What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-05 compared with 2021-05-06 · 146 added, 111 removed, 438 unchanged (37% of the section changed)

46 unchanged sentences

Mezzanine equity:

Series B 10 % Convertible Preferred stock — 5,000,000 shares authorized, 175,000 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Series B 10 % Convertible Preferred stock — 5,000,000 shares authorized, 175,000 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

175,000 175,000

Stockholders' equity:

Common stock—$ 0.50 par, 400,000,000 shares authorized, 232,411,218 and 232,414,718 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Common stock—$ 0.50 par, 400,000,000 shares authorized, 232,850,477 and 232,414,718 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

116,425 116,206

2 unchanged sentences

Accumulated earnings (deficit) ( 267,315 ) 55,183

( 83,257 ) 55,183

Total stockholders' equity

5 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(In thousands, except per share amounts)

6 unchanged sentences

Production and ad valorem taxes

10,141 9,569 19,793 17,970

Gathering and transportation

5 unchanged sentences

General and administrative

Loss (gain) on sale of assets

7,872 8,298 15,900 17,017

Gain on sale of assets ( 9 ) — ( 79 ) —

Total operating expenses

3 unchanged sentences

Gain (loss) from derivative financial instruments ( 223,958 ) ( 12,298 ) ( 245,707 ) 49,601

( 21,749 ) 61,899

Other income (expense) 530 ( 9 ) 811 304

Interest expense

2 unchanged sentences

( 114,060 ) ( 861 ) ( 352,599 ) ( 861 )

Total other income (expenses)

( 323,818 ) 9,402

Income (loss) before income taxes ( 164,092 ) 53,419

Benefit from (provision for) income taxes 29,967 ( 11,391 )

Net income (loss) ( 134,125 ) 42,028

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 taxes 68,177 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 income (loss) available to common stockholders $ ( 138,440 ) $ 29,956

Net income (loss) per share:

Net loss available to common stockholders $ ( 184,058 ) $ ( 60,002 ) $ ( 322,498 ) $ ( 30,046 )

Net loss per share:

$ ( 0.80 ) $ ( 0.29 ) $ ( 1.39 ) $ ( 0.15 )

15 unchanged sentences

Income tax withholdings on equity awards ( 2 ) ( 1 ) ( 14 ) — ( 15 )

— — — 42,028 42,028

Net income — — — 42,028 42,028

Preferred stock accretion — — — ( 2,500 ) ( 2,500 )

1 unchanged sentence

Balance at March 31, 2020 189,981 $ 94,990 $ 910,851 $ 168,552 $ 1,174,393

Balance at January 1, 2021 232,415 $ 116,206 $ 1,095,384 $ 55,183 $ 1,266,773

Stock-based compensation

507 254 1,298 — 1,552

Issuances of common stock 42,092 21,046 190,592 — 211,638

Stock issuance costs — — ( 10,079 ) — ( 10,079 )

Net loss — — — ( 49,876 ) ( 49,876 )

Preferred stock accretion — — — ( 2,917 ) ( 2,917 )

Payment of preferred dividends — — — ( 7,210 ) ( 7,210 )

Balance at June 30, 2020 232,580 $ 116,290 $ 1,092,662 $ 108,549 $ 1,317,501

Balance at January 1, 2021 232,415 $ 116,206 $ 1,095,384 $ 55,183 $ 1,266,773

Stock-based compensation

( 4 ) — 1,690 — 1,690

Stock issuance costs

— — ( 30 ) — ( 30 )

Net loss — — — ( 134,125 ) ( 134,125 )

Payment of preferred dividends

1 unchanged sentence

Balance at March 31, 2021 232,411 $ 116,206 $ 1,097,044 $ ( 83,257 ) $ 1,129,993

Stock-based compensation

472 235 1,564 — 1,799

Income tax withholdings on equity awards

( 33 ) ( 16 ) ( 182 ) — ( 198 )

Stock issuance costs

— — ( 126 ) — ( 126 )

Net loss — — — ( 179,695 ) ( 179,695 )

Payment of preferred dividends

— — — ( 4,363 ) ( 4,363 )

