What changed in this filing

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Item 9A. Controls and Procedures

2025-02-21 compared with 2024-02-16 · 124 added, 107 removed, 882 unchanged (21% of the section changed)

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OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURSIDICTIONS THAT PREVENT INSPECTIONS

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated herein by reference to "Business – Directors and Executive Officers" in this Form 10-K and to our definitive proxy statement which will be filed with the SEC within 120 days after December 31, 2024.

Section 16(a) Beneficial Ownership Reporting Compliance.

Our directors, executive officers and stockholders with ownership of 10% or greater are required, under Section 16(a) of the Securities Exchange Act of 1934, to file reports of their ownership and changes to their ownership of our securities with the SEC.

Based solely on our review of the reports and any written representations we received that no other reports were required, we believe that, during the year ended December 31, 2023, all of our officers, directors and stockholders with ownership of 10% or greater complied with all Section 16(a) filing requirements applicable to them.

Code of Ethics .

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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, 2024.

COMSTOCK RESOURCES, INC.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

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The following consolidated financial statements and notes of Comstock Resources, Inc.

are included on Pages F-1 to F-25 of this report:

are included on Pages F-1 to F-25 under Item 83 Financial Statements and Supplementary Data of this Annual report:

Report of Independent Registered Public Accounting Firm

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(b) Exhibits:

The exhibits to this report required to be filed pursuant to Item 15(c) are listed below.

The exhibits to this Annual Report required to be filed pursuant to Item 15(c) are listed below.

Contribution Agreement dated May 9, 2018, by and among Arkoma Drilling, L.P., Williston Drilling, L.P.

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Indenture dated June 28, 2021, by and among the Company, each of the guarantor subsidiaries named therein, and American Stock Transfer & Trust Company, LLC for the 5.875% Senior Notes due 2030 (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K dated June 28, 2021).

Indenture dated April 9, 2024, by and among the Company, each of the guarantor subsidiaries named therein, and Equiniti Trust Company, LLC for the 6.75% Senior Notes due 2029 (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K dated April 9, 2024).

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.

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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).

Second Amendment to Second Amended and Restated Credit Agreement dated as of October 30, 2024, 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, 2024).

Comstock Resources, Inc.

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and Comstock Resources, Inc.

dated December 22, 2023.

dated December 22, 2023 (incorporated by reference to Exhibit 10.6 to our Annual Report on Form 10-K for the year ended December 31, 2023.

Insider Trading section of our Code of Business Conduct and Ethics.

Insider Trading sections of our Policy on Compliance with Federal Securities Laws for our Directors and Officers.

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.

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 (incorporated by reference to Exhibit 97.1 to our Annual Report on Form 10-K for the year ended December 31, 2023).

Audit Letter of Netherland, Sewell & Associates, Inc.

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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 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 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.

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 natural gas and oil reserves.

Proved natural gas and oil reserve estimates are impacted by various inputs, including historical production, natural gas and oil price assumptions, and future operating and capital cost assumptions, among others, and requires the expertise of the Company's engineers in evaluating and interpreting the relevant data.

Because of the complexity involved in estimating natural gas and oil reserves, management used independent petroleum engineers to audit the estimates prepared by the Company's engineers as of December 31, 2024.

Auditing the impact of proved natural gas and oil reserves on DD&A is especially 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 the engineers in estimating proved natural gas and oil 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 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 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 natural gas and oil reserve amounts from the Company's reserve report.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management's estimates of proved natural gas and oil reserve volumes.

The work of managements's specialists was used in performing the procedures to evaluate the reasonableness of the proved natural gas and oil reserve volumes.

As a basis for using this work, the specialists' qualifications were understood and the Corporation's relationship with the specialists was assessed.

The procedures performed also included i) evaluating the methods and assumptions used by the specialists, ii) evaluating the specialists' findings related to estimated future production volumes by comparing the estimate to relevant historical and current period information, iv) for proved undeveloped reserves, we evaluated management's development plan for compliance with SEC requirements, as applicable.

/s/ ERNST & YOUNG LLP

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Deferred income taxes

Derivative financial instruments

Long-term operating leases

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Total natural gas and oil sales

Gain on sale of assets

Total revenues

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General and administrative, net

(Gain) loss on sale of assets

Total operating expenses

Operating income

Operating income (loss)

Other income (expenses):

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Income (loss) before income taxes

Provision for income taxes

(Provision for) benefit from income taxes

Net income (loss)

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Balance at December 31, 2021

Conversion of preferred stock

Stock-based compensation

Income tax withholdings on equity awards

Stock issuance costs

Payment of preferred dividends

Payment of preferred stock dividends

Payment of common stock dividends

Balance at December 31, 2022

Conversion of Series B convertible preferred stock

Stock-based compensation

Income tax withholdings on equity awards

Payment of preferred stock dividends

Payment of common stock dividends

Contributions from noncontrolling interest

Balance at December 31, 2023

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Income tax withholdings on equity awards

Payment of common stock dividends

Issuance of common stock

Stock issuance costs

Net income (loss)

Contributions from noncontrolling interest

Distributions to noncontrolling interest

Balance at December 31, 2024

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operating activities:

Deferred and non-current income taxes

(Gain) loss on sale of assets

Deferred income taxes

Gain on sale of assets

Depreciation, depletion and amortization

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Issuance of Senior Notes

Issuance of common stock

Retirement of Senior Notes

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Contributions from noncontrolling interest

Net cash used for financing activities

Distributions to noncontrolling interest

Net cash provided by (used for) financing activities

Net increase (decrease) in cash and cash equivalents

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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.

Certain amounts in prior period footnote disclosures have been reclassified to conform with current period presentation.

Comstock entered into an agreement with an affiliate of Quantum Capital Solutions ("Quantum"), in 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 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 %.

Quantum is entitled to a 12 % dividend on its invested capital and 80 % of any distributions from Pinnacle until an investment return hurdle is met.

After the return hurdle is met, Quantum's ownership reduces to 30 %.

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

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Income tax receivable

Other receivables

Production tax refunds receivable

Prepaid expenses

Accrued proceeds from sale of natural gas and oil properties

Fair Value Measurements

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

The Company performed its assessment of goodwill as of October 1, 2024 and determined there was no indication of impairment.

The Company had right-of-use lease assets of $ 73.8 million and $ 71.5 million as of December 31, 2024 and 2023, respectively, related to its corporate office lease, certain office equipment, vehicles and drilling rigs with corresponding short-term and long-term liabilities.

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Comstock currently has no finance-type leases.

Right-of-use lease assets representing the Company's right to use an underlying asset for the lease term and the related lease liabilities represent its obligation to make lease payments under the terms of the contracts.

Right-of-use lease assets represent the Company's right to use an underlying asset for the lease term and the related lease liabilities represent its obligation to make lease payments under the terms of the contracts.

Short-term leases that have an initial term of one year or less are not capitalized;

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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.

As of December 31, 2024 , the Company had three 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 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.

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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)

Short-term lease cost (drilling 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 $ 3.9 million , $ 3.8 million and $ 3.1 million for the years ended December 31, 2024, 2023 and 2022, respectively.

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Segment Reporting

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

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

This is consistent with the internal reporting provided to the Company's Chief Executive Officer, who is the chief operating decision maker ("CODM").

The CODM evaluates the performance of the Company and allocates resources based on consolidated financial information.

The measure of segment profit or loss used by the CODM is consolidated net income, which is provided in the accompanying consolidated statements of operations.

The significant segment expenses regularly provided to the CODM are operating expenses and certain significant non-operating items, such as gains or losses from derivative financial instruments, interest expense and income tax expense.

These items are also detailed in the accompanying consolidated statements of operations.

Derivative Financial Instruments and Hedging Activities

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Major 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 2024, the Company had two major purchasers of its natural gas production that accounted for 21 % and 12 % of its total natural gas and oil sales.

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.

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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

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.

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.

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 from unaffiliated third parties and fees received for gathering and treating services for certain natural gas wells not operated by the Company.

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

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.

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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 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.

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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 $ 30.7 million , $ 29.7 million and $ 27.5 million for the years ended December 31, 2024, 2023 and 2022 , 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.

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.

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

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.

Earnings Per Share

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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.

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 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.

ASU 2023-07 was implemented in this 2024 Annual Report.

See the Segment Reporting note above for the impact on the Company's 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

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 2023-09 will not have an impact on the Company's reported results of operations, financial position or liquidity.

The Company is still evaluating the impact of this standard on its financial statement disclosures.

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.

In November 2024, the FASB issued ASU 2024-03 "Disaggregation of Income Statement Expenses".

ASU 2024-03 requires additional disclosure, in the notes to the financial statements, of specified information about certain costs and expenses, including purchases of inventory, employee compensation, depreciation, intangible asset amortization and depreciation, depletion and amortization recognized as part of oil and gas-producing activities included in each relevant expense caption.

ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027 and 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.

The Company is still evaluating the impact of this standard on its 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 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.

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.

During 2024, 2023 and 2022, the Company spent $ 106.4 million , $ 98.6 million and $ 54.4 million on its leasing program to acquire 265,290 , 79,741 and 104,314 net acres, respectively, of undeveloped acreage in the Western Haynesville area through direct leasing or through acquisitions of undeveloped rights from third-party operators.

In 2022, the Company also acquired a pipeline and natural gas treating plant from an unaffiliated third party for $ 16.8 million .

The Company sold its interests in certain non-operated natural gas and oil properties for $ 1.2 million , $ 41.3 million and $ 4.1 million in 2024, 2023 and 2022, respectively.

(3) Natural Gas and Oil Producing Activities

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Unproved properties

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Costs Incurred

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Total capital expenditures

COMSTOCK RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(4) Long-term Debt

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6.75 % Senior Notes due 2029:

Premium, net of amortization

(Discount) premium, net of amortization

5.875 % Senior Notes due 2030:

Debt issuance costs, net of amortization

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

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

Debt issuance costs are amortized over the lives of the bank credit facility and senior notes on a straight-line basis which approximates the amortization that would be calculated using an effective interest rate method.

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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 2.25 % to 3.25 % or an alternative base rate plus 1.25 % to 2.25 %, 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 Company also 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 7.32 % and 7.33 % during the years ended December 31, 2024 and 2023 , respectively.

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.

The Company was in compliance with the covenants as of December 31, 2023.

In May 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 , which included principal of $ 244.4 million , premiums paid over face value of $ 4.5 million and accrued interest of $ 9.2 million .

As a result of the redemption, the Company recognized a loss of $ 47.8 million on early retirement of debt including the write-off of $ 43.3 million of unamortized discount resulting from adjusting the senior notes to fair value on the date that they were assumed by the Company.

In June 2022, the Company repurchased $ 26.1 million principal amount of its 6.75 % senior notes due in 2029 for $ 24.9 million .

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

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

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.

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 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.

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

In April 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 the 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.

(5) Commitments and Contingencies

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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 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 three drilling rigs under contract with initial terms of three years that were put into service in 2023 and 2024 .

These three rigs qualify as operating leases and their corresponding lease obligation is reflected on the Company's balance sheet as of December 31, 2024.

In August 2024, the Company entered into agreements for two additional drilling rigs, one with a three-year term and one with a one-year term, with an annual commitment of $ 12.8 million per drilling rig.

Comstock plans to take delivery of both drilling rigs in 2025.

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

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The Company does not believe the resolution of these matters will have a material adverse effect on the Company's financial position, results of operations or cash flows and no material amounts are accrued relative to these matters at December 31, 2024 or 2023 .

(6) Convertible Preferred Stock

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

(6) Stockholders' Equity

The authorized capital of the Company is 405,000,000 shares, of which 400,000,000 shares are common stock, $ 0.50 par value per share, and 5,000,000 are preferred stock, $ 10.00 par value per share.

In March 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 %.

As a result of open market purchases made by the Company's majority stockholder during the third quarter of 2024, beneficial ownership increased to 71 %.

(7) Stock-based Compensation

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During the years ended December 31, 2024, 2023 and 2022 the Company had $ 15.3 million , $ 9.9 million and $ 6.6 million , respectively, in stock-based compensation expense.

Restricted Stock

The fair value of restricted stock grants is amortized over the vesting period, generally one year to three years , using the straight-line method.

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

Restricted Stock

The fair value of restricted stock grants is amortized over the vesting period, generally one year to three years , using the straight-line method.

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.

A summary of restricted stock activity is presented below:

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The costs associated with PSUs are recognized as general and administrative expense over the performance periods of the awards.

The fair value of PSUs was measured at the grant date using the Geometric Brownian Motion Model ("GBM Model").

The fair value of PSUs was measured at the grant date using the Geometric Brownian Motion Model.

Significant assumptions used in this simulation include the Company's expected volatility and a risk-free interest rate based on U.S.

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Range of implied volatility:

A summary of PSU activity is presented below:

Outstanding at January 1, 2023

Outstanding at December 31, 2023

COMSTOCK RESOURCES, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of PSU activity is presented below:

Outstanding at January 1, 2024

Outstanding at December 31, 2024

Year Ended December 31,

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Unrealized hedging gains

Amortization of debt issuance costs and bond discount

Deferred tax liabilities

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Tax effect of:

Research and development and other income tax credits

Valuation allowance on deferred tax assets

State income taxes, net of federal benefit

Effect of changes in state tax laws or rates

Year Ended December 31,

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Tax effect of:

Research and development and other income tax credits

Valuation allowance on deferred tax assets

State income taxes, net of federal benefit

Effect of changes in state tax laws or rates

Effective tax rate

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NOLs that exceed the Section 382 limitation in any year continue to be allowed as carry forwards until they expire and can be used to offset taxable income for years within the carryover period subject to the limitation in each year.

NOLs incurred prior to 2018 generally have a 20-year life until they expire.

federal NOLs incurred prior to 2018 generally have a 20-year life until they expire.

NOLs generated in 2018 and after would be carried forward indefinitely.

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If the Company does not generate a sufficient level of taxable income prior to the expiration of the pre-2018 NOL carry-forward periods, then it will lose the ability to apply those NOLs as offsets to future taxable income.

The Company estimates that $ 740.6 million of the U.S.

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

The Company estimates that all of the U.S.

federal NOL carryforwards expiring in 2037 and $ 1.2 billion of the estimated state NOL carryforwards will expire unused.

The Company's federal income tax returns for the years subsequent to December 31, 2020 remain subject to examination.

The Company's income tax returns in major state income tax jurisdictions remain subject to examination for various periods subsequent to December 31, 2021.

The Company is currently under examination with the state of Louisiana and believe that its significant filing positions are highly certain and that all of its other significant income tax filing positions and deductions would be sustained upon audit or the final resolution would not have a material effect on the consolidated financial statements.

The Company is currently under examination with the state of Louisiana and believes that its significant filing positions are highly certain and that all of its other significant income tax filing positions and deductions would be sustained upon audit or the final resolution would not have a material effect on the consolidated financial statements.

Therefore, the Company has not established any significant reserves for uncertain tax positions.

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Period Ending December 31, 2025

Natural Gas Swap Contracts:

Period Ending December 31, 2026

Natural Gas Price 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.

Natural Gas Price Collar Contracts:

Volume (MMBtu)

Price per MMBtu:

Average Ceiling

Average Floor

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

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

The classification of derivative financial instruments between assets and liabilities consists of the following:

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Derivative Financial Instruments – current

Natural gas price derivatives

Derivative Financial Instruments – long-term

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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Natural gas price derivatives

Oil price derivatives

Interest rate derivatives

(11) Related Party Transactions

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

The Company operates natural gas and oil properties held by 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.

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Revisions of previous estimates.

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.

Revisions of previous estimates in 2024 and 2023 were primarily attributable to the significantly lower natural gas and oil prices that were used to determine proved reserves at the end of each year, which resulted in many of the Company's proved undeveloped locations being excluded from reserves since they did not generate an adequate return at those lower prices.

Revisions of previous natural gas estimates in 2022 were insignificant.

Extensions and discoveries.

Extensions and discoveries for 2023, 2022 and 2021 were primarily comprised of proved reserve additions attributable to the wells drilled in the current year that were not classified as proved undeveloped in prior years and additional proved undeveloped locations that are planned to be drilled in the Company's current development plan.

Extensions and discoveries for 2024, 2023 and 2022 were primarily comprised of proved reserve additions attributable to the wells drilled in the current year that were not classified as proved undeveloped in prior years and additional proved undeveloped locations that are planned to be drilled in the Company's current development plan that were not included in the prior year's reserve estimates.

Sales of minerals in place.

During 2024, the Company sold its interest in certain non-operated wells for $ 1.2 million .

The following table sets forth the standardized measure of discounted future net cash flows relating to proved reserves:

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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