Highlights of 2023‘s Second Quarter

  • Weak natural gas prices have weighed heavily on the second quarter results.
  • Natural gas and oil sales, including realized hedging gains, were $285 million.
  • Operating cash flow was $145 million or $0.53 per diluted share.
  • Adjusted EBITDAX for the quarter was $182 million.
  • Adjusted net income was just over break even for the quarter.
  • Solid results from Haynesville shale drilling program with 15 (12.0 net) operated wells turned to sales since the Company’s last update with an average initial production of 21 MMcf per day.
  • Comstock continues to have success in its Western Haynesville exploratory play. Comstock’s fourth and fifth well were recently turned to sales with strong initial production rates.

Financial Results for the Three Months Ended June 30, 2023

Comstock’s natural gas and oil sales in the second quarter of 2023 totaled $285.2 million (including realized hedging gains of $55.5 million). Operating cash flow (excluding changes in working capital) generated in the second quarter of 2023 was $145.5 million, and net loss available to common stockholders for the second quarter was $45.7 million or $0.17 per share. The reported net loss in the quarter included a pre-tax $60.0 million unrealized loss on hedging contracts held for risk management. Excluding this item and certain other items, adjusted net income available to common stockholders for the second quarter of 2023 was $1.0 million, or $0.00 per diluted share.

Comstock’s production cost per Mcfe in the second quarter averaged $0.84 per Mcfe, which was comprised of $0.36 for gathering and transportation costs, $0.27 for lease operating costs, $0.15 for production and other taxes and $0.06 for cash general and administrative expenses. Comstock’s unhedged operating margin was 54% in the second quarter of 2023 and 63% after hedging.

Financial Results for the Six Months Ended June 30, 2023

Natural gas and oil sales for the six months ended June 30, 2023 totaled $675.6 million (including realized hedging gains of $65.9 million). Operating cash flow (excluding changes in working capital) generated during the first six months of 2023 was $400.4 million, and net income available to common stockholders was $88.8 million or $0.32 per share. Net income during the first six months of 2023 included a pre-tax $4.0 million unrealized loss on hedging contracts held for risk management. Excluding this item and certain other items, adjusted net income available to common stockholders for the six months ended June 30, 2023 was $93.0 million or $0.33 per diluted share.

Comstock’s production cost per Mcfe during the six months ended June 30, 2023 averaged $0.84 per Mcfe, which was comprised of $0.36 for gathering and transportation costs, $0.27 for lease operating costs, $0.14 for production and other taxes and $0.07 for cash general and administrative expenses. Comstock’s unhedged operating margin was 65% during the first six months of 2023 and 69% after hedging.

Drilling Results

Comstock drilled 21 (17.2 net) operated horizontal Haynesville/Bossier shale wells in the second quarter of 2023 which had an average lateral length of 10,887 feet. Comstock turned 17 (13.0 net) operated wells to sales in the second quarter of 2023.

Since its last operational update in May, Comstock has turned 15 (12.0 net) operated Haynesville/Bossier shale wells to sales. These wells had initial daily production rates that averaged 21 MMcf per day. The completed lateral length of these wells averaged 10,671 feet.

Included in the wells turned to sales were the Dinkins JG #1 and the McCullough Ingram A #1, Comstock’s fourth and fifth successful Western Haynesville wells. The Dinkins well was drilled to a total vertical depth of 18,042 feet and has a 9,565 foot completed lateral. The well’s initial production rate was 34 MMcf per day. The McCullough Ingram well was drilled to a total vertical depth of 17,836 feet and has a 8,256 foot completed lateral. The well’s initial production rate was 35 MMcf per day.

Declaration of Quarterly Dividend

On July 31, 2023, Comstock’s Board of Directors declared a quarterly dividend of $0.125 per common share. The dividend will be payable on September 15, 2023 to stockholders of record at the close of business on September 1, 2023.

Earnings Call Information

Comstock has planned a conference call for 10:00 a.m. Central Time on August 1, 2023, to discuss the second quarter 2023 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/BId240081b2bc14ea8931c4866b16b9dbd. 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/mtj2p68k.

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. CT on August 1, 2023. The replay of the conference can be accessed using the webcast link: https://edge.media-server.com/mmc/p/mtj2p68k.

