COMSTOCK RESOURCES, INC. REPORTS SECOND QUARTER 2021 FINANCIAL AND OPERATING RESULTS

Rhea-AI Summary

Comstock Resources (CRK) announced its Q2 2021 financial results, reporting an adjusted net income of $55 million, or $0.22 per diluted share. Production averaged 1,387 MMcfe per day, an 8% increase QoQ, with revenues reaching $325 million, a 40% rise compared to Q2 2020. Operating cash flow was $196 million. The company refinanced its 9.75% senior notes, reducing annual interest payments by $28 million. However, it reported a net loss of $184.1 million due to a pre-tax loss on debt retirement and unrealized hedging losses. Future drilling activities remain on track for continued growth.

Positive

• Adjusted net income for Q2 2021 was $55 million ($0.22 per share).
• Production increased to 1,387 MMcfe per day, up 8% from Q1 2021.
• Revenues for Q2 reached $325 million, a 40% increase from the previous year.
• Operating cash flow was strong at $196 million.
• Free cash flow for the first half of 2021 totaled $53 million.
• Successfully refinanced 9.75% notes, saving $28 million annually.

Negative

• Net loss for Q2 2021 was $184.1 million ($0.80 per share).
• Q2 2021 included $114.1 million pre-tax loss from early debt retirement.
• Unrealized loss of $204.8 million on hedging contracts due to price changes.

FRISCO, TX, Aug. 03, 2021 (GLOBE NEWSWIRE) -- Comstock Resources, Inc. ("Comstock" or the "Company") (NYSE: CRK) today reported financial and operating results for the quarter ended June 30, 2021.

Highlights of 2021's Second Quarter

• Adjusted net income to common stockholders was $55 million for the quarter or $0.22 per diluted share.
• Production averaged 1,387 MMcfe per day, comprised of 98% natural gas, and was 8% higher than the first quarter of 2021 and 6% higher than the second quarter of 2020.
• Average realized price, including hedging, was $2.57 per Mcfe compared to $1.96 per Mcfe in 2020's second quarter.
• Revenues, including realized hedging losses, were $325 million, 40% higher than 2020's second quarter.
• Adjusted EBITDAX was $251 million, 55% higher than 2020's second quarter.
• Operating cash flow (excluding working capital changes) was $196 million or $0.71 per diluted share.
• Second quarter capital spending was $172 million, including $8 million for leasing activities.
• Generated free cash flow of $20 million, bringing free cash flow for the first six months of 2021 to $53 million.
• Refinanced 9.75% notes with new 8.5 year 5.875% senior notes, reducing annual interest payments by $28 million and extending senior note maturities to 7.6 years from 6.3 years. Combined with the March 2021 refinancing transaction, future annual interest payments have now been reduced by $48 million.
  
  

Second Quarter 2021 Financial Results

Revenues in the second quarter of 2021 totaled $324.8 million (including realized losses on hedging of $18.8 million). Net cash provided by operating activities (excluding changes in working capital) generated in the second quarter was $196.4 million, and the Company reported a net loss available to common stockholders for the second quarter of $184.1 million ($0.80 per share). The net loss in the quarter was due to a $114.1 million pre-tax loss on the early retirement of the 9.75% senior notes and a $204.8 million unrealized loss on hedging contracts held for risk management. The significant improvement in future natural gas prices since March 31, 2021 drove the unrealized loss on the hedging contracts. Excluding these items and certain other unusual items, adjusted net income available to common stockholders for the second quarter of 2021 was $55.0 million, or $0.22 per diluted share.

Comstock's production cost per Mcfe in the second quarter was $0.59 per Mcfe, which was comprised of $0.25 for gathering and transportation costs, $0.21 for lease operating costs, $0.08 for production and other taxes and $0.05 for cash general and administrative expenses. Production cost was $0.60 per Mcfe in both the first quarter of 2021 and the second quarter of 2020. Comstock's unhedged operating margin was 78% in the second quarter of 2021.

Financial Results for the Six Months Ended June 30, 2021

Revenues reported for the first six months of 2021 totaled $656.9 million (including realized losses on hedging of $27.3 million). Net cash provided by operating activities (excluding changes in working capital) was $403.0 million, and the Company reported a net loss available to common stockholders for the first six months of 2021 of $322.5 million ($1.39 per share). The net loss in the first six months of 2021 included $352.6 million in pre-tax losses on the early retirement of the 9.75% and 7.50% senior notes and a $217.9 million unrealized loss on the change in fair market value of the Company's hedging contracts. Excluding these items and certain other unusual items, adjusted net income available to common stockholders was $118.3 million, or $0.46 per diluted share.

Drilling Results

Comstock drilled 42 (33.5 net) operated horizontal Haynesville/Bossier shale wells in the first six months of 2021 which had an average lateral length of 7,902 feet. Comstock also participated in an additional eight (0.9 net) non-operated Haynesville shale wells in the first six months of 2021. Comstock turned 26 (23.3 net) wells to sales in the first six months of 2021 and currently expects to turn an additional 25 wells (20.8 net) to sales in the third quarter of 2021.

Since its last operational update in May, Comstock has turned 21 (18.5 net) new operated Haynesville/Bossier shale wells to sales. These wells had initial daily production rates of 15 MMcf to 32 MMcf per day, with an average of 22 MMcf per day. The completed lateral length of these wells averaged 8,251 feet. Comstock plans to continue to utilize five operated rigs for the remainder of 2021 for its planned drilling activity, having released one operated rig in May 2021.

Earnings Call Information

Comstock has planned a conference call for 10:00 a.m. Central Time on August 4, 2021, to discuss the second quarter of 2021 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 9664203 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 August 4, 2021 and will continue until 1:00 p.m. August 11, 2021. To hear the replay, call 855-859-2056 (404-537-3406 if calling from outside the US). The conference call access code is 9664203.

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 June 30,										Six Months Ended June 30,
	2021					2020					2021					2020
Revenues:
Natural gas sales	$	321,520				$	172,362				$	645,480				$	379,601
Oil sales	22,173					7,173					38,698					25,812
Total oil and gas sales	343,693					179,535					684,178					405,413
Operating expenses:
Production and ad valorem taxes	10,141					9,569					19,793					17,970
Gathering and transportation	31,736					26,590					61,194					55,001
Lease operating	26,011					27,820					50,574					53,698
Exploration	—					—					—					27
Depreciation, depletion and amortization	121,446					103,347					230,574					213,772
General and administrative	7,872					8,298					15,900					17,017
Gains on asset sales	(9		)			—					(79		)			—
Total operating expenses	197,197					175,624					377,956					357,485
Operating income	146,496					3,911					306,222					47,928
Other income (expenses):
Gain (loss) from derivative financial instruments	(223,958		)			(12,298		)			(245,707		)			49,601
Other income (expense)	530					(9		)			811					304
Interest expense	(56,880		)			(52,064		)			(120,691		)			(104,874		)
Loss on early retirement of debt	(114,060		)			(861		)			(352,599		)			(861		)
Total other expenses	(394,368		)			(65,232		)			(718,186		)			(55,830		)
Loss before income taxes	(247,872		)			(61,321		)			(411,964		)			(7,902		)
Benefit from income taxes	68,177					11,445					98,144					54
Net loss	(179,695		)			(49,876		)			(313,820		)			(7,848		)
Preferred stock dividends and accretion	(4,363		)			(10,126		)			(8,678		)			(22,198		)
Net loss available to common stockholders	$	(184,058	)			$	(60,002	)			$	(322,498	)			$	(30,046	)
Net loss per share:
Basic	$	(0.80	)			$	(0.29	)			$	(1.39	)			$	(0.15	)
Diluted	$	(0.80	)			$	(0.29	)			$	(1.39	)			$	(0.15	)
Weighted average shares outstanding:
Basic	231,428					208,904					231,403					198,910
Diluted (1)	231,428					208,904					231,403					198,910

(1)   Basic and diluted shares outstanding are the same since the effect of unvested restricted stock, performance stock units and preferred stock would be anti-dilutive.

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

	As of
	June 30, 2021				December 31, 2020
ASSETS
Cash and cash equivalents	$	19,727			$	30,272
Accounts receivable	185,976				145,786
Derivative financial instruments	10,765				8,913
Other current assets	8,410				14,839
Total current assets	224,878				199,810
Property and equipment, net	4,195,773				4,084,550
Goodwill	335,897				335,897
Derivative financial instruments	830				661
Operating lease right-of-use assets	6,833				3,025
Other assets	37				40
	$	4,764,248			$	4,623,983
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	292,998			$	259,284
Accrued costs	105,210				133,019
Operating leases	2,190				2,284
Derivative financial instruments	255,127				47,005
Total current liabilities	655,525				441,592
Long-term debt	2,847,309				2,517,149
Deferred income taxes	99,245				200,583
Derivative financial instruments	14,157				2,364
Long-term operating leases	4,674				740
Reserve for future abandonment costs	20,748				19,290
Other non-current liabilities	180				492
Total liabilities	3,641,838				3,182,210
Mezzanine equity:
Preferred stock	175,000				175,000
Stockholders' equity:
Common stock	116,425				116,206
Additional paid-in capital	1,098,300				1,095,384
Accumulated earnings (deficit)	(267,315		)		55,183
Total stockholders' equity	947,410				1,266,773
	$	4,764,248			$	4,623,983

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

	Three Months Ended June 30,									Six Months Ended June 30,
	2021					2020				2021					2020
Gas production (MMcf)	124,083					116,477				237,376					239,263
Oil production (Mbbls)	362					360				688					814
Total production (MMcfe)	126,260					118,631				241,506					244,144
Natural gas sales	$	321,520				$	172,362			$	645,480				$	379,601
Natural gas hedging settlements (1)	(16,879		)			46,791				(24,369		)			89,796
Total natural gas including hedging	304,641					219,153				621,111					469,397
Oil sales	22,173					7,173				38,698					25,812
Oil hedging settlements (1)	(1,965		)			6,434				(2,883		)			8,844
Total oil including hedging	20,208					13,607				35,815					34,656
Total oil and gas sales including hedging	$	324,849				$	232,760			$	656,926				$	504,053
Average gas price (per Mcf)	$	2.59				$	1.48			$	2.72				$	1.59
Average gas price including hedging (per Mcf)	$	2.46				$	1.88			$	2.62				$	1.96
Average oil price (per barrel)	$	61.25				$	19.97			$	56.25				$	31.72
Average oil price including hedging (per barrel)	$	55.82				$	37.89			$	52.06				$	42.59
Average price (per Mcfe)	$	2.72				$	1.51			$	2.83				$	1.66
Average price including hedging (per Mcfe)	$	2.57				$	1.96			$	2.72				$	2.06
Production and ad valorem taxes	$	10,141				$	9,569			$	19,793				$	17,970
Gathering and transportation	31,736					26,590				61,194					55,001
Lease operating	26,011					27,820				50,574					53,698
Cash general and administrative (2)	6,073					6,746				12,411					14,035
Total production costs	$	73,961				$	70,725			$	143,972				$	140,704
Production and ad valorem taxes (per Mcfe)	$	0.08				$	0.08			$	0.08				$	0.07
Gathering and transportation (per Mcfe)	0.25					0.22				0.25					0.23
Lease operating (per Mcfe)	0.21					0.24				0.21					0.22
Cash general and administrative (per Mcfe)	0.05					0.06				0.05					0.06
Total production costs (per Mcfe)	$	0.59				$	0.60			$	0.59				$	0.58
Unhedged operating margin	78			%		61		%		79			%		65		%
Hedged operating margin	77			%		70		%		78			%		72		%
Oil and Gas Capital Expenditures:
Exploratory leasehold	$	7,625				$	—			$	13,401				$	—
Development leasehold	2,005					2,455				6,061					6,336
Development drilling and completion	157,648					61,422				312,887					183,480
Other development	5,151					10,857				8,931					15,418
Total	$	172,429				$	74,734			$	341,280				$	205,234

(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 June 30,										Six Months Ended June 30,
	2021					2020					2021					2020
ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS:
Net loss available to common stockholders	$	(184,058	)			$	(60,002	)			$	(322,498	)			$	(30,046	)
Loss on early retirement of debt	114,060					861					352,599					861
Unrealized loss from derivative financial instruments	204,822					65,585					217,894					49,102
Non-cash interest amortization from adjusting debt assumed in acquisition to fair value	2,470					5,425					7,397					10,680
Gains on asset sales	(9		)			—					(79		)			—
Impairment of unevaluated oil and gas properties	—					—					—					27
Non-cash accretion from adjusting preferred stock issued in acquisition to fair value	—					2,917					—					5,417
Adjustment to provision for income taxes	(82,236		)			(13,043		)			(137,007		)			(8,048		)
Adjusted net income available to common stockholders (1)	$	55,049				$	1,743				$	118,306				$	27,993
Adjusted net income available to common stockholders per share (2)	$	0.22				$	0.01				$	0.46				$	0.14
Diluted shares outstanding	275,211					208,904				(3)	275,153					198,910				(3)

ADJUSTED EBITDAX:
Net loss	$	(179,695	)			$	(49,876	)			$	(313,820	)			$	(7,848	)
Interest expense (4)	57,172					52,001					121,252					104,811
Income taxes	(68,177		)			(11,445		)			(98,144		)			(54		)
Depreciation, depletion, and amortization	121,446					103,347					230,574					213,772
Exploration	—					—					—					27
Unrealized loss from derivative financial instruments	204,822					65,585					217,894					49,102
Stock-based compensation	1,799					1,552					3,489					2,982
Loss on early retirement of debt	114,060					861					352,599					861
Gains on asset sales	(9		)			—					(79		)			—
Total Adjusted EBITDAX (5)	$	251,418				$	162,025				$	513,765				$	363,653

(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 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)   Basic and diluted shares outstanding are the same since the effect of unvested restricted stock, performance stock units and preferred stock would be anti-dilutive.

(4)   Includes realized gains or losses from interest rate derivative financial instruments.

(5)   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 June 30,										Six Months Ended June 30,
	2021					2020					2021					2020
OPERATING CASH FLOW(1):
Net loss	$	(179,695	)			$	(49,876	)			$	(313,820	)			$	(7,848	)
Reconciling items:
Loss on early retirement of debt	114,060					861					352,599					861
Deferred income tax benefit	(71,131		)			(11,536		)			(101,281		)			(206		)
Depreciation, depletion and amortization	121,446					103,347					230,574					213,772
Unrealized loss from derivative financial instruments	204,822					65,585					217,894					49,102
Amortization of debt discount and issuance costs	5,086					7,527					13,575					14,726
Stock-based compensation	1,799					1,552					3,489					2,982
Exploration	—					—					—					27
Gains on asset sales	(9		)			—					(79		)			—
Operating cash flow	196,378					117,460					402,951					273,416
Decrease (increase) in accounts receivable	(33,158		)			28,875					(40,190		)			83,172
Decrease (increase) in other current assets	750					1,025					5,528					(2,803		)
Increase (decrease) in accounts payable and accrued expenses	28,341					(31,388		)			17,294					(87,694		)
Net cash provided by operating activities	$	192,311				$	115,972				$	385,583				$	266,091

	Three Months Ended June 30,										Six Months Ended June 30,
	2021					2020					2021					2020
FREE CASH FLOW(2):
Operating cash flow	$	196,378				$	117,460				$	402,951				$	273,416
Less:
Capital expenditures	(172,429		)			(74,734		)			(341,280		)			(205,234		)
Preferred dividends	(4,363		)			(7,210		)			(8,678		)			(16,782		)
Free cash flow	$	19,586				$	35,516				$	52,993				$	51,400

(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 is presented in the earnings release because management believes it to be a useful indicator of the Company's ability to internally fund acquisitions and debt maturities after capital expenditures and preferred dividend payments.

FAQ

What were Comstock Resources' financial results for Q2 2021?

Comstock reported an adjusted net income of $55 million for Q2 2021, with revenues of $325 million, reflecting a 40% increase from the previous year.

How much did Comstock's production increase in Q2 2021?

Production averaged 1,387 MMcfe per day in Q2 2021, an 8% increase compared to Q1 2021.

What was the net loss reported by Comstock Resources for the second quarter of 2021?

The company reported a net loss of $184.1 million for Q2 2021.

How did Comstock Resources perform in terms of free cash flow in the first half of 2021?

Comstock generated a total free cash flow of $53 million in the first six months of 2021.

What significant financial changes did Comstock make in Q2 2021?

The company successfully refinanced its 9.75% senior notes, reducing annual interest payments by $28 million.