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COMSTOCK RESOURCES, INC. REPORTS THIRD QUARTER 2020 FINANCIAL AND OPERATING RESULTS

Comstock Resources, Inc.
·15 min read

FRISCO, TX, Nov. 04, 2020 (GLOBE NEWSWIRE) -- Comstock Resources, Inc. ("Comstock" or the "Company") (NYSE: CRK) today reported financial and operating results for the quarter ended September 30, 2020.

Financial Results for the Three Months Ended September 30, 2020

For the third quarter of 2020, Comstock reported a net loss available to common stockholders of $130.9 million or $0.57 per share. The loss was primarily related to a $155.6 million unrealized loss on the mark-to-market value of the Company's derivative financial instruments that are held to hedge oil and natural gas prices as future natural gas prices have improved substantially since the end of the second quarter of 2020. The adjusted net loss available to common stockholders excluding the unrealized loss on the hedge contracts and other non-recurring items for the third quarter of 2020 was $13.8 million or $0.06 per diluted share.

Comstock produced 102.6 billion cubic feet ("Bcf") of natural gas and 0.4 million barrels of oil or 104.7 billion cubic feet of natural gas equivalent ("Bcfe") in the third quarter of 2020. Natural gas production averaged 1,115 million cubic feet ("MMcf") per day, an increase of 5% over natural gas production in the third quarter of 2019. Oil production in the third quarter of 2020 decreased to 3,851 barrels of oil per day from 6,563 barrels per day produced in the third quarter of 2019. 12% of the Company's net oil production was shut in or curtailed during the third quarter of 2020 and 7% of the natural gas production was shut-in due to offset completion activity or due to curtailments related to storm activity or pipeline constraints.

Comstock's average realized natural gas price in the third quarter of 2020, including realized hedging gains, decreased to $1.95 per Mcf as compared to $2.26 per Mcf realized in the third quarter of 2019. The Company's average realized oil price in the third quarter of 2020, including realized hedging gains, decreased to $33.52 per barrel as compared to $51.27 per barrel in the third quarter of 2019. Oil and gas sales were $212.2 million (including realized hedging gains) in the third quarter of 2020 as compared to $250.5 million in the third quarter of 2019. The lower oil and gas prices realized caused adjusted EBITDAX, or earnings before interest, taxes, depreciation, depletion, amortization, exploration expense and other noncash expenses, of $147.7 million in the third quarter of 2020 to decrease by 22% over adjusted EBITDAX of $188.6 million for the third quarter of 2019. The Company's operating cash flow generated in the third quarter of 2020 of $93.2 million decreased 35% over operating cash flow of $143.3 million in the third quarter of 2019.

Financial Results for the Nine Months Ended September 30, 2020

For the first nine months of 2020, Comstock reported a net loss available to common stockholders of $160.9 million or $0.77 per share. Adjusted net income available to common stockholders excluding the $204.7 million unrealized loss on derivative financial instruments and other non-recurring items for the first nine months of 2020 was $12.9 million or $0.06 per diluted share.

Comstock produced 341.8 Bcf of natural gas and 1.2 million barrels of oil or 348.8 Bcfe in the first nine months of 2020. Natural gas production averaged 1,248 MMcf per day, an increase of 99% over natural gas production in the first nine months of 2019 due to the acquisition of Covey Park Energy LLC, which was completed in July 2019. Oil production in the first nine months of 2020 decreased to 4,263 barrels of oil per day from 7,723 barrels per day produced in first nine months of 2019.

Comstock's average realized natural gas price in the first nine months of 2020, including realized hedging gains, decreased to $1.96 per Mcf as compared to $2.39 per Mcf realized in the first nine months of 2019. The Company's average realized oil price in the first nine months of 2020, including realized hedging gains, decreased to $39.84 per barrel as compared to $49.44 per barrel in the first nine months of 2019. Oil and gas sales were $716.3 million, including realized hedging gains, in the first nine months of 2020 as compared to sales of $512.8 million in the first nine months of 2019. Adjusted EBITDAX of $511.4 million in the first nine months of 2020 increased by 35% over adjusted EBITDAX of $378.8 million for the first nine months of 2019. The Company's operating cash flow generated in the first nine months of 2020 of $366.6 million increased 31% over operating cash flow of $280.4 million in the first nine months of 2019.

