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Item 2. Management’s Discussion and Analysis

2026-07-30 compared with 2026-05-06 · 77 added, 56 removed, 107 unchanged (55% of the section changed)

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Such forward-looking statements are based on management's current expectations and are subject to a number of factors and uncertainties which could cause actual results to differ materially from those described herein.

Although the we believe the expectations in such statements to be reasonable, there can be no assurance that such expectations will prove to be correct.

Although we believe the expectations in such statements to be reasonable, there can be no assurance that such expectations will prove to be correct.

You are cautioned not to place undue reliance on the forward-looking statements included in this report, which speak only as of the date made.

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Three Months Ended

Six Months Ended

(In thousands, except per unit amounts)

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Gas services expense

Natural gas and oil sales of $419.0 million for the three months ended March 31, 2026 increased by $6.0 million (1%) as compared to $413.0 million for the first quarter of 2025.

The increase was due to higher natural gas prices realized in the first quarter of 2026 as compared to the same period in 2025.

The average realized price for our natural gas was $4.27 per thousand cubic feet ("Mcf"), which increased 19% from the average realized natural gas price in the first quarter of 2025.

Our natural gas production for the first quarter of 2026 decreased 15% to 97.9 billion cubic feet ("Bcf") (1.1 Bcf per day).

Natural gas production for the first quarter of 2025 was 115.0 Bcf (1.3 Bcf per day) and was sold at an average price of $3.58 per Mcf.

Natural gas and oil sales of $288.2 million for the three months ended June 30, 2026 decreased by $51.7 million (15%) as compared to $340.0 million for the second quarter of 2025.

The decrease was due to lower natural gas prices realized in the second quarter of 2026 as compared to the same period in 2025.

The average realized price for our natural gas was $2.54 per thousand cubic feet ("Mcf"), which decreased 16% from the average realized natural gas price in the second quarter of 2025.

Our natural gas production for the second quarter of 2026 increased 1% to 113.1 billion cubic feet ("Bcf") (1.2 Bcf per day).

Natural gas production for the second quarter of 2025 was 112.2 Bcf (1.2 Bcf per day) and was sold at an average price of $3.02 per Mcf.

COMSTOCK RESOURCES, INC.

Natural gas and oil sales of $707.3 million for the six months ended June 30, 2026 decreased by $45.7 million (6%) as compared to $753.0 million for the six months ended June 30, 2025, which was primarily attributable to lower natural gas production, which decreased 7% to 210.9 Bcf (1.2 Bcf per day) during the first six months of 2026.

Natural gas prices increased by 1% during the first six months of 2026 as compared to 2025 natural gas prices.

Our natural gas production for the first six months of 2025 was 227.2 Bcf (1.3 Bcf per day) and was sold at an average price of $3.31 per Mcf.

We utilize natural gas price derivative financial instruments to manage our exposure to changes in prices of natural gas and 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:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Average Realized Natural Gas Price:

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Price per Mcf, including cash settlements on derivative financial instruments

Gas service revenues of $166.5 million increased $66.6 million (67%) for the first quarter of 2026 from $99.9 million in the first quarter of 2025.

The increases were primarily due to higher natural gas prices related to sales of natural gas purchased to utilize our excess transport capacity.

We reported a gain on sale of assets of $1.8 million for the first quarter of 2026, which was primarily due to post-closing adjustments related to the divestiture of our Shelby Trough properties in East Texas during the fourth quarter of 2025.

Gas service revenues of $63.5 million decreased $66.8 million (51%) for the second quarter of 2026 from $130.3 million in the second quarter of 2025.

Gas service revenues of $230.0 million decreased $0.2 million for the first six months of 2025 from $230.2 million for the first six months of 2025.

The decreases were primarily due to lower natural gas prices related to sales of natural gas purchased to utilize our excess transport capacity.

Costs and Expenses –

Our production and ad valorem taxes decreased $0.8 million (7%) to $10.4 million for the first quarter of 2026 from $11.2 million in the first quarter of 2025.

The decrease was primarily due to lower production in the first quarter of 2026.

Gathering and transportation costs for the first quarter of 2026 decreased $0.8 million (2%) to $41.8 million as compared to $42.6 million in the first quarter of 2025.

The decrease was due primarily to lower production.

Our lease operating expense of $28.3 million ($0.29 per Mcfe) for the first quarter of 2026 decreased $6.7 million (19%) as compared to our lease operating expense of $35.0 million ($0.30 per Mcfe) for the first quarter of 2025.

