8-K: Comstock Resources Reports Improved First Quarter 2025 Financial Results Driven by Higher Natural Gas Prices

Comstock Resources announced improved financial results for Q1 2025, driven by higher natural gas prices and increased production.

Summary

• Comstock Resources reported its financial and operating results for the quarter ended March 31, 2025.
• The company's financial performance improved due to higher natural gas prices during the first quarter.
• Natural gas and oil sales, including realized hedging gains, totaled $405 million for the quarter.
• Operating cash flow reached $239 million, or $0.81 per diluted share.
• Adjusted EBITDAX for the quarter was $293 million.
• Adjusted net income amounted to $53.8 million, or $0.18 per diluted share.
• Comstock resumed completion activity in late 2024, bringing fourteen (11.3 net) operated wells to sales with an average initial production rate of 25 MMcf per day.
• A successful step-out well in Freestone County, Texas, significantly expanded the company's Western Haynesville acreage.
• The company realized $3.58 per Mcf before hedging and $3.52 per Mcf after hedging for its natural gas production of 115 Bcf in the quarter.
• The net loss in the quarter included a pre-tax $322.4 million unrealized loss on hedging contracts.
• Comstock's production cost per Mcfe in the first quarter averaged $0.83 per Mcfe.
• Comstock drilled seven (6.9 net) operated horizontal Haynesville/Bossier shale wells in the first quarter of 2025, which had an average lateral length of 11,660 feet.
• The Olajuwon Pickens #1 well had an initial production rate of 41 MMcf per day.

Sentiment

Score: 7

Explanation: The report is generally positive due to improved financial results driven by higher natural gas prices and successful well completions. However, the net loss and unrealized hedging losses temper the overall sentiment.

Positives

• Higher natural gas prices drove improved financial results.
• Operating cash flow increased to $239 million.
• Adjusted EBITDAX reached $293 million.
• Adjusted net income was $53.8 million.
• The company successfully extended its Western Haynesville acreage with a step-out well.
• Comstock's unhedged operating margin was 77% in the first quarter of 2025 and 76% after hedging.
• The bank group reaffirmed the $2.0 billion borrowing base under its $1.5 billion revolving credit facility.

Negatives

• The company reported a net loss of $115.4 million for the first quarter.
• The net loss included a pre-tax $322.4 million unrealized loss on hedging contracts.
• Gas services margin was $(16,903) thousand.

Risks

• The company's financial results are subject to fluctuations in natural gas prices.
• Unrealized losses on hedging contracts can negatively impact net income.
• Exploration and development activities are subject to inherent risks and uncertainties.
• Forward-looking statements are subject to a number of factors and uncertainties which could cause actual results to differ materially.

Future Outlook

This press release may contain 'forward-looking statements' as that term is defined in the Private Securities Litigation Reform Act of 1995. Such 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.

Management Comments

• Higher natural gas prices in the first quarter drove improved financial results in the quarter.
• Comstock resumed completion activity in late 2024 allowing it to turn fourteen (11.3 net) operated wells to sales since the last update with an average per well initial production rate of 25 MMcf per day.
• The successful results of Comstock's step out Western Haynesville well drilled in Freestone County, Texas substantially extended the success the Company has had in proving up its Western Haynesville acreage.

Industry Context

Comstock's focus on the Haynesville shale positions it to benefit from increased natural gas demand. The successful Western Haynesville well could open up new opportunities for the company.

Comparison to Industry Standards

• It is difficult to compare Comstock's results directly to industry standards without knowing the specific metrics of its peers.
• However, companies like Southwestern Energy (SWN) and Chesapeake Energy (CHK) also operate in the natural gas sector and their performance can be used as a benchmark.
• Comstock's production cost per Mcfe of $0.83 is a key metric to compare against these companies to assess its operational efficiency.
• The initial production rate of 25 MMcf per day for the wells turned to sales is also a relevant benchmark to compare against industry averages for Haynesville shale wells.

Stakeholder Impact

• Shareholders will likely react positively to the improved financial results and successful well completions.
• Employees may benefit from the company's improved financial performance.
• Customers will continue to receive natural gas and oil from Comstock.
• Suppliers will continue to provide goods and services to Comstock.
• Creditors will be reassured by the company's reaffirmed borrowing base.

Next Steps

• Comstock has planned a conference call for 10:00 a.m. Central Time on May 1, 2025, to discuss the first quarter 2025 operational and financial results.

Key Dates

Keywords

Comstock Resources, Natural Gas, Haynesville Shale, Financial Results, Operating Results, Production, EBITDAX, Earnings, CRK