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

Rhea-AI Summary

Comstock Resources reported its financial results for Q4 and the full year of 2020. For Q4, net income was $77.5 million, significantly aided by an unrealized gain of $80.2 million on hedging. Adjusted net income stood at $34.6 million, with natural gas production rising 6% to 1.2 MMcf per day. However, net loss for the full year reached $83.4 million due to a $124.5 million unrealized loss on derivatives. The company achieved an increase in total proved reserves to 5.6 Tcf of natural gas and 11.0 million Bbls of oil. Planned 2021 drilling budget is set at $510-$550 million.

Positive

• Q4 net income of $77.5 million driven by unrealized gains.
• Natural gas production up 6% QoQ, averaging 1.2 MMcf per day.
• Proved reserves increased to 5.6 Tcf of natural gas and 11.0 million Bbls of oil.
• Adjusted EBITDAX increased to $210.8 million in Q4 2020.

Negative

• Full year net loss of $83.4 million due to unrealized losses.
• Decline in oil production averaging 4,120 Bbls per day, down from 7,356 Bbls in 2019.
• Average realized oil price decreased to $40.88 per barrel in 2020.

FRISCO, TX, Feb. 16, 2021 (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, 2020.

Financial Results for the Three Months Ended December 31, 2020

For the fourth quarter of 2020, Comstock reported net income available to common stockholders of $77.5 million or $0.30 per diluted share. The quarter results included a $80.2 million unrealized gain on the mark-to-market value of the Company's derivative financial instruments that are held to hedge oil and natural gas prices. The adjusted net income available to common stockholders excluding the unrealized gain on the hedge contracts and other non-recurring items for the fourth quarter of 2020 was $34.6 million or $0.14 per diluted share.

Comstock produced 109.0 billion cubic feet ("Bcf") of natural gas and 0.3 million barrels ("Bbls") of oil or 111.1 billion cubic feet of natural gas equivalent ("Bcfe") in the fourth quarter of 2020. Natural gas production averaged 1.2 million cubic feet ("MMcf") per day, an increase of 6% over natural gas production in the third quarter of 2020. Oil production in the fourth quarter of 2020 averaged 3,694 Bbls of oil per day as compared to 3,851 Bbls per day produced in the third quarter of 2020.

Comstock's average realized natural gas price in the fourth quarter of 2020, including realized hedging gains, was $2.40 per Mcf as compared to $2.30 per Mcf realized in the fourth quarter of 2019 and $1.95 per Mcf realized in the third quarter of 2020. The Company's average realized oil price in the fourth quarter of 2020, including realized hedging gains, was $44.47 per Bbl as compared to $50.36 per Bbl in the fourth quarter of 2019 and $33.52 per Bbl in the third quarter of 2020. Oil and gas sales were $276.8 million (including realized hedging gains) in the fourth quarter of 2020 as compared to $308.6 million in the fourth quarter of 2019. Adjusted EBITDAX, or earnings before interest, taxes, depreciation, depletion, amortization, exploration expense and other noncash expenses was $210.8 million in the fourth quarter of 2020 as compared to adjusted EBITDAX of $234.8 million for the fourth quarter of 2019. The Company's operating cash flow generated in the fourth quarter of 2020 was $154.6 million as compared to $187.9 million in the fourth quarter of 2019.

Financial Results for the Year Ended December 31, 2020

For the year ended December 31, 2020, Comstock reported a net loss available to common stockholders of $83.4 million or $0.39 per diluted share. The loss was primarily due to a $124.5 million unrealized loss related to the mark-to-market valuation of derivative financial instruments.  Adjusted net income available to common stockholders excluding the unrealized loss on hedges and other non-recurring items for the year ended December 31, 2020 was $49.6 million or $0.23 per diluted share.

Comstock produced 450.8 Bcf of natural gas and 1.5 million Bbls of oil or 459.9 Bcfe for the year ended December 31, 2020 as compared to 292.8 Bcf of natural gas, 2.7 million Bbls of oil or 308.9 Bcfe for the year ended December 31, 2019. Natural gas production averaged 1.2 MMcf per day in 2020, an increase of 54% over natural gas production in 2019.  Oil production averaged 4,120 Bbls of oil per day in 2020 compared to 7,356 Bbls of oil per day in 2019. Comstock's average realized natural gas price, including realized hedging gains, was $2.07 per Mcf for the year ended December 31, 2020, as compared to $2.35 per Mcf realized for the year ended December 31, 2019. The Company's average realized oil price in 2020, including realized hedging gains, was $40.88 per barrel as compared to $49.64 per barrel in 2019. Oil and gas sales were $993.1 million, including realized hedging gains, for the year ended December 31, 2020 as compared to oil and gas sales of $821.4 million in 2019. Adjusted EBITDAX of $722.2 million in  2020 was 18% higher than adjusted EBITDAX of $613.6 million in 2019. The Company's operating cash flow generated for the year ended December 31, 2020 of $521.2 million increased 11% over operating cash flow of $468.3 million for the year ended December 31, 2019.

