Comstock Resources(CRK) - 2022 Q2 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements (Unaudited) Unaudited financial statements for Q2 2022 show a significant turnaround from net loss to strong net income, driven by higher natural gas sales Consolidated Balance Sheets As of June 30, 2022, total assets increased to $5.29 billion, driven by oil and gas properties, with improved stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $530,811 | $318,736 | | Net Property and Equipment | $4,313,201 | $4,007,146 | | Total Assets | $5,288,193 | $4,668,229 | | Total Current Liabilities | $964,661 | $633,984 | | Long-term Debt | $2,510,253 | $2,615,235 | | Total Liabilities | $3,841,914 | $3,480,450 | | Total Stockholders' Equity | $1,271,279 | $1,012,779 | Consolidated Statements of Operations For Q2 2022, the company reported a net income of $376.9 million, a significant turnaround from a net loss, driven by a 175% increase in total revenues Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $946,254 | $343,693 | $1,515,668 | $684,178 | | Operating Income | $649,117 | $146,496 | $989,787 | $306,222 | | Net Income (Loss) | $376,891 | $(179,695) | $265,467 | $(313,820) | | Diluted EPS | $1.36 | $(0.80) | $0.96 | $(1.39) | Consolidated Statements of Cash Flows For the six months ended June 30, 2022, net cash from operating activities increased by 78% to $685.9 million, primarily due to higher commodity prices Cash Flow Summary - Six Months Ended June 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $685,933 | $385,583 | | Net Cash used for Investing Activities | $(515,361) | $(338,568) | | Net Cash used for Financing Activities | $(168,963) | $(57,560) | | Net Increase (Decrease) in Cash | $1,609 | $(10,545) | Notes to Consolidated Financial Statements The notes detail key accounting policies and events, including a $35.6 million acquisition, active debt management, and significant losses from derivative instruments - In April 2022, the Company acquired a pipeline, natural gas treating plant, and undeveloped deep rights in East Texas for $35.6 million[78] - In May 2022, the company redeemed all outstanding 7.5% senior notes due 2025 for $258.1 million, recognizing a loss of $47.8 million on the early retirement of debt[81] - In June 2022, the company repurchased $26.1 million of its 6.75% senior notes due 2029 for $24.9 million, recognizing a $1.0 million gain[83] Derivative Losses Recognized in Earnings (in thousands) | Period | Loss on Derivatives | | :--- | :--- | | Three Months Ended June 30, 2022 | $(72,826) | | Six Months Ended June 30, 2022 | $(510,319) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes increased revenue and profitability to higher natural gas prices, despite hedging losses, while maintaining strong liquidity and debt covenant compliance Results of Operations Oil and gas sales for Q2 2022 surged 151% to $861.3 million, driven by a 168% increase in natural gas prices, leading to net income despite derivative losses Average Realized Prices (Q2 2022 vs Q2 2021) | Metric | Q2 2022 | Q2 2021 | Change | | :--- | :--- | :--- | :--- | | Natural Gas Price (per Mcf) | $6.93 | $2.59 | +168% | | Price with Hedges (per Mcf) | $4.85 | $2.46 | +97% | | Oil Price (per Bbl) | $104.33 | $61.25 | +70% | - Realized net losses from the oil and natural gas price risk management program were $257.4 million for Q2 2022, compared to $18.8 million in Q2 2021[95] - The company sold its Bakken shale properties in October 2021, which accounted for most of its oil production, leading to a significant drop in oil output[92] Cash Flows, Liquidity and Capital Resources The company maintains strong liquidity of $1.1 billion, with cash from operations increasing 78% to $685.9 million, supporting increased capital expenditures - As of June 30, 2022, the company had $1.1 billion of liquidity, including $32.3 million in cash and unused capacity under its $1.4 billion bank credit facility[104][108] - In the first six months of 2022, the company drilled 61 (30.5 net) wells and completed 61 (30.3 net) Haynesville and Bossier shale wells[103] - The company expects to spend an additional $440 million to $490 million in the remainder of 2022 to drill 42 (28.9 net) more wells and complete 33 (27.0 net) wells[103] Item 3. Quantitative and Qualitative Disclosure About Market Risk The company's primary market risks are natural gas and oil price volatility and interest rate changes, mitigated by derivative instruments and fixed-rate debt - The company's financial results are highly dependent on fluctuating natural gas and oil prices[111] - As of June 30, 2022, the company had natural gas swaps covering 58.9 Bcf of 2022 production at an average price of $2.68/MMBtu and collars covering 196.1 Bcf of 2022-2023 production with an average floor of $2.86/MMBtu and ceiling of $7.81/MMBtu[112] - Of the ~$2.55 billion in total debt, ~$2.2 billion is fixed-rate senior notes, while $350.0 million under the bank credit facility is subject to variable interest rates[116] Item 4. Controls and Procedures As of June 30, 2022, the CEO and CFO concluded that disclosure controls and procedures are effective, with no material changes in internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[117] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls over financial reporting[117] Part II. Other Information Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL financial data files - The report includes required certifications from the CEO and CFO under Sarbanes-Oxley Sections 302 and 906[115] - Interactive Data Files (Inline XBRL) are also filed as exhibits[115]