Drilling Results

Comstock spent $315.7 million during the first nine months of 2020 for drilling and development activities. $308.6 million was spent to develop its Haynesville and Bossier shale properties, comprised of $280.4 million on drilling and completing wells and an additional $28.2 million on other development activity. In response to the higher anticipated natural gas prices, Comstock restarted completion activity and added two operating drilling rigs in the third quarter and currently has three completion crews working through the backlog of drilled but uncompleted wells. The ramp-up of activity will allow new wells to come on line late in the fourth quarter of 2020 and early in 2021 to coincide with the expected continued improvement of future natural gas prices. Comstock drilled 36 (28.6) horizontal operated Haynesville shale wells during the first nine months of 2020, which had an average lateral length of 9,143 feet. Comstock also participated in 18 (1.3 net) non-operated Haynesville shale wells in the first nine months of 2020. During the first nine months of 2020, Comstock turned 33 (24.6 net) Haynesville shale wells to sales and currently expects to turn an additional 22 (17.6 net) wells to sales in the fourth quarter of 2020.

Since its last operational update, Comstock turned 15 (11.7 net) Haynesville shale wells into sales. The average initial production rate of these wells was 26 MMcf per day and had an average completed lateral length of 9,088 feet.

2021 Drilling Budget

The Company currently plans to spend approximately $525.0 to $575.0 million in 2021 on drilling and completion activities primarily focused in the Haynesville/Bossier shale. Comstock is currently planning to operate six rigs for the first half of 2021 and seven rigs for the remainder of the year and expects to drill 70 (56.5 net) and complete 65 (56.6 net) operated horizontal wells.

Other Matters

Comstock has planned a conference call for 10:00 a.m. Central Time on November 5, 2020, to discuss the third quarter of 2020 operational and financial results. Investors wishing to participate should visit the Company's website at www.comstockresources.com for a live webcast or dial 844-776-7840 (international dial-in use 661-378-9538) and provide access code 1275655 when prompted. If you are unable to participate in the original conference call, a web replay will be available approximately 24 hours following the completion of the call on Comstock's website at www.comstockresources.com. The web replay will be available for approximately one week. A replay of the conference call will be available beginning at 1:00 p.m. CT November 5, 2020 and will continue until 1:00 p.m. November 12, 2020. To hear the replay, call 855-859-2056 (404-537-3406) if calling from outside the US). The conference call access code is 1275655.

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.

Comstock Resources, Inc. is an independent energy company based in Frisco, Texas engaged in oil and gas acquisitions, exploration and development, and its assets are primarily located in Texas, Louisiana and North Dakota. 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 September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Revenues:

Natural gas sales

$

168,374

$

193,506

$

547,975

$

375,589

Oil sales

9,637

30,938

35,449

103,852

Total oil and gas sales

178,011

224,444

583,424

479,441

Operating expenses:

Production and ad valorem taxes

9,798

9,381

27,768

22,703

Gathering and transportation

22,422

23,414

77,423

41,346

Lease operating

25,412

26,696

79,110

54,477

Exploration

241

27

241

Depreciation, depletion and amortization

99,056

80,247

312,828

164,684

General and administrative

8,974

8,105

25,991

22,760

(Gain) loss on sale of assets

(16

)

(16

)

25

Total operating expenses

165,646

148,084

523,131

306,236

Operating income

12,365

76,360

60,293

173,205

Other income (expenses):

Gain (loss) from derivative financial instruments

(121,579

)

24,858

(71,978

)

31,945

Other income

489

92

793

340

Transaction costs

(39,657

)

(41,100

)

Interest expense

(63,890

)

(51,015

)

(168,764

)

(107,434

)

Loss on early extinguishment of debt

(861

)

Total other income (expenses)

(184,980

)

(65,722

)

(240,810

)

(116,249

)

Income (loss) before income taxes

(172,615

)

10,638

(180,517

)

56,956

Benefit from (provision for) income taxes

46,123

(3,847

)

46,177

(15,183

)

Net income (loss)

(126,492

)

6,791

(134,340

)

41,773

Preferred stock dividends and accretion

(4,398

)

(8,128

)

(26,596

)

(8,128

)

Net income (loss) available to common stockholders

$

(130,890

)

$

(1,337

)

$

(160,936

)

$

33,645

Net income (loss) per share:

Basic

$

(0.57

)

$

(0.01

)

$

(0.77

)

$

0.26

Diluted

$

(0.57

)

$

(0.01

)

$

(0.77

)

$

0.26

Weighted average shares outstanding:

Basic

231,223

171,487

209,760

127,709

Diluted

231,223

171,487

209,760

127,709

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

As of

September 30, 2020

December 31, 2019

ASSETS

Cash and cash equivalents

$

28,268

$

18,532

Accounts receivable

100,959

180,341

Derivative financial instruments

8,830

75,304

Income taxes receivable

5,109

Other current assets

11,773

10,399

Total current assets

149,830

289,685

Property and equipment, net

4,012,348

4,008,803

Goodwill

335,897

335,897

Income taxes receivable

5,109

Derivative financial instruments

1,185

13,888

Operating lease right-of-use assets

3,554

3,509

Other assets

40

231

$

4,502,854

$

4,657,122

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable

$

202,174

$

252,994

Accrued costs

112,695

137,166

Operating leases

2,318

1,994

Derivative financial instruments

63,595

222

Total current liabilities

380,782

392,376

Long-term debt

2,507,669

2,500,132

Deferred income taxes

163,550

211,772

Derivative financial instruments

66,373

4,220

Long-term operating leases

1,236

1,515

Asset retirement obligation

19,402

18,151

Other non-current liabilities

1,162

6,351

Total liabilities

3,140,174

3,134,517

Mezzanine Equity:

Preferred stock

175,000

379,583

Stockholders' Equity:

Common stock

116,210

95,003

Additional paid-in capital

1,093,811

909,423

Accumulated earnings (deficit)

(22,341

)

138,596

Total stockholders' equity

1,187,680

1,143,022

$

4,502,854

$

4,657,122

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

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Gas production (MMcf)

102,560

97,236

341,823

171,313

Oil production (Mbbls)

354

603

1,168

2,108

Total production (MMcfe)

104,687

100,859

348,831

183,964

Natural gas sales

$

168,374

$

193,506

$

547,975

$

375,589

Natural gas hedging settlements (1)

32,000

26,030

121,796

32,995

Total natural gas including hedging

200,374

219,536

669,771

408,584

Oil sales

9,637

30,938

35,449

103,852

Oil hedging settlements (1)

2,238

17

11,082

387

Total oil including hedging

11,875

30,955

46,531

104,239

Total oil and gas sales including hedging

$

212,249

$

250,491

$

716,302

$

512,823

Average gas price (per Mcf)

$

1.64

$

1.99

$

1.60

$

2.19

Average gas price including hedging (per Mcf)

$

1.95

$

2.26

$

1.96

$

2.39

Average oil price (per barrel)

$

27.20

$

51.24

$

30.35

$

49.26

Average oil price including hedging (per barrel)

$

33.52

$

51.27

$

39.84

$

49.44

Average price (per Mcfe)

$

1.70

$

2.23

$

1.67

$

2.61

Average price including hedging (per Mcfe)

$

2.03

$

2.48

$

2.05

$

2.79

Production and ad valorem taxes

$

9,798

$

9,381

$

27,768

$

22,703

Gathering and transportation

$

22,422

$

23,414

$

77,423

$

41,346

Lease operating

$

25,412

$

26,696

$

79,110

$

54,477

Production and ad valorem taxes (per Mcfe)

$

0.09

$

0.09

$

0.08

$

0.12

Gathering and transportation (per Mcfe)

$

0.21

$

0.23

$

0.22

$

0.22

Lease operating (per Mcfe)

$

0.25

$

0.27

$

0.23

$

0.30

Oil and Gas Capital Expenditures:

Acquisitions

$

$

2,055,623

$

$

2,055,623

Exploratory leasehold

1,457

1,457

Development leasehold

1,027

2,407

7,363

6,713

Development drilling and completion

96,903

169,747

280,383

342,665

Other development

11,045

1,502

26,463

6,218

Total

$

110,432

$

2,229,279

$

315,666

$

2,411,219

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

ADJUSTED NET INCOME (LOSS) TO COMMON STOCKHOLDERS:

Net income (loss) available to common stockholders

$

(130,890

)

$

(1,337

)

$

(160,936

)

$

33,645

(Gain) loss on sale of oil and gas properties

(16

)

(16

)

25

Unrealized loss on derivative financial instruments

155,601

1,189

204,703

1,437

Loss on early extinguishment of debt

861

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

5,621

4,078

16,301

4,078

Non-cash accretion from adjusting preferred stock issued in
acquisition to fair value

5,417

Impairment of unevaluated oil and gas properties

27

Transaction costs

39,657

41,100

Covey Park July 2019 hedging settlements

4,574

4,574

Adjusted provision for income taxes

(44,122

)

(13,833

)

(53,430

)

(13,652

)

Adjusted net income (loss) available to common stockholders (1)

$

(13,806

)

$

34,328

$

12,927

$

71,207

Diluted shares outstanding

231,223

252,177

209,760

154,856

Adjusted net income (loss) available to common stockholders per share

$

(0.06

)

$

0.17

$

0.06

$

0.51


ADJUSTED EBITDAX:

Net income (loss)

$

(126,492

)

$

6,791

$

(134,340

)

$

41,773

Interest expense

63,890

51,015

168,764

107,434

Income taxes

(46,123

)

3,847

(46,177

)

15,183

Depreciation, depletion, and amortization

99,056

80,247

312,828

164,684

Unrealized loss from derivative financial instruments

155,601

1,189

204,703

1,437

Exploration

241

27

241

Stock-based compensation

1,752

1,088

4,734

2,359

Loss on early extinguishment of debt

861

Transaction costs

39,657

41,100

Covey Park July 2019 hedging settlements

4,574

4,574

(Gain) loss on sale of assets

(16

)

(16

)

25

Total Adjusted EBITDAX (2)

$

147,668

$

188,649

$

511,384

$

378,810

(1) Adjusted net income (loss) 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 non-cash unrealized gains and losses on derivative financial instruments and other unusual items.

(2) 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 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 September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

OPERATING CASH FLOW:

Net income (loss)

$

(126,492

)

$

6,791

$

(134,340

)

$

41,773

Reconciling items:

Deferred income taxes

(46,237

)

3,775

(46,443

)

15,205

Depreciation, depletion and amortization

99,056

80,247

312,828

164,684

Unrealized loss from derivative financial instruments

155,601

1,189

204,703

1,437

Amortization of debt discount and issuance costs

9,505

6,009

24,231

9,206

Stock-based compensation

1,752

1,088

4,734

2,359

Loss on early extinguishment of debt

861

Transaction costs

39,657

41,100

Covey Park July 2019 hedging settlements

4,574

4,574

Exploration

27

(Gain) loss on sale of assets

(16

)

(16

)

25

Operating cash flow (1)

93,169

143,330

366,585

280,363

Transaction costs

(39,657

)

(41,100

)

Covey Park July 2019 hedging settlements

(4,574

)

(4,574

)

Decrease (increase) in accounts receivable

(3,790

)

27,670

79,382

48,404

Decrease in other current assets

11,093

5,545

8,291

7,137

Increase (decrease) in accounts payable and accrued expenses

23,392

(22,534

)

(64,303

)

(7,424

)

Net cash provided by operating activities

$

123,864

$

109,780

$

389,955

$

282,806

(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.

CONTACT: Ronald Mills VP - Finance & Investor Relations 972-668-8834 rmills@comstockresources.com