Item 5. Market for Registrant’s Common Equity
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed for trading on the New York Stock Exchange under the symbol "CRK". As of February 20, 2025, we had 292,919,009 shares of common stock outstanding, which were held by 163 holders of record. 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.
Stockholder Return Performance
The following graph compares the yearly percentage change in the cumulative total stockholder return on our common stock during the five years ended December 31, 2024 with the cumulative returns during the same period for the New York Stock Exchange Index and the SPDR Standard & Poor's ("S&P") Oil and Gas Exploration and Production ETF. The graph assumes that $100.00 was invested on the last trading day of 2019, and that dividends, if any, were reinvested.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN (1)
Among Comstock, the NYSE Composite Index and the S&P Oil & Gas Exploration and Production ETF Index
As of December 31,
Total Return Analysis
2019
2020
2021
2022
2023
2024
Comstock
$
100.00
$
53.10
$
98.30
$
167.72
$
113.40
$
233.45
NYSE Composite
$
100.00
$
106.99
$
129.11
$
117.04
$
133.16
$
154.19
SPDR S&P Oil and Gas Exploration and Production ETF
$
100.00
$
63.60
$
106.04
$
154.15
$
159.64
$
158.04
_______________
(1) The data contained in the above graph is deemed to be furnished and not filed pursuant to Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.
ITEM 6. [RESERVED]
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COMSTOCK RESOURCES, INC.
ITEM 7. MANAGEMENT'S DI SCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our selected historical consolidated financial data and our accompanying consolidated financial statements and the notes to those financial statements included elsewhere in this report. The following discussion includes forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this report, particularly in "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements."
Overview
We are an independent energy company engaged in the acquisition, exploration, development and production of natural gas and oil in the United States. Our assets are concentrated in the Haynesville and Bossier shale located in North Louisiana and East Texas, a premier natural gas basin with superior economics due to the geographic proximity to Gulf Coast natural gas markets. We own interests in 2,427 producing natural gas and oil wells (1,542.6 net to us) and we operate 1,747 of these wells.
We use the successful efforts method of accounting, which 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 activities. 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 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 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. Natural gas prices have historically been volatile and are likely to remain volatile in the future.
Our operating costs are generally comprised of several components, including costs of our field personnel, insurance, repair and maintenance costs, production supplies, fuel used in operations, transportation costs, workover expenses and state production and ad valorem taxes.
Like all natural gas and oil exploration and production companies, we face the challenge of replacing our reserves. Although in the past we have offset the effect of declining production rates from existing properties through successful acquisition and drilling efforts, there can be no assurance that we will be able to continue to offset production declines or maintain production at current rates through future acquisitions or drilling activity.
Our operations and facilities are subject to extensive federal, state and local laws and regulations relating to the exploration for, and the development, production and transportation of, natural gas and oil, and operating safety. Future laws or regulations, any adverse changes in the interpretation of existing laws and regulations or our failure to comply with existing legal requirements may have an adverse effect on our business, results of operations and financial condition. Applicable environmental regulations require us to remove our equipment after production has ceased, to plug and abandon our wells and to remediate any environmental damage our operations may have caused. The present value of the estimated future costs to plug and abandon our natural gas and oil wells and to dismantle and remove our production facilities is included in our reserve for future abandonment costs, which was $34.0 million as of December 31, 2024.
Prices for natural gas and oil have been highly volatile in recent years but we expect our natural gas production to increase, assuming we maintain a sufficient development program to offset expected production declines from our producing wells. The level of our drilling activity is dependent on natural gas prices. 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 become insufficient to recover their carrying value.
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COMSTOCK RESOURCES, INC.
Results of Operations
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
Our operating data for the year ended December 31, 2024 and 2023 are summarized below:
Year Ended December 31,
2024
2023
(In thousands except per unit amounts)
Net Production Data:
Natural gas (MMcf)
527,548
524,467
Oil (MBbls)
50
70
Natural gas equivalent (MMcfe)
527,847
524,890
Revenues:
Natural gas sales
$
1,043,886
$
1,259,450
Oil sales
3,597
5,161
Total natural gas and oil sales
$
1,047,483
$
1,264,611
Expenses:
Production and ad valorem taxes
$
57,437
$
91,803
Gathering and transportation
$
194,890
$
184,906
Lease operating
$
130,504
$
132,203
Exploration
$
—
$
1,775
Average Sales Price:
Natural gas (per Mcf)
$
1.98
$
2.40
Oil (per Bbl)
$
71.94
$
73.73
Average equivalent (Mcfe)
$
1.98
$
2.41
Expenses ($ per Mcfe):
Production and ad valorem taxes
$
0.11
$
0.18
Gathering and transportation
$
0.37
$
0.35
Lease operating
$
0.25
$
0.25
Gas Services:
Gas services revenue
$
206,097
$
300,498
Gas services expense
$
205,407
$
282,050
Natural gas and oil sales. Natural gas and oil sales of $1.0 billion in 2024 decreased by $0.2 billion, or 17%, as compared to $1.3 billion in 2023. The decrease was primarily due to lower prices received for our natural gas production. 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. The following table presents our natural gas prices before and after the effect of cash settlements of our derivative financial instruments:
Year Ended December 31,
2024
2023
Average Realized Natural Gas Price:
Natural gas, per Mcf
$
1.98
$
2.40
Cash settlements on derivative financial instruments, per Mcf
0.39
0.15
Price per Mcf, including cash settlements on derivative
financial instruments
$
2.37
$
2.55
Gas services revenues. Gas services revenues of $206.1 million in 2024 decreased $94.4 million (31%) from $300.5 million in 2023. Gas services activities include sales of natural gas purchased from unaffiliated third parties for resale and fees received from unaffiliated third parties for natural gas gathering and treating services. These activities commenced in 2022 with the acquisition of a pipeline and natural gas treating plant and the opportunity to utilize our excess transport capacity in North Louisiana. Gas services revenues decreased in 2024 due primarily to lower natural gas prices on sales of natural gas purchased to utilize our excess transport capacity.
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COMSTOCK RESOURCES, INC.
Production and 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. Gathering and transportation costs increased $10.0 million (5%) to $194.9 million in 2024 as compared to $184.9 million in 2023. This increase was due to production growth in areas with higher average gathering and transportation rates.
Lease operating expenses. 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. Gas services expenses of $205.4 million in 2024 were $76.6 million (27%) lower than gas services expenses in 2023 of $282.1 million. The decrease was due primarily to lower natural gas prices for purchases of third-party natural gas for resale.
Depreciation, depletion and amortization expense ("DD&A"). 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 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, 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.
Derivative financial instruments. 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 $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. Interest expense was $210.6 million for 2024 as compared to $169.0 million for 2023. Included in interest expense was amortization of the premiums or discounts on our senior notes and the debt issuance cost amortization associated with our outstanding debt. The non-cash interest expense for 2024 totaled $11.5 million compared with $8.0 million for 2023. 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 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.
Net income. 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
Discussions of 2023 items and year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on February 16, 2024.
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COMSTOCK RESOURCES, INC.
Cash Flows, Liquidity and Capital Resources
Cash Flows
The following table summarizes sources and uses of cash and cash equivalents:
Year Ended December 31,
2024
2023
(in thousands)
Sources of cash and cash equivalents:
Operating activities
$
620,337
$
1,016,846
Issuance of 6.75% senior notes
372,000
—
Issuance of common stock
100,450
—
Contributions from noncontrolling interest
60,500
24,000
Borrowings on bank credit facility, net of repayments
—
480,000
Proceeds from asset sales
1,214
41,295
Total
$
1,154,501
$
1,562,141
Uses of cash and cash equivalents:
Capital expenditures
$
1,085,490
$
1,459,096
Repayments on bank credit facility, net of borrowings
65,000
—
Common stock dividends
—
138,985
Debt and stock issuance costs
6,855
144
Distributions to noncontrolling interest
3,653
—
Other
3,373
1,899
Total
$
1,164,371
$
1,600,124
Cash flows from operating activities. 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. In 2024, we sold certain non-operated properties for net proceeds of $1.2 million. In 2023, we sold certain non-operated properties for net proceeds of $41.3 million.
Capital expenditures. The decrease in capital expenditures of $373.6 million is primarily due to lower drilling and completion activities in 2024.
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COMSTOCK RESOURCES, INC.
Our capital expenditures are summarized in the following table:
Year Ended December 31,
2024
2023
(in thousands)
Acquisitions:
Unproved property
$
106,386
$
98,553
Exploration and development:
Developmental leasehold costs
13,461
27,905
Exploratory drilling and completion costs
354,557
244,129
Development drilling and completion costs
503,550
974,664
Other development costs
30,500
25,130
Asset retirement obligations
1,594
(19
)
Total exploration and development
1,010,048
1,370,362
Midstream
85,377
35,694
Other property
2,264
491
Total capital expenditures
$
1,097,689
$
1,406,547
Change in accrued capital expenditures and other
1,383
18,562
Prepaid drilling costs
(11,988
)
34,010
Asset retirement obligations
(1,594
)
(23
)
Total cash capital expenditures
$
1,085,490
$
1,459,096
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 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. We did not pay a dividend in 2024.
Liquidity and Capital Resources
As of December 31, 2024, we had $415.0 million outstanding under a bank credit facility. Aggregate commitments under the credit facility are $1.5 billion, which matures on November 15, 2027. Borrowings under the bank credit facility are subject to a borrowing base, which is currently set at $2.0 billion. The borrowing base is re-determined on a semi-annual basis and upon the occurrence of certain other events. Borrowings under the bank credit facility are secured by substantially all of our assets and those of our restricted subsidiaries and bear interest at our option, at either adjusted SOFR plus 2.25% to 3.25% or an alternate base rate plus 1.25% to 2.25%, in each case depending on the utilization of the borrowing base. We also pay a commitment fee of 0.375% to 0.5% on the unused portion of the committed borrowing base. 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 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 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. The timing of most of our capital expenditures is mostly discretionary. We have a significant degree of flexibility to adjust the level of our capital expenditures as circumstances warrant. If our plans or assumptions change or prove to be inaccurate, we may be required to seek additional capital, including debt or equity financing. 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
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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.
Our contractual obligations consist primarily of natural gas transportation and gathering contracts, principal and interest payments on our senior notes and bank credit facility and other operating lease obligations. 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 $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
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. As a result of a change of control in August 2018, our ability to use U.S. federal net operating losses ("NOLs") to reduce taxable income is limited. If we do not generate a sufficient level of taxable income prior to the expiration of the pre-2018 NOL carry-forward periods, then we will lose the ability to apply those NOLs as offsets to future taxable income. We estimate that $740.6 million of the U.S. federal NOL carryforwards and $1.2 billion of the estimated state NOL carryforwards will expire unused.
Our federal income tax returns for the years subsequent to December 31, 2020 remain subject to examination. Our income tax returns in major state income tax jurisdictions remain subject to examination for various periods subsequent to December 31, 2021. Currently, we are under examination with the state of Louisiana and we believe that our significant filing positions are highly certain and that all of our other significant income tax filing positions and deductions would be sustained upon audit or the final resolution would not have a material effect on our consolidated financial statements. Therefore, we have not established any significant reserves for uncertain tax positions.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and use assumptions that can affect the reported amounts of assets, liabilities, revenues or expenses.
Successful efforts accounting. We are required to select among alternative acceptable accounting policies. 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. 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.
Natural gas and oil reserve quantities. The determination of depreciation, depletion and amortization expense is highly dependent on the estimates of the proved natural gas and oil reserves attributable to our properties. The determination of whether impairments should be recognized on our oil and gas properties is also dependent on these estimates, as well as estimates of probable reserves. Reserve engineering is a subjective process of estimating underground accumulations of natural gas and oil that cannot be precisely measured. 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 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.
The information regarding present value of the future net cash flows attributable to our proved natural gas and oil reserves are estimates only and should not be construed as the current market value of the estimated natural gas and oil reserves attributable to our properties. Thus, such information includes revisions of certain reserve estimates attributable to proved properties included in the preceding year's estimates. Such revisions reflect additional information from subsequent activities, production history of the properties involved and any adjustments in the projected economic life of such properties resulting from changes in product prices. Any future downward revisions could adversely affect our financial condition, our future prospects and the value of our common stock.
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COMSTOCK RESOURCES, INC.
Impairment of natural gas and oil properties. We evaluate our proved properties for potential impairment when circumstances indicate that the carrying value of an asset may not be recoverable. If impairment is indicated based on a comparison of the asset's carrying value to its undiscounted expected future net cash flows, then it is recognized to the extent that the carrying value exceeds fair value. A significant amount of judgment is involved in performing these evaluations since the results are based on estimated future events. Expected future cash flows are determined using estimated future prices based on market based forward prices applied to projected future production volumes. The projected production volumes are based on the property's proved and risk adjusted probable natural gas and oil reserves estimates at the end of the period. The estimated future cash flows that we use in our assessment of the need for an impairment are based on a corporate forecast which considers forecasts from multiple independent price forecasts. Prices are not escalated to levels that exceed observed historical market prices. Costs are also assumed to escalate at a rate that is based on our historical experience, currently estimated at 2% per annum. The natural gas and oil prices used for determining asset impairments will generally differ from those used in the standardized measure of discounted future net cash flows because the standardized measure requires the use of the average first day of the month historical price for the year. Unproved properties are evaluated for impairment based upon the results of drilling, planned future drilling and the terms of our natural gas and oil leases. It is reasonably possible that our estimates of undiscounted future net cash flows attributable to our natural gas and oil properties may change in the future. The primary factors that may affect estimates of future cash flows include future adjustments, both positive and negative, to proved and appropriate risk-adjusted probable natural gas and oil reserves, results of future drilling activities, future prices for natural gas and oil, and increases or decreases in production and capital costs. As a result of these changes, there may be impairments in the carrying values of our proved and unproved natural gas and oil properties in the future.
Goodwill. We have goodwill of $335.9 million as of December 31, 2024 that was recorded in 2018. Goodwill represents the excess of purchase price over fair value of net tangible and identifiable intangible assets. We are not required to amortize goodwill as a charge to earnings; however, we are required to conduct an annual review of goodwill for impairment. We determine the potential for impairment of our goodwill by initially preparing a qualitative fair value assessment of our business value. In performing this qualitative assessment, we examine relevant events and circumstances that could have a negative effect on our business, including macroeconomic conditions, industry and market conditions (including current commodity price), earnings and cash flows, overall financial performance and other relevant entity specific events.
If the qualitative assessment indicates that it is more likely than not that our business is impaired, a quantitative analysis would be performed to assess our fair value and to determine the amount of impairment, if any, that requires recognition. When performing a quantitative impairment assessment of goodwill, fair value is determined based on a market approach or an income approach. If the carrying value of goodwill exceeds the fair value calculated using the quantitative approach, an impairment charge would be recorded for the difference between fair value and carrying value. If oil or natural gas prices decrease, drilling efforts are unsuccessful or our market capitalization declines, it is reasonably possible that impairments would need to be recognized. We performed a quantitative assessment of goodwill as of October 1, 2024 and determined there was no goodwill impairment.
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 NOLs 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. 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.
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 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 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.
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COMSTOCK RESOURCES, INC.
ITEM 7A. QUANTITATIVE AND QUA LITATIVE DISCLOSURES ABOUT MARKET RISK
Our financial condition, results of operations and capital resources are highly dependent upon the prevailing market prices of natural gas and oil. These commodity prices are subject to wide fluctuations and market uncertainties due to a variety of factors, some of which are beyond our control. Factors influencing natural gas and oil prices include the level of global demand for oil, the foreign supply of natural gas and oil, the establishment of and compliance with production quotas by oil exporting countries, weather conditions that determine the demand for natural gas, the price and availability of alternative fuels and overall economic conditions. It is impossible to predict future natural gas and oil prices with any degree of certainty. Sustained weakness in natural gas and oil prices may adversely affect our financial condition and results of operations and may also reduce the amount of natural gas and oil reserves that we can produce economically. Any reduction in our natural gas and oil reserves, including reductions due to price fluctuations, can have an adverse effect on our ability to obtain capital for our exploration and development activities. 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, 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.
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
At December 31, 2024, we had approximately $3.0 billion principal amount of long-term debt outstanding. $965.0 million of our long-term debt bear interest at a fixed rate of 5.875% and $1.6 billion of our long-term debt bear interest at a fixed rate of 6.75%. The fair market value of the senior notes due 2030 and senior notes due 2029 as of December 31, 2024 were $899.9 million and $1.6 billion, respectively, based on the market price of approximately 93% and 97% of the face amount of such debt. At December 31, 2024, we had $415.0 million of outstanding borrowings under our bank credit facility, which is subject to variable rates of interest that are tied to adjusted SOFR or an alternate base rate, at our option. Any increase in these interest rates would have an adverse impact to our results of operations and cash flow.