What changed in this filing

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Item 1. Financial Statements

2023-11-02 compared with 2023-08-03 · 129 added, 183 removed, 361 unchanged (46% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

2023 December 31,

September 30,

(In thousands)

2 unchanged sentences

Natural gas and oil sales and gas services

124,493 415,079

Joint interest operations

40,911 76,521

From affiliates

28,513 18,527

Derivative financial instruments

1 unchanged sentence

Total current assets

282,166 644,987

Property and equipment:

Natural gas and oil properties, successful efforts method:

6,483,151 5,843,409

319,791 298,230

37,710 26,475

Accumulated depreciation, depletion and amortization

( 1,814,651 ) ( 1,545,459 )

Net property and equipment

5,026,001 4,622,655

Goodwill 335,897 335,897

Operating lease right-of-use assets

$ 5,836,734 $ 5,694,255

LIABILITIES AND STOCKHOLDERS' EQUITY

4 unchanged sentences

Total current liabilities

762,062 756,137

Long-term debt

4 unchanged sentences

Total liabilities

3,536,548 3,415,941

Commitments and contingencies

Stockholders' equity:

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

Common stock—$ 0.50 par, 400,000,000 shares authorized, 278,429,463 and 277,517,087 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

1,255,382 1,253,417

Accumulated earnings

Total stockholders' equity

2,300,186 2,278,314

$ 5,836,734 $ 5,694,255

The accompanying notes are an integral part of these statements.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

September 30,

Nine Months Ended

September 30,

(In thousands, except per share amounts)

Natural gas sales

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

860 2,504 2,802 4,388

Total natural gas and oil sales

229,752 861,342 609,726 1,386,183

Gas services 58,459 84,912 168,063 129,485

Total revenues

1 unchanged sentence

Production and ad valorem taxes

19,599 21,729 34,505 35,549

Gathering and transportation

45,395 36,964 90,969 69,057

Lease operating

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

— 2,342 1,775 3,363

Depreciation, depletion and amortization

140,177 119,201 274,160 225,929

Gas services 55,390 82,778 156,685 123,453

General and administrative

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

Loss (gain) on sale of assets

Total operating expenses

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

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

Operating income

Other income (expenses)

Gain (loss) from derivative financial instruments

Other income 598 182 1,058 450

Interest expense

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

Loss on early retirement of debt

— ( 46,840 ) — ( 46,840 )

Total other expenses

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

(Provision for) benefit from income taxes 14,446 ( 108,422 ) ( 25,270 ) ( 76,800 )

Net income (loss) ( 45,706 ) 376,891 88,797 265,467

Income before income taxes

Provision for income taxes

Preferred stock dividends

Net income (loss) available to common stockholders $ ( 45,706 ) $ 372,528 $ 88,797 $ 256,789

Net income (loss) per share:

$ ( 0.17 ) $ 1.60 $ 0.32 $ 1.10

$ ( 0.17 ) $ 1.36 $ 0.32 $ 0.96

Net income available to common stockholders

Net income per share:

Weighted average shares outstanding:

276,669 232,045 276,610 232,011

276,669 277,614 276,610 277,485

Dividends per share

2 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Par Value Additional

Capital Accumulated

Earnings (Deficit) Total

(In thousands)

1 unchanged sentence

Stock-based compensation

( 5 ) ( 2 ) 1,479 — 1,477

Net loss — — — ( 111,424 ) ( 111,424 )

Payment of preferred stock dividends

1 unchanged sentence

Stock-based compensation

239 119 115 — 234

Net income — — — 376,891 376,891

Payment of preferred stock dividends

Balance at June 30, 2022

Stock-based compensation

Payment of preferred stock dividends

Balance at September 30, 2022

Balance at January 1, 2023

Stock-based compensation

( 7 ) ( 4 ) 2,050 — 2,046

Net income — — — 134,503 134,503

Payment of common stock dividends

— — — ( 34,688 ) ( 34,688 )

Balance at March 31, 2023

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

Stock-based compensation

Payment of common stock dividends

Balance at September 30, 2023

The accompanying notes are an integral part of these statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 88,797 $ 265,467

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

Deferred income taxes

25,270 70,329

Gain on sale of assets

Depreciation, depletion and amortization

274,160 225,929

(Gain) loss on derivative financial instruments

Cash settlements of derivative financial instruments

65,877 ( 374,549 )

Amortization of debt discount and issuance costs

2 unchanged sentences

(Increase) decrease in accounts receivable

Decrease in other current assets 1,201 881

Increase in accounts payable and accrued expenses 56 145,083

(Increase) decrease in other current assets

Increase (decrease) in accounts payable and accrued expenses

Net cash provided by operating activities

1 unchanged sentence

Capital expenditures and acquisitions

( 743,858 ) ( 515,454 )

Prepaid drilling costs

( 8,624 ) ( 10,601 )

Proceeds from sales of assets

2 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 cash provided by (used for) financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

54,652 30,663

Cash and cash equivalents, end of period

$ 9,919 $ 32,272

The accompanying notes are an integral part of these statements.

COMSTOCK RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

NOTES TO CONSOLIDA TED FINANCIAL STATEMENTS

September 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 June 30, 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 September 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 June 30, 2023 are not necessarily an indication of the results expected for the full year.

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

Other Current Assets

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

2023 December 31, 2022

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

September 30,

(In thousands)

4 unchanged sentences

Accrued proceeds from sale of natural gas and oil properties

$ 60,777 $ 56,324

Property and Equipment

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

September 30,

Nine Months Ended

September 30,

(In thousands)

Beginning capitalized exploratory well costs

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

Additions to exploratory well costs pending the

determination of proved reserves

Determined to have found proved reserves

Ending capitalized exploratory well costs

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.

As of September 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.

10 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 June 30, 2023 that was recorded in 2018.

The Company had goodwill of $ 335.9 million as of September 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 $ 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 Company has right-of-use lease assets of $ 148.1 million related to its corporate office, certain office equipment, vehicles, drilling rigs and hydraulic fracturing fleets 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 natural

Leases for the right to explore for and develop natural 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 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.

2 unchanged sentences

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

The Company has one hydraulic fracturing fleet lease contract 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.

The Company's drilling rig contracts are presently either for periods of less than one year, or they are on terms that provide for cancellation with 45 days advance notice without a specified expiration date.

The Company has one drilling rig contract with a three year term.

The Company's other drilling rig contracts are presently either for periods of less than one year, or they are on terms that provide for cancellation with 45 days advance notice without a specified expiration date.

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 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

Lease costs recognized during the three months and nine months ended September 30, 2023 and 2022 were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

4 unchanged sentences

Short-term lease cost (drilling rig costs included in natural gas and oil properties)

$ 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 $ 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:

Cash payments for operating leases associated with right-of-use assets included in cash provided by operating activities were $ 1.0 million and $ 0.8 million for the three months ended September 30, 2023 and 2022, respectively, and $ 2.9 million and $ 2.3 million for the nine months ended September 30, 2023 and 2022, respectively.

Cash payments for operating leases associated with right-of-use assets included in cash used for investing activities were $ 64.7 million and $ 37.3 million for the three months ended September 30, 2023 and 2022, respectively and $ 146.4 million and $ 82.8 million for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023 and December 31, 2022, the operating leases had a weighted-average term of 2.6 years and 2.2 years, respectively, and the weighted-average discount rate used to determine the present value of future operating lease payments was 6.9 % and 3.5 % , respectively.

As of September 30, 2023, the Company also had expected future payments for short term leased drilling services of $ 7.0 million .

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

(In thousands)

July 1 to December 31, 2023 $ 43,143

October 1 to December 31, 2023

Total lease payments

3 unchanged sentences

Accrued Costs

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

2023 December 31, 2022

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

September 30,

(In thousands)

Accrued interest payable $ 54,377 $ 54,867

Accrued transportation costs

Accrued drilling costs

Accrued interest payable

Accrued income and other taxes

1 unchanged sentence

Accrued lease operating expenses

Other 320 473

$ 132,057 $ 183,111

Reserve for Future Abandonment Costs

1 unchanged sentence

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

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

1 unchanged sentence

New wells placed on production

Acquisitions — 1,211

Liabilities settled and assets disposed of

( 42 ) ( 29 )

Accretion expense

9 unchanged sentences

COMSTOCK RESOURCES, INC.

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

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

Future Production Period

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

Three Months Ending December 31, 2023

Year Ending December 31, 2024

Natural Gas Price Swap Contracts:

6 unchanged sentences

Average Floor

Subsequent to September 30, 2023 , the Company entered into natural gas swap contracts to hedge an additional 47,580,000 MMBtu of natural gas production from January 2024 to December 2024 at an average price of $ 3.56 per MMBtu.

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

Type Consolidated Balance Sheet Location June 30,

2023 December 31, 2022

Consolidated Balance Sheet Location

September 30,

(In thousands)

Asset Derivative Financial Instruments:

Natural gas price derivatives Derivative Financial Instruments – current $ 17,553 $ 23,884

$ 17,553 $ 23,884

Natural gas price derivatives

Derivative Financial Instruments –

Liability Derivative Financial Instruments:

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

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

Natural gas price derivatives

Derivative Financial Instruments –

Natural gas price derivatives

Derivative Financial Instruments –

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

Gains and losses related to cash settlements and changes in the fair value recognized on the Company's derivative contracts recognized in the consolidated statement of operations were as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Gain (Loss) on Derivatives

Recognized in Earnings Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Recognized in Earnings

(In thousands)

Natural gas price derivatives

$ ( 4,495 ) $ ( 72,826 ) $ 61,914 $ ( 510,319 )

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 $ 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.

The Company recognized $ 2.7 million and $ 1.8 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 September 30, 2023 and 2022, respectively, and $ 7.0 million and $ 4.9 million for the nine months ended September 30, 2023 and 2022, respectively.

COMSTOCK RESOURCES, INC.

1 unchanged sentence

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.

As of September 30, 2023, Comstock had 1,430,949 shares of unvested restricted stock outstanding at a weighted average grant date fair value of $ 11.62 per share.

Total unrecognized compensation cost related to unvested restricted stock grants of $ 14.3 million as of September 30, 2023 is expected to be recognized over a period of 2.2 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.

As of September 30, 2023, Comstock had 750,399 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 1,500,798 shares of common stock.

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.

Total unrecognized compensation cost related to these grants of $ 7.9 million as of September 30, 2023 is expected to be recognized over a period of 2.3 years.

Revenue Recognition

1 unchanged sentence

Revenues are recognized upon the transfer of produced volumes to the Company's customers, who take control of the volumes and receive all the benefits of ownership upon delivery at designated sales points.

Gas services revenues represent sales of natural gas purchased for resale and fees received for gathering and treating services provided to unaffiliated third parties and certain natural gas wells operated by the Company.

Gas services revenues represent sales of natural gas purchased for resale from unaffiliated third parties and fees received for gathering and treating services for certain natural gas wells operated by the Company.

Revenues are recognized upon completion of the gathering and treating of contracted natural gas volumes and delivery of purchased natural gas volumes to the Company's customers.

9 unchanged sentences

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

Gas services revenue is recorded in the month the services are performed or purchased gas is sold based on an estimate of natural gas volumes and contract prices.

Gas services revenue is recorded in the month the services are performed and purchased gas is sold based on an estimate of natural gas volumes and contract prices.

The Company recognizes any differences between estimates and actual amounts received in the month when payment is received.

1 unchanged sentence

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 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.

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

The Company recognized accounts receivable of $ 157.1 million and $ 415.1 million as of September 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 six months ended June 30, 2023 and 2022.

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

COMSTOCK RESOURCES, INC.

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

September 30,

Nine Months Ended

September 30,

(In thousands)

3 unchanged sentences

Deferred - State

$ ( 14,446 ) $ 108,422 $ 25,270 $ 76,800

The difference between the federal statutory rate of 21% and the effective tax rate is due to the following:

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

September 30,

Nine Months Ended

September 30,

Tax at statutory rate

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

8 unchanged sentences

A three-level hierarchy is followed for disclosure to show the extent and level of judgment used to estimate fair value measurements:

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.

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.

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.

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.

