What changed in this filing

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Item 9A. Controls and Procedures

2024-02-16 compared with 2023-02-17 · 257 added, 348 removed, 732 unchanged (45% of the section changed)

16 unchanged sentences

The report, which expresses an unqualified opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2023, follows below.

COMSTOCK RESOURCES, INC.

Report of Independent Registered Public Accounting Firm

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February 16, 2024

COMSTOCK RESOURCES, INC.

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURSIDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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issued upon exercise of

outstanding options, warrants

and rights Number of securities authorized

outstanding options,

warrants and rights (1)

Number of securities authorized

for future issuance under equity

3 unchanged sentences

Equity compensation plans approved by stockholders

_______________

(1) Represents performance share unit awards that would be issuable based upon achievement of the maximum awards under the terms of the performance share unit awards.

1 unchanged sentence

Further information required by this item is incorporated herein by reference to our definitive proxy statement which will be filed with the SEC within 120 days after December 31, 2023.

COMSTOCK RESOURCES, INC.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

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Shareholders Agreement, dated June 7, 2019, by and among the Company, Arkoma Drilling CP, LLC, Williston Drilling CP, LLC, Arkoma Drilling, L.P., Williston Drilling, L.P., New Covey Park Energy LLC and Jerral W.

Jones (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K dated June 10, 2019).

Jo nes (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K dated June 10, 2019).

COMSTOCK RESOURCES, INC.

Description of Securities.

Second Amended and Restated Credit Agreement dated as of November 15, 2022, among the Company, Wells Fargo Bank National Association as Administrative Agent and the lenders party thereto from time to time (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K dated November 15, 2022).

First Amendment to Second Amended and Restated Credit Agreement dated as of October 27, 2023, among the Company, Wells Fargo Bank National Association as Administrative Agent and the lenders party thereto from time to time (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023).

Comstock Resources, Inc.

4 unchanged sentences

Burns (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K dated September 7, 2018).

Separation and Release Agreement dated as of November 18, 2022 between Comstock Resources, Inc.

COMSTOCK RESOURCES, INC.

Lease between Stonebriar I Office Partners, Ltd., and Comstock Resources, Inc.

dated May 6, 2004 (incorporated by reference to Exhibit 10.24 to our Annual Report on Form 10-K for the year ended December 31, 2004).

First Amendment to the Lease Agreement dated August 25, 2005, between Stonebriar I Office Partners, Ltd.

and Comstock Resources, Inc.

(incorporated by reference to Exhibit 10.19 to our Annual Report on Form 10-K for the year ended December 31, 2005).

Second Amendment to the Lease Agreement dated October 15, 2007 between Stonebriar I Office Partners, Ltd.

and Comstock Resources, Inc.

(incorporated by reference to Exhibit 10.10 to our Annual Report on Form 10-K for the year ended December 31, 2008).

Third Amendment to the Lease Agreement dated September 30, 2008 between Stonebriar I Office Partners, Ltd.

and Comstock Resources, Inc.

(incorporated by reference to Exhibit 10.11 to our Annual Report on Form 10-K for the year ended December 31, 2008).

Fourth Amendment to the Lease Agreement dated May 8, 2009 between Stonebriar I Office Partners, Ltd.

and Comstock Resources, Inc.

(incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2009).

Fifth Amendment to the Lease Agreement dated June 15, 2011 between Stonebriar I Office Partners, Ltd.

and Comstock Resources, Inc.

(incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2011).

Sixth Amendment to the Lease Agreement dated January 21, 2021 between Stonebriar I Office Partners, Ltd.

Amended and Restated Lease between Stonebriar I Office Partners, Ltd.

and Comstock Resources, Inc.

(incorporated by reference to Exhibit 10.20 to our Annual Report on Form 10-K for the year ended December 31, 2020).

dated December 22, 2023.

Subsidiaries of the Company.

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Chief Financial Officer certification under Section 906 of the Sarbanes-Oxley Act of 2002.

Executive Compensation Clawback Policy (as amended and restated) adopted by the Compensation Committee of the Board of Directors of Comstock Resources, Inc., effective as of June 6, 2023.

Audit Letter of Netherland, Sewell & Associates, Inc.

on Proved Reserves as of December 31, 2023.

101.INS* XBRL Instance Document

101.SCH* XBRL Schema Document

101.CAL* XBRL Calculation Linkbase Document

101.LAB* XBRL Labels Linkbase Document

101.PRE* XBRL Presentation Linkbase Document

101.DEF* XBRL Definition Linkbase Document

XBRL Instance Document

Inline XBRL Taxonomy Extension Schema With Embedded Linkbases Document

Cover Page Interactive Data File (embedded within the Inline XBRL document)

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Chief Executive Officer

February 17, 2023 (Principal Executive Officer)

February 16, 2024

(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

JAY ALLISON Chief Executive Officer and February 17, 2023

Jay Allison Chairman of the Board of Directors

Chief Executive Officer and

February 16, 2024

Chairman of the Board of Directors

(Principal Executive Officer)

/s/ ROLAND O.

BURNS President, Chief Financial Officer, February 17, 2023

Burns Secretary and Director

President, Chief Financial Officer,

February 16, 2024

Secretary and Director

(Principal Financial and Accounting Officer)

/s/ ELIZABETH B.

DAVIS Director February 17, 2023

February 16, 2024

/s/ MORRIS E.

FOSTER Director February 17, 2023

TURNER Director February 17, 2023

February 16, 2024

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

FINANCIAL STATEMENTS

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Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDEN T REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Comstock Resources, Inc.

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Depreciation, Depletion and Amortization of Proved Oil and Gas Properties

Description of the Matter At December 31, 2022, the net book value of the Company’s proved oil and natural gas properties was $4,300 million, and depreciation, depletion and amortization expense ("DD&A") was $489 million for the year then ended.

As described in Note 1 to the consolidated financial statements, the Company follows the successful efforts method of accounting for its oil and natural gas properties.

Depreciation, Depletion and Amortization of Proved Natural Gas and Oil Properties

Description of the Matter

At December 31, 2023, the net book value of the Company's proved natural gas and oil properties was $4,982 million, and depreciation, depletion and amortization expense ("DD&A") was $608 million for the year then ended.

As described in Note 1 to the consolidated financial statements, the Company follows the successful efforts method of accounting for its natural gas and oil properties.

Under this method, the capitalized costs of proved properties are depleted using the unit-of-production method based on proved reserves, as estimated by the Company's engineers.

Proved oil and natural gas reserves are prepared using standard geological and engineering methods generally recognized in the petroleum industry based on evaluations of estimated in-place hydrocarbon volumes using financial and non-financial inputs.

Proved natural gas and oil reserves are prepared using standard geological and engineering methods generally recognized in the petroleum industry based on evaluations of estimated in-place hydrocarbon volumes using financial and non-financial inputs.

Judgment is required by the Company's engineers in interpreting the data used to estimate reserves.

