common stockholders for the fourth quarter of 2022 was $516.9 million or $1.87 per share. Reported net income in the quarter included a pre-tax $302.8 million unrealized gain on hedging contracts held for risk management. Excluding this item and certain other items, adjusted net income available to common stockholders for the fourth quarter of 2022 was $287.7 million, or $1.05 per diluted share.

Comstock’s production cost per Mcfe in the fourth quarter was $0.76 per Mcfe, which was comprised of $0.32 for gathering and transportation costs, $0.24 for lease operating costs, $0.12 for production and other taxes and $0.08 for cash general and administrative expenses. Production cost was $0.82 per Mcfe in the third quarter of 2022 and $0.67 in the fourth quarter of 2021. Comstock’s unhedged operating margin was 86% in the fourth quarter of 2022 and 82% after hedging.

Financial Results for the Year Ended December 31, 2022

Natural gas and oil sales for the year ended December 31, 2022 totaled $2.3 billion (after realized hedging losses of $862.7 million). Net cash provided by operating activities (excluding changes in working capital) was $1.7 billion, and the Company reported net income available to common stockholders for the year ended December 31, 2022 of $1.1 billion, or $4.11 per share. Net income during the year included a pre-tax $200.2 million unrealized gain on hedging contracts held for risk management and a $46.8 million loss on the early retirement of debt. Excluding these items and certain other items, adjusted net income available to common stockholders for 2022 was $1.0 billion, or $3.73 per diluted share.

Drilling Results

Comstock drilled 73 (57.0 net) operated horizontal Haynesville/Bossier shale wells in 2022 which had an average lateral length of 10,044 feet. The Company also participated in an additional 42 (3.4 net) non-operated Haynesville shale wells in 2022. Comstock turned 66 (53.6 net) operated wells and 38 (1.8 net) non-operated wells to sales in 2022 and currently expects to turn an additional 17 (10.5 net) operated wells to sales in the first quarter of 2023.

Since its last operational update in November, Comstock has turned 19 (13.1 net) operated Haynesville/Bossier shale wells to sales. These wells had initial daily production rates that averaged 25 MMcf per day. The completed lateral length of these wells averaged 10,186 feet. Included in these results was the second successful exploratory well drilled in the Western Haynesville area, the Cazey Black A #1, which had an initial production rate of 42 MMcf per day.

2023 Drilling Budget

In response to the current lower natural gas prices, Comstock is releasing two of its nine operated drilling rigs and currently plans to spend approximately $950 million to $1.15 billion in 2023 on drilling and completion activities primarily focused on the continued development of its Haynesville/Bossier shale properties and delineation of its Western Haynesville play. Comstock also expects to spend $75 million to $125 million on infrastructure, including upgrades to its Western Haynesville pipeline and processing facilities, and for other development costs. Under its current operating plan, Comstock expects to drill 67 (50.5 net) and complete 69 (49.2 net) operated horizontal wells in 2023, including eight (8.0 net) wells in the Western Haynesville area. Comstock also expects to spend an additional $25 million to $35 million on lease acquisitions in 2023.

Declaration of Quarterly Dividend

On February 13, 2023, Comstock’s Board of Directors declared a quarterly dividend of $0.125 per common share. The dividend will be payable on March 15, 2023 to stockholders of record at the close of business on March 1, 2023.

Other Matters

Comstock has planned a conference call for 10:00 a.m. Central Time on February 15, 2023, to discuss the fourth quarter of 2022 operational and financial results. Investors wishing to participate 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/BId7bb63a06a2246038d691f84bbfe8331. 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/trvtnedj.

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. Central Time on February 15, 2023. The replay of the conference call can be accessed using the webcast link: https://edge.media-server.com/mmc/p/trvtnedj.

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 EndedDecember 31,
2022

2021

2022

2021

Revenues:

Natural gas sales
$
740,320

$
641,985

$
3,117,094

$
1,775,768

Oil sales

1,273

13,391

7,597

74,962

Total oil and gas sales

741,593

655,376

3,124,691

1,850,730

Gas services

180,791

503,366

Total revenues

922,384

655,376

3,628,057

1,850,730

Operating expenses:

Production and ad valorem taxes

17,837

12,673

77,917

49,141

Gathering and transportation

41,882

34,344

155,679

130,940

Lease operating

31,261

26,317

111,134

103,467

Depreciation, depletion and amortization

134,456

110,075

489,450

469,388

Gas services

159,773

465,044

General and administrative

11,954

10,991

39,405

34,943

Exploration

4,924

8,287

(Gain) loss on sale of assets

(319
)

162,170

(340
)

162,077

Total operating expenses

401,768

356,570

1,346,576

949,956

Operating income

520,616

298,806

2,281,481

900,774

Other income (expenses):

Gain (loss) from derivative financial instruments

119,132

195,378

(662,522
)

