COMSTOCK RESOURCES, INC. REPORTS SECOND QUARTER 2024 FINANCIAL AND OPERATING RESULTS

Rhea-AI Summary

Comstock Resources (NYSE: CRK) reported its Q2 2024 financial results, highlighting the impact of weak natural gas prices. Key points include:

- Natural gas and oil sales: $278 million (including $60.6 million in hedging gains)
- Operating cash flow: $118 million ($0.41 per diluted share)
- Adjusted EBITDAX: $167 million
- Adjusted net loss: $58.2 million ($0.20 per share)
- Enhanced liquidity with $400 million, 6.75% senior notes issuance
- 15 operated Haynesville/Bossier shale wells turned to sales, averaging 21 MMcf per day initial production
- Realized gas price: $1.65 per Mcf without hedging, $2.12 per Mcf after hedging
- Production cost: $0.84 per Mcfe
- Unhedged operating margin: 50% (61% after hedging)

Positive

• Enhanced liquidity with $400 million, 6.75% senior notes issuance
• 4% increase in production compared to Q2 2023
• 15 operated Haynesville/Bossier shale wells turned to sales with average initial production of 21 MMcf per day
• Hedging gains of $60.6 million mitigated impact of low natural gas prices

Negative

• Adjusted net loss of $58.2 million ($0.20 per share) for Q2 2024
• Weak natural gas prices significantly impacted financial results
• Realized gas price decreased to $1.65 per Mcf without hedging
• Net loss of $123.2 million ($0.43 per share) for Q2 2024
• Pre-tax $85.8 million unrealized loss on hedging contracts

Insights

Financial Analyst

Comstock Resources' Q2 2024 results paint a challenging picture for the natural gas producer, primarily due to weak natural gas prices. Despite a 4% increase in production compared to Q2 2023, the company reported a significant decline in financial performance:

• Natural gas and oil sales: $278 million (including realized hedging gains)
• Operating cash flow: $118 million ($0.41 per diluted share)
• Adjusted EBITDAX: $167 million
• Adjusted net loss: $58.2 million ($0.20 per share)

The company's realized gas price averaged $1.65 per Mcf without hedging and $2.12 per Mcf after hedging, highlighting the importance of their hedging strategy in this low-price environment. The production cost per Mcfe of $0.84 demonstrates efficient operations, but the unhedged operating margin of 50% (rising to 61% after hedging) shows the squeeze on profitability.

Comstock's issuance of $400 million in 6.75% senior notes is a strategic move to enhance liquidity, which could provide a buffer against continued price weakness. However, this additional debt may increase financial pressure if natural gas prices don't recover soon.

The company's continued focus on the Haynesville shale, with 15 new wells averaging 21 MMcf per day initial production, shows commitment to growth despite market challenges. This strategy could position Comstock well for a potential price recovery, but also increases risk if prices remain depressed.

Energy Market Analyst

Comstock's Q2 2024 results reflect the broader challenges facing the natural gas industry. The stark contrast between the 4% production increase and the significant financial decline underscores the severe impact of low natural gas prices on producers' bottom lines.

The average realized gas price of $1.65 per Mcf (unhedged) is particularly concerning, as it's well below the breakeven point for many producers. This price environment is likely to force industry-wide reassessment of capital expenditures and production targets. Comstock's hedging strategy, which boosted the realized price to $2.12 per Mcf, provides some insulation but may not be sustainable long-term if prices don't recover.

The company's focus on the Haynesville shale, known for its proximity to LNG export terminals, could be a strategic advantage. As global natural gas demand grows, particularly in Europe and Asia, Comstock's production could become more valuable. However, this potential upside is contingent on increased LNG export capacity and improved global pricing.

The $400 million senior notes issuance at 6.75% interest rate suggests that despite challenging market conditions, Comstock still has access to capital markets. This could provide a competitive edge over more financially constrained peers, allowing Comstock to weather the downturn and potentially capitalize on distressed assets or market recovery.

Investors should closely monitor natural gas inventory levels, weather patterns and global LNG demand as key indicators for potential price recovery and Comstock's future performance.

FRISCO, TX, July 30, 2024 (GLOBE NEWSWIRE) -- Comstock Resources, Inc. ("Comstock" or the "Company") (NYSE: CRK) today reported financial and operating results for the quarter ended June 30, 2024.

Highlights of 2024's Second Quarter

• Very weak natural gas prices weighed heavily on the second quarter financial results.
• Natural gas and oil sales, including realized hedging gains, were $278 million.
• Operating cash flow was $118 million or $0.41 per diluted share.
• Adjusted EBITDAX for the quarter was $167 million.
• Adjusted net loss was $58.2 million or $0.20 per share for the quarter.
• Enhanced liquidity with $400 million, 6.75% senior notes issuance.
• Steady results from the Haynesville shale drilling program with 15 (14.4 net) operated wells turned to sales since the Company's last update with an average initial production of 21 MMcf per day.
  
