What changed in this filing

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Item 1. Financial Statements

2023-08-03 compared with 2023-05-04 · 168 added, 97 removed, 376 unchanged (41% of the section changed)

1 unchanged sentence

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

3 unchanged sentences

Accounts receivable:

Oil and gas sales and gas services

Natural gas and oil sales and gas services

124,493 415,079

8 unchanged sentences

Property and equipment:

Oil and natural gas properties, successful efforts method:

Natural gas and oil properties, successful efforts method:

6,483,151 5,843,409

17 unchanged sentences

Deferred income taxes 451,004 425,734

Derivative financial instruments 2,052 —

Long-term operating leases 115,048 52,385

4 unchanged sentences

Stockholders' equity:

Common stock—$ 0.50 par, 400,000,000 shares authorized, 277,510,165 and 277,517,087 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Common stock—$ 0.50 par, 400,000,000 shares authorized, 278,492,648 and 277,517,087 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

139,246 138,759

7 unchanged sentences

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(In thousands, except per share amounts)

1 unchanged sentence

$ 228,892 $ 858,838 $ 606,924 $ 1,381,795

860 2,504 2,802 4,388

Total natural gas and oil sales

9 unchanged sentences

34,031 25,079 68,861 51,265

— 2,342 1,775 3,363

Depreciation, depletion and amortization

2 unchanged sentences

General and administrative

Gain on sale of assets ( 773 ) ( 2 )

10,038 9,063 22,406 17,286

Loss (gain) on sale of assets 648 ( 19 ) ( 125 ) ( 21 )

Total operating expenses

305,278 297,137 649,236 525,881

Operating income 145,620 336,772

Operating income (loss) ( 17,067 ) 649,117 128,553 989,787

Other income (expenses):

3 unchanged sentences

( 39,188 ) ( 44,320 ) ( 77,458 ) ( 90,811 )

Total other income (expenses) 28,599 ( 479,818 )

Loss on early retirement of debt

— ( 46,840 ) — ( 46,840 )

Total other expenses ( 43,085 ) ( 163,804 ) ( 14,486 ) ( 647,520 )

Income (loss) before income taxes ( 60,152 ) 485,313 114,067 342,267

12 unchanged sentences

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

9 unchanged sentences

Balance at March 31, 2022 232,920 $ 116,460 $ 1,101,838 $ ( 319,781 ) $ 898,517

Stock-based compensation

239 119 115 — 234

Net income — — — 376,891 376,891

Payment of preferred stock dividends — — — ( 4,363 ) ( 4,363 )

Balance at June 30, 2022 233,159 $ 116,579 $ 1,101,953 $ 52,747 $ 1,271,279

Balance at January 1, 2023 277,517 $ 138,759 $ 1,253,417 $ 886,138 $ 2,278,314

5 unchanged sentences

Balance at March 31, 2023 277,510 $ 138,755 $ 1,255,467 $ 985,953 $ 2,380,175

Stock-based compensation

983 491 ( 85 ) — 406

Net loss — — — ( 45,706 ) ( 45,706 )

Payment of common stock dividends

— — — ( 34,689 ) ( 34,689 )

Balance at June 30, 2023 278,493 $ 139,246 $ 1,255,382 $ 905,558 $ 2,300,186

The accompanying notes are an integral part of these statements.

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

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) $ 134,503 $ ( 111,424 )

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

Net income $ 88,797 $ 265,467

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

Deferred income taxes

8 unchanged sentences

Stock-based compensation

Decrease in accounts receivable 255,992 28,125

(Increase) decrease in other current assets ( 1,514 ) 2,985

Decrease in accounts payable and accrued expenses ( 123,024 ) ( 42,033 )

Loss on early retirement of debt

(Increase) decrease in accounts receivable 316,210 ( 203,918 )

Decrease in other current assets 1,201 881

Increase in accounts payable and accrued expenses 56 145,083

Net cash provided by operating activities 717,874 696,534

8 unchanged sentences

Borrowings on bank credit facility

160,000 595,000

Repayments of bank credit facility

( 140,000 ) ( 480,000 )