Estimating proved oil and natural gas reserves requires the selection and evaluation of inputs, including historical production, oil and natural gas price assumptions, future operating and capital cost assumptions and tax rates by jurisdiction, among others.

Because of the complexity involved in estimating oil and natural gas reserves, management used independent petroleum engineers to audit the proved reserve estimates prepared by the Company's engineers as of December 31, 2022.

Auditing the Company's DD&A calculation is complex because of the use of the work of the Company's engineers and the independent petroleum engineers and the evaluation of management's determination of the inputs described above used by these engineers in estimating proved oil and natural gas reserves.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls that address the risks of material misstatement relating to the DD&A calculation, including controls over the completeness and accuracy of the financial data used in estimating proved oil and natural gas reserves.

Estimating proved natural gas and oil reserves requires the selection and evaluation of inputs, including historical production, natural gas and oil price assumptions, future operating and capital cost assumptions, among others.

Because of the complexity involved in estimating natural gas and oil reserves, management used independent petroleum engineers to audit the proved reserve estimates prepared by the Company's engineers as of December 31, 2023.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls that address the risks of material misstatement relating to the DD&A calculation, including controls over the completeness and accuracy of the financial data used in estimating proved natural gas and oil reserves.

Our testing of the Company's DD&A calculation included, among other procedures, evaluating the professional qualifications and objectivity of the Company's engineers responsible for the preparation of the reserve estimates and the independent petroleum engineers used to audit the estimates.

On a sample basis, we tested the completeness and accuracy of the financial data used in the estimation of proved oil and natural gas reserves by agreeing significant inputs to source documentation, where applicable, and assessing the inputs for reasonableness based on our review of corroborative evidence and consideration of any contrary evidence.

Additionally, we performed analytic procedures on select inputs into the oil and natural gas reserve estimate as well as lookback procedures on the output.

On a sample basis, we tested the completeness and accuracy of the financial data used in the estimation of proved natural gas and oil reserves by agreeing significant inputs to source documentation, where applicable, and assessing the inputs for reasonableness based on our review of corroborative evidence and consideration of any contrary evidence.

Additionally, we performed analytic procedures on select inputs into the natural gas and oil reserve estimate as well as lookback procedures on the output.

For proved undeveloped reserves, we evaluated management's development plan for compliance with SEC requirements.

Finally, we tested that the DD&A calculation is based on the appropriate proved oil and natural gas reserve amounts from the Company's reserve report.

Finally, we tested that the DD&A calculation is based on the appropriate proved natural gas and oil reserve amounts from the Company's reserve report.

/s/ ERNST & YOUNG LLP

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COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December 31,

ASSETS (In thousands)

(In thousands)

Cash and cash equivalents

Accounts receivable:

Oil and gas sales and gas services 415,079 217,149

Natural gas and oil sales and gas services

Joint interest operations

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Property and equipment:

Oil and natural gas properties, successful efforts method:

Proved 5,843,409 4,756,394

Unproved 298,230 302,129

Other 26,475 6,690

Natural gas and oil properties, successful efforts method:

Accumulated depreciation, depletion and amortization

Net property and equipment

Goodwill 335,897 335,897

Operating lease right-of-use assets

$ 5,694,255 $ 4,668,229

LIABILITIES AND STOCKHOLDERS' EQUITY

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Deferred income taxes

Derivative financial instruments — 4,042

Long-term operating leases

Reserve for future abandonment costs

Other non-current liabilities — 24

Total liabilities

Commitments and contingencies

Mezzanine equity:

Series B Convertible Preferred Stock — 5,000,000 shares authorized, none and 175,000 shares issued and outstanding at December 31, 2022 and 2021, respectively

Stockholders' equity:

Common stock—$ 0.50 par, 400,000,000 shares authorized, 277,517,087 and 232,924,646 shares issued and outstanding at December 31, 2022 and 2021, respectively

138,759 116,462

Common stock—$ 0.50 par, 400,000,000 shares authorized, 278,429,463 and

277,517,087 shares issued and outstanding at December 31, 2023 and

2022, respectively

Additional paid-in capital

Accumulated earnings (deficit) 886,138 ( 204,042 )

Accumulated earnings

Total stockholders' equity attributable to Comstock

Noncontrolling interest

Total stockholders' equity

$ 5,694,255 $ 4,668,229

The accompanying notes are an integral part of these statements.

COMSTOCK RESOURCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND SUBSIDIARIES

CONSOLIDATED STA TEMENTS OF OPERATIONS

Year Ended December 31,

2022 2021 2020

(In thousands, except per share amounts)

Natural gas sales

Oil sales 7,597 74,962 48,796

Total natural gas and oil sales

Gas services 503,366 — —

Total revenues

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Depreciation, depletion and amortization

Gas services 465,044 — —

General and administrative, net

Exploration 8,287 — 27

(Gain) loss on sale of assets

3 unchanged sentences

Gain (loss) from derivative financial instruments

Other income 916 636 1,080

Interest expense

Loss on early extinguishment of debt

Total other expenses ( 879,538 ) ( 1,131,096 ) ( 224,659 )

Total other income (expenses)

Income (loss) before income taxes

(Provision for) benefit from income taxes ( 261,061 ) ( 11,403 ) 9,210

Provision for income taxes

Net income (loss)

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Net income (loss) available to common stockholders

Net income attributable to noncontrolling interest

Net income (loss) available to Comstock

Net income (loss) per share — basic

1 unchanged sentence

Weighted average shares outstanding:

Basic 236,045 231,633 215,194

Diluted 277,465 231,633 215,194

Dividends per share

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COMSTOCK RESOURCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Shares Common

Par Value Additional

Capital Accumulated

(Deficit) Total

AND SUBSIDIARIES

CONSOLIDATED STA TEMENTS OF STOCKHOLDERS' EQUITY

Noncontrolling

(In thousands)

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Income tax withholdings on equity awards

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

Stock issuance costs

Net loss — — — ( 52,417 ) ( 52,417 )

Preferred stock accretion — — — ( 5,417 ) ( 5,417 )

Payment of preferred dividends

Balance at December 31, 2021

Conversion of Series B convertible preferred stock

Stock-based compensation

Income tax withholdings on equity awards

Stock issuance costs — — ( 156 ) — ( 156 )

Net loss — — — ( 241,725 ) ( 241,725 )

Payment of preferred dividends — — — ( 17,500 ) ( 17,500 )

Payment of preferred stock dividends

Payment of common stock dividends

Balance at December 31, 2022

Conversion of Series B convertible preferred stock 43,750 21,875 153,125 — 175,000

Stock-based compensation

Income tax withholdings on equity awards

Net income — — — 1,140,882 1,140,882

Payment of preferred stock dividends — — — ( 16,014 ) ( 16,014 )

Payment of common stock dividends

Contributions from noncontrolling interest

Balance at December 31, 2023

1 unchanged sentence

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,

2022 2021 2020

(In thousands)

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Net income (loss)