The decrease was due to lower production in the first three months of 2026.

Gas service expenses of $162.9 million increased $46.1 million (39%) for the first quarter of 2026 from $116.8 million in the first quarter of 2025.

The increase was primarily due to higher natural gas prices related to purchases of third party natural gas for resale.

Depreciation, depletion and amortization ("DD&A") decreased $26.4 million to $141.5 million in the first quarter of 2026 from $167.9 million in the first quarter of 2025 due to lower natural gas production in the first quarter of 2026.

Our DD&A per equivalent Mcf produced was $1.45 per Mcfe for the quarter ended March 31, 2026 which was comparable to $1.46 for the quarter ended March 31, 2025.

General and administrative expenses, which are reported net of overhead reimbursements, increased to $18.2 million for the first quarter of 2026 as compared to $11.1 million in the first quarter of 2025.

The increase was primarily due to higher employee compensation, including stock-based compensation, which increased to $7.4 million in the first quarter of 2026 as compared to $4.4 million in the first quarter of 2025.

Our production and ad valorem taxes decreased $3.4 million (32%) to $7.2 million for the second quarter of 2026 from $10.6 million in the second quarter of 2025.

Production and ad valorem taxes decreased $4.1 million (19%) to $17.6 million during the first six months of 2026 from $21.7 million during the first six months of 2025.

The decreases were due primarily to the sale of producing properties in the prior periods and changes in natural gas prices.

Gathering and transportation costs for the second quarter of 2026 increased $1.6 million (4%) to $43.3 million as compared to $41.8 million in the second quarter of 2025.

Gathering and transportation costs during the first six months of 2026 increased $0.8 million (1%) to $85.1 million as compared to the first six months of 2025.

The increases in both periods were due primarily to production growth in areas with higher average gathering and transportation rates.

Our lease operating expense of $28.2 million ($0.25 per Mcfe) for the second quarter of 2026 decreased $3.0 million (10%) as compared to our lease operating expense of $31.1 million ($0.28 per Mcfe) for the second quarter of 2025.

Lease operating expense of $56.4 million ($0.27 per Mcfe) during the first six months of 2026 decreased $9.7 million (15%) from lease operating expense of $66.1 million ($0.29 per Mcfe) during the first six months of 2025.

The decreases were due primarily to the sale of producing properties in the prior periods.

Gas service expenses of $63.0 million decreased $63.7 million (50%) for the second quarter of 2026 from $126.7 million in the second quarter of 2025.

Gas service expenses of $225.9 million decreased $17.6 million (7%) for the first six months of 2026 from $243.5 million for the first six months of 2025.

The decreases were primarily due to lower natural gas prices and volumes related to purchases of third party natural gas for resale.

Depreciation, depletion and amortization ("DD&A") increased $9.1 million to $167.4 million in the second quarter of 2026 from $158.4 million in the second quarter of 2025.

Our DD&A per equivalent Mcf produced was $1.48 per Mcfe for the quarter ended June 30, 2026 as compared to $1.41 per Mcfe for the quarter ended June 30, 2025.

The increase was due primarily to higher finding and development costs in 2026.

DD&A decreased $17.3 million to $309.0 million for the first six months of 2026 from $326.3 million during the first six months of 2025.

Our DD&A per equivalent Mcf produced was $1.46 per Mcfe for the six months ended June 30, 2026, which was comparable to $1.44 per Mcfe for the six months ended June 30, 2025.

COMSTOCK RESOURCES, INC.

General and administrative expenses, which are reported net of overhead reimbursements, increased to $17.2 million for the second quarter of 2026 as compared to $12.3 million in the second quarter of 2025.

General and administrative expenses increased to $35.4 million for the six months ended June 30, 2026 as compared to $23.4 million for the six months ended June 30, 2025.

The increases in both periods were primarily due to higher stock-based compensation, which increased to $8.4 million in the second quarter of 2026 as compared to $5.5 million in the second quarter of 2025, and a reduction in overhead reimbursements resulting from the property divestitures completed in 2025.

For the six months ended June 30, 2026, stock-based compensation increased to $15.8 million as compared to $10.0 million for the same period in 2025.

We use derivative financial instruments as part of our price risk management program to protect our capital investments.

During the quarter ended March 31, 2026, we had net gains related to our derivative financial instruments of $2.4 million, as compared to net losses on derivative financial instruments of $330.3 million during the quarter ended March 31, 2025, resulting from the decline in future natural gas prices since December 31, 2025.