Balance at June 30, 2021 232,850 $ 116,425 $ 1,098,300 $ ( 267,315 ) $ 947,410

The accompanying notes are an integral part of these statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$ ( 134,125 ) $ 42,028

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Net loss $ ( 313,820 ) $ ( 7,848 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Deferred income taxes

4 unchanged sentences

(Gain) loss on derivative financial instruments 245,707 ( 49,601 )

21,749 ( 61,899 )

Cash settlements of derivative financial instruments

1 unchanged sentence

Amortization of debt discount and issuance costs

13,575 14,726

Stock-based compensation

1 unchanged sentence

(Increase) decrease in accounts receivable ( 40,190 ) 83,172

( 7,032 ) 54,297

(Increase) decrease in other current assets 5,528 ( 2,803 )

4,778 ( 3,828 )

Decrease in accounts payable and accrued expenses

( 11,047 ) ( 56,306 )

Increase (decrease) in accounts payable and accrued expenses 17,294 ( 87,694 )

Net cash provided by operating activities 385,583 266,091

193,272 150,119

CASH FLOWS FROM INVESTING ACTIVITIES:

3 unchanged sentences

Net cash used for investing activities ( 338,568 ) ( 233,874 )

( 165,551 ) ( 143,490 )

CASH FLOWS FROM FINANCING ACTIVITIES:

4 unchanged sentences

Issuance of Senior Notes 2,222,500 450,000

Retirement of 7.50% and 9.75% Senior Notes

Retirement of Senior Notes

( 2,210,626 ) —

Issuance of common stock — 206,626

Redemption of Series A Preferred Stock

— ( 210,000 )

Preferred stock dividends paid

3 unchanged sentences

Income tax withholdings on equity awards

Net cash provided by (used for) financing activities

( 198 ) ( 15 )

Net increase (decrease) in cash and cash equivalents

47,163 ( 3,005 )

Net cash used for financing activities ( 57,560 ) ( 39,154 )

Net decrease in cash and cash equivalents ( 10,545 ) ( 6,937 )

Cash and cash equivalents, beginning of period

6 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

June 30, 2021

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –

2 unchanged sentences

and its wholly-owned subsidiaries (collectively, "Comstock" or the "Company").

In management's opinion, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of Comstock as of March 31, 2021, and the related results of operations and cash flows for the periods being presented.

In management's opinion, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of Comstock as of June 30, 2021, and the related results of operations and cash flows for the periods being presented.

Net income and comprehensive income are the same in all periods presented.

4 unchanged sentences

These unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in Comstock's Annual Report on Form 10-K for the year ended December 31, 2020.

The results of operations for the period through March 31, 2021 are not necessarily an indication of the results expected for the full year.

The results of operations for the period through June 30, 2021 are not necessarily an indication of the results expected for the full year.

Property and Equipment

15 unchanged sentences

As a result of these changes, there may be future impairments in the carrying values of these or other properties.

The Company had goodwill of $ 335.9 million as of March 31, 2021 that was recorded in 2018.

Goodwill represents the excess of value of the Company over fair value of net tangible and identifiable intangible assets at the time of the change in control, which occurred on August 14, 2018.

The Company had goodwill of $ 335.9 million as of June 30, 2021 that was recorded in 2018.

The Company is not required to amortize goodwill as a charge to earnings;

3 unchanged sentences

The Company has right-of-use lease assets of $ 6.8 million related to its corporate office lease, certain office equipment and leased vehicles used in oil and gas operations with corresponding short-term and long-term liabilities.

In January 2021, the corporate office lease was extended for three additional years which added $ 4.7 million to operating lease right-of-use assets during the three months ended March 31, 2021.

The value of the lease assets and liabilities are determined based upon discounted future minimum cash flows contained within each of the respective contracts.

14 unchanged sentences

The costs associated with drilling rig operations are accounted for under the successful efforts method, which generally require that these costs be capitalized as part of our proved oil and natural gas properties on our balance sheet unless they are incurred on exploration wells that are unsuccessful, in which case they are charged to exploration expense.

Lease costs recognized during the three months ended March 31, 2021 were as follows:

Lease costs recognized during the three months and six months ended June 30, 2021 were as follows:

Three Months Ended

March 31, 2021

June 30, 2021 Six Months Ended

June 30, 2021

(In thousands)

2 unchanged sentences

Short-term lease cost (drilling rig costs included in proved oil and gas properties) 7,659 19,243

Cash payments for operating leases associated with right-of-use assets included in cash provided by operating activities were $ 661 thousand for the three months ended March 31, 2021.

As of March 31, 2021, expected future payments related to contracts that contain operating leases were as follows:

$ 8,284 $ 20,529

Cash payments for operating leases associated with right-of-use assets included in cash provided by operating activities were $ 625 thousand and $ 1.3 million for the three months and six months ended June 30, 2021.

As of June 30, 2021, expected future payments related to contracts that contain operating leases were as follows:

(In thousands)

April 1 to December 31, 2021 $ 1,670

July 1 to December 31, 2021 $ 1,141

Total lease payments

2 unchanged sentences

The weighted average term of these operating leases was 3.3 years and the weighted average interest rate used in lease computations was 2.8 %.

As of March 31, 2021, the Company also had expected future payments for contracted drilling services of $ 5.9 million.

As of June 30, 2021, the Company also had expected future payments for contracted drilling services of $ 4.8 million.

Accrued Costs

Accrued costs at March 31, 2021 and December 31, 2020 consisted of the following:

March 31, 2021

Accrued costs at June 30, 2021 and December 31, 2020 consisted of the following:

December 31, 2020

(In thousands)

Accrued capital expenditures $ 26,839 $ 24,959

Accrued interest payable $ 30,549 $ 67,265

Accrued capital expenditures 25,744 24,959

Accrued transportation costs 24,379 25,353

Accrued employee compensation 7,562 7,519

Other 4,445 4,457

Accrued ad valorem taxes 6,000 —

Accrued income and other taxes 5,661 2,168

Accrued lease operating expenses 2,354 3,466

Other 2,961 2,289

$ 105,210 $ 133,019

2 unchanged sentences

The following table summarizes the changes in Comstock's total estimated liability for such obligations during the periods presented:

Three Months Ended

Six Months Ended

(In thousands)

7 unchanged sentences

Comstock minimizes credit risk to counterparties of its derivative financial instruments through formal credit policies, monitoring procedures, and diversification.

The Company is not required to provide any credit support to its counterparties other than cross collateralization with the assets securing its bank credit facility.

The Company is not required to provide

any credit support to its counterparties other than cross collateralization with the assets securing its bank credit facility.

None of the Company's derivative financial instruments involve payment or receipt of premiums.

The Company classifies the fair value amounts of derivative financial instruments as net current or noncurrent assets or liabilities, whichever the case may be, by

commodity contract.

The Company classifies the fair value amounts of derivative financial instruments as net current or noncurrent assets or liabilities, whichever the case may be, by commodity contract.

All of Comstock's natural gas derivative financial instruments, except for certain basis swaps, are tied to the Henry Hub-NYMEX price index and all of its crude oil derivative financial instruments are tied to the WTI-NYMEX index price.

The Company had the following oil and natural gas price derivative financial instruments at March 31, 2021:

The Company had the following oil and natural gas price derivative financial instruments at June 30, 2021:

Future Production Period

Nine Months Ending December 31, 2021 Year Ending December 31, 2022 Total

Six Months Ending December 31, 2021 Year Ending December 31, 2022 Year Ending December 31, 2023 Total

Natural Gas Swap Contracts:

29 unchanged sentences

_____________________________

(1) For the nine months ending December 31, 2021, natural gas price swap contracts include 33,000,000 MMBtu at an average price of $ 2.51 that are part of certain natural gas price swaption contracts which include a call to extend the price swap by the counterparty as described in (2) below.

(1) For the six months ending December 31, 2021, natural gas price swap contracts include 22,080,000 MMBtu at an average price of $ 2.51 that are part of certain natural gas price swaption contracts which include a call to extend the price swap by the counterparty as described in (2) below.

(2) The counterparty has the right to exercise a call option to enter into a price swap with the Company on 43,800,000 MMBtu in 2022 at an average price $ 2.51 .

3 unchanged sentences

These contracts settle monthly through April 2023.

The fair value of these contracts was a net liability of $ 1.1 million at March 31, 2021.

The fair value of these contracts was a net liability of $ 1.0 million at June 30, 2021.

None of the Company's derivative contracts were designated as cash flow hedges.

1 unchanged sentence

The classification of derivative financial instruments between assets and liabilities, consists of the following:

Type Consolidated Balance Sheet Location March 31, 2021 December 31, 2020

Type Consolidated Balance Sheet Location June 30,

2021 December 31, 2020

(in thousands)

4 unchanged sentences

Natural gas price derivatives Derivative Financial Instruments – long-term $ 798 $ 661

Interest rate derivatives Derivative Financial Instruments – long-term 32 —

Liability Derivative Financial Instruments:

9 unchanged sentences

Gain (Loss) on Derivatives

Recognized in Earnings Three Months Ended March 31,

Recognized in Earnings Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(In thousands)

3 unchanged sentences

$ ( 223,958 ) $ ( 12,298 ) $ ( 245,707 ) $ 49,601

Subsequent to March 31, 2021, the Company entered into natural gas swap contracts to hedge 14,600,000 MMBtu of natural gas production from January 2022 to December 2022 at an average price of $ 2.70 per MMBtu.

Subsequent to June 30, 2021, the Company entered into natural gas swap contracts to hedge 2,750,000 MMBtu of natural gas production from April 2022 to December 2022 at an average price of $ 3.00 per MMBtu.

The Company also entered into natural gas collar contracts to hedge 6,350,000 MMBtu of natural gas production from January 2022 to December 2022 at an average floor price of $ 2.85 per MMBtu and an average ceiling price of $ 5.13 per MMBtu.

Stock-Based Compensation

1 unchanged sentence

Compensation cost is measured at the grant date based on the fair value of the award and is recognized over the award vesting period and included in general and administrative expenses for awards of restricted stock and performance stock units ("PSUs") to the Company's employees and directors.

The Company recognized $ 1.7 million and $ 1.4 million of stock-based compensation expense within general and administrative expenses related to awards of restricted stock and PSUs to its employees and directors during the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, Comstock had 1,034,506 shares of unvested restricted stock outstanding at a weighted average grant date fair value of $ 5.80 per share.

Total unrecognized compensation cost related to unvested restricted stock grants of $ 3.7 million as of March 31, 2021 is expected to be recognized over a period of 1.6 years.

As of March 31, 2021, Comstock had 1,136,488 PSUs outstanding at a weighted average grant date fair value of $ 9.33 per unit.

The Company recognized $ 1.8 million and $ 1.6 million of stock-based compensation expense within general and administrative expenses related to awards of restricted stock and PSUs to its employees and directors during the three months ended June 30, 2021 and 2020, respectively, and $ 3.5 million and $ 3.0 million for the six months ended June 30, 2021 and 2020, respectively.

On June 8, 2021, the Company granted 473,162 shares of restricted stock to its employees and directors with a per share value of $ 6.05 .

As of June 30, 2021, Comstock had 1,305,368 shares of unvested restricted stock outstanding at a weighted average grant date fair value of $ 5.96 per share.

Total unrecognized compensation cost related to unvested restricted stock grants of $ 5.7 million as of June 30, 2021 is expected to be recognized over a period of 2.1 years.

On June 8, 2021, the Company granted 220,929 PSUs to its officers with a per unit value of $ 8.56 .

As of June 30, 2021, Comstock had 1,357,417 PSUs outstanding at a weighted average grant date fair value of $ 9.21 per unit.

The number of shares of common stock to be issued related to the PSUs is based on the Company's stock price performance as compared to its peers which could result in the issuance of anywhere from zero to 2,714,834 shares of common stock.

Total unrecognized compensation cost related to these grants of $ 4.1 million as of March 31, 2021 is expected to be recognized over a period of 1.5 years.

Total unrecognized compensation cost related to these grants of $ 5.0 million as of June 30, 2021 is expected to be recognized over a period of 2.0 years.

Revenue Recognition

12 unchanged sentences

The amount of oil or natural gas sold may differ from the amount to which the Company is entitled based on its revenue interests in the properties.

