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


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Source: Comstock Resources, Inc.

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.

 

Ronald Mills
VP - Finance & Investor Relations
972-668-8834
[email protected]


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