What changed in this filing

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Item 1. Financial Statements

2024-05-02 compared with 2023-11-02 · 137 added, 183 removed, 307 unchanged (51% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30,

(In thousands)

16 unchanged sentences

Operating leases

Derivative financial instruments

Total current liabilities

7 unchanged sentences

Stockholders' equity:

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

Common stock—$ 0.50 par, 400,000,000 shares authorized, 292,202,274

and 278,429,463 shares issued and outstanding at March 31, 2024

and December 31, 2023, respectively

Additional paid-in capital

Accumulated earnings

Total stockholders' equity attributable to Comstock

Noncontrolling interest

Total stockholders' equity

3 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands, except per share amounts)

8 unchanged sentences

General and administrative

Loss (gain) on sale of assets

Gain on sale of assets

Total operating expenses

Operating income

Operating income (loss)

Other income (expenses):

Gain (loss) from derivative financial instruments

Gain from derivative financial instruments

Interest expense

Loss on early retirement of debt

Total other expenses

Income before income taxes

Provision for income taxes

Preferred stock dividends

Net income available to common stockholders

Net income per share:

Total other income (expenses)

Income (loss) before income taxes

(Provision for) benefit from income taxes

Net income (loss)

Net income attributable to noncontrolling interest

Net income (loss) available to Comstock

Net income (loss) per share:

Weighted average shares outstanding:

3 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Noncontrolling Interest

(In thousands)

1 unchanged sentence

Stock-based compensation

Payment of preferred stock dividends

Payment of common stock dividends

Balance at March 31, 2023

Stock-based compensation

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, 2024

Stock-based compensation

Payment of common stock dividends

Issuance of common stock

Net income (loss)

Contributions from noncontrolling interest

Balance at March 31, 2024

Stock-based compensation

Payment of common stock dividends

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

Nine Months Ended September 30,

Three Months Ended

(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

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

Net income (loss)

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

Deferred income taxes

1 unchanged sentence

Depreciation, depletion and amortization

(Gain) loss on derivative financial instruments

Gain on derivative financial instruments

Cash settlements of derivative financial instruments

1 unchanged sentence

Stock-based compensation

Loss on early retirement of debt

(Increase) decrease in accounts receivable

Decrease in accounts receivable

(Increase) decrease in other current assets

Increase (decrease) in accounts payable and accrued expenses

Decrease in accounts payable and accrued expenses

Net cash provided by operating activities

7 unchanged sentences

Repayments of bank credit facility

Retirement of Senior Notes

Preferred stock dividends paid

Issuance of common stock

Common stock dividends paid

Debt and stock issuance costs

Income tax withholdings on equity awards

Contribution from noncontrolling interest

Net cash provided by (used for) financing activities

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

3 unchanged sentences

NOTES TO CONSOLIDA TED FINANCIAL STATEMENTS

September 30, 2023

March 31, 2024

(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 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.

In management's opinion, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of Comstock as of March 31, 2024, and the related results of operations and cash flows for the periods being presented.

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.

2 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, 2023.

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

The results of operations for the period through March 31, 2024 are not necessarily an indication of the results expected for the full year.

Pinnacle Gas Services ("PGS") is a joint venture entity formed by the Company and an affiliate of Quantum Capital Solutions.

PGS provides gathering and treating services for natural gas production in the Company's Western Haynesville area.

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 for general corporate purposes include $ 60.2 million and $ 54.9 million of other property and equipment as of March 31, 2024 and December 31, 2023 , respectively.

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 portions 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.

Other Current Assets

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

September 30,

Other current assets at March 31, 2024 and December 31, 2023 consisted of the following:

(In thousands)

Pipe and well equipment inventory

Prepaid drilling costs

Income tax receivable

Production tax refunds receivable

Prepaid expenses

Prepaid drilling costs

Accrued proceeds from sale of natural gas and oil properties

Property and Equipment

1 unchanged sentence

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

COMSTOCK RESOURCES, INC.

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 natural gas and oil reserves.

COMSTOCK RESOURCES, INC.

The changes in capitalized exploratory well costs are as follows:

Three Months Ended

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

Additions to exploratory well costs pending the determination of proved reserves

Determined to have found proved reserves

Ending capitalized exploratory well costs

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.

As of March 31, 2024 and December 31, 2023, 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.

2 unchanged sentences

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

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

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

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

5 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 September 30, 2023 that was recorded in 2018.

The Company had goodwill of $ 335.9 million as of March 31, 2024 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 $ 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 Company has right-of-use lease assets of $ 97.7 million related to its corporate office, 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.

7 unchanged sentences

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.

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

1 unchanged sentence

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 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 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.

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

COMSTOCK RESOURCES, INC.

responding to these changing conditions.

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

The Company has three drilling rig contracts with a three year term with options to extend the term by mutual agreement at mutually acceptable terms or terminate the contracts 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 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 nine months ended September 30, 2023 and 2022 were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Lease costs recognized during the three months ended March 31, 2024 and 2023 were as follows:

Three Months Ended March 31,

(In thousands)

2 unchanged sentences

Operating lease cost included in natural gas and oil properties

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

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

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:

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

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

Cash payments for operating leases associated with right-of-use lease assets included in net cash provided by operating activities were $ 0.9 million and $ 1.0 million for the three months ended March 31, 2024 and 2023, respectively.

Cash payments for operating leases associated with right-of-use lease assets included in net cash used for investing activities were $ 20.9 million and $ 40.6 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024 and December 31, 2023, the operating leases had a weighted-average term of 2.7 years and 2.9 years, respectively, and the weighted-average discount rate used to determine the present value of future operating lease payments was 7.3 % and 7.2 % , respectively.

As of March 31, 2024, the Company also had expected future payments for short term leased drilling services of $ 2.6 million .

As of March 31, 2024, expected future payments related to contracts that contain operating leases were as follows:

(In thousands)

October 1 to December 31, 2023

April 1 to December 31, 2024

Total lease payments

1 unchanged sentence

Total lease liability

COMSTOCK RESOURCES, INC.

Accrued Costs

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

September 30,

Accrued costs at March 31, 2024 and December 31, 2023 consisted of the following:

(In thousands)

Accrued transportation costs

Accrued drilling costs

Accrued interest payable

Accrued drilling costs

Accrued income and other taxes

Accrued employee compensation

Accrued lease operating expenses

Accrued employee compensation

COMSTOCK RESOURCES, INC.

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:

Nine Months Ended

September 30,

Three Months Ended

(In thousands)

1 unchanged sentence

New wells placed on production

Liabilities settled and assets disposed of

Liabilities settled

Accretion expense

8 unchanged sentences

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

COMSTOCK RESOURCES, INC.

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

The Company had the following natural gas price derivative financial instruments at March 31, 2024:

Future Production Period

Three Months Ending December 31, 2023

Nine Months Ending

December 31, 2024

Year Ending December 31, 2025

Year Ending December 31, 2026

Natural Gas Price Swap Contracts:

1 unchanged sentence

Average Price per MMBtu

Natural Gas Price Collar Contracts:

Volume (MMBtu)

Average Price per MMBtu:

Average Ceiling

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.

Subsequent to March 31, 2024 , the Company entered into natural gas collar contracts to hedge an additional 146,000,000 MMBtu of natural gas production from January 2025 to December 2026 at an average floor price of $ 3.50 per MMBtu and an average ceiling price of $ 3.92 per MMBtu.

The Company also entered into natural gas swap contracts to hedge an additional 27,375,000 MMBtu of natural gas production from January 2025 to December 2025 at an average price of $ 3.50 per MMBtu.

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

Consolidated Balance Sheet Location

September 30,

(In thousands)

1 unchanged sentence

Natural gas price derivatives

Derivative Financial Instruments –

Derivative Financial Instruments – current

Liability Derivative Financial Instruments:

Natural gas price derivatives

Derivative Financial Instruments –

Natural gas price derivatives

Derivative Financial Instruments –

Derivative Financial Instruments – long-term

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

COMSTOCK RESOURCES, INC.

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

Gain on Derivatives Recognized in Earnings

(In thousands)

3 unchanged sentences

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

The Company recognized $ 2.7 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.

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

The Company recognized $ 3.4 million and $ 2.0 million of stock-based compensation expense within general and administrative expenses related to awards of restricted stock and PSUs to its employees and directors during the three months ended March 31, 2024 and 2023, respectively.

In February 2024, the Company granted an aggregate of 1,272,811 shares of restricted stock to its employees.

The grants were valued at $ 7.63 per share.

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 September 30, 2023, Comstock had 750,399 PSUs outstanding with a weighted average grant date fair value of $ 15.92 per unit.

As of March 31, 2024, Comstock had 2,701,895 shares of unvested restricted stock outstanding at a weighted average grant date fair value of $ 9.74 per share.

Total unrecognized compensation cost related to unvested restricted stock grants of $ 19.9 million as of March 31, 2024 is expected to be recognized over a period of 2.3 years.

In February 2024, the Company granted an aggregate of 705,603 PSUs to its executive officers at an estimated value of $ 9.69 per unit.

As of March 31, 2024, Comstock had 1,466,504 PSUs outstanding with a weighted average grant date fair value of $ 12.59 per unit.

The number of shares of common stock to be issued related to the PSUs is based on the Company's stock price performance as compared to its peers which could result in the issuance of anywhere from zero to 2,933,008 shares of common stock.

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.

Total unrecognized compensation cost related to these grants of $ 12.5 million as of March 31, 2024 is expected to be recognized over a period of 2.6 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 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.

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

Profits and losses earned from 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.

4 unchanged sentences

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.

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 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.

2 unchanged sentences

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.

Historically, differences between estimated

COMSTOCK RESOURCES, INC.

revenues and actual revenues received have not been significant.

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 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.

The Company did not have any significant imbalance positions at March 31, 2024 or December 31, 2023.

The Company recognized accounts receivable of $ 83.8 million and $ 166.6 million as of March 31, 2024 and December 31, 2023 , 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 nine months ended September 30, 2023 and 2022 .

COMSTOCK RESOURCES, INC.

Accordingly, no allowance for doubtful accounts has been recorded for the three months ended March 31, 2024 and 2023 .

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

7 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

Current - Federal

Current - State

3 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Tax at statutory rate

4 unchanged sentences

Effective tax rate

COMSTOCK RESOURCES, INC.

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

7 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.

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 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 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 –

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

Fair Values – Reported

The following presents the carrying amounts and the fair values of the Company's financial instruments as of March 31, 2024 and December 31, 2023:

March 31, 2024

December 31, 2023

9 unchanged sentences

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

(3) The fair value of the Company's fixed rate debt was based on quoted prices as of September 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 March 31, 2024 and December 31, 2023 , 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 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.

At March 31, 2024 and December 31, 2023, 2,701,895 and 1,429,084 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.

COMSTOCK RESOURCES, INC.

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

3 unchanged sentences

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

COMSTOCK RESOURCES, INC.

Weighted average unearned PSUs outstanding were as follows:

Three Months Ended

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 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 attributable to common stock

Income allocable to unvested restricted shares

Basic income attributable to common stock

Effect of Dilutive Securities:

Restricted stock

Performance stock units

Convertible preferred stock

Diluted income attributable to common stock

Nine Months Ended September 30,

Basic and diluted income (loss) per share for the three months ended March 31, 2024 and 2023 were determined as follows:

Three Months Ended March 31,

(In thousands, except per share amounts)

Net income attributable to common stock

Net income (loss) attributable to common stock

Income allocable to unvested restricted shares

Basic income attributable to common stock

Effect of Dilutive Securities:

Restricted stock

Performance stock units

Convertible preferred stock

Diluted income attributable to common stock

Basic income (loss) attributable to common stock

Diluted income (loss) attributable to common stock

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.

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 nine months ended September 30, 2023 and 2022, respectively, were as follows:

Nine Months Ended

September 30,

Cash payments made for interest and income taxes and other non-cash investing activities for the three months ended March 31, 2024 and 2023, respectively, were as follows:

Three Months Ended

(In thousands)

3 unchanged sentences

Non-cash investing activities include:

Increase (decrease) in accrued capital expenditures

Decrease in accrued capital expenditures

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

COMSTOCK RESOURCES, INC.

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 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) ACQUISITION

In March 2024, the Company acquired approximately 189,000 net undeveloped acres in its Western Haynesville area from an unaffiliated third party for $ 50.0 million , which was accounted for as an asset acquisition.

(3) LONG-TERM DEBT

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

At March 31, 2024, long-term debt was comprised of the following:

(In thousands)

4 unchanged sentences

Debt issuance costs, net of amortization

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

As of March 31, 2024, the Company had $ 540.0 million outstanding under a bank credit facility.

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

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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 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.

The Company was in compliance with the covenants as of March 31, 2024 .

(4) COMMON STOCK

On March 25, 2024, the Company issued 12,500,000 shares of common stock in a private placement to two entities controlled by Comstock's majority stockholder, receiving proceeds of $ 100.5 million .

Following the issuance, Comstock's majority stockholder's beneficial ownership in the Company increased to 67 %.

COMSTOCK RESOURCES, INC.

(5) COMMITMENTS AND CONTINGENCIES

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 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 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 September 30, 2023 or 2022 .

(6) RELATED PARTY TRANSACTIONS

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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 $ 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 Company received $ 279 thousand and $ 224 thousand for the three months ended March 31, 2024 and 2023, respectively, for drilling, operating and marketing services provided to the partnerships.

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

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

COMSTOCK RESOURCES, INC.

In connection with the operation of the wells, the Company had a $ 13.4 million and $ 16.1 million receivable from the partnerships at March 31, 2024 and December 31, 2023 , respectively.

(7) SUBSEQUENT EVENT

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.

On April 9, 2024, the Company issued $ 400.0 million principal amount of 6.75 % senior notes due 2029 (the "New 2029 Notes") in a private placement and received net proceeds after offering costs and deducting the initial purchasers' discounts of $ 365.2 million , which were used to pay down outstanding borrowings on the Company's bank credit facility.

The New 2029 Notes have substantially identical terms as the Company's $ 1,223.9 million aggregate principal amount of 6.75 % senior notes due 2029, which mature on March 1, 2029 and accrue interest at a rate of 6.75 % per annum, payable semi-annually on March 1 and September 1 of each year.

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