(560,648
)
Other income (expense)

410

(372
)

916

636

Interest expense

(38,888
)

(47,840
)

(171,092
)

(218,485
)
Loss on early retirement of debt

(46,840
)

(352,599
)
Total other income (expenses)

80,654

147,166

(879,538
)

(1,131,096
)
Income (loss) before income taxes

601,270

445,972

1,401,943

(230,322
)
Provision for income taxes

(81,451
)

(85,571
)

(261,061
)

(11,403
)
Net income (loss)

519,819

360,401

1,140,882

(241,725
)
Preferred stock dividends and accretion

(2,925
)

(4,411
)

(16,014
)

(17,500
)
Net income (loss) available to common stockholders
$
516,894

$
355,990

$
1,124,868

$
(259,225
)
Net income (loss) per share:

Basic
$
2.08

$
1.53

$
4.75

$
(1.12
)
Diluted
$
1.87

$
1.30

$
4.11

$
(1.12
)
Weighted average shares outstanding:

Basic

247,543

231,972

236,045

231,633

Diluted

277,032

276,713

277,465

231,633

Dividends per share
$
0.125

$

$
0.125

$

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

As of December 31,
20222021

ASSETS

Cash and cash equivalents
$
54,652

$
30,663

Accounts receivable

510,127

267,738

Derivative financial instruments

23,884

5,258

Other current assets

56,324

15,077

Total current assets

644,987

318,736

Property and equipment, net

4,622,655

4,007,146

Goodwill

335,897

335,897

Operating lease right-of-use assets

90,716

6,450

$
5,694,255

$
4,668,229

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts payable
$
530,195

$
314,569

Accrued costs

183,111

135,026

Operating leases

38,411

2,444

Derivative financial instruments

4,420

181,945

Total current liabilities

756,137

633,984

Long-term debt

2,152,571

2,615,235

Deferred income taxes

425,734

197,417

Derivative financial instruments

4,042

Long-term operating leases

52,385

4,075

Asset retirement obligation

29,114

25,673

Other non-current liabilities

24

Total liabilities

3,415,941

3,480,450

Mezzanine Equity:

Preferred stock

175,000

Stockholders’ Equity:

Common stock

138,759

116,462

Additional paid-in capital

1,253,417

1,100,359

Accumulated earnings (deficit)

886,138

(204,042
)
Total stockholders’ equity

2,278,314

1,012,779

$
5,694,255

$
4,668,229

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

Three Months Ended December 31,Year EndedDecember 31,
2022

2021

2022

2021

Gas production (MMcf)

132,858

123,002

500,616

489,274

Oil production (Mbbls)

16

176

82

1,210

Total production (MMcfe)

132,955

124,060

501,107

496,534

Natural gas sales
$
740,320

$
641,985

$
3,117,094

$
1,775,768

Natural gas hedging settlements (1)

(183,677
)

(272,891
)

(862,715
)

(411,798
)
Total natural gas including hedging

556,643

369,094

2,254,379

1,363,970

Oil sales

1,273

13,391

7,597

74,962

Oil hedging settlements (1)

(2,588
)

(8,077
)
Total oil including hedging

1,273

10,803

7,597

66,885

Total oil and gas sales including hedging
$
557,916

$
379,897

$
2,261,976

$
1,430,855

Average gas price (per Mcf)
$
5.57

$
5.22

$
6.23

$
3.63

Average gas price including hedging (per Mcf)
$
4.19

$
3.00

$
4.50

$
2.79

Average oil price (per barrel)
$
79.56

$
76.09

$
92.65

$
61.95

Average oil price including hedging (per barrel)
$
79.56

$
61.38

$
92.65

$
55.28

Average price (per Mcfe)
$
5.58

$
5.28

$
6.24

$
3.73

Average price including hedging (per Mcfe)
$
4.20

$
3.06

$
4.51

$
2.88

Production and ad valorem taxes
$
17,837

$
12,673

$
77,917

$
49,141

Gathering and transportation

41,882

34,344

155,679

130,940

Lease operating

31,261

26,317

111,134

103,467

Cash general and administrative (2)

10,262

9,484

32,795

28,145

Total production costs
$
101,242

$
82,818

$
377,525

$
311,693

Production and ad valorem taxes (per Mcfe)
$
0.12

$
0.10

$
0.16

$
0.10

Gathering and transportation (per Mcfe)

0.32

0.28

0.31

0.26

Lease operating (per Mcfe)

0.24

0.21

0.22

0.21

Cash general and administrative (per Mcfe)

0.08

0.08

0.07

0.06

Total production costs (per Mcfe)
$
0.76

$
0.67

$
0.76

$
0.63

Unhedged operating margin

86
%

87
%

88
%

83
%
Hedged operating margin

82
%

78
%

83
%

78
%
Oil and Gas Capital Expenditures:

Proved property acquisitions
$
295

$
21,781

$
500

$
21,781

Unproved property acquisitions

16,724

17,222

54,120

35,871

Total oil and gas properties acquisitions
$
17,019

$
39,003

$
54,620

$
57,652

Exploration and Development:

Development leasehold
$
5,429

$
6,159

$
13,727

$
12,953

Exploratory drilling and completion

14,517

6,966

63,520

6,966

Development drilling and completion

281,653

114,617

901,026

569,141

Other development costs

1,193

12,373

53,693

39,168

Total exploration and development capital expenditures
$
302,792

$
140,115

$
1,031,966

$
628,228

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

(2)   Excludes stock-based compensation.

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

Three Months Ended December 31,Year EndedDecember 31,

2022

2021

2022

2021

ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS:

Net income (loss) available to common stockholders
$
516,894

$
355,990

$
1,124,868

$
(259,225
)

Unrealized (gain) loss from derivative financial instruments

(302,809
)

(469,830
)

(200,193
)

140,934

Non-cash interest amortization from adjusting debt assumed in
acquisition to fair value

2,659

4,174

12,621

(Gain) loss on sale of assets

(319
)

162,170

(340
)

162,077

Loss on early retirement of debt

46,840

352,599

Exploration expense

4,924

8,287

Adjustment to (provision for) benefit from income taxes

68,970

47,777

39,011

(106,000
)

Adjusted net income available to common stockholders (1)
$
287,660

$
98,766

$
1,022,647

$
303,006

Adjusted net income available to common stockholders per share (2)
$
1.05

$
0.37

$
3.73

$
1.16

Diluted shares outstanding

277,032

276,713

277,464

275,663

ADJUSTED EBITDAX:Net income (loss)
$
519,819

$
360,401

$
1,140,882

$
(241,725
)

Interest expense (3)

38,888

46,811

171,092

218,322

Income taxes

81,451

85,571

261,061

11,403

Depreciation, depletion, and amortization

134,456

110,075

489,450

469,388

Exploration

4,924

8,287

Unrealized (gain) loss from derivative financial instruments

(302,809
)

(469,830
)

(200,193
)

140,934

Stock-based compensation

1,692

1,508

6,610

6,799

Loss on early extinguishment of debt

46,840

352,599

(Gain) loss on sale of assets

(319
)

162,170

(340
)

162,077

Total Adjusted EBITDAX (4)
$
478,102

$
296,706

$
1,923,689

$
1,119,797

(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 December 31,Year EndedDecember 31,
2022

2021

2022

2021

OPERATING CASH FLOW(1):

Net income (loss)
$
519,819

$
360,401

$
1,140,882

$
(241,725
)
Reconciling items:

Unrealized (gain) loss from derivative financial instruments

(302,809
)

(469,830
)

(200,193
)

140,934

Deferred income taxes (benefit)

79,928

81,377

228,317

(3,565
)
Depreciation, depletion and amortization

134,456

110,075

489,450

469,388

Loss on early retirement of debt

46,840

352,599

Amortization of debt discount and issuance costs

1,713

4,116

10,255

21,703

Stock-based compensation

1,692

1,508

6,610

6,799

(Gain) loss on sale of assets

(319
)

162,170

(340
)

162,077

Operating cash flow
$
434,480

$
249,817

$
1,721,821

$
908,210

(Increase) decrease in accounts receivable

117,211

(24,573
)

(242,389
)

(121,952
)
Increase in other current assets

(10,655
)

(2,883
)

(10,296
)

(2,033
)
Increase (decrease) in accounts payable and accrued expenses

(72,704
)

18,091

229,252

74,780

Net cash provided by operating activities
$
468,332

$
240,452

$
1,698,388

$
859,005

Three Months Ended December 31,Year EndedDecember 31,
2022

2021

2022

2021

FREE CASH FLOW(2):

Operating cash flow
$
434,480

$
249,817

$
1,721,821

$
908,210

Less:

Preferred stock dividends

(2,925
)

(4,411
)

(16,014
)

(17,500
)
Exploration and development capital expenditures

(302,792
)

(140,115
)

(1,031,966
)

(628,228
)
Other capital expenditures

(147
)

(123
)

(803
)

(192
)
Free cash flow from operations
$
128,616

$
105,168

$
673,038

$
262,290

Acquisitions of proved and unproved properties

(17,019
)

(39,003
)

(54,620
)

(57,652
)
Other assets acquisitions

(1,025
)

(17,973
)

Proceeds from divestitures

4,093

138,133

4,186

138,394

Free cash flow after acquisition and divestiture activity
$
114,665

$
204,298

$
604,631

$
343,032

(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, debt maturities and dividends after exploration and development capital expenditures, preferred dividend payments, proved and unproved property acquisitions and proceeds from divestiture of oil and gas properties.

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