Drilling Results

Comstock spent $483.6 million during 2020 for drilling and development activities in 2020. Comstock also spent $7.9 million on leasing activity. $476.9 million was spent to develop its Haynesville and Bossier shale properties, comprised of $436.1 million on drilling and completing wells and an additional $40.8 million on other development activity. Comstock drilled 55 (46.1 net) operated horizontal Haynesville shale wells during the year ended December 31, 2020, which had an average lateral length of  9,247 feet. Comstock also participated in 16 (1.3 net) non-operated Haynesville shale wells in 2020. During the year ended December 31, 2020, Comstock turned 76 (43.7 net) Haynesville shale wells to sales and currently expects to turn 14 (13.0 net) operated wells to sales in the first quarter of 2021.

Since its last operational update, Comstock completed an additional 20 (17.7 net) Haynesville shale wells.  The average initial production rate of these wells was 24 MMcf per day and had an average completed lateral length of 9,288 feet.

2020 Proved Oil & Gas Reserves

Comstock also announced that proved natural gas and oil reserves as of December 31, 2020 were estimated at 5.6 trillion cubic feet ("Tcf") of natural gas and 11.0 million Bbls of oil, or 5.6 Tcfe as compared to total proved reserves of 5.4 Tcfe as of December 31, 2019. The reserve estimates were determined under the SEC guidelines and were audited by the Company's independent reserve engineering firms. The 5.6 Tcfe of proved reserves at December 31, 2020 were 36% developed and 97% were operated by Comstock. The present value, using a 10% discount rate, or the future net cash flows before income taxes of the proved reserves (the "PV-10 Value") was approximately $2.0 billion, using average first of month 2020 prices of $1.99 per Mcf of natural gas and $39.57 per Bbl of oil. The PV-10 Value was impacted by the much lower oil and gas prices required under the SEC methodology. The natural gas and oil prices used in determining the December 31, 2020 proved reserves estimates were 23% lower for natural gas and 29% lower for oil as compared to prices used at December 31, 2019. The PV-10 Value using NYMEX reference prices of $2.75 per Mcf for natural gas and $50.00 per barrel for oil less the Company’s differentials would have been $4.4 billion.

The following table reflects the changes in the proved reserve estimates since the end of 2019:

		Oil (MMBbls)				Natural Gas (Bcf)				Total (Bcfe)
Proved Reserves:
Proved Reserves at December 31, 2019		16.7				5,341.5				5,442.0
Production		(1.5	)			(450.8	)			(459.9	)
Extensions and discoveries		—				365.7				365.7
Revisions:
Price		(2.9	)			(68.2	)			(85.3	)
Performance and Other		(1.3	)			374.7				366.4
Proved Reserves at December 31, 2020		11.0				5,562.9				5,628.9

Despite the low prices used to determine proved reserves, Comstock replaced 159% of its 2020 production excluding price revisions and 141% including them. Based on the 2020 proved reserve additions, Comstock’s "all-in" finding costs were approximately $0.66 per Mcfe excluding price-related revisions ($0.75 per Mcfe including price-related revisions).

2021 Drilling Budget

The Company currently plans to spend approximately $510 million to $550 million in 2021 on drilling and completion activities primarily focused on development of its Haynesville/Bossier shale properties and $7 million to $10 million on its leasing program. Under its current operating plan, Comstock expects to drill 62 (51.0 net) and complete 58 (50.5 net) operated horizontal wells utilizing five to six rigs during 2021. 

Other Matters

Comstock has planned a conference call for 10:00 a.m. Central Time on February 17, 2021, to discuss the fourth 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 8399473 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 February 17, 2021 and will continue until 1:00 p.m. February 24, 2021. To hear the replay, call 855-859-2056 (404-537-3406) if calling from outside the US). The conference call access code is 8399473.