Realized net losses from our price risk management program were $80.4 million for the quarter ended March 31, 2026 as compared to realized net losses of $8.0 million for the quarter ended March 31, 2025.

Interest expense was $53.1 million and $54.8 million for the quarters ended March 31, 2026 and 2025, respectively.

During the quarter ended June 30, 2026, we had net gains related to our derivative financial instruments of $44.4 million, as compared to net gains on derivative financial instruments of $235.8 million during the quarter ended June 30, 2025, resulting from the decrease in future natural gas prices since June 30, 2025.

Realized net gains from our price risk management program were $43.3 million for the quarter ended June 30, 2026 as compared to realized net gains of $4.3 million for the quarter ended June 30, 2025.

Net gains on derivative financial instruments were $46.8 million for the first six months of 2026 as compared to net losses of $94.5 million for the first six months of 2025, resulting from a decrease in future natural gas prices since December 31, 2025.

Realized net losses from our price risk management program were $37.1 million for the first six months of 2026 as compared to realized net losses of $3.7 million for the first six months of 2025.

Interest expense was $55.0 million and $55.2 million for the quarters ended June 30, 2026 and 2025, respectively, and $108.1 million and $110.0 million for six months ended June 30, 2026 and 2025, respectively.

The decrease in interest expense was due primarily to decreased borrowings on our bank credit facility.

Exploration expense was $9.3 million for the first quarter of 2026 as compared to $2.2 million for the first quarter of 2025, which was related to the acquisition of seismic data in our Western Haynesville area.

COMSTOCK RESOURCES, INC.

Income taxes for the quarters ended March 31, 2026 and 2025 were a provision of $12.0 million and a benefit of $143.3 million, respectively.

Income taxes for the quarters ended March 31, 2026 and 2025 reflect an effective tax rate of 9.6% and 55.4%, respectively.

Exploration expense was $4.4 million for the second quarter of 2026, and exploration expense was $13.8 million and $2.2 million for the six months ended June 30, 2026 and 2025, respectively, which were related to the acquisition of seismic data in our Western Haynesville area.

Income taxes for the quarters ended June 30, 2026 and 2025 were a benefit of $2.8 million and a provision of $141.5 million, respectively.

Income taxes for the six months ended June 30, 2026 and 2025 were a provision of $9.2 million and a benefit of $1.8 million, respectively.

Income taxes for the quarters ended June 30, 2026 and 2025 reflect an effective tax rate of (23.3)% and 52.0%, respectively, and income taxes for the six months ended June 30, 2026 and 2025 reflect an effective tax rate of 6.7% and (13.2)%, respectively.

The difference between the federal statutory tax rate of 21% and our effective rate is primarily attributable to research and development and other tax credits, release of valuation allowance on deferred tax assets, state income taxes, changes in certain nondeductible items and the income attributable to noncontrolling interest.

We reported net income of $112.5 million, or $0.38 per share for the quarter ended March 31, 2026.

Income from operations for the first quarter of 2026 was $174.9 million as compared to income from operations of $126.2 million for the first quarter of 2025.

We reported a net loss of $115.4 million or $0.40 per share for the quarter ended March 31, 2025.

We reported net income available to the Company of $8.8 million for the quarter ended June 30, 2026 as compared to net income available to the Company of $124.8 million for the quarter ended June 30, 2025.

Income from operations for the second quarter of 2026 was $22.6 million as compared to income from operations of $89.4 million for the second quarter of 2025.

In the first six months of 2026, we reported net income available to the Company of $116.2 million as compared to net income available to the Company of $3.6 million for the first six months of 2025.

Income from operations for the first six months of 2026 was $197.5 million as compared to income from operations of $215.6 million for the first six months of 2025.

COMSTOCK RESOURCES, INC.

Cash Flows, Liquidity and Capital Resources

The following table summarizes sources and uses of cash and cash equivalents:

Three Months Ended

Six Months Ended

(In thousands)

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Operating activities

Contributions from noncontrolling interest, net of transaction costs

Borrowings on bank credit facilities, net of repayments

Contributions from noncontrolling interest

Proceeds from asset sales

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Capital expenditures

Redemption of noncontrolling interest

Distributions to noncontrolling interest

Income tax withholdings on equity awards

Debt and stock issuance costs

Cash flows from operating activities.