  

Financial Results for the Three Months Ended June 30, 2024

Comstock's realized gas price for the second quarter of 2024 averaged $1.65 per Mcf without hedging and $2.12 per Mcf after hedging. As a result, Comstock's natural gas and oil sales in the second quarter of 2024 decreased to $278.2 million (including realized hedging gains of $60.6 million) despite a 4% increase in production as compared to the second quarter of 2023. Operating cash flow (excluding changes in working capital) generated in the second quarter of 2024 was $118.1 million, and net loss for the second quarter was $123.2 million or $0.43 per share. Net loss in the quarter included a pre-tax $85.8 million unrealized loss on hedging contracts held for risk management. Excluding this item, adjusted net loss for the second quarter of 2024 was $58.2 million, or $0.20 per share.

Comstock's production cost per Mcfe in the second quarter averaged $0.84 per Mcfe, which was comprised of $0.38 for gathering and transportation costs, $0.27 for lease operating costs, $0.14 for production and other taxes and $0.05 for cash general and administrative expenses. Comstock's unhedged operating margin was 50% in the second quarter of 2024 and 61% after hedging.

Financial Results for the Six Months Ended June 30, 2024

Natural gas and oil sales for the six months ended June 30, 2024 totaled $614.1 million (including realized hedging gains of $108.5 million). Operating cash flow (excluding changes in working capital) generated during the first six months of 2024 was $300.1 million, and net loss was $137.7 million or $0.49 per share. Net loss during the first six months of 2024 included a pre-tax $94.5 million unrealized loss on hedging contracts held for risk management. Excluding this item, adjusted net loss for the six months ended June 30, 2024 was $66.8 million or $0.24 per share.

Comstock's production cost per Mcfe during the six months ended June 30, 2024 averaged $0.79 per Mcfe, which was comprised of $0.36 for gathering and transportation costs, $0.26 for lease operating costs, $0.13 for production and other taxes and $0.04 for cash general and administrative expenses. Comstock's unhedged operating margin was 57% during the first six months of 2024 and 65% after hedging.

Drilling Results

Comstock drilled 11 (9.2 net) operated horizontal Haynesville/Bossier shale wells in the second quarter of 2024 which had an average lateral length of 11,346 feet. Comstock turned 12 (11.7 net) operated wells to sales in the second quarter of 2024.

Since its last operational update in May, Comstock has turned 15 (14.4 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 9,802 feet.

Earnings Call Information

Comstock has planned a conference call for 10:00 a.m. Central Time on July 31, 2024, to discuss the second quarter 2024 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/BI3dd152694a074bc28172df7314b38 fa6. 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/w3stws2d.

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 July 31, 2024. The replay of the conference can be accessed using the webcast link: https://edge.media-server.com/mmc/p/w3stws2d.

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,
		2024				2023				2024				2023
Revenues:
Natural gas sales		$	216,527			$	228,892			$	503,610			$	606,924
Oil sales			1,074				860				1,950				2,802
Total natural gas and oil sales			217,601				229,752				505,560				609,726
Gas services			29,229				58,459				77,042				168,063
Total revenues			246,830				288,211				582,602				777,789
Operating expenses:
Production and ad valorem taxes			19,244				19,599				37,152				34,505
Gathering and transportation			49,361				45,395				96,460				90,969
Lease operating			34,805				34,031				69,877				68,861
Exploration			—				—				—				1,775
Depreciation, depletion and amortization			194,242				140,177				384,931				274,160
Gas services			31,494				55,390				80,174				156,685
General and administrative			10,177				10,038				19,348				22,406
(Gain) loss on sale of assets			—				648				—				(125	)
Total operating expenses			339,323				305,278				687,942				649,236
Operating income (loss)			(92,493	)			(17,067	)			(105,340	)			128,553
Other income (expenses):
Gain (loss) from derivative financial instruments			(25,252	)			(4,495	)			14,055				61,914
Other income			322				598				653				1,058
Interest expense			(51,932	)			(39,188	)			(101,489	)			(77,458	)
Total other expenses			(76,862	)			(43,085	)			(86,781	)			(14,486	)
Income (loss) before income taxes			(169,355	)			(60,152	)			(192,121	)			114,067
(Provision for) benefit from income taxes			46,106				14,446				54,398				(25,270	)
Net income (loss)			(123,249	)			(45,706	)			(137,723	)			88,797
Net income attributable to noncontrolling interest			(3,061	)			—				(4,908	)			—
Net income (loss) available to Comstock		$	(126,310	)		$	(45,706	)		$	(142,631	)		$	88,797
Net income (loss) per share
Basic		$	(0.43	)		$	(0.17	)		$	(0.49	)		$	0.32
Diluted		$	(0.43	)		$	(0.17	)		$	(0.49	)		$	0.32
Weighted average shares outstanding:
Basic			289,670				276,669				283,816				276,610
Diluted			289,670				276,669				283,816				276,610
Dividends per share		$	—			$	0.125			$	—			$	0.250

