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

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 sales22,173    7,173    38,698    25,812   
Total oil and gas sales343,693    179,535    684,178    405,413   
Operating expenses:       
Production and ad valorem taxes10,141    9,569    19,793    17,970   
Gathering and transportation31,736    26,590    61,194    55,001   
Lease operating26,011    27,820    50,574    53,698   
Exploration—    —    —    27   
Depreciation, depletion and amortization121,446    103,347    230,574    213,772   
General and administrative7,872    8,298    15,900    17,017   
Gains on asset sales(9)  —    (79)  —   
Total operating expenses197,197    175,624    377,956    357,485   
        
Operating income146,496    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 taxes68,177    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:       
Basic231,428    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 receivable185,976  145,786
Derivative financial instruments10,765  8,913
Other current assets8,410  14,839
Total current assets224,878  199,810
Property and equipment, net4,195,773  4,084,550
Goodwill335,897  335,897
Derivative financial instruments830  661
Operating lease right-of-use assets6,833  3,025
Other assets37  40
 $4,764,248  $4,623,983
    
LIABILITIES AND STOCKHOLDERS' EQUITY   
Accounts payable$292,998  $259,284
Accrued costs105,210  133,019
Operating leases2,190  2,284
Derivative financial instruments255,127  47,005
Total current liabilities655,525  441,592
Long-term debt2,847,309  2,517,149
Deferred income taxes99,245  200,583
Derivative financial instruments14,157  2,364
Long-term operating leases4,674  740
Reserve for future abandonment costs20,748  19,290
Other non-current liabilities180  492
Total liabilities3,641,838  3,182,210
Mezzanine equity:   
Preferred stock175,000  175,000
Stockholders' equity:   
Common stock116,425  116,206
Additional paid-in capital1,098,300  1,095,384
Accumulated earnings (deficit)(267,315) 55,183
Total stockholders' equity947,410  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 hedging304,641    219,153   621,111    469,397  
Oil sales22,173    7,173   38,698    25,812  
Oil hedging settlements (1)(1,965)  6,434   (2,883)  8,844  
Total oil including hedging20,208    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 transportation31,736    26,590   61,194    55,001  
Lease operating26,011    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 margin78  % 61 % 79  % 65 %
Hedged operating margin77  % 70 % 78  % 72 %
        
Oil and Gas Capital Expenditures:       
Exploratory leasehold$7,625    $—   $13,401    $—  
Development leasehold2,005    2,455   6,061    6,336  
Development drilling and completion157,648    61,422   312,887    183,480  
Other development5,151    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 debt114,060    861    352,599    861    
Unrealized loss from derivative financial instruments204,822    65,585    217,894    49,102    
Non-cash interest amortization from adjusting debt assumed in acquisition to fair value2,470    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 outstanding275,211    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 amortization121,446    103,347    230,574    213,772    
Exploration—    —    —    27    
Unrealized loss from derivative financial instruments204,822    65,585    217,894    49,102    
Stock-based compensation1,799    1,552    3,489    2,982    
Loss on early retirement of debt114,060    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 debt114,060    861    352,599    861   
Deferred income tax benefit(71,131)  (11,536)  (101,281)  (206) 
Depreciation, depletion and amortization121,446    103,347    230,574    213,772   
Unrealized loss from derivative financial instruments204,822    65,585    217,894    49,102   
Amortization of debt discount and issuance costs5,086    7,527    13,575    14,726   
Stock-based compensation1,799    1,552    3,489    2,982   
Exploration—    —    —    27   
Gains on asset sales(9)  —    (79)  —   
Operating cash flow196,378    117,460    402,951    273,416   
Decrease (increase) in accounts receivable(33,158)  28,875    (40,190)  83,172   
Decrease (increase) in other current assets750    1,025    5,528    (2,803) 
Increase (decrease) in accounts payable and accrued expenses28,341    (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.


Ron Mills
VP - Finance and Investor Relations
Comstock Resources
972-668-8834
rmills@comstockresources.com

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