Net cash provided by our operating activities increased $97.2 million (56%) to $272.0 million in the first three months of 2026 from $174.7 million in the same period in 2025.

The increase was due primarily to higher natural gas prices.

Contributions from noncontrolling interest.

During the first three months of 2025, our noncontrolling interest partner contributed $59.5 million to our midstream partnership to fund the build-out of our Western Haynesville midstream system.

COMSTOCK RESOURCES, INC.

Net cash provided by our operating activities decreased $80.1 million (15%) to $442.2 million in the first six months of 2026 from $522.3 million in the same period in 2025.

The decrease was due primarily to lower natural gas production and lower realized natural gas prices.

Contributions and redemption of noncontrolling interest.

On June 15, 2026, PGS redeemed Cactus' interest in PGS for $445 million.

The redemption was funded by the issuance of 600,000 Class A-2 Units representing a 27% ownership interest in PGS for $600 million to Starville, net of $18.5 million in related transaction costs.

Capital expenditures.

Our capital expenditures are summarized in the following table:

Three Months Ended

Six Months Ended

(In thousands)

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Total exploration and development

Midstream property and equipment

Other property and equipment

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Total cash capital expenditures

We drilled 17 (15.3 net) wells and completed 13 (11.7 net) Haynesville and Bossier shale operated wells during the first three months of 2026.

We currently expect to spend an additional $1.1 billion to $1.2 billion in the remaining nine months of 2026 on drilling, completion, infrastructure and other activity.

We drilled 34 (30.9 net) wells and completed 29 (24.4 net) Haynesville and Bossier shale operated wells during the first six months of 2026.

We currently expect to spend an additional $720 million to $820 million in the remaining six months of 2026 on drilling, completion, infrastructure and other activity.

COMSTOCK RESOURCES, INC.

Liquidity and Capital Resources

As of March 31, 2026, we had $1.27 billion of liquidity, comprised of $1.15 billion of unused borrowing capacity under our bank credit facilities and $14.8 million of cash and cash equivalents on hand.

As of June 30, 2026, we had $1.2 billion of liquidity, comprised of $1.1 billion of unused borrowing capacity under our bank credit facilities and $45.0 million of cash and cash equivalents on hand.

$150 million of unused borrowing capacity under our PGS bank credit facility is restricted to PGS midstream activities.

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Lack of access to the debt or equity markets due to general economic conditions could impede our ability to complete acquisitions.

As of March 31, 2026, we had $350.0 million outstanding under the Comstock bank credit facility.

As of June 30, 2026, we had $545.0 million outstanding under the Comstock bank credit facility.

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

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We also pay a commitment fee of 0.375% to 0.5%, which is dependent on the utilization of the borrowing base.

Comstock's bank credit facility places certain restrictions upon our and our 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

COMSTOCK RESOURCES, INC.

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.

We were in compliance with the covenants as of March 31, 2026.

As of March 31, 2026, PGS had $47.0 million outstanding under a bank credit facility.

Comstock's 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 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.

We were in compliance with the covenants as of June 30, 2026.

As of June 30, 2026, PGS had no borrowings outstanding under its bank credit facility.

Aggregate commitments under the PGS bank credit facility are $150 million, which matures on March 26, 2030.

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The PGS bank credit facility contains financial covenants that require the maintenance of an interest coverage ratio of at least 2.5 to 1.0 and a consolidated net leverage ratio of less than 4.0 to 1.0.

PGS was in compliance with the covenants as of June 30, 2026.

F ederal and State Taxation

At March 31, 2026, we had $1.5 billion in U.S.

At June 30, 2026, we had $1.5 billion in U.S.

federal net operating loss ("NOL") carryforwards and $2.0 billion in certain state NOL carryforwards.

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Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP").

COMSTOCK RESOURCES, INC.

States ("GAAP").

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities as of the date of the financial statements.

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Actual results may differ materially from these estimates under different assumptions or conditions.

In Part II, Item 7 of our 2025 Annual Report, we disclosed our critical accounting policies and estimates, which are made in accordance with GAAP, involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operation.

There have been no significant changes to our critical accounting policies and estimates during the three months ended March 31, 2026, as compared to those disclosed in the 2025 Annual Report.

In Part II, Item 7 of the Annual Report, we disclosed our critical accounting policies and estimates, which are made in accordance with GAAP, involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operation.

There have been no significant changes to our critical accounting policies and estimates during the six months ended June 30, 2026, as compared to those disclosed in the Annual Report.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis