What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2025-02-21 compared with 2024-02-16 · 61 added, 63 removed, 236 unchanged (34% of the section changed)

2 unchanged sentences

As of February 20, 2025, we had 292,919,009 shares of common stock outstanding, which were held by 163 holders of record.

During 2023, we paid quarterly cash dividends on our common stock of 12.5¢ per share.

We have not paid a dividend on our common stock since 2023.

The declaration and payment of future dividends will be at the discretion of the board of directors and will depend upon the results of our operations, capital requirements, our financial condition and such other factors as our board of directors may deem relevant.

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Accordingly, our exploration costs consist of costs we incur to acquire seismic data used for exploration, impairments of our unevaluated leasehold where we were not successful in discovering reserves and the costs of unsuccessful exploratory wells that we drill.

We generally sell our natural gas and oil at current market prices at the point our wells connect to third party purchaser pipelines or terminals.

We generally sell our natural gas and oil at current market prices at the point where our wells connect to third party purchaser pipelines or terminals.

We have entered into certain transportation and treating agreements with midstream and pipeline companies to transport a substantial portion of our natural gas production to long-haul gas pipelines.

We market our products several different ways depending upon a number of factors, including the availability of purchasers for the product, the availability and cost of pipelines near our wells, market prices, pipeline constraints and operational flexibility.

We market our products in several different ways depending upon a number of factors, including the availability of purchasers for the product, the availability and cost of pipelines near our wells, market prices, pipeline constraints and operational flexibility.

Accordingly, our revenues are heavily dependent upon the prices of and demand for natural gas.

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If we are unable to offset production declines with the new wells we plan to drill in 2025 and future periods, our production volumes and cash flows from our operating activities may not be sufficient to fund our capital expenditures, and thus, we may need to either curtail drilling activity or seek additional borrowings, which would result in an increase in our interest expense in 2025 and future periods.

We may need to recognize impairments of our natural gas and oil properties if natural gas and oil prices decline, and as a result, the expected future cash flows from these properties becomes insufficient to recover their carrying value.

COMSTOCK RESOURCES, INC.

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The decrease was primarily due to lower prices received for our natural gas production.

Our 2023 natural gas production increased 5% to 524.5 Bcf (1.4 Bcf per day), and was sold at an average price of $2.40 per Mcf as compared to 500.6 Bcf (1.4 Bcf per day) sold at an average price of $6.23 in 2022.

Our 2024 natural gas production increased 1% to 527.5 Bcf (1.4 Bcf per day), which was sold at an average price of $1.98 per Mcf as compared to 524.5 Bcf (1.4 Bcf per day) sold at an average price of $2.40 in 2023.

We utilize natural gas derivative financial instruments to manage our exposure to changes in prices of natural gas to protect returns on investment from our drilling activities.

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Production and ad valorem taxes.

Our production and ad valorem taxes increased $13.9 million (18%) to $91.8 million in 2023 from $77.9 million in 2022.

This increase was primarily related to increases in the Louisiana production tax rate and higher ad valorem taxes.

Our production and ad valorem taxes decreased $34.4 million (37%) to $57.4 million in 2024 from $91.8 million in 2023.

This decrease was primarily related to a statutory decrease to the Louisiana production tax rate and lower Texas production taxes and ad valorem taxes related to lower natural gas prices in 2024.

Gathering and transportation.

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Lease operating expenses.

Our lease operating expense of $132.2 million ($0.25 per Mcfe) in 2023 was $21.1 million, or 19%, higher than lease operating expenses in 2022 of $111.1 million ($0.22 per Mcfe).

The increase in lease operating expense was due to higher production and increased water disposal costs and other production costs.

Our lease operating expense of $130.5 million ($0.25 per Mcfe) in 2024 was $1.7 million, or 1% lower than lease operating expenses in 2023 of $132.2 million ($0.25 per Mcfe).

The decrease in lease operating expense was due to lower water disposal costs and other production costs as compared to 2023.

Gas services expenses.

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DD&A expense increased $187.5 million (31%) to $795.4 million in 2024 from $607.9 million in 2023 and our DD&A expense per equivalent Mcf produced was $1.51 per Mcfe in 2024 as compared to $1.16 per Mcfe in 2023.

The increase in DD&A rate was primarily due to higher drilling and completion costs incurred for wells turned to sales in 2023 combined with lower estimated proved reserves resulting from the low natural gas price used in the determination of proved reserves at December 31, 2023.

The increase in DD&A rate was primarily due to lower estimated proved undeveloped reserves used in determining the DD&A rate, which resulted from the low natural gas price used in the estimation of proved reserves at December 31, 2024.

General and administrative expenses.

General and administrative expenses, which are reported net of overhead reimbursements, decreased to $38.0 million in 2023 from $39.4 million in 2022 due primarily to lower personnel costs.

General and administrative expenses, which are reported net of overhead reimbursements, increased to $39.4 million in 2024 from $38.0 million in 2023 due primarily to higher stock-based compensation.

Stock-based compensation included in general and administrative expenses was $15.3 million and $9.9 million in 2024 and 2023, respectively.

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We use derivative financial instruments as part of our price risk management program to protect the cash flow we generate from our operating activities.

We had net gains on derivative financial instruments of $187.6 million for 2023 as compared to net losses on derivative financial instruments of $662.5 million for 2022.

Realized net gains from our natural gas price risk management program were $80.3 million in 2023 as compared to $862.7 million of realized net losses in 2022.

We recognized unrealized gains on derivative financial instruments of $107.3 million and $200.2 million in 2023 and 2022, respectively.

We had net gains on derivative financial instruments of $10.2 million for 2024 as compared to net gains on derivative financial instruments of $187.6 million for 2023.

Realized net gains from our natural gas price risk management program were $207.8 million in 2024 as compared to $80.3 million of realized net gains in 2023.

We recognized unrealized losses on derivative financial instruments of $197.6 million and unrealized gains of $107.3 million in 2024 and 2023, respectively.

Interest expense.

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The non-cash interest expense for 2024 totaled $11.5 million compared with $8.0 million for 2023.

The decrease in interest expense in 2023 was due primarily to the retirement of our 7.5% senior notes in 2022.

Loss on early retirement of debt.

During 2022, we retired $244.4 million principal amount of our 7.5% senior notes and $26.1 million principal amount of our 6.75% senior notes.

As a result of premiums paid over face value and costs associated with the retirements, we recognized a loss on early retirement of debt of $46.8 million during 2022.

The increase in interest expense in 2024 was due primarily to the issuance of our 6.75% senior notes in 2024.

Income taxes.

Our income tax provision was $35.1 million and $261.1 million in 2023 and 2022, respectively.

Our effective tax rate of 14% in 2023 and 19% in 2022 differed from the federal income tax rate of 21% primarily due to changes in our valuation allowance on our federal and state net operating loss carryforwards and state income taxes.

We reported net income available to common stockholders of $211.9 million or $0.76 per diluted share in 2023 and a net income available to common stockholders of $1.1 billion or $4.11 per diluted share in 2022.

The decrease in net income in 2023 is primarily due to the impact of lower natural gas prices in 2023.

Income from operations in 2023 decreased to $226.6 million as compared to $2.3 billion in 2022.

Our income tax benefit was $149.1 million in 2024 as compared to a provision of $35.1 million in 2023.

Our effective tax rate of 41% in 2024 differed from the federal income tax rate of 21% due primarily to research and development and other tax credits claimed in 2024, changes in our valuation allowance on our federal and state net operating loss carryforwards and state income taxes, including a reduction in the Louisiana state corporate tax rates.

Our effective tax rate of 14% in 2023 differed from the federal income tax rate of 21% primarily due to changes in our valuation allowance on our federal and state net operating loss carryforwards and state income taxes.

We reported a net loss available to common stockholders of $218.8 million or $(0.76) per diluted share in 2024 and net income available to common stockholders of $211.9 million or $0.76 per diluted share in 2023.

The net loss in 2024 is primarily due to the impact of lower natural gas prices in 2024 and the unrealized loss on our derivative financial instruments of $197.6 million.

Loss from operations in 2024 was $168.6 million as compared to income from operations of $226.6 million in 2023.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

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Operating activities

Issuance of 6.75% senior notes

Issuance of common stock

Contributions from noncontrolling interest

Borrowings on bank credit facility, net of repayments

Proceeds from asset sales

Contributions from noncontrolling interest

Uses of cash and cash equivalents:

Capital expenditures

Retirement of senior notes

Repayments on bank credit facility, net of borrowings

Common stock dividends

Preferred stock dividends

Debt issuance costs

Debt and stock issuance costs

Distributions to noncontrolling interest

Cash flows from operating activities.

Net cash provided by our operating activities decreased $681.5 million (40%) to $1.0 billion in 2023 from $1.7 billion in 2022.

The decrease was primarily due to the lower realized natural gas prices we had in 2023.

Net cash provided by our operating activities decreased $396.5 million (39%) to $620.3 million in 2024 from $1.0 billion in 2023.

The decrease was primarily due to the lower natural gas prices we realized in 2024.

Issuance of 6.75% senior notes and debt issuance costs.

In April 2024, we issued $400.0 million principal amount of 6.75% senior notes due 2029 in a private placement and received net proceeds after deducting the initial purchasers' discounts of $365.2 million, which were used to pay down outstanding borrowings on our bank credit facility.

We incurred $6.8 million of debt issuance costs associated with the senior note issuance.

Issuance of common stock and stock issuance costs.

In 2024, we issued 12,500,000 shares of common stock to two entities controlled by our majority stockholder in a private placement, receiving total proceeds of $100.5 million.

Contributions from noncontrolling interest.

In 2023, we formed a midstream partnership to fund the future build-out of our Western Haynesville midstream system.

During 2024 and 2023, our noncontrolling partner contributed $60.5 million and $24.0 million, respectively, to the midstream partnership.

Proceeds from asset sales.

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In 2023, we sold certain non-operated properties for net proceeds of $41.3 million.

Contributions from noncontrolling interest.

During the fourth quarter of 2023, we formed a midstream partnership to fund the future build-out of our Western Haynesville midstream system over the next several years.

During 2023, the noncontrolling interest contributed $24.0 million to the midstream partnership.

Capital expenditures.

The increase in capital expenditures of $357.2 million is primarily due to higher drilling, completion and acquisition activities in 2023.

The decrease in capital expenditures of $373.6 million is primarily due to lower drilling and completion activities in 2024.

COMSTOCK RESOURCES, INC.

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Acquisitions:

Proved property

Unproved property

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Total exploration and development

Midstream property

Other property

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Total cash capital expenditures

We currently expect to spend approximately $750 million to $850 million in 2024 on our development and exploration projects primarily focused on the continued development of our Haynesville/Bossier shale properties including the exploration and development of our Western Haynesville acreage.

We currently expect to spend approximately $1.0 billion to $1.1 billion in 2025 on our development and exploration projects primarily focused on the continued development of our Haynesville/Bossier shale properties including the exploration and development of our Western Haynesville acreage.

We also expect to spend $130 million to $150 million in our Western Haynesville midstream partnership.

Under our 2024 operating plan, we currently expect to run five operated drilling rigs and to drill 46 operated horizontal wells (35.9 net) and to turn 44 operated wells (38.2 net) to sales in 2024.

Retirement of senior notes.

In 2022, we retired all of our outstanding 7.5% senior notes due in 2025 for $248.9 million, which included premiums paid over face value of $4.5 million, and we retired $26.1 million principal amount of our 6.75% senior notes for $24.9 million.

Common stock and preferred stock dividends.

Under our 2025 operating plan, we currently expect to drill 46 operated horizontal wells (40.3 net) and to turn 46 operated wells (39.7 net) to sales in 2025.

Common stock dividends.

In 2023, we paid a quarterly cash dividend of 12.5¢ per share of common stock.

On December 15, 2022, we paid a cash dividend of 12.5¢ per share of common stock.

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

Debt issuance costs.

In 2022, we entered into a new five-year bank credit facility and we incurred $10.8 million of issuance costs associated with the new bank credit facility

We did not pay a dividend in 2024.

Liquidity and Capital Resources

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The bank credit facility places certain restrictions upon our and our restricted subsidiaries' ability to, among other things, incur additional indebtedness, pay cash dividends, repurchase common stock, make certain loans, investments and divestitures and redeem our senior notes.

The only financial covenants are the maintenance of a leverage ratio of less than 3.5 to 1.0 and an adjusted current ratio of at least 1.0 to 1.0.

The only financial covenants are the maintenance of a leverage ratio of less than 4.0 to 1.0, which reduces to 3.75 to 1.0 on June 30, 2025 and to 3.5 to 1.0 on September 30, 2025 and an adjusted current ratio of at least 1.0 to 1.0.

We were in compliance with the covenants as of December 31, 2024.

As of December 31, 2024, we had $1.1 billion of liquidity, comprised of $1.1 billion of unused borrowing capacity under our bank credit facility and $6.8 million of cash and cash equivalents on hand.

Our short and long-term capital

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requirements consist primarily of funding our development and exploration activities, acquisitions, payments of contractual obligations, and debt service.

Our short and long-term capital requirements consist primarily of funding our development and exploration activities, acquisitions, payments of contractual obligations, and debt service.

We expect to fund our future development and exploration activities with future operating cash flow.

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We expect to fund future acquisitions, depending on the size and timing, with future operating cash flow, borrowings under our bank credit facility, or other debt or equity financings, to the extent available.

The availability and attractiveness of debt or equity financing will depend upon a number of factors, some of which will relate to our financial condition and performance and some of which will be beyond our control, such as prevailing interest rates, natural gas and oil prices and other market conditions.

The availability and attractiveness of debt or equity financing will depend upon a number of factors, some of

COMSTOCK RESOURCES, INC.

which will relate to our financial condition and performance and some of which will be beyond our control, such as prevailing interest rates, natural gas and oil prices and other market conditions.

We cannot provide any assurance that we will be able to obtain such capital, or if such capital is available, that we will be able to obtain it on acceptable terms.

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Our natural gas transportation and gathering contracts extend to 2031 and commitments under these contracts are $84.4 million for 2025, $91.6 million for 2026, $90.0 million for 2027, $82.9 million for 2028, $73.8 million for 2029 and $98.0 million for commitments thereafter.

Interest payments under our senior notes and bank credit facility are $175.1 million for 2024 through 2026, $170.6 million for 2027, $139.3 million for 2028 and $72.8 million for all periods thereafter.

Interest payments under our senior notes and bank credit facility are $196.6 million for 2025 and 2026, $192.8 million for 2027, $166.3 million for 2028, $75.0 million for 2029 and $2.4 million for all periods thereafter.

Federal and State Taxation

At December 31, 2023, we had $754.1 million in U.S.

On December 31, 2024, we had $743.0 million in U.S.

federal net operating loss carryforwards and $1.8 billion in certain state net operating loss carryforwards.

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There are two generally acceptable methods for accounting for natural gas and oil producing activities.

The full cost method allows the capitalization of all costs associated with finding natural gas and oil reserves, including certain general and administrative expenses.

The full cost method allows the capitalization of all costs associated with finding natural gas and oil reserves.

The successful efforts method allows only for the capitalization of costs associated with developing proven natural gas and oil properties as well as exploration costs associated with successful exploration projects.

Costs related to exploration that are not successful are expensed when it is determined that commercially productive oil and gas reserves were not found.

We have elected to use the successful efforts method to account for our oil and gas activities and we do not capitalize any of our general and administrative expenses.

We have elected to use the successful efforts method to account for our oil and gas activities.

Natural gas and oil reserve quantities.

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The accuracy of any reserve estimate depends on the quality of available data, production history and engineering and geological interpretation and judgment.

Because all reserve estimates are to some degree imprecise, the quantities and timing of natural gas and oil that are ultimately recovered, production and operating costs, the amount and timing of future development expenditures and future natural gas and oil prices may all differ materially from

COMSTOCK RESOURCES, INC.

those assumed in these estimates.

Proved reserve estimates included in this report were prepared by the Company's engineers and audited by independent petroleum engineers.

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Any future downward revisions could adversely affect our financial condition, our future prospects and the value of our common stock.

COMSTOCK RESOURCES, INC.

Impairment of natural gas and oil properties.

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Income Taxes.

We account 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 future tax consequences attributable to the future utilization of existing tax net operating loss and other types of carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled.

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In recording deferred income tax assets, we consider whether it is more likely than not that some portion or all of our deferred income tax assets will be realized in the future.

The ultimate realization of deferred income tax assets is dependent

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upon the generation of future taxable income during the periods in which those deferred income tax assets would be deductible.

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

We believe that after considering all the available objective evidence, historical and prospective, with greater weight given to historical evidence, we are not able to determine that it is more likely than not that all of our deferred tax assets will be realized.

As a result, we established valuation allowances for our deferred tax assets and U.S.

federal and state net operating loss carryforwards that are not expected to be utilized due to the uncertainty of generating taxable income prior to the expiration of the carryforward periods.

federal and state NOL carryforwards that are not expected to be utilized due to the uncertainty of generating taxable income prior to the expiration of the carryforward periods.

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

COMSTOCK RESOURCES, INC.

QUANTITATIVE AND QUA LITATIVE DISCLOSURES ABOUT MARKET RISK

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Similarly, any improvements in natural gas and oil prices can have a favorable impact on our financial condition, results of operations and capital resources.

As of December 31, 2023, we had natural gas price swap agreements to hedge approximately 146.4 Bcf of our 2024 production at an average price of $3.55 per MMBtu.

As of December 31, 2024, we had natural gas price swap agreements to hedge approximately 315.7 Bcf of our 2025 and 2026 production at an average price of $3.49 per MMBtu.

We have also entered into natural gas collars to hedge approximately 175.2 Bcf of natural gas with an average floor price of $3.50 per MMBtu and an average ceiling price of $3.99 per MMBtu.

None of our derivative contracts have margin requirements or collateral provisions that could require funding prior to the scheduled cash settlement date.

A change of 10% in the market price of natural gas on December 31, 2023 would change the fair value of our natural gas swaps by approximately $38.2 million.

An increase of 10% in the market price of natural gas on December 31, 2024 would decrease the fair value of our natural gas swaps and collars by approximately $131.9 million.

A decrease of 10% in the market price of natural gas on December 31, 2024 would increase the fair value of our natural gas price swaps and collars by approximately $132.9 million.

The impact of hypothetical changes in market prices of natural gas on our natural gas derivative financial instruments does not include the offsetting impact that the same hypothetical changes in market prices of natural gas may have on our physical sales of natural gas.

Since our outstanding natural gas derivative financial instruments hedge only a portion of our forecasted physical gas production, a positive or negative impact to the fair value of our natural gas derivative financial instruments would be partially offset by our physical sales of natural gas.

Since December 31, 2024, we entered into natural gas collar contracts to hedge 47.5 Bcf of natural gas production during 2026 at an average ceiling price of $5.05 per MMBtu and an average floor price of $3.50 per MMBtu.

Interest Rates

5 unchanged sentences

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 5. Market for Registrant’s Common Equity