The Company did not have any significant imbalance positions at March 31, 2021.

The Company did not have any significant imbalance positions at June 30, 2021.

Sales of oil and natural gas generally occur at or near the wellhead.

When sales of oil and gas occur at locations other than the wellhead, the Company accounts for costs incurred to transport the production to the delivery point as gathering and transportation expenses.

The Company recognized accounts receivable of $ 126.5 million as of March 31, 2021 from customers for contracts where performance obligations have been satisfied and an unconditional right to consideration exists.

The Company recognized accounts receivable of $ 144.4 million as of June 30, 2021 from customers for contracts where performance obligations have been satisfied and an unconditional right to consideration exists.

Credit Losses

4 unchanged sentences

The Company has not had any significant credit losses in the past and believes its accounts receivable are fully collectible.

Accordingly, no allowance for doubtful accounts has been recorded for the three months ended March 31, 2021 and 2020.

Accordingly, no allowance for doubtful accounts has been recorded for the six months ended June 30, 2021 and 2020.

Deferred income taxes are provided to reflect the future tax consequences or benefits of differences between the tax basis of assets and liabilities and their reported amounts in the financial statements using enacted tax rates.

1 unchanged sentence

The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those deferred income tax assets would be deductible.

The Company believes that after considering all the available objective evidence, historical and prospective, with greater weight given to historical evidence, management is not able to determine that it is more likely than not that all of its deferred tax assets will be realized.

will be realized.

As a result, the Company established valuation allowances for its deferred tax assets and U.S.

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(In thousands)

Current - Federal $ — $ —

Current - State $ ( 3,001 ) $ ( 88 ) $ ( 3,137 ) $ ( 149 )

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Tax at statutory rate 21.0 % 21.0 % 21.0 % 21.0 %

1 unchanged sentence

Valuation allowance on deferred tax assets

10.9 ( 0.8 ) ( 7.6 ) 5.2

State income taxes, net of federal benefit

4.1 ( 2.5 ) 1.3 ( 30.0 )

Nondeductible stock-based compensation

0.3 0.8 0.1 2.9

Change in Louisiana tax law ( 8.8 ) — 9.0 —

Effective tax rate 27.5 % 18.7 % 23.8 % 0.7 %

Effective June 30, 2021, the State of Louisiana enacted a new law, which provides that all NOL deductions claimed on any corporate income tax return filed on or after January 1, 2022 for NOLs relating to loss years on or after January 1, 2001 may be carried forward indefinitely, until such losses are fully recovered.

The restoration of future NOLs previously expected to lapse due to limitation rules now serve as a tax benefit to the Company, subject to other limitations.

The Company's federal income tax returns for the years subsequent to December 31, 2016 remain subject to examination.

9 unchanged sentences

Level 2 — Inputs used to measure fair value, other than quoted prices included in Level 1, are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active.

Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.

includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.

Level 3 — Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment.

These values are generally determined using pricing models for which the assumptions utilize management's estimates of market participant assumptions.

cash flow model based on inputs that are readily available in public markets and, accordingly, the valuation of these derivative financial instruments, is categorized as a Level 2 measurement.

The Company's natural gas price swap agreements, basis swap agreements, interest rate swap agreements and its crude oil and natural gas price collars were not traded on a public exchange, and their value is determined utilizing a discounted cash flow model based on inputs that are readily available in public markets and, accordingly, the valuation of these derivative financial instruments, is categorized as a Level 2 measurement.

The Company's natural gas swaption agreements are measured at fair value using a third-party pricing service, categorized as a Level 3 measurement.