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
June 30,		 Six Months Ended
June 30,
2023 2022 2023 2022
Revenues:
Natural gas sales $         228,892 $         858,838 $         606,924 $         1,381,795
Oil sales         860         2,504         2,802         4,388
Total natural gas and oil sales         229,752         861,342         609,726         1,386,183
Gas services         58,459         84,912         168,063         129,485
Total revenues         288,211         946,254         777,789         1,515,668
Operating expenses:
Production and ad valorem taxes         19,599         21,729         34,505         35,549
Gathering and transportation         45,395         36,964         90,969         69,057
Lease operating         34,031         25,079         68,861         51,265
Exploration         —         2,342         1,775         3,363
Depreciation, depletion and amortization         140,177         119,201         274,160         225,929
Gas services         55,390         82,778         156,685         123,453
General and administrative         10,038         9,063         22,406         17,286
Loss (gain) on sale of assets         648         (19 )         (125 )         (21 )
Total operating expenses         305,278         297,137         649,236         525,881
Operating income (loss)         (17,067 )         649,117         128,553         989,787
Other income (expenses):
Gain (loss) from derivative financial instruments         (4,495 )         (72,826 )         61,914         (510,319 )
Other income         598         182         1,058         450
Interest expense         (39,188 )         (44,320 )         (77,458 )         (90,811 )
Loss on early retirement of debt         —         (46,840 )         —         (46,840 )
Total other expenses         (43,085 )         (163,804 )         (14,486 )         (647,520 )
Income (loss) before income taxes         (60,152 )         485,313         114,067         342,267
(Provision for) benefit from income taxes         14,446         (108,422 )         (25,270 )         (76,800 )
Net income (loss)         (45,706 )         376,891         88,797         265,467
Preferred stock dividends         —         (4,363 )         —         (8,678 )
Net income (loss) available to common stockholders $         (45,706 ) $         372,528 $         88,797 $         256,789
Net income (loss) per share:
Basic $         (0.17 ) $         1.60 $         0.32 $         1.10
Diluted $         (0.17 ) $         1.36 $         0.32 $         0.96
Weighted average shares outstanding:
Basic         276,669         232,045         276,610         232,011
Diluted         276,669         277,614         276,610         277,485
Dividends per share $         0.125 $         — $         0.25 $         —

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

Three Months Ended June 30, Six Months Ended June 30,
2023 2022 2023 2022
Natural gas production (MMcf)         126,307         123,950         253,374         238,856
Oil production (Mbbls)         13         24         40         45
Total production (MMcfe)         126,386         124,092         253,612         239,127
Natural gas sales $         228,892 $         858,838 $         606,924 $         1,381,795
Natural gas hedging settlements (1)         55,494         (257,363 )         65,877         (374,549 )
Total natural gas including hedging         284,386         601,475         672,801         1,007,246
Oil sales         860         2,504         2,802         4,388
Total natural gas and oil sales including hedging $         285,246 $         603,979 $         675,603 $         1,011,634
Average natural gas price (per Mcf) $         1.81 $         6.93 $         2.40 $         5.79
Average natural gas price including hedging (per Mcf) $         2.25 $         4.85 $         2.66 $         4.22
Average oil price (per barrel) $         66.15 $         104.33 $         70.05 $         97.51
Average price (per Mcfe) $         1.82 $         6.94 $         2.40 $         5.80
Average price including hedging (per Mcfe) $         2.26 $         4.87 $         2.66 $         4.23
Production and ad valorem taxes $         19,599 $         21,729 $         34,505 $         35,549
Gathering and transportation         45,395         36,964         90,969         69,057
Lease operating         34,031         25,079         68,861         51,265
Cash general and administrative (2)         7,733         7,482         18,054         14,210
Total production costs $         106,758 $         91,254 $         212,389 $         170,081
Production and ad valorem taxes (per Mcfe) $         0.15 $         0.18 $         0.14 $         0.15
Gathering and transportation (per Mcfe)         0.36         0.30         0.36         0.29
Lease operating (per Mcfe)         0.27         0.20         0.27         0.21
Cash general and administrative (per Mcfe)         0.06         0.06         0.07         0.06
Total production costs (per Mcfe) $         0.84 $         0.74 $         0.84 $         0.71
Unhedged operating margin 54 % 89 % 65 % 88 %
Hedged operating margin 63 % 85 % 69 % 83 %
Gas services revenue $         58,459 $         84,912 $         168,063 $         129,485
Gas services expenses         55,390         82,778         156,685         123,453
Gas services margin         3,069         2,134         11,378         6,032
Natural Gas and Oil Capital Expenditures:
Proved property acquisitions $         — $         (69 ) $         — $         205
Unproved property acquisitions         15,953         21,551         56,648         25,182
Total natural gas and oil properties acquisitions $         15,953 $         21,482 $         56,648 $         25,387
Exploration and Development:
Development leasehold $         4,975 $         655 $         13,718 $         5,287
Exploratory drilling and completion         74,622         18,840         104,312         30,397
Development drilling and completion         231,038         225,371         511,214         414,419
Other development costs         11,353         18,325         17,450         36,937
Total exploration and development capital expenditures $         321,988 $         263,191 $         646,694 $         487,040

