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

Rhea-AI Summary

Comstock Resources reported strong financial results for fiscal 2022, generating $673 million in free cash flow, with production increasing 7% in Q4 2022 to 1,445 MMcfe per day. Annual oil and gas sales reached $2.3 billion, a 58% increase from 2021. Adjusted net income for 2022 was $1.0 billion, or $3.73 per diluted share. The company successfully drilled 73 operated wells and plans to allocate $950 million to $1.15 billion for drilling and completion in 2023. Comstock declared a $0.125 per share quarterly dividend, to be paid on March 15, 2023. A conference call is scheduled for February 15, 2023, to discuss results further.

Positive

• Generated $673 million in free cash flow in 2022.
• Increased production by 7% in Q4 2022 to 1,445 MMcfe per day.
• Achieved $2.3 billion in annual oil and gas sales, a 58% increase from 2021.
• Adjusted net income of $1.0 billion or $3.73 per diluted share for 2022.
• Successfully drilled 73 horizontal wells with an average lateral length of 10,044 feet.
• Plans to spend $950 million to $1.15 billion to enhance operations in 2023.

Negative

• Production cost per Mcfe increased to $0.76 in Q4 2022, up from $0.67 in Q4 2021.
• Realized hedging losses of $862.7 million for the year ended December 31, 2022.

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.

FAQ

What were Comstock Resources' 2022 financial results?

Comstock Resources generated $673 million in free cash flow, with total oil and gas sales reaching $2.3 billion, a 58% increase from 2021.

What is the production rate of Comstock Resources in Q4 2022?

In Q4 2022, Comstock's production increased to 1,445 MMcfe per day.

How much was Comstock Resources' adjusted net income for 2022?

The adjusted net income for Comstock Resources in 2022 was $1.0 billion, or $3.73 per diluted share.

What is the dividend declared by Comstock Resources for March 2023?

Comstock declared a quarterly dividend of $0.125 per common share, payable on March 15, 2023.

What is Comstock Resources' plan for drilling in 2023?

Comstock plans to spend between $950 million to $1.15 billion on drilling and completion activities in 2023.