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

Adjustments to reconcile net income (loss) to net cash provided by

operating activities:

Deferred and non-current income taxes

Exploration — — 27

(Gain) loss on sale of assets

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(Increase) decrease in other current assets

Increase in accounts payable and accrued expenses 229,252 74,780 12,923

Increase (decrease) in accounts payable and accrued expenses

Net cash provided by operating activities

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Issuance of Senior Notes

— 2,222,500 751,500

Retirement of Senior Notes

Issuance of common stock — — 206,626

Redemption of Series A Convertible Preferred Stock — — ( 210,000 )

Debt and stock issuance costs

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Common stock dividends paid

Contributions from noncontrolling interest

Net cash used for financing activities

Net increase in cash and cash equivalents 23,989 391 11,740

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of the year

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COMSTOCK RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AND SUBSIDIARIES

NOTES TO CONSO LIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies

Accounting policies used by Comstock Resources, Inc.

and subsidiaries reflect oil and natural gas industry practices and conform to accounting principles generally accepted in the United States of America.

and subsidiaries reflect natural gas and oil industry practices and conform to accounting principles generally accepted in the United States of America.

Basis of Presentation and Principles of Consolidation

Comstock Resources, Inc.

and its subsidiaries are engaged in the acquisition, exploration, development and production of oil and natural gas.

The consolidated financial statements include the accounts of Comstock Resources, Inc.

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

The Company's operations are primarily focused in North Louisiana and East Texas.

The consolidated financial statements include the accounts of Comstock Resources, Inc., its wholly owned or controlled subsidiaries and a variable interest entity for which Comstock is the primary beneficiary (collectively, "Comstock" or the "Company").

All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company accounts for its undivided interest in oil and gas properties using the proportionate consolidation method, whereby its share of assets, liabilities, revenues and expenses are included in its financial statements.

The Company accounts for its undivided interest in natural gas and oil properties using the proportionate consolidation method, whereby its share of assets, liabilities, revenues and expenses are included in its financial statements.

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

All adjustments are of a normal recurring nature unless otherwise disclosed.

Comstock entered into an agreement with an affiliate of Quantum Capital Solutions ("Quantum"), in the fourth quarter of 2023 to form Pinnacle Gas Services, LLC ("PGS"), a midstream company in Comstock's Western Haynesville area.

As part of the transaction, Comstock contributed a 145-mile high-pressure pipeline and a natural gas treating plant.

Quantum committed to contribute up to $ 300 million to fund future expansion costs.

Quantum is entitled to a 12 % dividend on its invested capital and 80 % of any distributions from Pinnacle until certain return hurdles are met.

After the return hurdles are met, Quantum's ownership reduces to 30 %.

Comstock operates and manages PGS pursuant to a management services agreement.

The Board of PGS is comprised of five members:

three selected by Comstock and two selected by Quantum.

PGS is considered a variable interest entity to Comstock.

Comstock has the power to direct the activities that most significantly impact the performance of PGS and has the obligation to absorb losses or right to receive benefits that could potentially be significant to PGS.

Accordingly, Comstock is considered the primary beneficiary and consolidates the assets, liabilities and results of operations of PGS in the accompanying consolidated financial statements.

PGS assets that cannot be used by Comstock include $ 54.9 million of other property and equipment as of December 31, 2023 .

Other PGS assets that cannot be used by Comstock and PGS liabilities for which creditors do not have recourse to Comstock's assets are not material to the Company's consolidated financial statements.

The portion of PGS net income and stockholders' equity not attributable to Comstock's controlling interest are shown separately as noncontrolling interests in the accompanying consolidated statements of operations and statements of stockholders' equity.

Use of Estimates in the Preparation of Financial Statements

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Actual amounts could differ from those estimates.

Changes in the future estimated oil and natural gas reserves or the estimated future cash flows attributable to the reserves that are utilized for impairment analyses could have a significant impact on the future results of operations.

Changes in the future estimated natural gas and oil reserves or the estimated future cash flows attributable to the reserves that are utilized for impairment analyses could have a significant impact on the future results of operations.

Concentration of Credit Risk, Accounts Receivable and Credit Losses

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The Company places its cash with high credit quality financial institutions and its derivative financial instruments with financial institutions and other firms that management believes have high credit ratings.

Substantially all of the Company's accounts receivable are due from either purchasers of oil and gas or participants in oil and gas wells for which the Company serves as the operator.

Generally, operators of oil and gas wells have the right to offset future revenues against unpaid charges related to operated wells.

Oil and gas sales are generally unsecured.

Substantially all of the Company's accounts receivable are due from either purchasers of natural gas and oil or participants in natural gas and oil wells for which the Company serves as the operator.

Generally, operators of natural gas and oil wells have the right to offset future revenues against unpaid charges related to operated wells.

Natural gas and oil sales are generally unsecured.

The Company's policy is to assess the collectability of its receivables based upon their age, the credit quality of the purchaser or participant and the potential for revenue offset.

1 unchanged sentence

Accordingly, no allowance for doubtful accounts has been recorded for the years ended December 31, 2023, 2022 and 2021 , respectively.

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Current Assets

2 unchanged sentences

(In thousands)

Pipe and well equipment inventory $ 34,819 $ 5,015

Production tax refunds receivable 11,156 7,879

Prepaid drilling costs

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

Income tax receivable

Production tax refunds receivable

Prepaid expenses

$ 56,324 $ 15,077

Accrued proceeds from sale of natural gas and oil properties

Fair Value Measurements

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These include cash and cash equivalents held in bank accounts and derivative financial instruments.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement

COMSTOCK RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

Year Ended December 31,

(In thousands)

Balance at beginning of year $ ( 22,588 )

Total gains (losses) included in earnings ( 162,421 )

Settlements, net 58,448

Transfers out of Level 3 126,561

Balance at end of year $ —

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

As of December 31,

Carrying Value Fair Value Carrying Value Fair Value

Carrying Value

(In thousands)

Commodity-based derivatives (1)

$ 23,884 $ 23,884 $ 5,258 $ 5,258

Commodity-based derivatives (1)

4,420 4,420 185,987 185,987

Bank credit facility (2)

— — 235,000 235,000

6.75 % senior notes due 2029 (3)

— — 196,998 248,066

5.875 % senior notes due 2030 (3)

1,229,836 1,129,029 1,256,874 1,337,500

5.875 % senior notes due 2030 (3)

965,000 846,788 965,000 989,125

_______________

(1) The Company's commodity-based derivatives 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.

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

Property and Equipment

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

Costs incurred to acquire oil and gas leasehold are capitalized.

Acquisition costs for proved oil and gas properties, costs of drilling and equipping productive wells, and costs of unsuccessful development wells are capitalized and amortized on an equivalent unit-of-production basis over the life of the remaining related oil and gas reserves.

Equivalent units are determined by converting oil to natural gas at the ratio of one barrel of oil for six thousand cubic feet of natural gas.