(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,
2023 2022 2023 2022
ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS:
Net income (loss) available to common stockholders $         (45,706 ) $         372,528 $         88,797 $         256,789
Unrealized (gain) loss from derivative financial instruments         59,989         (184,537 )         3,963         135,770
Loss on early retirement of debt         —         46,840         —         46,840
Non-cash interest amortization from adjusting debt assumed in
acquisition to fair value		         —         1,414         —         4,174
Exploration expense         —         2,342         1,775         3,363
Loss (gain) on sale of assets         648         (19 )         (125 )         (21 )
Adjustment to (provision for) benefit from income taxes         (13,892 )         35,050         (1,364 )         (37,539 )
Adjusted net income available to common stockholders (1) $         1,039 $         273,618 $         93,046 $         409,376
Adjusted net income available to common stockholders per share (2) $         — $         1.00 $         0.33 $         1.50
Diluted shares outstanding         276,669         277,614         276,610         277,484

ADJUSTED EBITDAX:
Net income (loss) $         (45,706 ) $         376,891 $         88,797 $         265,467
Interest expense         39,188         44,320         77,458         90,811
Income taxes         (14,446 )         108,422         25,270         76,800
Depreciation, depletion, and amortization         140,177         119,201         274,160         225,929
Exploration         —         2,342         1,775         3,363
Unrealized (gain) loss from derivative financial instruments         59,989         (184,537 )         3,963         135,770
Stock-based compensation         2,305         1,581         4,351         3,076
Loss on early extinguishment of debt         —         46,840         —         46,840
Loss (gain) on sale of assets         648         (19 )         (125 )         (21 )
Total Adjusted EBITDAX (3) $         182,155 $         515,041 $         475,649 $         848,035

(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)   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,
2023 2022 2023 2022
OPERATING CASH FLOW(1):
Net income (loss) $         (45,706 ) $         376,891 $         88,797 $         265,467
Reconciling items:
Unrealized (gain) loss from derivative financial instruments         59,989         (184,537 )         3,963         135,770
Deferred income taxes (benefit)         (13,910 )         95,117         25,270         70,329
Depreciation, depletion and amortization         140,177         119,201         274,160         225,929
Loss on early retirement of debt         —         46,840         —         46,840
Amortization of debt discount and issuance costs         1,994         2,873         3,991         7,098
Stock-based compensation         2,305         1,581         4,351         3,076
Loss (gain) on sale of assets         648         (19 )         (125 )         (21 )
Operating cash flow $         145,497 $         457,947 $         400,407 $         754,488
(Increase) decrease in accounts receivable         60,218         (232,043 )         316,210         (203,918 )
(Increase) decrease in other current assets         2,715         (2,104 )         1,201         881
Increase in accounts payable and accrued expenses         123,080         187,116         56         145,083
Net cash provided by operating activities $         331,510 $         410,916 $         717,874 $         696,534

Three Months Ended June 30, Six Months Ended
June 30,
2023 2022 2023 2022
FREE CASH FLOW(2):
Operating cash flow $         145,497 $         457,947 $         400,407 $         754,488
Less:
Exploration and development capital expenditures         (321,988 )         (263,191 )         (646,694 )         (487,040 )
Other capital expenditures         (6,970 )         (18,057 )         (11,513 )         (18,079 )
Preferred stock dividends         —         (4,363 )         —         (8,678 )
Free cash flow (deficit) from operations $         (183,461 ) $         172,336 $         (257,800 ) $         240,691
Acquisitions of natural gas and oil properties         (15,953 )         (21,482 )         (56,648 )         (25,387 )
Proceeds from divestitures         41,165         48         41,295         93
Free cash flow (deficit) after acquisition and divestiture activity $         (158,249 ) $         150,902 $         (273,153 ) $         215,397

(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 natural gas and oil properties.

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

June 30,
2023		 December 31,
2022
ASSETS
Cash and cash equivalents $         9,919 $         54,652
Accounts receivable         193,917         510,127
Derivative financial instruments         17,553         23,884
Other current assets         60,777         56,324
Total current assets         282,166         644,987
Property and equipment, net         5,026,001         4,622,655
Goodwill         335,897         335,897
Operating lease right-of-use assets         192,670         90,716
$         5,836,734 $         5,694,255
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable $         552,315 $         530,195
Accrued costs         132,057         183,111
Operating leases         77,690         38,411
Derivative financial instruments         —         4,420
Total current liabilities         762,062         756,137
Long-term debt         2,176,418         2,152,571
Deferred income taxes         451,004         425,734
Derivative financial instruments         2,052         —
Long-term operating leases         115,048         52,385
Asset retirement obligation         29,964         29,114
Total liabilities         3,536,548         3,415,941
Stockholders’ Equity:
Common stock         139,246         138,759
Additional paid-in capital         1,255,382         1,253,417
Accumulated earnings         905,558         886,138
Total stockholders’ equity         2,300,186         2,278,314
$         5,836,734 $         5,694,255