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

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Natural gas production (MMcf)			130,861				126,307				270,304				253,374
Oil production (Mbbls)			15				13				27				40
Total production (MMcfe)			130,949				126,386				270,464				253,612
Natural gas sales		$	216,527			$	228,892			$	503,610			$	606,924
Natural gas hedging settlements (1)			60,552				55,494				108,547				65,877
Total natural gas including hedging			277,079				284,386				612,157				672,801
Oil sales			1,074				860				1,950				2,802
Total natural gas and oil sales including hedging		$	278,153			$	285,246			$	614,107			$	675,603
Average natural gas price (per Mcf)		$	1.65			$	1.81			$	1.86			$	2.40
Average natural gas price including hedging (per Mcf)		$	2.12			$	2.25			$	2.26			$	2.66
Average oil price (per barrel)		$	71.60			$	66.15			$	72.22			$	70.05
Average price (per Mcfe)		$	1.66			$	1.82			$	1.87			$	2.40
Average price including hedging (per Mcfe)		$	2.12			$	2.26			$	2.27			$	2.66
Production and ad valorem taxes		$	19,244			$	19,599			$	37,152			$	34,505
Gathering and transportation			49,361				45,395				96,460				90,969
Lease operating			34,805				34,031				69,877				68,861
Cash general and administrative (2)			6,095				7,733				11,850				18,054
Total production costs		$	109,505			$	106,758			$	215,339			$	212,389
Production and ad valorem taxes (per Mcfe)		$	0.14			$	0.15			$	0.13			$	0.14
Gathering and transportation (per Mcfe)			0.38				0.36				0.36				0.36
Lease operating (per Mcfe)			0.27				0.27				0.26				0.27
Cash general and administrative (per Mcfe)			0.05				0.06				0.04				0.07
Total production costs (per Mcfe)		$	0.84			$	0.84			$	0.79			$	0.84
Unhedged operating margin			50	%			54	%			57	%			65	%
Hedged operating margin			61	%			63	%			65	%			69	%
Gas services revenue		$	29,229			$	58,459			$	77,042			$	168,063
Gas services expenses			31,494				55,390				80,174				156,685
Gas services margin		$	(2,265	)		$	3,069			$	(3,132	)		$	11,378
Natural Gas and Oil Capital Expenditures:
Unproved property acquisitions		$	9,694			$	15,953			$	79,138			$	56,648
Total natural gas and oil properties acquisitions		$	9,694			$	15,953			$	79,138			$	56,648
Exploration and Development:
Development leasehold		$	2,592			$	4,975			$	6,530			$	13,718
Exploratory drilling and completion			52,392				74,622				158,848				104,312
Development drilling and completion			151,350				231,038				297,143				511,214
Other development costs			14,685				11,353				14,722				17,450
Total exploration and development capital expenditures		$	221,019			$	321,988			$	477,243			$	646,694

(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,
		2024				2023				2024				2023
ADJUSTED NET INCOME (LOSS):
Net income (loss)		$	(123,249	)		$	(45,706	)		$	(137,723	)		$	88,797
Unrealized loss from derivative financial instruments			85,804				59,989				94,492				3,963
Exploration expense			—				—				—				1,775
(Gain) loss on sale of assets			—				648				—				(125	)
Adjustment to income taxes			(20,769	)			(13,892	)			(23,521	)			(1,364	)
Adjusted net income (loss)		$	(58,214	)		$	1,039			$	(66,752	)		$	93,046
Adjusted net income (loss) per share (2)		$	(0.20	)		$	0.00			$	(0.24	)		$	0.33
Diluted shares outstanding			289,670				276,669				283,816				276,610
ADJUSTED EBITDAX:
Net income (loss)		$	(123,249	)		$	(45,706	)		$	(137,723	)		$	88,797
Interest expense			51,932				39,188				101,489				77,458
Income taxes			(46,106	)			(14,446	)			(54,398	)			25,270
Depreciation, depletion, and amortization			194,242				140,177				384,931				274,160
Exploration			—				—				—				1,775
Unrealized loss from derivative financial instruments			85,804				59,989				94,492				3,963
Stock-based compensation			4,082				2,305				7,497				4,351
(Gain) loss on sale of assets			—				648				—				(125	)
Total Adjusted EBITDAX (3)		$	166,705			$	182,155			$	396,288			$	475,649

(1)   Adjusted net income (loss) 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, gains and losses on sales of assets and other unusual items.