This conversion ratio is not based on the

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

price of oil or natural gas, and there may be a significant difference in price between an equivalent volume of oil versus natural gas.

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.

Property and Equipment

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

Costs incurred to acquire natural gas and oil leasehold are capitalized.

Acquisition costs for proved natural gas and oil properties, costs of drilling and equipping productive wells, and costs of unsuccessful development wells are capitalized and amortized on an equivalent unit-of-production basis over the life of the remaining related natural gas and oil reserves.

Equivalent units are determined by converting oil to natural gas at the ratio of one barrel of oil for six thousand cubic feet of natural gas.

This conversion ratio is not based on the price of oil or natural gas, and there may be a significant difference in price between an equivalent volume of oil versus natural gas.

The changes in capitalized exploratory well costs are as follows:

6 unchanged sentences

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

The estimated future costs of dismantlement, restoration, plugging and abandonment of oil and gas properties and related facilities disposal are capitalized when asset retirement obligations are incurred and amortized as part of depreciation, depletion and amortization expense.

Exploration expense includes geological and geophysical expenses and delay rentals related to exploratory oil and gas properties, costs of unsuccessful exploratory drilling and impairments of unproved properties.

The estimated future costs of dismantlement, restoration, plugging and abandonment of natural gas and oil properties and related facilities disposal are capitalized when asset retirement obligations are incurred and amortized as part of depreciation, depletion and amortization expense.

Exploration expense includes geological and geophysical expenses and delay rentals related to exploratory natural gas and oil properties, costs of unsuccessful exploratory drilling and impairments of unproved properties.

As of December 31, 2023 and 2022, the unproved properties primarily relate to future drilling locations that were not included in proved undeveloped reserves.

Most of these future drilling locations are located on acreage where the reservoir is known to be productive but have been excluded from proved reserves due to uncertainty on whether the wells would be drilled within the next five years as required by SEC rules in order to be included in proved reserves.

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

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

Costs associated with unevaluated exploratory acreage are periodically assessed for impairment on a property by property basis, and any impairment in value is included in exploration expense.

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

Exploratory drilling costs are initially capitalized as proved property but charged to expense if and when the well is determined not to have found commercial proved natural gas and oil reserves.

Exploratory drilling costs are evaluated within a one-year period after the completion of drilling.

The Company assesses the need for an impairment of the costs capitalized for its proved oil and gas properties when events or changes in circumstances, such as a significant drop in commodity prices, indicate that the Company may not be able to recover its capitalized costs.

The Company assesses the need for an impairment of the costs capitalized for its proved natural gas and oil properties when events or changes in circumstances, such as a significant drop in commodity prices, indicate that the Company may not be able to recover its capitalized costs.

If impairment is indicated based on undiscounted expected future cash flows attributable to the property, then a provision for impairment is recognized to the extent that net capitalized costs exceed the estimated fair value of the property.

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

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, future oil and natural gas production, production costs, capital expenditures, and the total proved and risk-adjusted probable oil and natural gas reserves expected to be recovered.

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

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 reserves.

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, future natural gas and oil production, production costs, capital expenditures, and the total proved and risk-adjusted probable natural gas and oil reserves expected to be recovered.

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.

The oil and natural gas prices used for determining asset impairments will generally differ from those used in the standardized measure of discounted future net cash flows because the standardized measure requires the use of an average price based on the first day of each month of the preceding year.

Unproved properties are evaluated for impairment based upon the results of drilling, planned future drilling and the terms of the oil and gas leases.

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 natural gas reserves, results of future drilling activities, future prices for oil and natural gas, and increases or decreases in production and capital costs.

As a result of these changes, there may be impairments in the carrying values of our oil and gas properties.

Other property and equipment consists primarily of pipelines, natural gas treating plants, computer equipment, furniture and fixtures and an airplane which are depreciated over estimated useful lives ranging from three to 50 years on a straight-line basis.

The natural gas and oil prices used for determining asset impairments will generally differ from those used in the standardized measure of discounted future net cash flows because the standardized measure requires the use of an average price based on the first day of each month of the preceding year.

Unproved properties are evaluated for impairment based upon the results of drilling, planned future drilling and the terms of the natural gas and oil leases.

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 our natural gas and oil properties.

The Company had goodwill of $ 335.9 million as of December 31, 2023 and 2022.

3 unchanged sentences

The Company performed its quantitative assessment of goodwill as of October 1, 2023 and determined there was no indication of impairment.

The Company had right-of-use lease assets of $ 90.7 million and $ 6.5 million as of December 31, 2022 and 2021, respectively, related to its corporate office lease, certain office equipment, vehicles and a hydraulic fracturing fleet 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.

The Company had right-of-use lease assets of $ 71.5 million and $ 90.7 million as of December 31, 2023 and 2022, respectively, related to its corporate office lease, certain office equipment, vehicles and drilling rigs 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, including the effects of early termination provisions.

The Company determines if contracts contain a lease at inception of the contract.

6 unchanged sentences

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

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

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

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 operations routinely change due to changes in oil and natural gas prices, demand for oil and natural gas, and the overall operating and economic environment.

Comstock accordingly manages the terms of its contracts for drilling rigs so as to allow for maximum flexibility in responding to these changing conditions.

In April 2022, the Company took delivery of a natural gas powered hydraulic fracturing fleet, which has been leased 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 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'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 has two drilling rig lease contracts with a three year term with options to extend the term by mutual agreement at mutually acceptable terms or terminate the contract at any time without default by the lessor.

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 30 or 45 days advance notice without a specified expiration date.

The Company had two hydraulic fracturing fleet completion contracts with three year terms but both contracts were terminated during 2023.

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 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.

For hydraulic fracturing fleet and drilling rig leases, the Company has elected the practical expedient to not separate lease components from nonlease components in the determination of their lease asset and liability values.

The costs associated with drilling and completion operations are accounted for under the successful efforts method, which 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.

For drilling rig leases, the Company has elected the practical expedient to not separate lease components from nonlease components in the determination of their lease asset and liability values.

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lease costs recognized during the years ended December 31, 2023, 2022 and 2021 were as follows:

Year Ended December 31,

2022 2021 2020

(In thousands)

1 unchanged sentence

Operating lease cost included in lease operating expense

Operating lease cost included in proved oil and gas properties 25,200 — —

Variable lease cost (completion costs included in proved oil and gas properties) 25,095 — —

Short-term lease cost (drilling rig costs included in proved oil and gas properties) 62,077 32,735 33,334

$ 115,504 $ 35,346 $ 35,814

Operating lease cost included in proved natural gas and oil properties

Variable lease cost (drilling and completion costs included in proved natural gas and oil properties)

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

Cash payments for operating leases associated with right-of-use assets included in cash provided by operating activities were $ 3.8 million , $ 3.1 million and $ 2.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Cash payments for operating leases associated with right-of-use assets included in cash used for investing activities were $ 174.3 million , $ 112.4 million and $ 32.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.

COMSTOCK RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022, the operating leases had a weighted average remaining term of 2.9 years and 2.2 years, respectively, and the weighted-average discount rate used to determine the present value of future operating lease payments was 7.2 % and 3.5 % , respectively.

1 unchanged sentence

(In thousands)

2023 $ 41,007

Total lease payments

7 unchanged sentences

Accrued drilling costs

Accrued income and other taxes 31,256 15,655

Accrued transportation costs

1 unchanged sentence

Accrued lease operating expenses

Other 473 1,856

$ 183,111 $ 135,026

Accrued income and other taxes

COMSTOCK RESOURCES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Reserve for Future Abandonment Costs

The Company's asset retirement obligations relate to future plugging and abandonment costs of its oil and gas properties and related facilities disposal.

The Company's asset retirement obligations relate to future plugging and abandonment costs of its natural gas and oil properties and related facilities disposal.

The Company records a liability in the period in which an asset retirement obligation is incurred, in an amount equal to the estimated fair value of the obligation that is capitalized.

6 unchanged sentences

New wells placed on production

Acquisitions 1,211 637

Changes in estimates and timing

Liabilities settled

Divestitures ( 944 ) ( 466 )

Accretion expense

Reserve for future abandonment costs at end of the year

COMSTOCK RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-based Compensation

2 unchanged sentences

Under the fair value based method, compensation cost is measured at the grant date based on the fair value of the award and is recognized on a straight-line basis over the award vesting period.

Forfeitures are recognized as they occur.

Segment Reporting

The Company presently operates in one business segment, the exploration and production of North American oil and natural gas.

The Company presently operates in one business segment, the exploration and production of North American natural gas and oil.

Derivative Financial Instruments and Hedging Activities

4 unchanged sentences

Major Purchasers

In 2022, the Company had three major purchasers of its natural gas production that accounted for 27 %, 21 %, and 12 % of its total oil and natural gas sales.

In 2021, the Company had three major purchasers of its natural gas production that accounted for 22 %, 21 %, and 13 % of its total oil and natural gas sales.

In 2020, the Company had four major purchasers of its natural gas production that accounted for 19 %, 15 %, 15 % and 10 % of its total oil and natural gas sales.

The loss of any of these purchasers would not have a material adverse effect on the Company as there is an available market for its oil and natural gas production from other purchasers.

In 2023, the Company had three major purchasers of its natural gas production that accounted for 20 % , 17 % , and 10 % of its total natural gas and oil sales.

In 2022 , the Company had three major purchasers of its natural gas production that accounted for 27 % , 21 % , and 12 % of its total natural gas and oil sales.

In 2021 , the Company had three major purchasers of its natural gas production that accounted for 22 % , 21 % and 13 % of its total natural gas and oil sales.

The loss of any of these purchasers would not have a material adverse effect on the Company as there is an available market for its natural gas and oil production from other purchasers.

Revenue Recognition and Gas Balancing

Comstock produces natural gas and oil and reports revenues separately for each of these two primary products in its statements of operations.

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.

Revenues are recognized upon the transfer of produced volumes to the Company's customers, who

COMSTOCK RESOURCES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

take control of the volumes and receive all the benefits of ownership upon delivery at designated sales points.

Costs incurred to gather or transport each product prior to the transfer of control are recognized as operating expenses.

Gas services revenues represent sales of natural gas purchased for resale and fees received for gathering and treating services provided to unaffiliated third parties.

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 not 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.

Profits and losses earned in the gathering and treating of natural gas produced by the Company's natural gas wells are eliminated in consolidation.

Revenues and expenses associated with natural gas purchased for resale are presented on a gross basis in the Company's consolidated statements of operations as the Company acts as the principal in the transaction by assuming the risks and rewards from ownership of the natural gas volumes purchased and the responsibility to deliver the natural gas volumes to their sales point.

All oil and natural gas and gas services revenues are subject to contracts that have commercial substance, contain specific pricing terms, and define the enforceable rights and obligations of both parties.

All natural gas and oil and gas services revenues are subject to contracts that have commercial substance, contain specific pricing terms, and define the enforceable rights and obligations of both parties.

These contracts typically provide for cash settlement within 25 days following each production month and are cancellable upon 30 days' notice by either party for oil and vary for natural gas based upon the terms set out in the confirmations between both parties.

Prices for sales of oil and natural gas are generally based upon terms that are common in the oil and gas industry, including index or spot prices, location and quality differentials, as well as market supply and demand conditions.

As a result, prices for oil and natural gas routinely fluctuate based on changes in these factors.

Prices for sales of natural gas and oil are generally based upon terms that are common in the natural gas and oil industry, including index or spot prices, location and quality differentials, as well as market supply and demand conditions.

As a result, prices for natural gas and oil routinely fluctuate based on changes in these factors.

Prices for gathering and treating services are generally fixed in nature but can vary due to the quality of the gas being treated.

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 oil and natural gas 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.

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

Each unit of production (thousand cubic feet of natural gas and barrel of crude oil ) 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 natural gas and oil 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.

Natural gas and oil 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.

The Company recognizes any differences between estimates and actual amounts received in

COMSTOCK RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the month when payment is received.

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

Historically, differences between estimated revenues and actual revenue received have not been significant.

3 unchanged sentences

General and Administrative Expenses

General and administrative expenses are reported net of reimbursements of overhead costs that are received from working interest owners of the oil and gas properties operated by the Company of $ 27.5 million, $ 25.3 million and $ 24.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.

General and administrative expenses are reported net of reimbursements of overhead costs that are received from working interest owners of the natural gas and oil properties operated by the Company of $ 29.7 million , $ 27.5 million and $ 25.3 million for the years ended December 31, 2023, 2022 and 2021 , respectively.

The Company accounts for income taxes using the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis, as well as the tax consequences attributable to the future utilization of existing net operating loss and other carryforwards.

1 unchanged sentence

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that the change in rate is enacted.

COMSTOCK RESOURCES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Earnings Per Share

3 unchanged sentences

Year Ended December 31,

2022 2021 2020

(in thousands)

Unvested restricted stock

COMSTOCK RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

2 unchanged sentences

Year Ended December 31,

2022 2021 2020

(In thousands, except per unit amounts)

1 unchanged sentence

Weighted average grant date fair value per unit

The Series A and Series B Convertible Preferred Stock were convertible into 52,500,000 and 43,750,000 shares of common stock, respectively.

The Company redeemed all of the shares of Series A Convertible Preferred Stock on May 19, 2020.

The Series B Convertible Preferred Stock was convertible into 43,750,000 shares of common stock.

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

2 unchanged sentences

Year Ended December 31,

2022 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.

For the year ended December 31, 2023, the weighted average shares of unvested restricted stock and PSUs were excluded from the computation of earnings per share because to include them would have been antidilutive to the calculation.

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Year Ended December 31,

2022 2021 2020

(In thousands, except per share amounts)

12 unchanged sentences

Diluted income (loss) per share

Basic and diluted per share amounts are the same for the years ended December 31, 2021 and 2020 due to the net loss in those periods.

COMSTOCK RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplementary Information With Respect to the Consolidated Statements of Cash Flows

2 unchanged sentences

Year Ended December 31,

2022 2021 2020

(In thousands)

Cash payments for:

Interest $ 166,275 $ 203,742 $ 228,555

Income tax payments (refunds) $ 16,524 $ 149 $ ( 10,218 )

Income tax payments

Non-cash investing activities include:

1 unchanged sentence

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

Non-cash investing and financing activities related to acquisitions:

Acquired working capital $ — $ — $ 520

Non-cash financing activities include:

Conversion of preferred stock into common stock

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

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

(2) Acquisitions and Dispositions of Oil and Gas Properties

Recent Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update ("ASU") 2023-07 "Segment Reporting–Improvements to Reportable Segment Disclosures".

ASU 2023-07 requires additional disclosures about a public entity's reportable segments, including requiring all annual disclosures of reportable segment's profit or loss and assets during interim periods, identifying the title and position of an entity's chief operating decision maker ("CODM"), disclosing significant expenses regularly provided to the CODM that are included in each reported measure of segment profit or loss, and disclosing additional measures of profit or loss used by the CODM in deciding how to allocate resources.

The update is effective for public entities for fiscal years beginning after December 15, 2023, and interim and fiscal years beginning after December 15, 2024.

ASU 2023-07 will not have an impact on the Company's reported results of operations, financial position or liquidity but will have an impact on the Company's financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09 "Improvements to Income Tax Disclosures".

ASU 2023-09 requires additional disclosures around effective tax rates and cash income taxes paid and is effective for public entities for annual periods

COMSTOCK RESOURCES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

beginning after December 15, 2024.

ASU 2023-07 will not have an impact on the Company's reported results of operations, financial position or liquidity but will have an impact on the Company's financial statement disclosures.

(2) Acquisitions and Dispositions of Natural Gas and Oil Properties

During 2023, 2022 and 2021, the Company spent $ 98.6 million , $ 54.4 million and $ 22.9 million on its leasing program to acquire 79,741 , 104,314 and 32,556 net acres, respectively, in the Western Haynesville area.

In 2022, the Company acquired a 145 -mile pipeline and natural gas treating plant from an unaffiliated third party and the undeveloped deep rights on approximately 68,000 net undeveloped acres in East Texas for $ 35.6 million including transaction costs.

The purchase price was allocated as follows:

$ 18.8 million was allocated to unproved oil and gas properties and $ 16.8 million to other property and equipment.

$ 18.8 million was allocated to unproved natural gas and oil properties and $ 16.8 million to other property and equipment.

In 2021, the Company acquired approximately 17,500 net acres of predominantly undeveloped Haynesville shale acreage in East Texas from an unaffiliated third party, which also included interests in 37 producing wells for $ 34.7 million.

During 2022 and 2021, the Company acquired an additional 36,100 and 32,556 net acres through direct leasing for $ 35.6 million and $ 22.9 million , respectively.

In December 2022, the Company sold its interest in certain nonstrategic, non-operated properties for $ 4.1 million.

The Company sold its interest in certain natural gas and oil non-operated properties for $ 41.3 million and $ 4.1 million in 2023 and 2022, respectively.

In November 2021, the Company sold its non-operated properties in the Bakken shale for $ 138.1 million after selling expenses and incurred a $ 162.2 million pre-tax loss on the divestiture.

COMSTOCK RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) Oil and Gas Producing Activities

Set forth below is certain information regarding the aggregate capitalized costs of oil and gas properties and costs incurred by the Company for its oil and natural gas property acquisition, development and exploration activities:

(3) Natural Gas and Oil Producing Activities

Set forth below is certain information regarding the aggregate capitalized costs of natural gas and oil properties and costs incurred by the Company for its natural gas and oil property acquisition, development and exploration activities:

Capitalized Costs

5 unchanged sentences

Accumulated depreciation depletion and amortization

4,300,406 3,700,077

Unproved properties

$ 4,598,636 $ 4,002,206

Costs Incurred

Year Ended December 31,

2022 2021 2020

(In thousands)

9 unchanged sentences

Total capital expenditures

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(4) Long-term Debt

3 unchanged sentences

Bank Credit Facility:

Principal $ — $ 235,000

6.75 % Senior Notes due 2029:

Principal 1,223,880 1,250,000

Premium, net of amortization

5.875 % Senior Notes due 2030:

Principal 965,000 965,000

7.5 % Senior Notes due 2025:

Principal — 244,400

Discount, net of amortization — ( 47,402 )

Debt issuance costs, net of amortization

$ 2,152,571 $ 2,615,235

COMSTOCK RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The premium on the 6.75 % senior notes due 2029 is being amortized over its life using the effective interest rate method.

1 unchanged sentence

The following table summarizes Comstock's principal amount of debt as of December 31, 2023 by year of maturity:

2023 2024 2025 2026 2027 Thereafter Total

(In thousands)

Bank Credit Facility

6.75 % Senior Notes due 2029

— — — — — 1,223,880 1,223,880

5.875 % Senior Notes due 2030

— — — — — 965,000 965,000

$ — $ — $ — $ — $ — $ 2,188,880 $ 2,188,880

On November 15, 2022, the Company entered into an amended and restated bank credit facility with Wells Fargo Bank National Association, as administrative agent, and other participating banks with an aggregate commitment of $ 1.5 billion.

The new bank credit facility is subject to a borrowing base of $ 2.0 billion, which is redetermined on a semi-annual basis and upon the occurrence of certain other events and matures on November 15, 2027.

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 adjusted SOFR plus 1.75 % to 2.75 % or an alternative base rate plus 0.75 % to 1.75 %, in each case depending on the utilization of the borrowing base.

There were no borrowings outstanding at December 31, 2022.

As of December 31, 2023, the Company had $ 480.0 million outstanding under a bank credit facility.

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

Borrowings under the bank credit facility are subject to a borrowing base of $ 2.0 billion , which is re-determined on a semi-annual basis and upon the occurrence of certain other events.

Borrowings under the bank credit facility are secured by substantially all of the assets of the Company and its restricted subsidiaries and bear interest at the Company's option, at either adjusted SOFR plus 1.75 % to 2.75 % or an alternative base rate plus 0.75 % to 1.75 % , in each case depending on the utilization of the borrowing base.

The Company pays a commitment fee of 0.375 % to 0.5 % , which is dependent on the utilization of the borrowing base.

The weighted average interest rate on borrowings under the bank credit facility were 7.33 % and 3.61 % during the years ended December 31, 2023 and 2022, respectively.

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 bank credit facility places certain restrictions upon the Company's and its restricted 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.

4 unchanged sentences

The Company recognized a gain of $ 1.0 million on early retirement of debt relating to the repurchase.

In 2021, the Company refinanced $ 375.0 million principal amount of its 7.5 % senior notes due in 2025 and $ 1,650.0 million principal amount of its 9.75 % senior notes due 2026 with proceeds from the issuance of $ 1,250.0 million principal amount of its 6.75 % senior notes due in 2029 and $ 965.0 million principal amount of its 5.875 % senior notes due in 2030.

COMSTOCK RESOURCES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

amount of its 6.75 % senior notes due in 2029 and $ 965.0 million principal amount of its 5.875 % senior notes due in 2030.

The Company recognized a loss of $ 352.6 million on early retirement of debt for the year ended December 31, 2021.

(5) Commitments and Contingencies

The Company has natural gas transportation and gathering contracts which extend to 2031.

Commitments under these contracts are $ 57.0 million for 2023, $ 57.5 million for 2024, $ 45.7 million for 2025, $ 40.9 million for 2026, $ 40.7 million for 2027 and $ 124.3 million for 2028 through 2031.

The Company has drilling rig contracts and completion service contracts.

Terms of drilling contracts vary from well to well, or are for periods ranging from less than one year to three years .

The Company has drilling rig contracts with terms ranging from less than one year to three years .

The service contracts with terms less than one year are generally for terms ranging from 45 days to six months .

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.

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

Existing commitments under these contracts are $ 34.9 million for 2023 and 2024, $ 36.7 million for 2025, $ 31.9 million for 2026 and $ 1.8 million for 2027.

In 2021 and 2022, the Company entered into hydraulic fracturing services agreements for exclusive use of two natural gas powered hydraulic fracturing fleets.

The term of the agreements are three years and the minimum commitment under these agreements are $ 19.2 million per year.

The Company took delivery of the first fleet in the second quarter of 2022 and expects delivery of the second fleet in the second quarter of 2023.

Commitments under these contracts are $ 33.7 million for 2023, $ 38.5 million for 2024, $ 24.3 million for 2025 and $ 4.7 million for 2026.

COMSTOCK RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company began utilizing two of these rigs in the second half of 2023 and will begin utilizing the third rig in early 2024.

The two rigs being utilized qualify as operating leases and their corresponding lease obligation is reflected on the Company's balance sheet as of December 31, 2023.

The Company has natural gas transportation and gathering contracts which extend to 2031.

Commitments under these contracts are $ 97.8 million for 2024, $ 89.6 million for 2025, $ 63.9 million for 2026, $ 62.7 million for 2027, $ 56.3 million for 2028 and $ 96.4 million for 2029 through 2031.

During the years ended December 31, 2023, 2022 and 2021, expenditures under these contracts totaled $ 96.5 million , $ 50.1 million and $ 24.4 million , respectively.

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

14 unchanged sentences

The fair value of each restricted share on the date of grant is equal to the market price of a share of the Company's stock.

COMSTOCK RESOURCES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of restricted stock activity is presented below:

Shares Weighted

Outstanding at January 1, 2023

Granted 627,791 $ 17.70

Vested ( 549,363 ) $ 5.67

Forfeitures ( 65,341 ) $ 8.85

Outstanding at December 31, 2023

Year Ended December 31,

2022 2021 2020

(In thousands, except per share data)

3 unchanged sentences

Unrecognized compensation expense related to unvested shares

Expected recognition period 2.3 years

COMSTOCK RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Expected recognition period

Performance Share Units

10 unchanged sentences

Year Ended December 31,

2022 2021 2020

Risk free interest rate

Range of implied volatility:

Minimum 50 % 37 % 39 %

Maximum 83 % 83 % 198 %

A summary of PSU activity is presented below:

PSUs Weighted

Outstanding at January 1, 2023

Granted 237,407 $ 25.92

Earned ( 596,893 ) $ 7.85

Forfeitures ( 137,870 ) $ 10.95

Outstanding at December 31, 2023

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31,

2022 2021 2020

(In thousands, except per unit data)

4 unchanged sentences

Unrecognized compensation expense related to unvested shares

Expected recognition period 2.3 years

Expected recognition period

The fair value of PSUs is amortized over the vesting period of three years , using the straight-line method.

4 unchanged sentences

Matching contributions to the plan were approximately $ 1.9 million , $ 1.5 million and $ 1.3 million for the years ended December 31, 2023, 2022 and 2021 , respectively.

COMSTOCK RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(10) Income Taxes

2 unchanged sentences

Year Ended December 31,

2022 2021 2020

(In thousands)

3 unchanged sentences

Deferred - State

$ 261,061 $ 11,403 $ ( 9,210 )

In recording deferred income tax assets, the Company considers whether it is more likely than not that its deferred income tax assets will be realized in the future.

4 unchanged sentences

The Company will continue to assess the valuation allowances against deferred tax assets considering all available information obtained in future periods.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The tax effects of significant temporary differences representing the net deferred tax liabilities were as follows:

6 unchanged sentences

Asset retirement obligation

Other 4,932 7,771

161,490 206,919

Valuation allowance on deferred tax assets

4 unchanged sentences

Amortization of debt issuance costs and bond discount

Other ( 10,162 ) ( 7,186 )

Deferred tax liabilities

Net deferred tax liability

COMSTOCK RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The difference between the customary rate of 21.0% and the effective tax rate on income (losses) is due to the following:

Year Ended December 31,

2022 2021 2020

(In thousands)

3 unchanged sentences

State income taxes, net of federal benefit

Other ( 950 ) 1,150 904

Total $ 261,061 $ 11,403 $ ( 9,210 )

Year Ended December 31,

2022 2021 2020

Tax at statutory rate

2 unchanged sentences

State income taxes, net of federal benefit

Other ( 0.1 ) ( 0.5 ) ( 1.5 )

Effective tax rate

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2023, Comstock had the following carryforwards available to reduce future income taxes:

Types of Carryforward Years of

Carryforward Amount

Types of Carryforward

(In thousands)

Net operating loss – U.S.

federal 2023-2037 $ 899,953

Net operating loss – U.S.

federal Unlimited $ 9,931

Net operating loss – state taxes Unlimited $ 1,486,685

Net operating loss – state taxes

Interest expense – U.S.

federal Unlimited $ 481,449

Interest expense – state taxes Unlimited $ 531,058

Interest expense – state taxes

The Company's ability to use net operating losses ("NOLs") generated before its ownership change in 2018 to reduce taxable income is limited under IRC Section 382.

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federal NOL carryforwards and $ 1.2 billion of the estimated state NOL carryforwards will expire unused.

COMSTOCK RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company's federal income tax returns for the years subsequent to December 31, 2019 remain subject to examination.

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(11) Derivative Financial Instruments and Hedging Activities

Comstock generally uses commodity price swaps, basis swaps and collars to hedge oil and natural gas prices to manage price risk.

Comstock generally uses commodity price swaps, basis swaps and collars to hedge natural gas and oil prices to manage price risk.

Swaps are settled monthly based on differences between the prices specified in the instruments and the settlement prices of futures contracts.

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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.

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

None of the Company's derivative contracts are designated as fair value or cash flow hedges.

The Company recognizes cash settlements and changes in the fair value of its derivative financial instruments as a single component of other income (expenses) in the consolidated statements of operations and as separate components within cash flows from operating activities in the consolidated statements of cash flows.

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

The Company had the following outstanding natural gas price derivative financial instruments at December 31, 2022:

Future Production Period Ending December 31, 2023

Natural Gas Collar Contracts:

Volume (MMBtu) 174,925,000

Price per MMBtu:

Average Ceiling $ 9.96

Average Floor $ 2.99

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company had the following outstanding natural gas price derivative financial instruments at December 31, 2023:

Period Ending December 31, 2024

Natural Gas Swap Contracts:

Volume (MMBtu)

Average Price per MMBtu

The aggregate fair value of the Company's derivative financial instruments are presented on a gross basis in the accompanying consolidated balance sheets.

1 unchanged sentence

As of December 31,

Type Consolidated Balance Sheet Location 2022 2021

Consolidated Balance Sheet Location

(in thousands)

Asset Derivative Financial Instruments:

Natural gas price derivatives Derivative Financial Instruments – current $ 23,884 $ 4,528

Oil price derivatives Derivative Financial Instruments – current — 730

$ 23,884 $ 5,258

Natural gas price derivatives

Derivative Financial Instruments – current

Liability Derivative Financial Instruments:

Natural gas price derivatives Derivative Financial Instruments – current $ 4,420 $ 181,215

Oil price derivatives Derivative Financial Instruments – current — 730

$ 4,420 $ 181,945

Natural gas price derivatives Derivative Financial Instruments – long-term $ — $ 4,042

Natural gas price derivatives

Derivative Financial Instruments – current

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

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Interest rate derivatives

$ ( 662,522 ) $ ( 560,648 ) $ 9,951

(12) Related Party Transactions

The Company operates oil and natural gas properties held by a partnerships owned by its majority stockholder.

The Company operates natural gas and oil properties held by a partnerships owned by its majority stockholder.

Comstock charges the partnership for the costs incurred to drill, complete and produce the 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.

Comstock also provides natural gas marketing services to the partnerships in return for a fee equal to $ 0.02 per Mcf for natural gas marketed.

The Company received $ 1.3 million , $ 0.9 million and $ 1.4 million in 2023, 2022 and 2021, respectively, for operating and marketing services provided to the partnership.

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In connection with the operation of the wells, the Company had a $ 16.1 million and $ 18.5 million receivable from the partnerships at December 31, 2023 and 2022 , respectively.

In 2021, the Company acquired from unaffiliated third parties a 50 % interest in approximately 35,000 net acres of predominantly undeveloped Haynesville shale acreage in East Texas, which also included interests in 37 producing wells.

An affiliate of the Company's majority stockholder acquired the remaining 50 % of the acreage and wells alongside Comstock.

Comstock is the operator of the future drilling program on the jointly acquired acreage.

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(13) Oil and Gas Reserves Information (Unaudited)

Set forth below is a summary of the Company's proved oil and natural gas reserves:

(13) Natural Gas and Oil Reserves Information (Unaudited)

Set forth below is a summary of the Company's proved natural gas and oil reserves:

Year Ended December 31,

2022 2021 2020

(MBbls) Natural

Proved Reserves:

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Sales of minerals in place

Production ( 82 ) ( 500,616 ) ( 1,210 ) ( 489,274 ) ( 1,508 ) ( 450,836 )

End of period

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Revisions of previous estimates.

Revisions of previous natural gas estimates in 2021 and 2020 were primarily attributable to higher production performance from the Company's wells as compared to expected performance from proved undeveloped locations included in proved reserves in the previous year.

Revisions of previous estimates for oil in 2020 were primarily related to changes in oil prices.

Revisions of previous estimates in other years were insignificant.

Revisions of previous estimates in 2023 were primarily attributable to significantly lower natural gas and oil prices that were used to determine proved reserves at the end of the year.

Revisions of previous estimates in 2022 were insignificant.

Revisions of previous natural gas estimates in 2021 were primarily attributable to higher production performance from the Company's wells as compared to expected performance from proved undeveloped locations included in proved reserves in the previous year.

Extensions and discoveries.

2 unchanged sentences

As of December 31,

2022 2021 2020

(In thousands)

2 unchanged sentences

Future Costs:

Production ( 5,473,650 ) ( 3,954,726 ) ( 3,173,350 )

Development and Abandonment

2 unchanged sentences

10% Discount Factor

( 12,404,908 ) ( 5,848,131 ) ( 2,015,149 )

Standardized Measure of Discounted Future Net Cash Flows

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 unchanged sentence

Year Ended December 31,

2022 2021 2020

(In thousands)

12 unchanged sentences

Standardized Measure, End of Year

The standardized measure of discounted future net cash flows was determined based on the simple average of the first of month market prices for oil and natural gas for each year.

Prices used in determining quantities of oil and natural gas reserves and future cash inflows from oil and natural gas reserves represent prices received at the Company's sales point.

The standardized measure of discounted future net cash flows was determined based on the simple average of the first of month market prices for natural gas and oil for each year.

Prices used in determining quantities of natural gas and oil reserves and future cash inflows from natural gas and oil reserves represent prices received at the Company's sales point.

These prices have been adjusted from posted or index prices for both location and quality differences.

Prices used in determining oil and natural gas reserves quantities and cash flows are as follows:

Prices used in determining natural gas and oil reserves quantities and cash flows are as follows:

Year Ended December 31,

2022 2021 2020

$/barrel $ 91.21 $ 62.38 $ 32.88

$/Mcf $ 6.03 $ 3.33 $ 1.71

Proved reserve information utilized in the preparation of the financial statements were based on estimates prepared by the Company's petroleum engineering staff in accordance with guidelines established by the Securities and Exchange Commission and the Financial Accounting Standards Board, which require that reserve reports be prepared under existing economic and operating conditions with no provision for price and cost escalation except by contractual agreement.

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The engineering firm was selected for their geographic expertise and their historical experience.

Future development and production costs are computed by estimating the expenditures to be incurred in developing and producing proved oil and gas reserves at the end of the year, based on year end costs and assuming continuation of existing economic conditions.

Future development and production costs are computed by estimating the expenditures to be incurred in developing and producing proved natural gas and oil reserves at the end of the year, based on year end costs and assuming continuation of existing economic conditions.

Future income tax expenses are computed by applying the appropriate statutory tax rates to the future pre-tax net cash flows relating to proved reserves, net of the tax basis of the properties involved.

The future income tax expenses give effect to permanent differences and tax credits, but do not reflect the impact of future operations.

(14) Subsequent Event

On February 13, 2023, Comstock's Board of Directors declared a quarterly cash dividend of $ 0.125 per common share to stockholders of record at the close of business of March 1, 2023, with a payment date of March 15, 2023.

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-K

Item 9A. Controls and Procedures