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 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,										Twelve Months Ended December 31,
	2020					2019					2020					2019
Revenues:
Natural gas sales	$	261,424				$	260,206				$	809,399				$	635,795
Oil sales	13,347					29,042					48,796					132,894
Total oil and gas sales	274,771					289,248					858,195					768,689
Operating expenses:
Production and ad valorem taxes	9,199					12,999					36,967					35,702
Gathering and transportation	29,159					29,957					106,582					71,303
Lease operating	23,342					26,285					102,452					80,762
Depreciation, depletion and amortization	104,284					111,842					417,112					276,526
General and administrative	6,049					6,484					32,040					29,244
Exploration	—					—					27					241
(Gain) loss on sale of assets	(1		)			—					(17		)			25
Total operating expenses	172,032					187,567					695,163					493,803
Operating income	102,739					101,681					163,032					274,886
Other income (expenses):
Gain from derivative financial instruments	81,929					19,790					9,951					51,735
Other income	287					282					1,080					622
Transaction costs	—					90					—					(41,010		)
Interest expense	(66,065		)			(54,107		)			(234,829		)			(161,541		)
Loss on early extinguishment of debt	—					—					(861		)			—
Total other income (expenses)	16,151					(33,945		)			(224,659		)			(150,194		)
Income (loss) before income taxes	118,890					67,736					(61,627		)			124,692
Benefit from (provision for) income taxes	(36,967		)			(12,620		)			9,210					(27,803		)
Net income (loss)	81,923					55,116					(52,417		)			96,889
Preferred stock dividends and accretion	(4,400		)			(14,287		)			(30,996		)			(22,415		)
Net income (loss) available to common stockholders	$	77,523				$	40,829				$	(83,413	)			$	74,474
Net income (loss) per share:
Basic	$	0.34				$	0.22				$	(0.39	)			$	0.52
Diluted	$	0.30				$	0.19				$	(0.39	)			$	0.52
Weighted average shares outstanding:
Basic	231,377					187,280					215,194					142,750
Diluted	275,127					284,100					215,194					187,378

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

	As of
	December 31, 2020			December 31, 2019
ASSETS
Cash and cash equivalents	$	30,272		$	18,532
Accounts receivable	145,786			180,341
Derivative financial instruments	8,913			75,304
Income taxes receivable	—			5,109
Other current assets	14,839			10,399
Total current assets	199,810			289,685
Property and equipment, net	4,084,550			4,008,803
Goodwill	335,897			335,897
Income taxes receivable	—			5,109
Derivative financial instruments	661			13,888
Operating lease right-of-use assets	3,025			3,509
Other assets	40			231
	$	4,623,983		$	4,657,122
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	259,284		$	252,994
Accrued costs	133,019			137,166
Operating leases	2,284			1,994
Derivative financial instruments	47,005			222
Total current liabilities	441,592			392,376
Long-term debt	2,517,149			2,500,132
Deferred income taxes	200,583			211,772
Derivative financial instruments	2,364			4,220
Long-term operating leases	740			1,515
Asset retirement obligation	19,290			18,151
Other non-current liabilities	492			6,351
Total liabilities	3,182,210			3,134,517
Mezzanine Equity:
Preferred stock	175,000			379,583
Stockholders' Equity:
Common stock	116,206			95,003
Additional paid-in capital	1,095,384			909,423
Accumulated earnings	55,183			138,596
Total stockholders' equity	1,266,773			1,143,022
	$	4,623,983		$	4,657,122

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

	Three Months Ended December 31,								Twelve Months Ended December 31,
	2020				2019				2020				2019
Gas production (MMcf)	109,013				121,521				450,836				292,834
Oil production (Mbbls)	340				577				1,508				2,685
Total production (MMcfe)	111,052				124,980				459,883				308,944
Natural gas sales	$	261,424			$	260,206			$	809,399			$	635,795
Natural gas hedging settlements (1)	240				19,302				122,036				52,297
Total natural gas including hedging	261,664				279,508				931,435				688,092
Oil sales	13,347				29,042				48,796				132,894
Oil hedging settlements (1)	1,767				—				12,849				387
Total oil including hedging	15,114				29,042				61,645				133,281
Total oil and gas sales including hedging	$	276,778			$	308,550			$	993,080			$	821,373
Average gas price (per Mcf)	$	2.40			$	2.14			$	1.80			$	2.17
Average gas price including hedging (per Mcf)	$	2.40			$	2.30			$	2.07			$	2.35
Average oil price (per barrel)	$	39.27			$	50.36			$	32.36			$	49.49
Average oil price including hedging (per barrel)	$	44.47			$	50.36			$	40.88			$	49.64
Average price (per Mcfe)	$	2.47			$	2.31			$	1.87			$	2.49
Average price including hedging (per Mcfe)	$	2.49			$	2.47			$	2.16			$	2.66
Production and ad valorem taxes	$	9,199			$	12,999			$	36,967			$	35,702
Gathering and transportation	$	29,159			$	29,957			$	106,582			$	71,303
Lease operating	$	23,342			$	26,285			$	102,452			$	80,762
Production and ad valorem taxes (per Mcfe)	$	0.09			$	0.10			$	0.08			$	0.11
Gathering and transportation (per Mcfe)	$	0.26			$	0.24			$	0.23			$	0.23
Lease operating (per Mcfe)	$	0.21			$	0.21			$	0.22			$	0.27
Oil and Gas Capital Expenditures:
Acquisitions	$	—			$	41,828			$	—			$	2,097,451
Exploratory leasehold	6,492				—				7,949				—
Development leasehold	5,659				890				13,022				7,603
Development drilling and completion	155,691				150,960				436,074				493,625
Other development	8,062				3,121				34,525				9,339
Total	$	175,904			$	196,799			$	491,570			$	2,608,018