Retirement of Senior Notes

— ( 273,920 )

Preferred stock dividends paid

2 unchanged sentences

Income tax withholdings on equity awards

( 1,899 ) ( 1,365 )

Net cash used for financing activities ( 51,420 ) ( 168,963 )

Net decrease in cash and cash equivalents ( 20,975 ) ( 18,526 )

Net increase (decrease) in cash and cash equivalents ( 44,733 ) 1,609

Cash and cash equivalents, beginning of period

4 unchanged sentences

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

June 30, 2023

(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, 2023, 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, 2023, 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.

3 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, 2022.

The results of operations for the period through March 31, 2023 are not necessarily an indication of the results expected for the full year.

The results of operations for the period through June 30, 2023 are not necessarily an indication of the results expected for the full year.

Other Current Assets

Other current assets at March 31, 2023 and December 31, 2022 consisted of the following:

Other current assets at June 30, 2023 and December 31, 2022 consisted of the following:

2023 December 31, 2022

4 unchanged sentences

Prepaid drilling costs — 4,265

Accrued proceeds from sale of oil and gas properties 975 3,118

Accrued proceeds from sale of natural gas and oil properties — 3,118

$ 60,777 $ 56,324

Property and Equipment

The Company follows the successful efforts method of accounting for its oil and natural gas properties.

Costs incurred to acquire oil and gas leases and to drill and complete developmental wells are capitalized.

Exploratory well costs are initially capitalized as proved property in the consolidated balance sheets but charged to exploration expense if and when the well is determined not to have found commercial proved oil and gas reserves.

The Company follows the successful efforts method of accounting for its natural gas and oil properties.

Costs incurred to acquire natural gas and oil leases and to drill and complete developmental wells are capitalized.

COMSTOCK RESOURCES, INC.

The changes in capitalized exploratory well costs are as follows:

Three Months Ended

March 31, Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(In thousands)

1 unchanged sentence

Additions to exploratory well costs pending the determination of proved reserves 74,622 18,840 104,312 30,397

Determined to have found proved reserves ( 70,983 ) ( 27,592 ) ( 70,983 ) ( 27,592 )

Ending capitalized exploratory well costs $ 34,196 $ 9,771 $ 34,196 $ 9,771

As of March 31, 2023 and December 31, 2022, the Company had no exploratory wells for which costs have been capitalized for a period greater than one year.

The Company assesses the need for an impairment of the capitalized costs for its proved oil and gas properties on a property basis.

No impairments were recognized to adjust the carrying value of the Company's proved oil and gas properties during any of the periods presented.

Unproved oil and gas properties are also periodically assessed and any impairment in value is charged to expense.

The costs related to unproved properties are transferred to proved oil and gas properties and amortized on an equivalent unit-of-production basis when they are reflected in proved oil and natural gas reserves.

The Company determines the fair values of its oil and gas properties using a discounted cash flow model and proved and risk-adjusted probable oil and natural gas reserves.

As of June 30, 2023 and December 31, 2022, the Company had no exploratory wells for which costs have been capitalized for a period greater than one year.

The Company assesses the need for an impairment of the capitalized costs for its proved natural gas and oil properties on a property basis.

No impairments were recognized to adjust the carrying value of the Company's proved natural gas and oil properties during any of the periods presented.

Unproved natural gas and oil properties are also periodically assessed and any impairment in value is charged to expense.

The costs related to unproved properties are transferred to proved natural gas and oil properties and amortized on an equivalent unit-of-production basis when they are reflected in proved natural gas and oil reserves.

The Company determines the fair values of its natural gas and oil properties using a discounted cash flow model and proved and risk-adjusted probable natural gas and oil reserves.

Undrilled acreage can also be valued based on sales transactions in comparable areas.