(2)   Adjusted net income (loss) 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 depreciation, depletion and amortization, unrealized gains and losses on derivative financial instruments 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,
		2024				2023				2024				2023
OPERATING CASH FLOW (1):
Net income (loss)		$	(123,249	)		$	(45,706	)		$	(137,723	)		$	88,797
Reconciling items:
Unrealized loss from derivative financial instruments			85,804				59,989				94,492				3,963
Deferred income taxes			(46,144	)			(13,910	)			(54,431	)			25,270
Depreciation, depletion and amortization			194,242				140,177				384,931				274,160
Amortization of debt discount and issuance costs			3,399				1,994				5,383				3,991
Stock-based compensation			4,082				2,305				7,497				4,351
(Gain) loss on sale of assets			—				648				—				(125	)
Operating cash flow		$	118,134			$	145,497			$	300,149			$	400,407
(Increase) decrease in accounts receivable			(23,187	)			60,218				76,231				316,210
(Increase) decrease in other current assets			(730	)			2,715				4,846				1,201
Increase (decrease) in accounts payable and accrued expenses			(10,642	)			123,080				(126,112	)			56
Net cash provided by operating activities		$	83,575			$	331,510			$	255,114			$	717,874

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
FREE CASH FLOW (DEFICIT)(2):
Operating cash flow		$	118,134			$	145,497			$	300,149			$	400,407
Less:
Exploration and development capital expenditures			(221,019	)			(321,988	)			(477,243	)			(646,694	)
Midstream capital expenditures			(11,190	)			(6,870	)			(16,488	)			(11,057	)
Other capital expenditures			(942	)			(100	)			(971	)			(456	)
Contributions from midstream partner			11,000				—				17,000				—
Free cash deficit from operations		$	(104,017	)		$	(183,461	)		$	(177,553	)		$	(257,800	)
Acquisitions			(9,694	)			(15,953	)			(79,138	)			(56,648	)
Proceeds from divestitures			—				41,165				—				41,295
Free cash deficit after acquisition and divestiture activity		$	(113,711	)		$	(158,249	)		$	(256,691	)		$	(273,153	)

(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 (deficit) from operations and free cash flow (deficit) 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, midstream and other capital expenditures, contributions from its midstream partner, 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, 2024				December 31, 2023
ASSETS
Cash and cash equivalents		$	19,270			$	16,669
Accounts receivable			155,199				231,430
Derivative financial instruments			79,649				126,775
Other current assets			69,289				86,619
Total current assets			323,407				461,493
Property and equipment, net			5,574,617				5,384,771
Goodwill			335,897				335,897
Operating lease right-of-use assets			90,604				71,462
		$	6,324,525			$	6,253,623
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable		$	377,909			$	523,260
Accrued costs			139,414				134,466
Operating leases			34,952				23,765
Total current liabilities			552,275				681,491
Long-term debt			2,856,045				2,640,391
Deferred income taxes			415,604				470,035
Derivative financial instruments			47,366				—
Long-term operating leases			55,621				47,742
Asset retirement obligation			31,709				30,773
Total liabilities			3,958,620				3,870,432
Stockholders' Equity:
Common stock			146,130				139,214
Additional paid-in capital			1,358,549				1,260,930
Accumulated earnings			815,639				958,270
Total stockholders' equity attributable to Comstock			2,320,318				2,358,414
Noncontrolling interest			45,587				24,777
Total stockholders' equity			2,365,905				2,383,191
		$	6,324,525			$	6,253,623

FAQ

What was Comstock Resources' (CRK) Q2 2024 revenue?

Comstock Resources' natural gas and oil sales in Q2 2024 were $278.2 million, including realized hedging gains of $60.6 million.

How did natural gas prices affect Comstock Resources' (CRK) Q2 2024 results?

Weak natural gas prices significantly impacted Comstock's Q2 2024 financial results, with realized gas prices averaging $1.65 per Mcf without hedging and $2.12 per Mcf after hedging.

What was Comstock Resources' (CRK) production cost per Mcfe in Q2 2024?

Comstock's production cost per Mcfe in Q2 2024 averaged $0.84, comprising $0.38 for gathering and transportation, $0.27 for lease operating, $0.14 for production and other taxes, and $0.05 for cash G&A expenses.

How many wells did Comstock Resources (CRK) turn to sales in Q2 2024?

Comstock turned 12 (11.7 net) operated wells to sales in Q2 2024, and since its last operational update, it has turned 15 (14.4 net) operated Haynesville/Bossier shale wells to sales.