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.

Fair Values – Reported

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

Fair Values –

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

September 30, 2023

December 31, 2022

Carrying Value

(In thousands)

Commodity-based derivatives (1)

$ 17,553 $ 17,553 $ 23,884 $ 23,884

Commodity-based derivatives (1)

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

Bank credit facility (2)

$ 20,000 $ 20,000 $ — $ —

6.75 % senior notes due 2029 (3)

$ 1,229,437 $ 1,122,910 $ 1,229,836 $ 1,129,029

5.875 % senior notes due 2030 (3)

$ 965,000 $ 832,313 $ 965,000 $ 846,788

_____________________________

(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 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.

(3) The fair value of the Company's fixed rate debt was based on quoted prices as of September 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 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.

At September 30, 2023 and December 31, 2022, 1,430,949 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

September 30,

Nine Months Ended

September 30,

(In thousands)

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

September 30,

Nine Months Ended

September 30,

(In thousands, except per unit amounts)

1 unchanged sentence

Weighted average grant date fair value per unit

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

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

Three Months Ended September 30,

(In thousands, except per share amounts)

Net income (loss) attributable to common stock $ ( 45,706 ) $ 372,528

Net income attributable to common stock

Income allocable to unvested restricted shares

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

Basic income attributable to common stock

Effect of Dilutive Securities:

2 unchanged sentences

Convertible preferred stock

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

Diluted income attributable to common stock

Nine Months Ended September 30,

(In thousands, except per share amounts)

8 unchanged sentences

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 six months ended June 30, 2023 and 2022, respectively, were as follows:

Six Months Ended

Cash payments made for interest and income taxes and other non-cash investing activities for the nine months ended September 30, 2023 and 2022, respectively, were as follows:

Nine Months Ended

September 30,

(In thousands)

5 unchanged sentences

Liabilities assumed in exchange for right-of-use lease assets

COMSTOCK RESOURCES, INC.

(2) LONG-TERM DEBT

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

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

(In thousands)

6.75 % Senior Notes due 2029:

Principal $ 1,223,880

Premium, net of amortization

5.875 % Senior Notes due 2030:

Principal 965,000

Bank Credit Facility:

Debt issuance costs, net of amortization

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

As of September 30, 2023, the Company had $ 345.0 million outstanding under a bank credit facility.

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

5 unchanged sentences

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 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.

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

During the nine months ended September 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.

1 unchanged sentence

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.

Comstock expects to take delivery of two of the rigs in the second half of 2023 and the third rig in early 2024.

Comstock took delivery of one of the rigs during August 2023 and expects to take delivery of the second rig in the fourth quarter of 2023 and the third rig in early 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

COMSTOCK RESOURCES, INC.

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 June 30, 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 the loss can be reasonably estimated.

(4) RELATED PARTY TRANSACTIONS

2 unchanged sentences

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 $ 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 Company received $ 327 thousand and $ 152 thousand for the three months ended September 30, 2023 and 2022, respectively, and $ 1.0 million and $ 735 thousand for the nine months ended September 30, 2023 and 2022, 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 $ 28.5 million and $ 18.5 million receivable from the partnerships at June 30, 2023 and December 31, 2022, respectively.

In connection with the operation of the wells, the Company had a $ 21.2 million and $ 18.5 million receivable from the partnerships at September 30, 2023 and December 31, 2022 , respectively.

COMSTOCK RESOURCES, INC.

(5) SUBSEQUENT EVENT

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.

On October 30, 2023, the board of directors of the Company authorized a dividend of $ 0.125 per share to be paid on December 15, 2023 to common stockholders of record on December 1, 2023.

On October 30, 2023, Comstock entered into a midstream partnership for the Company's Western Haynesville acreage with Quantum Capital Solutions ("QCS"), an affiliate of Quantum Capital Group.

In connection with this transaction, Comstock contributed its Pinnacle gathering and treating system, which is comprised of a 145-mile high pressure pipeline and the Bethel natural gas processing plant to the partnership in exchange for a total capital commitment by QCS of $ 300 million to fund the future build-out of the Western Haynesville midstream system.

Comstock will control and operate the midstream system.

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