COMSTOCK RESOURCES : REPORTS SECOND QUARTER 2022 FINANCIAL AND OPERATING RESULTS - Form 8-K
August 01, 2022 at 04:30 pm EDT
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COMSTOCK RESOURCES, INC. REPORTS
SECOND QUARTER 2022 FINANCIAL AND OPERATING RESULTS
FRISCO, TEXAS, August 1, 2022 - Comstock Resources, Inc. ("Comstock" or the "Company") (NYSE: CRK) today reported financial and operating results for the quarter ended June 30, 2022.
Highlights of 2022's Second Quarter
•Generated free cash flow from operations of $190 million in the quarter.
•Retired $271 million in senior notes and reduced annualized leverage ratio to 1.2x.
•Adjusted net income to common stockholders was $274 million for the quarter or $1.00 per diluted share.
•Adjusted EBITDAX increased 105% to $515 million.
•Operating cash flow (excluding working capital changes) increased 133% to $458 million or $1.65 per diluted share.
•Oil and gas sales, after realized hedging losses, were $604 million, 86% higher than 2021's second quarter.
•Strong results from Haynesville drilling program with 16 (14.4 net) operated wells turned to sales with an average initial production of 26 MMcf per day.
•Completed an attractive bolt-on acquisition which included approximately 60,000 net acres prospective for the Haynesville and Bossier shale in East Texas and a 145 mile high pressure pipeline and natural gas treating plant for $36 million.
•Achieved independent certification for natural gas production under the MiQ standard during the quarter.
Financial Results for the Three Months Ended June 30, 2022
Revenues in the second quarter of 2022 totaled $604.0 million (including realized hedging losses of $257.4 million). Net cash provided by operating activities (excluding changes in working capital) generated in the second quarter was $457.9 million, and net income available to common stockholders for the second quarter of 2022 was $372.5 million or $1.36 per share. Reported net income in the quarter included a pre-tax $184.5 million unrealized gain on hedging contracts held for risk management and a $46.8 million loss on early retirement of senior notes in the quarter. Excluding these items and certain
other items, adjusted net income available to common stockholders for the second quarter of 2022 was $273.6 million, or $1.00 per diluted share.
Comstock's production cost per Mcfe in the second quarter averaged $0.74 per Mcfe, which was comprised of $0.30 for gathering and transportation costs, $0.20 for lease operating costs, $0.18 for production and other taxes and $0.06 for cash general and administrative expenses. Production cost was $0.69 per Mcfe in the first quarter of 2022 and $0.59 in the second quarter of 2021. The increase is due to higher production taxes resulting from higher natural gas prices in the quarter. Comstock's unhedged operating margin was 89% in the second quarter of 2022 and 85% after hedging.
Financial Results for the Six Months Ended June 30, 2022
Revenues for the six months ended June 30, 2022 totaled $1.0 billion (including realized hedging losses of $374.5 million). Net cash provided by operating activities (excluding changes in working capital) generated during the first six months of 2022 was $754.5 million, and income available to common stockholders was $256.8 million or $0.96 per share. Net income during the first six months of 2022 included a pre-tax $135.8 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 six months ended June 30, 2022 was $409.4 million or $1.50 per diluted share.
Comstock's production cost per Mcfe during the six months ended June 30, 2022 averaged $0.71 per Mcfe, which was comprised of $0.29 for gathering and transportation costs, $0.21 for lease operating costs, $0.15 for production and other taxes and $0.06 for cash general and administrative expenses. Production cost was $0.59 per Mcfe for the six months ended June 30, 2021. Comstock's unhedged operating margin was 88% during the first six months of 2022 and 83% after hedging.
Drilling Results
Comstock drilled 18 (16.5 net) operated horizontal Haynesville/Bossier shale wells in the second quarter of 2022 which had an average lateral length of 9,924 feet. The Company also participated in an additional 13 (1.9 net) non-operated Haynesville shale wells in the second quarter of 2022. Comstock turned 16 (14.4 net) wells to sales in the second quarter of 2022 and currently expects to turn an additional 14 (13.2 net) wells to sales in the third quarter of 2022.
Since its last operational update in May, Comstock has turned 14 (12.6 net) new operated Haynesville/Bossier shale wells to sales. These wells had initial daily production rates that averaged 26 MMcf per day. The completed lateral length of these wells averaged 9,577 feet. Included in the reported drilling results was Comstock's successful Circle M well drilled in Robertson County, Texas in the Western Haynesville area. The well was completed with a 7,900 foot lateral and was tested at 37 MMcf per day.
During the second quarter, Comstock completed an acquisition which included approximately 60,000 net acres prospective for the Haynesville and Bossier shale in East Texas, a 145 mile high pressure natural gas pipeline and a natural gas treating plant for $35.6 million.
Natural Gas Certification
Comstock announced it has achieved certification for its operated natural gas production under the MiQ standard for methane emissions measurement and management. The MiQ Standard scores production, based on how well operators deploy integrated technologies to detect, measure, and abate emissions while also including a detailed assessment of policies and work practices that evaluate an operator's preparedness to prevent future methane emissions. The certification highlights Comstock's ongoing commitment to produce natural gas under strict environmental standards and deliver differentiated, independently certified gas based on methane intensity to both domestic and international markets. Comstock received the certification in June 2022 and the first block of the Company's certified natural gas is available for trading. The certificates, which can be traded bundled (combined with natural gas delivery) or unbundled, will be available on MiQ's Digital Registry in the coming weeks. The certification covers all the Company's facilities in North Louisiana and East Texas, which currently produce approximately 2.0 billion cubic feet per day of natural gas.
Earnings Call Information
Comstock has planned a conference call for 10:00 a.m. Central Time on August 2, 2022, to discuss the second 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/BI2b5f1d27974644e3bb8e3cae9a36c3c1. 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/cjhpy3va.
If you are unable to participate in the original conference call, a web replay will be available for twelve months beginning at 10:00 a.m. CT on August 2, 2022. The replay of the conference can be accessed using the webcast link: https://edge.media-server.com/mmc/p/cjhpy3va.
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,
2022
2021
2022
2021
Revenues:
Natural gas sales
$
858,838
$
321,520
$
1,381,795
$
645,480
Oil sales
2,504
22,173
4,388
38,698
Total oil and gas sales
861,342
343,693
1,386,183
684,178
Gas services
84,912
-
129,485
-
Total revenues
946,254
343,693
1,515,668
684,178
Operating expenses:
Production and ad valorem taxes
21,729
10,141
35,549
19,793
Gathering and transportation
36,964
31,736
69,057
61,194
Lease operating
25,079
26,011
51,265
50,574
Exploration
2,342
-
3,363
-
Depreciation, depletion and amortization
119,201
121,446
225,929
230,574
Gas services
82,778
-
123,453
-
General and administrative
9,063
7,872
17,286
15,900
Gain on sale of assets
(19)
(9)
(21)
(79)
Total operating expenses
297,137
197,197
525,881
377,956
Operating income
649,117
146,496
989,787
306,222
Other income (expenses):
Loss from derivative financial instruments
(72,826)
(223,958)
(510,319)
(245,707)
Other income
182
530
450
811
Interest expense
(44,320)
(56,880)
(90,811)
(120,691)
Loss on early retirement of debt
(46,840)
(114,060)
(46,840)
(352,599)
Total other expenses
(163,804)
(394,368)
(647,520)
(718,186)
Income (loss) before income taxes
485,313
(247,872)
342,267
(411,964)
(Provision for) benefit from income taxes
(108,422)
68,177
(76,800)
98,144
Net income (loss)
376,891
(179,695)
265,467
(313,820)
Preferred stock dividends
(4,363)
(4,363)
(8,678)
(8,678)
Net income (loss) available to common stockholders
$
372,528
$
(184,058)
$
256,789
$
(322,498)
Net income (loss) per share:
Basic
$
1.60
$
(0.80)
$
1.10
$
(1.39)
Diluted
$
1.36
$
(0.80)
$
0.96
$
(1.39)
Weighted average shares outstanding:
Basic
232,045
231,428
232,011
231,403
Diluted
277,614
231,428
277,485
231,403
COMSTOCK RESOURCES, INC.
OPERATING RESULTS
(In thousands, except per unit amounts)
Three Months Ended June 30,
Six Months Ended June 30,
2021
2021
2022
Pro
Forma (3)
As Reported
2022
Pro
Forma (3)
As Reported
Gas production (MMcf)
123,950
122,324
124,083
238,856
234,128
237,376
Oil production (Mbbls)
24
29
362
45
46
688
Total production (MMcfe)
124,092
122,496
126,260
239,127
234,404
241,506
Natural gas sales
$
858,838
$
317,160
$
321,520
$
1,381,795
$
639,955
$
645,480
Natural gas hedging settlements (1)
(257,363)
(16,879)
(16,879)
(374,549)
(24,369)
(24,369)
Total natural gas including hedging
601,475
300,281
304,641
1,007,246
615,586
621,111
Oil sales
2,504
1,792
22,173
4,388
2,743
38,698
Oil hedging settlements (1)
-
-
(1,965)
-
-
(2,883)
Total oil including hedging
2,504
1,792
20,208
4,388
2,743
35,815
Total oil and gas sales including hedging
$
603,979
$
302,073
$
324,849
$
1,011,634
$
618,329
$
656,926
Average gas price (per Mcf)
$
6.93
$
2.59
$
2.59
$
5.79
$
2.73
$
2.72
Average gas price including hedging (per Mcf)
$
4.85
$
2.45
$
2.46
$
4.22
$
2.63
$
2.62
Average oil price (per barrel)
$
104.33
$
61.79
$
61.25
$
97.51
$
59.63
$
56.25
Average oil price including hedging (per barrel)
$
104.33
$
61.79
$
55.82
$
97.51
$
59.63
$
52.06
Average price (per Mcfe)
$
6.94
$
2.60
$
2.72
$
5.80
$
2.74
$
2.83
Average price including hedging (per Mcfe)
$
4.87
$
2.47
$
2.57
$
4.23
$
2.64
$
2.72
Production and ad valorem taxes
$
21,729
$
8,033
$
10,141
$
35,549
$
16,081
$
19,793
Gathering and transportation
36,964
31,736
31,736
69,057
61,194
61,194
Lease operating
25,079
22,807
26,011
51,265
43,866
50,574
Cash general and administrative (2)
7,482
6,073
6,073
14,210
12,411
12,411
Total production costs
$
91,254
$
68,649
$
73,961
$
170,081
$
133,552
$
143,972
Production and ad valorem taxes (per Mcfe)
$
0.18
$
0.06
$
0.08
$
0.15
$
0.07
$
0.08
Gathering and transportation (per Mcfe)
0.30
0.26
0.25
0.29
0.26
0.25
Lease operating (per Mcfe)
0.20
0.19
0.21
0.21
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)
$
0.74
$
0.56
$
0.59
$
0.71
$
0.57
$
0.59
Unhedged operating margin
89%
78%
78%
88%
79%
79%
Hedged operating margin
85%
77%
77%
83%
78%
78%
Oil and gas capital expenditures:
Proved property acquisitions
$
(69)
$
-
$
-
$
205
$
-
$
-
Unproved property acquisitions
21,551
7,625
7,625
25,182
13,401
13,401
Total oil and gas properties acquisitions
$
21,482
$
7,625
$
7,625
$
25,387
$
13,401
$
13,401
Exploration and development:
Development leasehold
$
655
$
1,995
$
2,005
$
5,287
$
6,038
$
6,061
Exploratory drilling and completion
18,840
-
-
30,397
-
-
Development drilling and completion
225,371
157,648
157,648
414,419
312,887
312,887
Other development costs
18,325
2,951
4,624
36,937
5,340
8,076
Total exploration and development capital expenditures
$
263,191
$
162,594
$
164,277
$
487,040
$
324,265
$
327,024
(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 June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS:
Net income (loss) available to common stockholders
$
372,528
$
(184,058)
$
256,789
$
(322,498)
Unrealized (gain) loss from derivative financial instruments
(184,537)
204,822
135,770
217,894
Loss on early retirement of debt
46,840
114,060
46,840
352,599
Non-cash interest amortization from adjusting debt assumed in
acquisition to fair value
1,414
2,470
4,174
7,397
Exploration expense
2,342
-
3,363
-
Gain on sale of assets
(19)
(9)
(21)
(79)
Adjustment to (provision for) benefit from income taxes
35,050
(87,875)
(37,539)
(142,608)
Adjusted net income available to common stockholders (1)
$
273,618
$
49,410
$
409,376
$
112,705
Adjusted net income available to common stockholders per share (2)
$
1.00
$
0.20
$
1.50
$
0.44
Diluted shares outstanding
277,614
275,211
277,484
275,153
ADJUSTED EBITDAX:
Net income (loss)
$
376,891
$
(179,695)
$
265,467
$
(313,820)
Interest expense (3)
44,320
57,172
90,811
121,252
Income taxes
108,422
(68,177)
76,800
(98,144)
Depreciation, depletion, and amortization
119,201
121,446
225,929
230,574
Exploration
2,342
-
3,363
-
Unrealized (gain) loss from derivative financial instruments
(184,537)
204,822
135,770
217,894
Stock-based compensation
1,581
1,799
3,076
3,489
Loss on early extinguishment of debt
46,840
114,060
46,840
352,599
Gain on sale of assets
(19)
(9)
(21)
(79)
Total Adjusted EBITDAX (4)
$
515,041
$
251,418
$
848,035
$
513,765
(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 June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
OPERATING CASH FLOW (1):
Net income (loss)
$
376,891
$
(179,695)
$
265,467
$
(313,820)
Reconciling items:
Unrealized (gain) loss from derivative financial instruments
(184,537)
204,822
135,770
217,894
Deferred income taxes (benefit)
95,117
(71,131)
70,329
(101,281)
Depreciation, depletion and amortization
119,201
121,446
225,929
230,574
Loss on early retirement of debt
46,840
114,060
46,840
352,599
Amortization of debt discount and issuance costs
2,873
5,086
7,098
13,575
Stock-based compensation
1,581
1,799
3,076
3,489
Gain on sale of assets
(19)
(9)
(21)
(79)
Operating cash flow
$
457,947
$
196,378
$
754,488
$
402,951
Increase in accounts receivable
(232,043)
(33,158)
(203,918)
(40,190)
(Increase) decrease in other current assets
(11,126)
750
(9,720)
5,528
Increase in accounts payable and accrued expenses
187,116
28,341
145,083
17,294
Net cash provided by operating activities
$
401,894
$
192,311
$
685,933
$
385,583
Three Months Ended June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
FREE CASH FLOW (2):
Operating cash flow
$
457,947
$
196,378
$
754,488
$
402,951
Less:
Exploration and development capital expenditures
(263,191)
(164,277)
(487,040)
(327,024)
Preferred dividends
(4,363)
(4,363)
(8,678)
(8,678)
Free cash flow from operations
$
190,393
$
27,738
$
258,770
$
67,249
Acquisitions
(39,539)
(7,665)
(43,466)
(13,447)
Proceeds from divestitures
48
11
93
211
Free cash flow after acquisition and divestiture activity
$
150,902
$
20,084
$
215,397
$
54,013
(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)
As of
June 30,
2022
December 31, 2021
ASSETS
Cash and cash equivalents
$
32,272
$
30,663
Accounts receivable
471,656
267,738
Derivative financial instruments
2,086
5,258
Other current assets
24,797
15,077
Total current assets
530,811
318,736
Property and equipment, net
4,313,201
4,007,146
Goodwill
335,897
335,897
Operating lease right-of-use assets
108,284
6,450
$
5,288,193
$
4,668,229
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable
$
454,752
$
314,569
Accrued costs
153,763
135,026
Operating leases
37,561
2,444
Derivative financial instruments
318,585
181,945
Total current liabilities
964,661
633,984
Long-term debt
2,510,253
2,615,235
Deferred income taxes
267,746
197,417
Derivative financial instruments
-
4,042
Long-term operating leases
70,797
4,075
Asset retirement obligation
28,433
25,673
Other non-current liabilities
24
24
Total liabilities
3,841,914
3,480,450
Mezzanine Equity:
Preferred stock
175,000
175,000
Stockholders' Equity:
Common stock
116,579
116,462
Additional paid-in capital
1,101,953
1,100,359
Accumulated earnings (deficit)
52,747
(204,042)
Total stockholders' equity
1,271,279
1,012,779
$
5,288,193
$
4,668,229
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Comstock Resources Inc. published this content on 01 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 August 2022 20:28:23 UTC.
Comstock Resources, Inc. is an independent energy company. The Company is engaged in the acquisition, exploration, development and production of oil and natural gas in the United States. The Company operates through the exploration and production of North American oil and natural gas segment. The Company primarily operates in the Haynesville shale, a natural gas basin located in North Louisiana and East Texas, with economic and geographical proximity to the Gulf Coast markets. The Company is focused on the development of drilling opportunities in the Haynesville and Bossier shales and exploration activities in Western Haynesville play. The Company has approximately 2,959 drilling locations on its Haynesville/Bossier shale acreage, where the Company estimates to have 4.9 trillion cubic feet equivalent (TCFE) of reserve potential. The Company owns interests in approximately 2,478 producing oil and natural gas wells (1,516.7 net) and operates 1,703 of these wells.