Significant Level 3 assumptions associated with the calculation of discounted future cash flows included in the cash flow model include management's outlook for oil and natural gas prices, production costs, capital expenditures, and future production as well as estimated proved oil and gas reserves and risk-adjusted probable oil and natural gas reserves.

Management's oil and natural gas price outlook is developed based on third-party longer-term price forecasts as of each measurement date.

Significant Level 3 assumptions associated with the calculation of discounted future cash flows included in the cash flow model include management's outlook for natural gas and oil prices, production costs, capital expenditures, and future production as well as estimated proved natural gas and oil reserves and risk-adjusted probable natural gas and oil reserves.

Management's natural gas and oil price outlook is developed based on third-party longer-term price forecasts as of each measurement date.

The expected future net cash flows are discounted using an appropriate discount rate in determining a property's fair value.

It is reasonably possible that the Company's estimates of undiscounted future net cash flows attributable to its oil and gas properties may change in the future.

The primary factors that may affect estimates of future cash flows include future adjustments, both positive and negative, to proved and appropriate risk-adjusted probable oil and gas reserves, results of future drilling activities, future prices for oil and natural gas, and increases or decreases in production and capital costs.

It is reasonably possible that the Company's estimates of undiscounted future net cash flows attributable to its natural gas and oil properties may change in the future.

The primary factors that may affect estimates of future cash flows include future adjustments, both positive and negative, to proved and appropriate risk-adjusted probable natural gas and oil reserves, results of future drilling activities, future prices for natural gas and oil, and increases or decreases in production and capital costs.

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, 2023 that was recorded in 2018.

The Company had goodwill of $ 335.9 million as of June 30, 2023 that was recorded in 2018.

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

2 unchanged sentences

If the carrying value of goodwill exceeds the fair value, an impairment charge would be recorded for the difference between fair value and carrying value.

The Company has right-of-use lease assets of $ 82.5 million related to its corporate office, certain office equipment, vehicles and a hydraulic fracturing fleet used to complete natural gas wells with corresponding short-term and long-term liabilities.

The Company has right-of-use lease assets of $ 192.7 million related to its corporate office, certain office equipment, vehicles and hydraulic fracturing fleets used to complete natural gas wells with corresponding short-term and long-term liabilities.

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

6 unchanged sentences

Short-term lease costs exclude expenses related to leases with a lease term of one month or less.

Leases for the right to explore for and develop oil and natural gas reserves and the related rights to use the land associated with those leases are reflected as oil and gas properties.

Comstock contracts for a variety of equipment used in its oil and natural gas exploration and development activities.

Leases for the right to explore for and develop natural

COMSTOCK RESOURCES, INC.

gas and oil reserves and the related rights to use the land associated with those leases are reflected as natural gas and oil properties.

Comstock contracts for a variety of equipment used in its natural gas and oil exploration and development activities.

Contract terms for this equipment vary broadly, including the contract duration, pricing, scope of services included along with the equipment, cancellation terms, and rights of substitution, among others.

The Company's drilling and completion operations routinely change due to changes in commodity prices, demand for oil and natural gas, and the overall operating and economic environment.

The Company's drilling and completion operations routinely change due to changes in commodity prices, demand for natural gas and oil, and the overall operating and economic environment.

Accordingly, Comstock manages the terms of its contracts for drilling rigs and completion equipment so as to allow for maximum flexibility in responding to these changing conditions.

The Company is currently utilizing a natural gas powered hydraulic fracturing fleet, which has been leased with a three year term.

The Company has two hydraulic fracturing fleet lease contracts with a three year term.

The Company's other hydraulic fracturing fleet contracts are on terms less than one year and include rights of substitution.

1 unchanged sentence

The Company has elected not to recognize right-of-use lease assets for contracts less than one year.

