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 Ended
December 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,
  2022  2021 
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 Ended
December 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 Ended
December 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 Ended
December 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 Ended
December 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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