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

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

	Three Months Ended December 31,										Twelve Months Ended December 31,
	2020					2019					2020					2019
ADJUSTED NET INCOME (LOSS) TO COMMON STOCKHOLDERS:
Net income (loss) available to common stockholders	$	77,523				$	40,829				$	(83,413	)			$	74,474
(Gain) loss on sale of assets	(1		)			—					(17		)			25
Unrealized (gain) loss on derivative financial instruments	(80,158		)			(488		)			124,545					949
Loss on early extinguishment of debt	—					—					861					—
Non-cash interest amortization from adjusting debt assumed in acquisition to fair value	5,811					5,065					22,112					9,143
Non-cash accretion from adjusting preferred stock issued in acquisition to fair value	—					4,583					5,417					4,583
Impairment of unevaluated oil and gas properties	—					—					27					—
Transaction costs	—					(90		)			—					41,010
Covey Park July 2019 hedging settlements	—					—					—					4,574
Adjusted benefit (provision) for income taxes	31,408					(836		)			(19,930		)			(12,420		)
Adjusted net income available to common stockholders (1)	$	34,583				$	49,063				$	49,602				$	122,338
Adjusted net income available to common stockholders per diluted share	$	0.14				$	0.22				$	0.23				$	0.77

ADJUSTED EBITDAX:
Net income (loss)	$	81,923				$	55,116				$	(52,417	)			$	96,889
Interest expense	66,065					54,107					234,829					161,541
Income taxes	36,967					12,620					(9,210		)			27,803
Depreciation, depletion, and amortization	104,284					111,842					417,112					276,526
Unrealized (gain) loss from derivative financial instruments	(80,158		)			(488		)			124,545					949
Exploration	—					—					27					241
Stock-based compensation	1,730					1,661					6,464					4,020
Loss on early extinguishment of debt	—					—					861					—
Transaction costs	—					(90		)			—					41,010
Covey Park July 2019 hedging settlements	—					—					—					4,574
(Gain) loss on sale of assets	(1		)			—					(17		)			25
Total Adjusted EBITDAX (2)	$	210,810				$	234,768				$	722,194				$	613,578

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 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 December 31,										Twelve Months Ended December 31,
	2020					2019					2020					2019
OPERATING CASH FLOW:
Net income (loss)	$	81,923				$	55,116				$	(52,417	)			$	96,889
Reconciling items:
Deferred income taxes	37,034					12,821					(9,409		)			28,026
Depreciation, depletion and amortization	104,284					111,842					417,112					276,526
Unrealized (gain) loss from derivative financial instruments	(80,158		)			(488		)			124,545					949
Amortization of debt discount and issuance costs	9,807					7,068					34,038					16,274
Stock-based compensation	1,730					1,661					6,464					4,020
Loss on early extinguishment of debt	—					—					861					—
Transaction costs	—					(90		)			—					41,010
Covey Park July 2019 hedging settlements	—					—					—					4,574
Exploration	—					—					27					—
(Gain) loss on sale of assets	(1		)			—					(17		)			25
Operating cash flow (1)	$	154,619				$	187,930				$	521,204				$	468,293
Net cash provided by operating activities	$	185,746				$	168,431				$	575,701				$	451,237
Transaction costs	—					(90		)			—					41,010
Covey Park July 2019 hedging settlements	—					—					—					4,574
Increase (decrease) in accounts receivable	44,827					45,184					(34,555		)			(3,220		)
Increase (decrease) in other current assets	1,272					(2,686		)			(7,019		)			(9,823		)
Increase in accounts payable and accrued expenses	(77,226		)			(22,909		)			(12,923		)			(15,485		)
Operating cash flow (1)	$	154,619				$	187,930				$	521,204				$	468,293

(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.

FAQ

What were Comstock Resources' Q4 2020 financial results for CRK?

In Q4 2020, Comstock reported net income of $77.5 million and adjusted net income of $34.6 million.

What caused the net loss for Comstock in 2020?

The net loss of $83.4 million was primarily due to a $124.5 million unrealized loss on derivative financial instruments.

How much natural gas did Comstock produce in 2020?

Comstock produced 450.8 Bcf of natural gas in 2020.

What is Comstock's projected drilling budget for 2021?

Comstock plans to spend approximately $510 million to $550 million on drilling and completion activities in 2021.

What were the proved reserves for Comstock as of December 31, 2020?

As of December 31, 2020, Comstock's proved reserves were estimated at 5.6 Tcf of natural gas and 11.0 million Bbls of oil.