The following is a reconciliation of the beginning and ending balances for derivative instruments classified as Level 3 in the fair value hierarchy:

Three Months Ended

March 31, 2021

Six Months Ended

(In thousands)

Balance at beginning of year $ ( 22,588 ) $ 4,351

Total loss included in earnings

Total gain (loss) included in earnings ( 30,262 ) 11,454

Settlements, net

5,402 ( 22,585 )

Transfers out of Level 3 ( 6,418 ) —

1 unchanged sentence

Fair Values – Reported

The following presents the carrying amounts and the fair values of the Company's financial instruments as of March 31, 2021 and December 31, 2020:

March 31, 2021 December 31, 2020

The following presents the carrying amounts and the fair values of the Company's financial instruments as of June 30, 2021 and December 31, 2020:

June 30, 2021 December 31, 2020

Carrying Value Fair Value Carrying Value Fair Value

12 unchanged sentences

$ 1,257,257 $ 1,328,125 $ — $ —

5.875 % senior notes due 2030 (3)

$ 965,000 $ 984,300 $ — $ —

______________

(1) The Company's natural gas price swaps and basis swap agreements, its interest rate swap agreements and its crude oil and natural gas price collars are classified as Level 2 and measured at fair value using a market approach using third party pricing services and other active markets or broker quotes that are readily available in the public markets.

2 unchanged sentences

(2) The carrying value of our floating rate debt outstanding approximates fair value.

(3) The fair value of the Company's fixed rate debt was based on quoted prices as of March 31, 2021 and December 31, 2020, respectively, a Level 1 measurement.

(3) The fair value of the Company's fixed rate debt was based on quoted prices as of June 30, 2021 and December 31, 2020, respectively, a Level 1 measurement.

Earnings Per Share

Unvested restricted stock containing non-forfeitable rights to dividends are included in common stock outstanding and are considered to be participating securities and included in the computation of basic and diluted earnings per share pursuant to the two-class method.

At March 31, 2021 and December 31, 2020, 1,034,506 and 1,038,006 shares of restricted stock, respectively, are included in common stock outstanding as such shares have a non-forfeitable right to participate in any dividends that might be declared and have the right to vote on matters submitted to the Company's stockholders.

At June 30, 2021 and December 31, 2020, 1,305,368 and 1,038,006 shares of restricted stock, respectively, are included in common stock outstanding as such shares have a non-forfeitable right to participate in any dividends that might be declared and have the right to vote on matters submitted to the Company's stockholders.

Weighted average shares of unvested restricted stock outstanding were as follows:

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(in thousands)

1 unchanged sentence

PSUs represent the right to receive a number of shares of the Company's common stock that may range from zero to up to two times the number of PSUs granted on the award date based on the achievement of certain performance measures during a performance period.

The number of potentially dilutive shares related to PSUs is based on the number of shares, if any,

which would be issuable at the end of the respective period, assuming that date was the end of the performance period.

The number of potentially dilutive shares related to PSUs is based on the number of shares, if any, which would be issuable at the end of the respective period, assuming that date was the end of the performance period.

The treasury stock method is used to measure the dilutive effect of PSUs.

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(In thousands, except per unit amounts)

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(In thousands)

1 unchanged sentence

None of the Company's participating securities participate in losses and as such are excluded from the computation of basic earnings per share during periods of net losses.

The PSUs were anti-dilutive in the three months ended March 31, 2020.

Basic and diluted income (loss) per share were determined as follows:

Three Months Ended March 31,

Loss Shares Per Share Income Shares Per Share

(In thousands, except per share amounts)

Net income (loss) attributable to common stock $ ( 138,440 ) $ 29,956

Income allocable to unvested restricted shares — ( 37 )

Basic income (loss) attributable to common stock ( 138,440 ) 231,377 $ ( 0.60 ) 29,919 188,916 $ 0.16

Effect of Dilutive Securities:

Convertible preferred stock — — 12,072 96,250

Diluted income (loss) attributable to common stock $ ( 138,440 ) 231,377 $ ( 0.60 ) $ 41,991 285,166 $ 0.15

Basic and diluted per share amounts are the same for the three months ended March 31, 2021 due to the net loss in the period.

Basic and diluted per share amounts are the same for the three months and six months ended June 30, 2021 and 2020 due to the net losses in the periods.

Supplementary Information with Respect to the Consolidated Statements of Cash Flows

Cash payments made for interest and income taxes and other non-cash investing activities for the three months ended March 31, 2021 and 2020, respectively, were as follows:

Three Months Ended

Cash payments made for interest and income taxes and other non-cash investing activities for the six months ended June 30, 2021 and 2020, respectively, were as follows:

Six Months Ended

(In thousands)

3 unchanged sentences

Increase (decrease) in accrued capital expenditures $ 785 $ ( 29,078 )

Liabilities assumed in exchange for right-of-use lease assets $ 4,998 $ 1,505

Non-cash financing activities include:

Retirement of debt in exchange for common stock $ — $ ( 4,151 )

Issuance of common stock in exchange for debt $ — $ 5,012

(2) LONG-TERM DEBT

At March 31, 2021, long-term debt was comprised of the following:

At June 30, 2021, long-term debt was comprised of the following:

(In thousands)

2 unchanged sentences

6.75 % Senior Notes due 2029:

Net discount, net of amortization ( 28,866 )

6.75% Senior Notes due 2029:

Principal 1,250,000

Premium, net of amortization 7,257

5.875 % Senior Notes due 2030:

Principal 965,000

Bank Credit Facility:

Debt issuance costs, net of amortization ( 41,722 )

As of March 31, 2021, the Company had $ 550.0 million outstanding under a bank credit facility with a $ 1.4 billion committed borrowing base which is re-determined on a semi-annual basis and upon the occurrence of certain other events which matures on July 16, 2024.

As of June 30, 2021, the Company had $ 475.0 million outstanding under a bank credit facility with a $ 1.4 billion committed borrowing base which is re-determined on a semi-annual basis and upon the occurrence of certain other events and matures on July 16, 2024.

Borrowings under the bank credit facility are secured by substantially all of the assets of the Company and its subsidiaries and bear interest at the Company's option, at either LIBOR plus 2.25 % to 3.25 % or a base rate plus 1.25 % to 2.25 %, in each case depending on the utilization of the borrowing base.

2 unchanged sentences

The only financial covenants are the maintenance of a leverage ratio of less than 4.0 to 1.0 and an adjusted current ratio of at least 1.0 to 1.0.

The Company was in compliance with the covenants as of March 31, 2021.

On March 4, 2021, the Company issued $ 1.25 billion principal amount of its 6.75 % senior notes due 2029 in a private placement and received net proceeds after offering costs of $ 1.24 billion, which were used to repurchase a portion of the Company's 7.50 % senior notes due 2025 and 9.75 % senior notes due 2026 pursuant to a tender offer.

The new senior notes mature on March 1, 2029 and accrue interest at a rate of 6.75 % per annum, payable semi-annually on March 1 and September 1 of each year.

Pursuant to the tender offer, Comstock repurchased $ 375.0 million principal amount of its 7.50 % senior notes due 2025 and $ 777.1 million principal amount of its 9.75 % senior notes due 2026 for and aggregate amount of $ 1.26 billion, which included premiums paid over face value of $ 97.9 million, accrued interest of $ 12.5 million and $ 1.1 million of costs related to the tender offer.

As a result of the early retirement of the senior notes repurchased in the tender offer, the Company recognized a $ 238.5 million loss on early retirement of debt in the three months ended March 31, 2021.

The Company was in compliance with the covenants as of June 30, 2021.

On March 4, 2021, the Company issued $ 1.25 billion principal amount of its 6.75 % senior notes due 2029 ("the 2029 Notes") in a private placement and received net proceeds after offering costs of $ 1.24 billion, which were used to repurchase a portion of the Company's 7.5 % senior notes due 2025 and 9.75 % senior notes due 2026 (the "2026 Notes") pursuant to a tender offer.

The 2029 Notes mature on March 1, 2029 and accrue interest at a rate of 6.75 % per annum, payable semi-annually on March 1 and September 1 of each year.

Pursuant to the tender offer, Comstock repurchased $ 375.0 million principal amount of its 7.5 % senior notes due 2025 and $ 777.1 million principal amount of the 2026 Notes for an aggregate amount of $ 1.26 billion, which included premiums paid over face value of $ 97.9 million, accrued interest of $ 12.5 million and $ 1.1 million of costs related to the tender offer.

On June 28, 2021, the Company issued $ 965.0 million principal amount of its 5.875 % senior notes due 2030 (the "2030 Notes") in a private placement and received net proceeds after offering costs of $ 949.5 million, which were used along with cash on hand to redeem all outstanding 2026 Notes.

The 2030 Notes mature on January 15, 2030 and accrue interest at a rate of 5.875 % per annum, payable semi-annually on January 15 and July 15 of each year.

On June 29, 2021, Comstock completed the redemption of all outstanding 2026 Notes for an aggregate amount of $ 978.6 million, which included premiums paid over face value of $ 74.0 million and accrued interest of $ 31.7 million.

As a result of the early retirement of the senior notes repurchased in the tender offer and the redemption of the 2026 Notes, the Company recognized a loss of $ 114.1 million and $ 352.6 million on early retirement of debt for the three months and six months ended June 30, 2021, respectively.

(3) PREFERRED STOCK

In connection with the acquisition of Covey Park Energy LLC, the Company issued 210,000 shares of Series A Convertible Preferred Stock with a face value of $ 210.0 million and a fair value of $ 200.0 million as part of the consideration for the acquisition and sold 175,000 shares of Series B Convertible Preferred Stock for $ 175.0 million to its majority stockholder.

On May 19, 2020, the Company redeemed the 210,000 outstanding shares of the Series A Preferred Stock for an aggregate redemption price of $ 210.0 million plus accrued and unpaid dividends of approximately $ 2.9 million.

The holder of the Series B Preferred Stock is entitled to receive quarterly dividends at a rate of 10 % per annum, which are paid in arrears.

On May 19, 2020, the Company redeemed the 210,000 outstanding shares of the Series A Convertible Preferred Stock for an aggregate redemption price of $ 210.0 million plus accrued and unpaid dividends of approximately $ 2.9 million.

The holder of the Series B Convertible Preferred Stock is entitled to receive quarterly dividends at a rate of 10 % per annum, which are paid in arrears.

The holder of the Series B Convertible Preferred Stock may convert any or all shares of such preferred stock into shares of the Company's common stock at $ 4.00 per share, subject to adjustment pursuant to customary anti-dilution provisions.

2 unchanged sentences

(4) COMMITMENTS AND CONTINGENCIES

In April 2021, the Company entered into a well stimulation agreement that extends to 2024 for exclusive use of a natural gas powered pressure pumping fleet.

The minimum commitment under this contract is $ 19.2 million per year from 2022 through 2024.

From time to time, the Company is involved in certain litigation that arises in the normal course of its operations.

The Company records a loss contingency for these matters when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

The Company does not believe the resolution of these matters will have a material effect on the Company's financial position, results of operations or cash flows and no material amounts are accrued relative to these matters at March 31, 2021 or 2020.

(5) RELATED PARTY TRANSACTIONS

Comstock operates oil and gas properties held by a partnership owned by our majority stockholder.

We charge the partnership for the costs incurred to drill, complete and produce the wells, as well as drilling and operating overhead fees that we charge other interest owners.

We also provide natural gas marketing services to the partnership, including evaluating potential markets and providing hedging services, in return for a fee equal to $ 0.02 per Mcf for natural gas marketed.

We received $ 412 thousand and $ 324 thousand for the three months ended March 31, 2021 and 2020, respectively, for operating and marketing services provided to the partnership.

In connection with our operation of the wells, we had a $ 13.0 million receivable from the partnership at March 31, 2021, which was collected in full in May 2021.

We also had a $ 1.9 million receivable for the fair market value of oil and natural gas price hedging contracts that we have entered into with the partnership.

Comstock operates oil and gas properties held by a partnership owned by its majority stockholder.

The Company charges the partnership for the costs incurred to drill, complete and produce the wells, as well as drilling and operating overhead fees that are charged other interest owners.

Comstock also provides natural gas marketing services to the partnership, including evaluating potential markets and providing hedging services, in return for a fee equal to $ 0.02 per Mcf for natural gas marketed.

The Company received $ 399 thousand and $ 810 thousand for the three and six months ended June 30, 2021, and $ 55 thousand and $ 379 thousand for the three and six months ended June 30, 2020, respectively, for drilling, operating and marketing services provided to the partnership.

In connection with our operation of the wells, the Company had a $ 17.8 million receivable from the partnership at June 30, 2021, which was collected in full in August 2021.

The Company also had a $ 10.1 million receivable for the fair market value of oil and natural gas price hedging contracts that were entered into with the partnership.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements