COMSTOCK RESOURCES, INC. REPORTS THIRD QUARTER 2022 FINANCIAL AND OPERATING RESULTS AND ANNOUNCES REINSTATEMENT OF QUARTERLY DIVIDEND

Rhea-AI Summary

Comstock Resources reported record financial results for Q3 2022, achieving an operating cash flow of $533 million and free cash flow of $286 million. The company retired $250 million in debt, reducing leverage to under 1x. Adjusted net income was $326 million, equating to $1.18 per diluted share, with revenues reaching $692 million—76% higher than Q3 2021. The Board reinstated a quarterly dividend of $0.125 per share, the first since 2014, payable on December 15, 2022. Comstock's drilling program in the Haynesville shale contributed significantly, with 17 wells turned to sales averaging 29 MMcf per day.

Positive

• Operating cash flow reached a record $533 million.
• Free cash flow from operations was $286 million.
• Adjusted net income was $326 million, or $1.18 per diluted share.
• Revenue of $692 million, up 76% from Q3 2021.
• Board approved reinstatement of quarterly dividend at $0.125 per share.

Negative

• Production costs increased to $0.82 per Mcfe from $0.74 in Q2 2022.

FRISCO, TX, Nov. 01, 2022 (GLOBE NEWSWIRE) -- Comstock Resources, Inc. ("Comstock" or the "Company") (NYSE: CRK) today reported financial and operating results for the quarter ended September 30, 2022.

Highlights of 2022's Third Quarter

• Generated highest quarterly operating cash flow in the Company's history of $533 million or $1.92 per diluted share.
• Free cash flow from operations was $286 million in the quarter.
• Retired $250 million of debt in the third quarter and reduced leverage to under 1x.
• Adjusted net income to common stockholders for the quarter was $326 million or $1.18 per diluted share.
• Adjusted EBITDAX increased 93% in the quarter to a record high $598 million.
• Oil and gas sales, including realized hedging losses, were $692 million, 76% higher than 2021's third quarter.
• Strong results from Haynesville shale drilling program with 17 (15.2 net) operated wells turned to sales since our last update with an average initial production of 29 MMcf per day.
• Board of directors approved reinstatement of a quarterly common stock dividend to commence in the fourth quarter.

Commenting on the quarter, Jay Allison, the Company's Chief Executive Officer said, "Comstock delivered record cash flow and free cash flow from operations in the third quarter. The record-setting financial results we have had so far this year have repositioned our balance sheet to be a strength of the Company and has allowed us to reinstate our quarterly cash dividend."

Financial Results for the Three Months Ended September 30, 2022

Comstock's revenues in the third quarter of 2022 totaled $692.4 million (after realized hedging losses of $304.5 million). Net cash provided by operating activities (excluding changes in working capital) generated in the third quarter was $532.9 million, and net income available to common stockholders for the third quarter of 2022 was $351.2 million or $1.28 per share. Reported net income in the quarter included a pre-tax $33.2 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 third quarter of 2022 was $325.6 million, or $1.18 per diluted share.

Comstock's production cost per Mcfe in the third quarter averaged $0.82 per Mcfe, which was comprised of $0.35 for gathering and transportation costs, $0.22 for lease operating costs, $0.19 for production and other taxes and $0.06 for cash general and administrative expenses. Production cost was $0.74 per Mcfe in the second quarter of 2022 and $0.65 in the third quarter of 2021. The increase in production cost in the quarter is attributable to the higher natural gas prices realized this year which has resulted in higher production tax and higher gathering and transportation expenses. Comstock's unhedged operating margin was 89% in the third quarter of 2022 and 85% after hedging. Comstock's margin is one of the highest in the industry.

Financial Results for the Nine Months Ended September 30, 2022

Revenues for the nine months ended September 30, 2022 totaled $1.7 billion (after realized hedging losses of $679.0 million). Net cash provided by operating activities (excluding changes in working capital) generated during the first nine months of 2022 was $1.3 billion, and income available to common stockholders was $608.0 million or $2.24 per share. Net income during the first nine months of 2022 included a pre-tax $102.6 million unrealized loss on hedging contracts held for risk management and a $46.8 million loss on early retirement of debt. Excluding these items and certain other items, adjusted net income available to common stockholders for the nine months ended September 30, 2022 was $735.0 million or $2.68 per diluted share.

Comstock's production cost per Mcfe during the nine months ended September 30, 2022 averaged $0.75 per Mcfe, which was comprised of $0.31 for gathering and transportation costs, $0.22 for lease operating costs, $0.16 for production and other taxes and $0.06 for cash general and administrative expenses. Production cost was $0.61 per Mcfe for the nine months ended September 30, 2021. The higher 2022 production costs are attributable to higher 2022 realized natural gas prices. Comstock's unhedged operating margin was 88% during the first nine months of 2022 and 84% after hedging.

Drilling Results

Comstock drilled 21 (14.8 net) operated horizontal Haynesville/Bossier shale wells in the third quarter of 2022 which had an average lateral length of 10,275 feet. The Company also participated in an additional seven (0.7 net) non-operated Haynesville shale wells in the third quarter of 2022. Comstock turned 17 (15.2 net) operated wells and 18 (0.6 net) non-operated wells to sales in the third quarter of 2022 and currently expects to turn an additional 11 (8.7 net) operated wells to sales in the fourth quarter of 2022.

Since its last operational update in August, Comstock has turned 17 (15.2 net) operated Haynesville/Bossier shale wells to sales. These wells had initial daily production rates that averaged 29 MMcf per day. The completed lateral length of these wells averaged 9,899 feet.

Reinstatement of Quarterly Dividend

Comstock's Board of Directors approved the reinstatement of the Company's quarterly cash dividend, with the first dividend to be paid in the fourth quarter of 2022, at an annual dividend rate of $0.50 per share ($0.125 per quarter). Comstock last paid a common dividend in 2014. The fourth quarter dividend will be payable on December 15, 2022 to stockholders of record at the close of business on December 1, 2022.

Earnings Call Information

Comstock has planned a conference call for 9:00 a.m. Central Time on November 2, 2022, to discuss the third quarter 2022 operational and financial results. Investors wishing to listen 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/BI39ce5cb8026c4144ae9a888f217e28ae. 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/uhgfab48.

If you are unable to participate in the original conference call, a web replay will be available for twelve months beginning at 12:00 p.m. CT on November 2, 2022. The replay of the conference can be accessed using the webcast link: https://edge.media-server.com/mmc/p/uhgfab48.

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 September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
Revenues:
Natural gas sales	$	994,979			$	488,303			$	2,376,774			$	1,133,783
Oil sales		1,936				22,873				6,324				61,571
Total oil and gas sales		996,915				511,176				2,383,098				1,195,354
Gas services		193,090				—				322,575				—
Total revenues		1,190,005				511,176				2,705,673				1,195,354
Operating expenses:
Production and ad valorem taxes		24,531				16,675				60,080				36,468
Gathering and transportation		44,740				35,402				113,797				96,596
Lease operating		28,608				26,576				79,873				77,150
Exploration		—				—				3,363				—
Depreciation, depletion and amortization		129,065				128,739				354,994				359,313
Gas services		181,818				—				305,271				—
General and administrative		10,165				8,052				27,451				23,952
Gain on sale of assets		—				(14	)			(21	)			(93	)
Total operating expenses		418,927				215,430				944,808				593,386
Operating income		771,078				295,746				1,760,865				601,968
Other income (expenses):
Loss from derivative financial instruments		(271,335	)			(510,319	)			(781,654	)			(756,026	)
Other income		56				197				506				1,008
Interest expense		(41,393	)			(49,954	)			(132,204	)			(170,645	)
Loss on early retirement of debt		—				—				(46,840	)			(352,599	)
Total other expenses		(312,672	)			(560,076	)			(960,192	)			(1,278,262	)
Income (loss) before income taxes		458,406				(264,330	)			800,673				(676,294	)
(Provision for) benefit from income taxes		(102,810	)			(23,976	)			(179,610	)			74,168
Net income (loss)		355,596				(288,306	)			621,063				(602,126	)
Preferred stock dividends		(4,411	)			(4,411	)			(13,089	)			(13,089	)
Net income (loss) available to common stockholders	$	351,185			$	(292,717	)		$	607,974			$	(615,215	)
Net income (loss) per share:
Basic	$	1.50			$	(1.26	)		$	2.61			$	(2.66	)
Diluted	$	1.28			$	(1.26	)		$	2.24			$	(2.66	)
Weighted average shares outstanding:
Basic		232,482				231,747				232,170				231,519
Diluted		277,715				231,747				277,605				231,519

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

	Three Months Ended September 30,												Nine Months Ended September 30,
						2021												2021
		2022			Pro Forma (3)				As Reported					2022			Pro Forma (3)				As Reported
Gas production (MMcf)		128,902				127,121				128,896				367,758				361,248				366,272
Oil production (Mbbls)		21				29				346				66				75				1,034
Total production (MMcfe)		129,025				127,296				130,968				368,152				361,700				372,474
Natural gas sales	$	994,979			$	484,012			$	488,303			$	2,376,774			$	1,123,967			$	1,133,783
Natural gas hedging settlements (1)		(304,489	)			(114,538	)			(114,538	)			(679,038	)			(138,907	)			(138,907	)
Total natural gas including hedging		690,490				369,474				373,765				1,697,736				985,060				994,876
Oil sales		1,936				1,941				22,873				6,324				4,684				61,571
Oil hedging settlements (1)		—				—				(2,606	)			—				—				(5,489	)
Total oil including hedging		1,936				1,941				20,267				6,324				4,684				56,082
Total oil and gas sales including hedging	$	692,426			$	371,415			$	394,032			$	1,704,060			$	989,744			$	1,050,958
Average gas price (per Mcf)	$	7.72			$	3.81			$	3.79			$	6.46			$	3.11			$	3.10
Average gas price including hedging (per Mcf)	$	5.36			$	2.91			$	2.90			$	4.62			$	2.73			$	2.72
Average oil price (per barrel)	$	92.19			$	66.93			$	66.11			$	95.82			$	62.45			$	59.55
Average oil price including hedging (per barrel)	$	92.19			$	66.93			$	58.58			$	95.82			$	62.45			$	54.24
Average price (per Mcfe)	$	7.73			$	3.82			$	3.90			$	6.47			$	3.12			$	3.21
Average price including hedging (per Mcfe)	$	5.37			$	2.92			$	3.01			$	4.63			$	2.74			$	2.82
Production and ad valorem taxes	$	24,531			$	14,508			$	16,675			$	60,080			$	30,589			$	36,468
Gathering and transportation		44,740				35,349				35,402				113,797				96,543				96,596
Lease operating		28,608				23,747				26,576				79,873				67,613				77,150
Cash general and administrative (2)		8,323				6,250				6,250				22,533				18,661				18,661
Total production costs	$	106,202			$	79,854			$	84,903			$	276,283			$	213,406			$	228,875
Production and ad valorem taxes (per Mcfe)	$	0.19			$	0.11			$	0.13			$	0.16			$	0.08			$	0.09
Gathering and transportation (per Mcfe)		0.35				0.28				0.27				0.31				0.27				0.26
Lease operating (per Mcfe)		0.22				0.19				0.20				0.22				0.19				0.21
Cash general and administrative (per Mcfe)		0.06				0.05				0.05				0.06				0.05				0.05
Total production costs (per Mcfe)	$	0.82			$	0.63			$	0.65			$	0.75			$	0.59			$	0.61
Unhedged operating margin		89	%			84	%			83	%			88	%			81	%			81	%
Hedged operating margin		85	%			79	%			78	%			84	%			78	%			78	%
Oil and gas capital expenditures:
Proved property acquisitions	$	—			$	—			$	—			$	205			$	—			$	—
Unproved property acquisitions		12,214				5,248				5,248				37,396				18,649				18,649
Total oil and gas properties acquisitions	$	12,214			$	5,248			$	5,248			$	37,601			$	18,649			$	18,649
Exploration and development:
Development leasehold	$	3,011			$	721			$	733			$	8,298			$	6,759			$	6,794
Exploratory drilling and completion		18,606				—				—				49,003				—				—
Development drilling and completion		204,954				141,637				141,637				619,373				454,524				454,524
Other development costs		15,563				17,171				18,719				52,500				22,511				26,795
Total exploration and development capital expenditures	$	242,134			$	159,529			$	161,089			$	729,174			$	483,794			$	488,113

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

(2)   Excludes stock-based compensation.

(3)   Excludes results of the Company's Bakken shale assets, which were sold in October 2021.

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

	Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS:
Net income (loss) available to common stockholders	$	351,185			$	(292,717	)		$	607,974			$	(615,215	)
Unrealized (gain) loss from derivative financial instruments		(33,154	)			392,870				102,616				610,764
Loss on early retirement of debt		—				—				46,840				352,599
Non-cash interest amortization from adjusting debt assumed in acquisition to fair value		—				2,565				4,174				9,962
Exploration expense		—				—				3,363				—
Gain on sale of assets		—				(14	)			(21	)			(93	)
Adjustment to (provision for) benefit from income taxes		7,580				(11,169	)			(29,959	)			(153,777	)
Adjusted net income available to common stockholders (1)	$	325,611			$	91,535			$	734,987			$	204,240
Adjusted net income available to common stockholders per share (2)	$	1.18			$	0.35			$	2.68			$	0.79
Diluted shares outstanding		277,715				276,886				277,605				276,368

ADJUSTED EBITDAX:
Net income (loss)	$	355,596			$	(288,306	)		$	621,063			$	(602,126	)
Interest expense (3)		41,393				50,259				132,204				171,511
Income taxes		102,810				23,976				179,610				(74,168	)
Depreciation, depletion, and amortization		129,065				128,739				354,994				359,313
Exploration		—				—				3,363				—
Unrealized (gain) loss from derivative financial instruments		(33,154	)			392,870				102,616				610,764
Stock-based compensation		1,842				1,802				4,918				5,291
Loss on early extinguishment of debt		—				—				46,840				352,599
Gain on sale of assets		—				(14	)			(21	)			(93	)
Total Adjusted EBITDAX (4)	$	597,552			$	309,326			$	1,445,587			$	823,091

(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 September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
OPERATING CASH FLOW(1):
Net income (loss)	$	355,596			$	(288,306	)		$	621,063			$	(602,126	)
Reconciling items:
Unrealized (gain) loss from derivative financial instruments		(33,154	)			392,870				102,616				610,764
Deferred income taxes (benefit)		78,060				16,339				148,389				(84,942	)
Depreciation, depletion and amortization		129,065				128,739				354,994				359,313
Loss on early retirement of debt		—				—				46,840				352,599
Amortization of debt discount and issuance costs		1,444				4,012				8,542				17,587
Stock-based compensation		1,842				1,802				4,918				5,291
Gain on sale of assets		—				(14	)			(21	)			(93	)
Operating cash flow	$	532,853			$	255,442			$	1,287,341			$	658,393
Increase in accounts receivable		(155,682	)			(57,189	)			(359,600	)			(97,379	)
(Increase) decrease in other current assets		(15,494	)			(4,678	)			(25,214	)			850
Increase in accounts payable and accrued expenses		156,873				39,395				301,956				56,689
Net cash provided by operating activities	$	518,550			$	232,970			$	1,204,483			$	618,553

	Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
FREE CASH FLOW(2):
Operating cash flow	$	532,853			$	255,442			$	1,287,341			$	658,393
Less:
Exploration and development capital expenditures		(242,134	)			(161,089	)			(729,174	)			(488,113	)
Other capital expenditures		(603	)			(23	)			(713	)			(69	)
Preferred dividends		(4,411	)			(4,411	)			(13,089	)			(13,089	)
Free cash flow from operations	$	285,705			$	89,919			$	544,365			$	157,122
Acquisitions		(12,347	)			(5,248	)			(54,492	)			(18,649	)
Proceeds from divestitures		—				50				93				261
Free cash flow after acquisition and divestiture activity	$	273,358			$	84,721			$	489,966			$	138,734

(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 and debt maturities after exploration and development capital expenditures, preferred dividend payments, proved and unproved property acquisitions, and proceeds from divestiture of oil and gas properties.

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

	September 30, 2022			December 31, 2021
ASSETS
Cash and cash equivalents	$	38,648		$	30,663
Accounts receivable		627,338			267,738
Derivative financial instruments		2,368			5,258
Other current assets		40,470			15,077
Total current assets		708,824			318,736
Property and equipment, net		4,440,022			4,007,146
Goodwill		335,897			335,897
Operating lease right-of-use assets		99,622			6,450
	$	5,584,365		$	4,668,229
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	617,463		$	314,569
Accrued costs		150,327			135,026
Operating leases		38,024			2,444
Derivative financial instruments		285,713			181,945
Total current liabilities		1,091,527			633,984
Long-term debt		2,261,697			2,615,235
Deferred income taxes		345,806			197,417
Derivative financial instruments		—			4,042
Long-term operating leases		61,676			4,075
Asset retirement obligation		29,235			25,673
Other non-current liabilities		8			24
Total liabilities		3,789,949			3,480,450
Mezzanine Equity:
Preferred stock		175,000			175,000
Stockholders' Equity:
Common stock		116,879			116,462
Additional paid-in capital		1,098,605			1,100,359
Accumulated earnings (deficit)		403,932			(204,042	)
Total stockholders' equity		1,619,416			1,012,779
	$	5,584,365		$	4,668,229

FAQ

What was Comstock Resources' operating cash flow in Q3 2022?

Comstock Resources reported an operating cash flow of $533 million in Q3 2022.

What is the dividend amount approved by Comstock's Board for Q4 2022?

The Board approved a quarterly dividend of $0.125 per share for Q4 2022.

When will Comstock's dividend be paid?

The dividend will be paid on December 15, 2022, to shareholders of record on December 1, 2022.

How much debt did Comstock retire in Q3 2022?

Comstock retired $250 million of debt in Q3 2022.

What was the revenue for Comstock in Q3 2022?

Comstock reported revenues of $692 million for Q3 2022.