The costs associated with drilling and completion 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, 2023 and 2022 were as follows:

Three Months Ended March 31,

The costs associated with drilling and completion operations are accounted for under the successful efforts method, which generally require that these costs be capitalized as part of our proved natural gas and oil 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 and six months months ended June 30, 2023 and 2022 were as follows:

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

2023 2022 2023 2022

(In thousands)

1 unchanged sentence

Operating lease cost included in lease operating expense 502 329 1,010 599

Operating lease cost included in oil and natural gas properties 9,450 —

Variable lease cost (completion costs included in oil and natural gas properties) 1,761 —

Short-term lease cost (drilling rig costs included in oil and natural gas properties) 29,392 11,035

Operating lease cost included in natural gas and oil properties 13,230 6,300 22,680 6,300

Variable lease cost (completion costs included in natural gas and oil properties) 3,301 11,127 5,062 11,127

Short-term lease cost (drilling rig costs included in natural gas and oil properties) 24,496 17,105 53,888 28,140

$ 41,973 $ 35,297 $ 83,529 $ 47,037

Cash payments for operating leases associated with right-of-use assets included in cash provided by operating activities were $ 1.0 million and $ 0.7 million for the three months ended March 31, 2023 and 2022, respectively.

Cash payments for operating leases associated with right-of-use assets included in cash used for investing activities were $ 40.6 million and $ 11.0 million for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023 and December 31, 2022, the operating leases had a weighted-average term of 2.0 years and 2.2 years, respectively, and the weighted-average discount rate used to determine the present value of future operating lease payments was 3.6 % and 3.5 %, respectively.

As of March 31, 2023, the Company also had expected future payments for contracted drilling services of $ 148.7 million.

As of March 31, 2023, expected future payments related to contracts that contain operating leases were as follows:

Cash payments for operating leases associated with right-of-use assets included in cash provided by operating activities were $ 0.9 million and $ 0.8 million for the three months ended June 30, 2023 and 2022, respectively, and $ 1.9 million and $ 1.5 million for the six months ended June 30, 2023 and 2022, respectively.

Cash payments for operating leases associated with right-of-use assets included in cash used for investing activities were $ 41.0 million and $ 34.5 million for the three months ended June 30, 2023 and 2022, respectively and $ 81.6 million and $ 45.6 million for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023 and December 31, 2022, the operating leases had a weighted-average term of 2.5 years and 2.2 years, respectively, and the weighted-average discount rate used to determine the present value of future operating lease payments was 5.8 % and 3.5 %, respectively.

As of June 30, 2023, the Company also had expected future payments for contracted drilling services of $ 117.8 million.

As of June 30, 2023, expected future payments related to contracts that contain operating leases were as follows:

(In thousands)

April 1 to December 31, 2023 $ 30,753

July 1 to December 31, 2023 $ 43,143

Total lease payments

1 unchanged sentence

Total lease liability $ 192,738

COMSTOCK RESOURCES, INC.

Accrued Costs

Accrued costs at March 31, 2023 and December 31, 2022 consisted of the following:

Accrued costs at June 30, 2023 and December 31, 2022 consisted of the following:

2023 December 31, 2022

(In thousands)

Accrued interest payable $ 54,377 $ 54,867

Accrued transportation costs 29,449 28,357

Accrued drilling costs 25,392 54,438

Accrued income and other taxes 10,174 31,256

Accrued transportation costs 28,135 28,357

Accrued interest payable 19,697 54,867

Accrued employee compensation 8,484 11,308

3 unchanged sentences

Reserve for Future Abandonment Costs

Comstock's asset retirement obligations relate to future plugging and abandonment expenses on its oil and gas properties and disposal of other facilities.

Comstock's asset retirement obligations relate to future plugging and abandonment expenses on its natural gas and oil properties and disposal of other facilities.

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)

1 unchanged sentence

New wells placed on production

Acquisitions — 1,211

Liabilities settled and assets disposed of

( 42 ) ( 29 )

Accretion expense

8 unchanged sentences

All of Comstock's natural gas derivative financial instruments are tied to the Henry Hub-NYMEX price index.

The Company had the following oil and natural gas price derivative financial instruments at March 31, 2023:

COMSTOCK RESOURCES, INC.

The Company had the following natural gas price derivative financial instruments at June 30, 2023:

Future Production Period

Nine Months Ending December 31, 2023

Natural Gas Collar Contracts:

Six Months Ending December 31, 2023 Year Ending December 31, 2024 Total

Natural Gas Price Swap Contracts:

Volume (MMBtu) — 47,580,000 47,580,000

Average Price per MMBtu $ 3.50 $ 3.50

Natural Gas Price Collar Contracts:

Volume (MMBtu) 46,000,000 46,000,000

Average Price per MMBtu:

Average Ceiling $ 10.28 $ 10.28

1 unchanged sentence

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

Type Consolidated Balance Sheet Location March 31,

Type Consolidated Balance Sheet Location June 30,

2023 December 31, 2022

5 unchanged sentences

Natural gas price derivatives Derivative Financial Instruments – current $ — $ 4,420

Natural gas price derivatives Derivative Financial Instruments – long-term $ 2,052 $ —

The Company recognized cash settlements and changes in the fair value of its derivative financial instruments as a single component of other income (expenses).

2 unchanged sentences

Recognized in Earnings Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(In thousands)

4 unchanged sentences

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 $ 2.0 million and $ 1.5 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, 2023 and 2022, respectively.

As of March 31, 2023, Comstock had 959,136 shares of unvested restricted stock outstanding at a weighted average grant date fair value of $ 13.30 per share.

Total unrecognized compensation cost related to unvested restricted stock grants of $ 8.8 million as of March 31, 2023 is expected to be recognized over a period of 2.1 years.

As of March 31, 2023, Comstock had 552,126 PSUs outstanding with a weighted average grant date fair value of $ 14.76 per unit.

The Company recognized $ 2.3 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, 2023 and 2022, respectively, and $ 4.4 million and $ 3.1 million for the six months ended June 30, 2023 and 2022, respectively.

COMSTOCK RESOURCES, INC.

In June 2023, the Company granted an aggregate of 954,031 shares of restricted stock to its directors and employees.

The grants were valued at $ 9.80 per share.

As of June 30, 2023, Comstock had 1,494,134 shares of unvested restricted stock outstanding at a weighted average grant date fair value of $ 11.52 per share.

Total unrecognized compensation cost related to unvested restricted stock grants of $ 16.6 million as of June 30, 2023 is expected to be recognized over a period of 2.4 years.

In June 2023, the Company granted an aggregate of 359,689 PSUs to its executive officers at a value of $ 13.64 per unit.

As of June 30, 2023, Comstock had 742,425 PSUs outstanding with a weighted average grant date fair value of $ 15.92 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 1,484,850 shares of common stock.

Total unrecognized compensation cost related to these grants of $ 4.7 million as of March 31, 2023 is expected to be recognized over a period of 2.0 years.

Total unrecognized compensation cost related to these grants of $ 8.8 million as of June 30, 2023 is expected to be recognized over a period of 2.5 years.

Revenue Recognition

11 unchanged sentences

Each unit of production (barrel of crude oil and thousand cubic feet of natural gas) represents a separate performance obligation under the Company's contracts since each unit has economic benefit on its own and each is priced separately according to the terms of the contracts.

Comstock has elected to exclude all taxes from the measurement of transaction prices, and its revenues are reported net of royalties and exclude revenue interests owned by others because the Company acts as an agent when selling crude oil and natural gas, on behalf of royalty owners and working interest owners.

Comstock has elected to exclude all taxes from the measurement of transaction prices, and its revenues are reported net of royalties and exclude revenue interests owned by others because the Company acts as an agent when selling natural gas and oil, on behalf of royalty owners and working interest owners.

Revenue is recorded in the month of production based on an estimate of the Company's share of volumes produced and prices realized.

3 unchanged sentences

The amount of natural gas or oil 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, 2023 or December 31, 2022.

The Company recognized accounts receivable of $ 177.8 million and $ 415.1 million as of March 31, 2023 and December 31, 2022, respectively, from purchasers for contracts where performance obligations have been satisfied and an unconditional right to consideration exists.

The Company did not have any significant imbalance positions at June 30, 2023 or December 31, 2022.

The Company recognized accounts receivable of $ 124.5 million and $ 415.1 million as of June 30, 2023 and December 31, 2022, respectively, from purchasers 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, 2023 and 2022.

Accordingly, no allowance for doubtful accounts has been recorded for the six months ended June 30, 2023 and 2022.

COMSTOCK RESOURCES, INC.

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.

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(In thousands)

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

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

2 unchanged sentences

State income taxes, net of federal benefit

3.8 5.0 ( 0.5 ) 5.3

Nondeductible stock-based compensation

( 0.1 ) 0.1 0.6 0.1

Effective tax rate 24.0 % 22.3 % 22.2 % 22.4 %

9 unchanged sentences

Level 1 — Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date.

COMSTOCK RESOURCES, INC.

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.

3 unchanged sentences

Fair Values – Reported

The following presents the carrying amounts and the fair values of the Company's financial instruments as of March 31, 2023 and December 31, 2022:

March 31, 2023 December 31, 2022

The following presents the carrying amounts and the fair values of the Company's financial instruments as of June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

Carrying Value Fair Value Carrying Value Fair Value

4 unchanged sentences

$ 2,052 $ 2,052 $ 4,420 $ 4,420

Bank credit facility (2)

$ 20,000 $ 20,000 $ — $ —

6.75 % senior notes due 2029 (3)

4 unchanged sentences

(1) The Company's commodity-based derivatives are classified as Level 2 and measured at fair value using third party pricing services and other active markets or broker quotes that are readily available in the public markets.

(2) The fair value of the Company's fixed rate debt was based on quoted prices as of March 31, 2023 and December 31, 2022, respectively, a Level 1 measurement.

(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 June 30, 2023 and December 31, 2022, 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, 2023 and December 31, 2022, 959,136 and 966,058 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, 2023 and December 31, 2022, 1,494,134 and 966,058 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

2023 2022 2023 2022

(In thousands)

3 unchanged sentences

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

COMSTOCK RESOURCES, INC.

Weighted average unearned PSUs outstanding were as follows:

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(In thousands, except per unit amounts)

1 unchanged sentence

Weighted average grant date fair value per unit $ 15.92 $ 10.41 $ 15.92 $ 10.41

Basic and diluted income (loss) per share for the three months ended March 31, 2023 and 2022 were determined as follows:

Three Months Ended March 31,

Basic and diluted income (loss) per share for the three months and six months months ended June 30, 2023 and 2022 were determined as follows:

Three Months Ended June 30,

Income Shares Per Share Loss Shares Per Share

3 unchanged sentences

Basic income (loss) attributable to common stock ( 45,706 ) 276,669 $ ( 0.17 ) 371,081 232,045 $ 1.60

Effect of Dilutive Securities:

Restricted stock — — 1,447 680

Performance stock units — — — 1,139

Convertible preferred stock — — 4,363 43,750

Diluted income (loss) attributable to common stock $ ( 45,706 ) 276,669 $ ( 0.17 ) $ 376,891 277,614 $ 1.36

Six Months Ended June 30,

Income Shares Per Share Loss Shares Per Share

(In thousands, except per share amounts)

Net income attributable to common stock $ 88,797 $ 256,789

Income allocable to unvested restricted shares ( 73 ) ( 1,021 )

Basic income attributable to common stock 88,724 276,610 $ 0.32 255,768 232,011 $ 1.10

Effect of Dilutive Securities:

Restricted stock — — 1,021 640

Performance stock units — — — 1,084

Convertible preferred stock — — 8,678 43,750

Diluted income attributable to common stock $ 88,724 276,610 $ 0.32 $ 265,467 277,485 $ 0.96

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.

COMSTOCK RESOURCES, INC.

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, 2023 and 2022, 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, 2023 and 2022, respectively, were as follows:

Six Months Ended

(In thousands)

6 unchanged sentences

(2) LONG-TERM DEBT

At March 31, 2023, long-term debt was comprised of the following:

At June 30, 2023, long-term debt was comprised of the following:

(In thousands)

6 unchanged sentences

Debt issuance costs, net of amortization ( 38,019 )

As of March 31, 2023, the Company had no borrowings outstanding under the bank credit facility.

As of June 30, 2023, the Company had $ 20.0 million outstanding under a bank credit facility.

Aggregate commitments under the bank credit facility are $ 1.5 billion, which matures on November 15, 2027.

3 unchanged sentences

The Company also pays a commitment fee of 0.375 % to 0.5 % on the unused portion of the borrowing base.

The bank credit facility places certain restrictions upon the Company's and its subsidiaries' ability to, among other things, incur additional indebtedness, pay cash dividends, repurchase common stock, make certain loans, investments and divestitures and redeem the

senior notes.

The only financial covenants are the maintenance of a leverage ratio of less than 3.5 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, 2023.

(3) CONVERTIBLE PREFERRED STOCK

On November 30, 2022, all of the outstanding shares of the Series B Redeemable Convertible Preferred Stock were converted into 43,750,000 shares of common stock.

The Company was in compliance with the covenants as of June 30, 2023.

During the six months ended June 30, 2022, the Company completed the early redemption of all of its outstanding 7.5 % senior notes due in 2025 for an aggregate amount of $ 258.1 million and repurchased $ 26.1 million principal amount of its 6.75 % senior notes due in 2029 for $ 24.9 million.

As a result of the redemption and repurchase, the Company recognized a loss of $ 46.8 million on early retirement of debt.

(4) COMMITMENTS AND CONTINGENCIES

In July 2022, the Company entered into a hydraulic fracturing services agreement for exclusive use of a natural gas powered hydraulic fracturing fleet.

The term of the agreement is three years and the minimum commitment under this agreement is $ 19.2 million per year.

The Company expects to take delivery of the fleet in the second quarter of 2023.

In December 2022, the Company entered into agreements for three new drilling rigs with a three year term and a minimum annual commitment of $ 12.2 million per drilling rig.

1 unchanged sentence

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, 2023 or 2022.

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

COMSTOCK RESOURCES, INC.

the loss can be reasonably estimated.

(5) RELATED PARTY TRANSACTIONS

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

Comstock operates natural gas and oil properties held by partnerships owned by its majority stockholder.

The Company charges the partnerships for the costs incurred to drill, complete and produce wells, as well as drilling and operating overhead fees.

Comstock also provides natural gas marketing services to the partnerships, 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 $ 224 thousand and $ 194 thousand for the three months ended March 31, 2023 and 2022, respectively, for drilling, operating and marketing services provided to the partnerships.

The Company received $ 0.4 million for the three months ended June 30, 2023 and 2022, respectively, and $ 0.7 million and $ 0.6 million for the six months ended June 30, 2023, respectively, for drilling, operating and marketing services provided to the partnerships.

The fees received for the services are reflected as a reduction of general and administrative expenses in the accompanying consolidated statements of operations.

In connection with the operation of the wells, the Company had a $ 10.6 million and $ 18.5 million receivable from the partnerships at March 31, 2023 and December 31, 2022, respectively.

In connection with the operation of the wells, the Company had a $ 28.5 million and $ 18.5 million receivable from the partnerships at June 30, 2023 and December 31, 2022, respectively.

(6) SUBSEQUENT EVENT

On May 1, 2023, the board of directors of the Company authorized a dividend of $ 0.125 per share to be paid to common stockholders of record on June 1, 2023.

On July 31, 2023, the board of directors of the Company authorized a dividend of $ 0.125 per share to be paid on September 15, 2023 to common stockholders of record on September 1, 2023.

COMSTOCK RESOURCES, INC.

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