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Comstock Resources First Quarter 2020 Results

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   |    Wednesday,May 06,2020

Comstock Resources, Inc. reported its Q1 2020 results.

Financial Results

For the first quarter of 2020, Comstock reported net income available to common stockholders of $30.0 million or $0.15 per diluted share. Net income available to common stockholders as adjusted to exclude certain items not related to normal operating activities for the first quarter of 2020 was $23.6 million or $0.12 per diluted share. These items included $5.3 million in non-cash interest amortization resulting from adjusting debt assumed in the Covey Park acquisition to fair value; $2.5 million of non-cash accretion resulting from adjusting the preferred stock issued in connection with the Covey Park acquisition to fair value; and $16.5 million in unrealized hedging gains.

Comstock produced 122.8 billion cubic feet ("Bcf") of natural gas and 454,495 barrels of oil or 125.5 billion cubic feet of natural gas equivalent ("Bcfe") in the first quarter of 2020. Natural gas production averaged 1,349 million cubic feet ("MMcf") per day, an increase of 270% over natural gas production in the first quarter of 2019. The growth in natural gas production was primarily attributable to the Covey Park acquisition and the successful results from Comstock's Haynesville shale drilling activities in 2019 and 2020. Oil production in the first quarter of 2020 decreased to 4,994 barrels of oil per day from 9,005 barrels per day produced in the first quarter of 2019 due primarily to expected production declines from the Bakken Shale properties acquired in 2018.

Comstock's average realized natural gas price in the first quarter of 2020, including hedging, decreased to $2.04 per Mcf as compared to $2.87 per Mcf realized in the first quarter of 2019. The Company's average realized oil price in the first quarter of 2020, including hedging, increased to $46.31 per barrel as compared to $45.78 per barrel in the first quarter of 2019. Oil and gas sales were $271.3 million (including realized hedging gains) in the first quarter of 2020 as compared to sales of $132.3 million in the first quarter of 2019. EBITDAX, or earnings before interest, taxes, depreciation, depletion, amortization, exploration expense and other noncash expenses, of $201.6 million in the first quarter of 2020 increased by 108% over EBITDAX of $96.9 million for the first quarter of 2019. The Company's operating cash flow generated in the first quarter of 2020 of $156.0 million increased 120% over operating cash flow of $70.8 million in the first quarter of 2019.

Drilling Results

Total expenditures in the first quarter of 2020 for drilling and development activities were $130.5 million. Comstock spent $128.3 million to develop its Haynesville and Bossier shale properties, including $122.1 million on drilling and completing wells and an additional $6.2 million on other development activity. Comstock drilled 13 (9.6 net) horizontal operated Haynesville shale wells during the first three months of 2020, which had an average lateral length of approximately 9,200 feet. Comstock also participated in 7 (0.4 net) non-operated Haynesville shale wells in the first quarter of 2020. During the first quarter of 2020, Comstock had 21 (11.5 net) Haynesville shale wells turn to sales and had 32 (13.5 net) wells in the process of being completed or waiting to be completed.

Since its last operational update, Comstock reported on an additional twenty Haynesville shale wells. The average initial production rate of these wells was 24 MMcf per day. The wells had completed lateral lengths ranging from 4,574 feet to 9,885 feet, with an average completed lateral length of 8,758 feet. Each well was tested at initial production rates of 15 to 32 MMcf per day.

Other

"Our natural gas operations in East Texas and North Louisiana have not been adversely impacted by COVID-19 virus pandemic", stated M. Jay Allison, Chief Executive Officer of the Company. "We have modified our procedures and practices to minimize unnecessary risk of exposure and prevent infection among our employees and our contractors. Our operations team has continued to execute on our drilling program with little disruption and production operations have not been impacted. While natural gas prices are expected to remain low in the near-term as we manage through an oversupplied market resulting from the winter heating season, we anticipate a much healthier supply and demand balance for natural gas later this year and in 2021. Our improved outlook for the natural gas markets is primarily driven by our expectation for significant declines in natural gas supply in 2020 and 2021 due to a continued reduction in natural gas directed drilling and completion activity and less associated gas production from reduced activity in oil basins driven by the very low oil prices post COVID-19."

Following the end of the quarter, the Company completed its scheduled semi-annual borrowing base redetermination under its revolving bank credit facility, resulting in the bank group decreasing the borrowing base from $1.575 billion to $1.4 billion. The commitment level was reduced from $1.5 billion to $1.4 billion. The decrease is related to lowered oil and natural gas prices that the banks used to determine the borrowing base.