Financial Data and Key Metrics Changes - Natural gas and oil sales increased to $335 million, a 10% rise from Q3 2024 [6][11] - Adjusted EBITDA for the quarter was $249 million, with adjusted net income reported at $28 million or $0.09 per diluted share, compared to a loss in the same period in 2024 [7][11] - Operating cash flow generated was $190 million, equating to $0.65 per diluted share [7][11] Business Line Data and Key Metrics Changes - Production averaged 1.22 BCFE per day in Q3 2025, with a total of 36 wells turned to sales in the first nine months of the year [11][14] - Three new Western Haynesville wells were brought online, increasing the total to eight wells for 2025, with an average initial production rate of 32 million cubic feet per day [7][25] - In the legacy Haynesville, 28 wells were turned to sales with an average initial production rate of 25 million cubic feet per day [7][24] Market Data and Key Metrics Changes - The quarterly NYMEX settlement gas price averaged $3.07, while the average Henry Hub spot price was $3.03 [12] - Realized gas price during Q3 averaged $2.75, reflecting a $0.32 basis differential compared to the NYMEX settlement price [12] Company Strategy and Development Direction - The company is focusing on expanding its operations in the Western Haynesville to meet growing natural gas demand driven by LNG exports and AI data center power needs [4][32] - A divestiture of non-strategic assets is underway to improve the balance sheet, with proceeds aimed at retiring long-term debt [6][10] - The company plans to drill 19 wells and turn 13 wells to sales in the Western Haynesville in 2025, while also maintaining production in the legacy Haynesville [31][32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future of natural gas, citing record LNG exports and the increasing demand for power generation [4][5] - The company anticipates continued improvements in drilling efficiencies and cost reductions in both the Western and legacy Haynesville areas [32] - Liquidity is strong, totaling over $900 million, which will be enhanced by the upcoming Shelby Trough divestiture [32] Other Important Information - The company has a total of 1,055,386 gross and 797,440 net acres in the Haynesville Bossier Shale, with significant resource potential identified [16] - The average lateral length of drilled wells has increased, with a focus on longer laterals to enhance production efficiency [20][23] Q&A Session Summary Question: Broader question around 2026 capital efficiency - Management indicated that efficiency gains in the legacy Haynesville are nearing their peak, while improvements in the Western Haynesville are still being realized [34][35] Question: Perspective on gas competition along the Gulf Coast - Management highlighted the advantage of owning midstream assets in the Western Haynesville, allowing for direct sales to end users and establishing reliable supply relationships [37][38] Question: Characterization of the Shelby Trough sale - Management described the sale as a win-win, allowing for debt reduction while maintaining a strong inventory position in the Western Haynesville [40][42] Question: Assumptions regarding Western Haynesville inventory - Management acknowledged conservative assumptions in inventory estimates, with ongoing efforts to optimize well spacing and unitization [44][45] Question: Optimization of acreage around 10,000-foot laterals - Management noted that geological structures and ownership issues currently limit the ability to optimize the entire position for longer laterals [46][48] Question: Update on Marquette Gas Treating Plant expansion - Management confirmed that the expansion to 1.3 Bcf/d was part of the original plan, with long lead times for equipment manufacturing [50][51] Question: Potential collaboration with Aethon - Management mentioned ongoing acreage swaps with Aethon to facilitate longer laterals, indicating a collaborative approach to enhance production [58][59]

3rd Quarter 2025 Results Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include the timing and extent of changes in market prices for oil and gas, operating risks, liquidity risks, including risks relating to our debt, political and regulatory developments and legislation, and other risk factors and known trends and uncertainties as described in our Annual Report on Form 10-K for fiscal year 2024 and as updated and supplemented in o ...

Financial Performance - Comstock reported natural gas and oil sales of $335.0 million for Q3 2025, including realized hedging gains of $26.4 million[5]. - Operating cash flow for Q3 2025 was $190.4 million, translating to $0.65 per diluted share[6]. - Adjusted net income for Q3 2025 was $27.9 million, or $0.09 per diluted share, excluding a pre-tax unrealized gain on hedging contracts[5]. - Adjusted EBITDAX for Q3 2025 was $249 million[6]. - For the nine months ended September 30, 2025, total natural gas and oil sales reached $1.08 billion, including realized hedging losses of $22.7 million[9]. - Comstock's net income for the nine months ended September 30, 2025, was $133.4 million, or $0.45 per diluted share[9]. - Adjusted net income for the three months ended September 30, 2025, was $27,904,000, a significant recovery from a loss of $48,509,000 in the same period of 2024[30]. Production and Operations - The company turned 28 wells to sales in 2025 in its Legacy Haynesville area, with an average initial production rate of 25 MMcf per day[6]. - The company drilled 17 operated horizontal Haynesville/Bossier shale wells in Q3 2025, with an average lateral length of 11,692 feet[12]. - Natural gas production decreased by 16% year-over-year to 111,770 MMcf for the three months ended September 30, 2025, compared to 133,116 MMcf in 2024[27]. - Total natural gas and oil sales including hedging increased by 9.8% to $334,968,000 for the three months ended September 30, 2025, compared to $305,034,000 in 2024[27]. - Average natural gas price per Mcf rose to $2.75 for the three months ended September 30, 2025, up from $1.90 in 2024, reflecting a 44.7% increase[27]. - Gas services revenue surged to $141,265,000 for the three months ended September 30, 2025, compared to $50,847,000 in 2024, indicating a substantial growth[27]. Costs and Expenditures - Comstock's production cost per Mcfe in Q3 2025 averaged $0.77, with an unhedged operating margin of 72%[7]. - Free cash deficit from operations for the three months ended September 30, 2025, was $73,672,000, compared to a deficit of $44,125,000 in 2024[34]. - Total exploration and development capital expenditures increased to $267,110,000 for the three months ended September 30, 2025, from $184,392,000 in 2024, representing a 45% increase[34]. - Total production costs decreased to $85,843,000 for the three months ended September 30, 2025, down from $101,864,000 in 2024, reflecting a 15.7% reduction[27]. - Unhedged operating margin improved to 72% for the three months ended September 30, 2025, compared to 60% in 2024[27]. Balance Sheet and Assets - Total current assets increased to $268,853 million in September 2025 from $284,034 million in December 2024, reflecting a decrease of approximately 5.4%[37]. - Long-term debt rose to $3,126,015 million in September 2025, up from $2,952,090 million in December 2024, indicating an increase of about 5.9%[37]. - Total liabilities increased to $4,223,183 million in September 2025 compared to $4,048,553 million in December 2024, representing a growth of approximately 4.3%[37]. - Stockholders' equity attributable to Comstock grew to $2,360,264 million in September 2025, up from $2,241,023 million in December 2024, marking an increase of about 5.3%[37]. - Cash and cash equivalents significantly increased to $19,215 million in September 2025 from $6,799 million in December 2024, showing a growth of approximately 183.5%[37]. - Accounts payable rose to $455,282 million in September 2025, compared to $421,814 million in December 2024, reflecting an increase of about 7.9%[37]. - Accumulated earnings increased to $843,311 million in September 2025 from $728,619 million in December 2024, indicating a growth of approximately 15.7%[37]. - Total stockholders' equity reached $2,617,810 million in September 2025, up from $2,333,544 million in December 2024, representing an increase of about 12.2%[37]. - Other current assets decreased to $68,552 million in September 2025 from $97,524 million in December 2024, reflecting a decline of approximately 29.7%[37]. - Derivative financial instruments increased to $8,140 million in September 2025 from $4,865 million in December 2024, indicating a growth of about 67.5%[37].

Core Insights - Comstock Resources reported strong financial results for Q3 2025, driven by higher natural gas prices, with total natural gas and oil sales reaching $335 million, including realized hedging gains of $26.4 million [3][9] - The company achieved an operating cash flow of $190.4 million and a net income of $118.1 million, translating to $0.40 per diluted share [3][9] - Adjusted net income for the quarter was $27.9 million, or $0.09 per diluted share, after excluding certain items [3][9] Financial Performance - For Q3 2025, Comstock realized an average price of $2.99 per Mcf after hedging for its natural gas production of 112 Bcf [3][4] - The production cost per Mcfe averaged $0.77, with an unhedged operating margin of 72% and a hedged operating margin of 74% [4][7] - For the nine months ended September 30, 2025, total natural gas and oil sales amounted to $1.08 billion, with an operating cash flow of $639 million and a net income of $133.4 million [6][7] Production and Drilling Activities - Comstock turned 28 wells to sales in 2025, with an average lateral length of 11,919 feet and an initial production rate of 25 MMcf per day [9][10] - In Q3 2025, the company drilled 17 operated horizontal Haynesville/Bossier shale wells, achieving an average lateral length of 11,692 feet [10] - The company divested non-strategic Cotton Valley wells for net proceeds of $15 million and entered into an agreement to sell Shelby Trough assets for $430 million [9][14] Divestitures - On September 2, 2025, Comstock sold its legacy Cotton Valley wells for net proceeds of $15.2 million, which included interests in 883 wells [13] - The agreement to divest Shelby Trough properties includes interests in 155 producing wells and approximately 36,000 net acres, with expected proceeds to reduce long-term debt [14] Operational Metrics - The average natural gas price for Q3 2025 was $2.75 per Mcf, compared to $1.90 in Q3 2024, reflecting a significant year-over-year increase [24] - Total production for Q3 2025 was 111,837 MMcfe, down from 133,198 MMcfe in Q3 2024 [24] - The company reported a total of 111,770 MMcf of natural gas production for Q3 2025, compared to 133,116 MMcf in the same period last year [24]

Core Insights - The third-quarter earnings season is underway, with energy companies like Comstock Resources Inc., Williams, and Marathon Petroleum Corp. expected to report better-than-expected earnings due to a favorable energy business environment in the September quarter [1] Oil & Gas Pricing Analysis - Average WTI spot prices for July, August, and September were $68.39, $64.86, and $63.96 per barrel, respectively, indicating a healthier pricing environment compared to the previous quarter [2] - Year-over-year, the pricing environment was less favorable, with average prices in July, August, and September 2024 at $81.80, $76.68, and $70.24 per barrel, respectively [3] - Natural gas prices in the September quarter of 2025 were higher than in the same period of 2024, with Henry Hub average prices at $3.20, $2.91, and $2.97 per million Btu [4] Stock Selection Strategy - Identifying stocks with potential for better-than-expected earnings is challenging, but a combination of positive Earnings ESP and Zacks Rank can help [5] - Stocks with this combination have a 70% chance of delivering an earnings surprise [6] Company-Specific Insights - Comstock Resources, a leading natural gas producer, is expected to benefit from favorable commodity pricing, with an Earnings ESP of +2.86% and a Zacks Rank of 3, scheduled to report on Nov. 3 [8] - Williams, known for its midstream operations, is anticipated to benefit from stable cash flows and higher natural gas prices, with an Earnings ESP of +0.56% and a Zacks Rank of 3, also reporting on Nov. 3 [9] - Marathon Petroleum, a leading refiner, is likely to gain from lower year-over-year oil prices, with an Earnings ESP of +8.68% and a Zacks Rank of 3, set to report on Nov. 4 [10]

Core Viewpoint - Comstock Resources (CRK) is positioned well to potentially beat earnings estimates in its upcoming quarterly report, supported by a strong history of exceeding expectations [1]. Earnings Performance - Comstock has a solid track record of surpassing earnings estimates, with an average surprise of 28.47% over the last two quarters [2]. - In the last reported quarter, Comstock achieved earnings of $0.13 per share, exceeding the Zacks Consensus Estimate of $0.09 per share, resulting in a surprise of 44.44% [3]. - For the previous quarter, the company was expected to report earnings of $0.16 per share but delivered $0.18 per share, yielding a surprise of 12.50% [3]. Earnings Estimates and Predictions - Recent estimates for Comstock have been trending upward, indicating positive sentiment among analysts [6]. - The Zacks Earnings ESP (Expected Surprise Prediction) for Comstock is currently positive, suggesting a strong likelihood of an earnings beat [6][9]. - Stocks with a positive Earnings ESP and a Zacks Rank of 3 (Hold) or better have a nearly 70% chance of producing a positive surprise [7]. Earnings ESP Details - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the Most Accurate Estimate reflecting the latest analyst revisions [8]. - Comstock's current Earnings ESP stands at +3.17%, indicating increased analyst optimism regarding its near-term earnings potential [9]. - The next earnings report for Comstock is anticipated to be released on November 3, 2025 [9].

Core Points - Comstock Resources, Inc. plans to release its third quarter 2025 results on November 3, 2025, after market close [1] - A conference call to discuss the results will be held on November 4, 2025, at 10:00 a.m. CT [1] - The company is a leading independent natural gas producer focused on the Haynesville Shale development in North Louisiana and East Texas [4] Conference Call Details - Interested parties must register to participate in the conference call via a provided link [2] - The conference call will be available in listen-only mode through a specific website URL [3] - A replay of the conference call will be accessible for twelve months starting at 1:00 p.m. CT on November 4, 2025 [3] Company Information - Comstock Resources operates primarily in the natural gas sector, emphasizing the Haynesville Shale region [4] - Financial results presentations will be available on the company's website [4]

I analyze oil and gas companies like Comstock Resources and related companies in my service, Oil & Gas Value Research, where I look for undervalued names in the oil and gas space. I break down everything you need to know about these companies -- the balance sheet, competitive position and development prospects. This article is an example of what I do. But for Oil & Gas Value Research members, they get it first and they get analysis on some companies that is not published on the free site. Interested? Sign u ...

Group 1 - The article discusses the analysis of oil and gas companies, specifically Comstock Resources, focusing on identifying undervalued companies in the sector [1] - It highlights the cyclical nature of the oil and gas industry, emphasizing the importance of patience and experience for investors [2] - The article mentions a significant pullback in Comstock Resources' stock after reaching a recent high, indicating market volatility [2] Group 2 - The analysis includes a breakdown of the companies' balance sheets, competitive positions, and development prospects [1] - The article suggests that members of the Oil & Gas Value Research service receive exclusive insights and analyses not available to the general public [1]

[PART I. Financial Information](index=4&type=section&id=PART%20I.%20Financial%20Information) This section provides unaudited consolidated financial statements, management's discussion and analysis, and disclosures on market risks and controls [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes [Consolidated Balance Sheets](index=6&type=page&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets show the company's financial position, with notable increases in cash, property and equipment, and total liabilities, alongside an overall increase in total stockholders' equity | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | $25,859 | $6,799 | | Total current assets | $268,979 | $284,034 | | Net property and equipment | $6,002,010 | $5,688,389 | | Total liabilities | $4,259,996 | $4,048,553 | | Total stockholders' equity | $2,434,867 | $2,333,544 | [Consolidated Statements of Operations](index=8&type=page&id=Consolidated%20Statements%20of%20Operations) The company reported a significant increase in total revenues for both the three and six months ended June 30, 2025, primarily driven by higher natural gas sales and gas services, leading to net income Revenues (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (%) | | :------------------------ | :------------------ | :------------------ | :--------- | | Natural gas sales | $339,225 | $216,527 | +56.6% | | Oil sales | $741 | $1,074 | -31.0% | | Total natural gas and oil sales | $339,966 | $217,601 | +56.2% | | Gas services | $130,296 | $29,229 | +345.1% | | Total revenues | $470,262 | $246,830 | +90.5% | Net Income (Loss) and EPS (Three Months Ended June 30) | Metric | 2025 (in thousands, except per share) | 2024 (in thousands, except per share) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | | Net income (loss) | $130,728 | $(123,249) | | Net income (loss) available to the Company | $124,842 | $(126,310) | | Basic EPS | $0.45 | $(0.43) | | Diluted EPS | $0.44 | $(0.43) | Net Income (Loss) and EPS (Six Months Ended June 30) | Metric | 2025 (in thousands, except per share) | 2024 (in thousands, except per share) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | | Net income (loss) | $15,335 | $(137,723) | | Net income (loss) available to the Company | $3,564 | $(142,631) | | Basic EPS | $0.05 | $(0.49) | | Diluted EPS | $0.05 | $(0.49) | [Consolidated Statements of Stockholders' Equity](index=10&type=page&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) The Consolidated Statements of Stockholders' Equity show an increase in total stockholders' equity from January 1, 2025, to June 30, 2025, primarily driven by net income and noncontrolling interests - Total stockholders' equity increased from **$2.334 billion** at January 1, 2025, to **$2.435 billion** at June 30, 2025[19](index=19&type=chunk) - Noncontrolling interest significantly increased from **$92.521 million** at January 1, 2025, to **$191.292 million** at June 30, 2025, largely due to contributions[19](index=19&type=chunk) - Accumulated earnings increased from **$607.341 million** at March 31, 2025, to **$732.183 million** at June 30, 2025, reflecting net income[19](index=19&type=chunk) [Consolidated Statements of Cash Flows](index=12&type=page&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities more than doubled for the six months ended June 30, 2025, compared to the prior year, primarily due to higher natural gas prices Cash Flows (Six Months Ended June 30) | Activity | 2025 (in thousands) | 2024 (in thousands) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | | Net cash provided by operating activities | $522,310 | $255,114 | +104.7% | | Net cash used for investing activities | $(639,267) | $(575,724) | +11.0% | | Net cash provided by financing activities | $136,017 | $323,211 | -57.9% | | Net increase in cash and cash equivalents | $19,060 | $2,601 | +632.8% | | Cash and cash equivalents, end of period | $25,859 | $19,270 | +34.2% | - Operating cash flow increased primarily due to **higher natural gas prices**[113](index=113&type=chunk) - Capital expenditures increased to **$639.267 million** in 2025 from **$575.724 million** in 2024[22](index=22&type=chunk)[117](index=117&type=chunk) [Notes to Consolidated Financial Statements](index=14&type=page&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the company's accounting policies, financial instrument valuations, debt structure, commitments, and other significant financial disclosures [Summary of Significant Accounting Policies](index=14&type=page&id=Summary%20of%20Significant%20Accounting%20Policies) This section outlines the company's basis of presentation, including the consolidation of Pinnacle Gas Services, the successful efforts method for natural gas and oil properties, and accounting for goodwill and right-of-use lease assets - Comstock consolidates Pinnacle Gas Services (PGS), a joint venture, as the primary beneficiary, with PGS assets not usable by Comstock for general corporate purposes totaling **$243.2 million** as of June 30, 2025[27](index=27&type=chunk) - The Company follows the successful efforts method for natural gas and oil properties, capitalizing costs for acquired leases and developmental wells, while expensing exploratory well costs if unsuccessful[29](index=29&type=chunk) - Capitalized exploratory well costs increased to **$151.973 million** at June 30, 2025, from **$69.800 million** at June 30, 2024[31](index=31&type=chunk) - Goodwill remained at **$335.9 million** as of June 30, 2025, with no impairment indicators identified[35](index=35&type=chunk) - Right-of-use lease assets totaled **$87.8 million** as of June 30, 2025, related to corporate office, equipment, vehicles, and drilling rigs[36](index=36&type=chunk) [Accrued Costs](index=19&type=page&id=Accrued%20Costs) Accrued costs increased to $151.798 million at June 30, 2025, from $146.173 million at December 31, 2024, primarily driven by a significant rise in accrued income and other taxes Accrued Costs (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Accrued interest payable | $63,404 | $64,041 | | Accrued drilling costs | $31,918 | $34,493 | | Accrued transportation costs | $28,597 | $28,031 | | Accrued income and other taxes | $16,378 | $1,350 | | Accrued employee compensation | $5,319 | $14,076 | | Accrued lease operating expenses | $3,693 | $2,630 | | Other | $2,489 | $1,552 | | **Total Accrued Costs** | **$151,798** | **$146,173** | [Reserve for Future Abandonment Costs](index=19&type=page&id=Reserve%20for%20Future%20Abandonment%20Costs) The reserve for future abandonment costs increased to $35.008 million at June 30, 2025, from $33.996 million at the beginning of the period, primarily due to accretion expense and new wells placed on production Changes in Reserve for Future Abandonment Costs (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :-------------------------------------- | :--- | :--- | | Reserve for future abandonment costs at beginning of period | $33,996 | $30,773 | | New wells placed on production | $51 | $87 | | Liabilities settled | $(34) | $(31) | | Accretion expense | $995 | $880 | | Reserve for future abandonment costs at end of period | $35,008 | $31,709 | [Derivative Financial Instruments and Hedging Activities](index=19&type=page&id=Derivative%20Financial%20Instruments%20and%20Hedging%20Activities) Comstock utilizes natural gas price swaps and collar contracts for risk management, recognizing a significant gain in Q2 2025 due to declining future natural gas prices, but a net loss for H1 2025 Natural Gas Price Derivative Instruments (June 30, 2025) | Contract Type | Future Production Period | Volume (MMBtu) | Average Price per MMBtu | | :-------------------------- | :----------------------- | :--------------- | :---------------------- | | Natural Gas Price Swap Contracts | Six Months Ending Dec 31, 2025 | 100,280,000 | $3.48 | | | Year Ending Dec 31, 2026 | 116,800,000 | $3.51 | | Natural Gas Price Collar Contracts | Six Months Ending Dec 31, 2025 | 27,600,000 | Ceiling: $3.80, Floor: $3.50 | | | Year Ending Dec 31, 2026 | 167,900,000 | Ceiling: $4.35, Floor: $3.50 | - Gain from derivative financial instruments: **$235.847 million** for Q2 2025 (vs. **$(25.252) million** in Q2 2024)[51](index=51&type=chunk) - Loss from derivative financial instruments: **$(94.492) million** for H1 2025 (vs. **$14.055 million** in H1 2024)[51](index=51&type=chunk) [Stock-Based Compensation](index=20&type=page&id=Stock-Based%20Compensation) The company recognized increased stock-based compensation expense for both the three and six months ended June 30, 2025, related to grants of restricted stock and performance stock units - Stock-based compensation expense: **$5.5 million** (Q2 2025) vs **$4.1 million** (Q2 2024), and **$10.0 million** (H1 2025) vs **$7.5 million** (H1 2024)[52](index=52&type=chunk) - Unvested restricted stock outstanding: **1,979,667 shares** with **$21.3 million** unrecognized compensation cost as of June 30, 2025[53](index=53&type=chunk) - PSUs outstanding: **1,603,916 units** with **$24.6 million** unrecognized compensation cost as of June 30, 2025[55](index=55&type=chunk) [Segment Reporting](index=22&type=page&id=Segment%20Reporting) Comstock operates as a single business segment focused on the exploration and production of North American natural gas and oil, primarily in the Haynesville and Bossier shale - Operates in one business segment: exploration and production of North American natural gas and oil (Haynesville and Bossier shale)[56](index=56&type=chunk) - Consolidated net income is the primary measure of segment profit or loss[56](index=56&type=chunk) [Revenue Recognition](index=22&type=page&id=Revenue%20Recognition) Revenues from natural gas and oil sales are recognized upon transfer of produced volumes, while gas services revenues are recognized upon service completion or delivery - Natural gas and oil revenues recognized upon transfer of produced volumes to customers[57](index=57&type=chunk) - Gas services revenues include sales of purchased natural gas for resale and gathering/treating fees, recognized upon service completion or delivery[58](index=58&type=chunk) - Accounts receivable from purchasers: **$140.5 million** (June 30, 2025) vs **$145.4 million** (Dec 31, 2024)[61](index=61&type=chunk) [Credit Losses](index=23&type=page&id=Credit%20Losses) Comstock has not experienced significant credit losses historically and believes all receivables are fully collectible, thus no allowance for doubtful accounts has been recorded - No significant credit losses have been experienced in the past[63](index=63&type=chunk) - No allowance for doubtful accounts has been recorded for the six months ended June 30, 2025, and 2024[63](index=63&type=chunk) [Income Taxes](index=23&type=page&id=Income%20Taxes) The company's effective tax rate for Q2 2025 was 52.0%, significantly impacted by mark-to-market changes in derivative financial instruments, and the impact of the OBBBA is being evaluated Effective Tax Rate | Period | 2025 | 2024 | | :----------------------- | :----- | :----- | | Three Months Ended June 30 | 52.0% | 27.2% | | Six Months Ended June 30 | (13.2)% | 28.3% | - Significant variance in the effective tax rate from the statutory rate primarily due to the impact of mark-to-market changes in the Company's derivative financial instruments[66](index=66&type=chunk) - The One Big Beautiful Bill Act (OBBBA), signed in July 2025, is expected to provide benefits (increased interest expense deductions and bonus depreciation), but its impact is still being evaluated[70](index=70&type=chunk) [Fair Value Measurements](index=25&type=page&id=Fair%20Value%20Measurements) The company measures certain financial assets and liabilities at fair value using a three-level hierarchy, classifying commodity-based derivatives as Level 2 and fixed-rate senior notes as Level 1 Fair Values of Financial Instruments (June 30, 2025) | Instrument | Carrying Value (in thousands) | Fair Value (in thousands) | Level | | :-------------------------- | :---------------------------- | :------------------------ | :---- | | Commodity-based derivatives (Asset) | $275 | $275 | Level 2 | | Commodity-based derivatives (Liability) | $161,926 | $161,926 | Level 2 | | Bank credit facility | $475,000 | $475,000 | N/A (floating rate) | | 6.75% senior notes due 2029 | $1,605,711 | $1,616,820 | Level 1 | | 5.875% senior notes due 2030 | $965,000 | $936,050 | Level 1 | [Earnings Per Share](index=25&type=page&id=Earnings%20Per%20Share) Unvested restricted stock and performance stock units are included in the computation of basic and diluted earnings per share, with the company reporting positive EPS for Q2 and H1 2025 - Unvested restricted stock: **2,342 thousand shares** (Q2 2025) and **2,330 thousand shares** (H1 2025) included in EPS calculations[78](index=78&type=chunk) - Weighted average PSUs: **1,411 thousand units** (Q2 2025) and **1,351 thousand units** (H1 2025) for diluted EPS[79](index=79&type=chunk) Basic and Diluted EPS | Period | Basic EPS (2025) | Basic EPS (2024) | Diluted EPS (2025) | Diluted EPS (2024) | | :----------------------- | :--------------- | :--------------- | :----------------- | :----------------- | | Three Months Ended June 30 | $0.45 | $(0.43) | $0.44 | $(0.43) | | Six Months Ended June 30 | $0.05 | $(0.49) | $0.05 | $(0.49) | [Supplementary Information with Respect to the Consolidated Statements of Cash Flows](index=28&type=page&id=Supplementary%20Information%20with%20Respect%20to%20the%20Consolidated%20Statements%20of%20Cash%20Flows) This section provides additional details on cash payments for interest and income taxes, and non-cash investing activities, noting increased interest payments and a shift to an income tax refund position Cash Payments (Six Months Ended June 30, in thousands) | Category | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Interest payments | $104,733 | $90,349 | | Income tax payments (refunds) | $(31,000) | $37 | | Liabilities assumed in exchange for right-of-use lease assets | $36,244 | $34,196 | [Recent Accounting Pronouncements](index=28&type=page&id=Recent%20Accounting%20Pronouncements) The company is evaluating the impact of new FASB ASUs on income tax disclosures and disaggregation of income statement expenses, neither of which is expected to materially impact reported results - ASU 2023-09, 'Improvements to Income Tax Disclosures,' effective after December 15, 2024, is not expected to materially impact reported results[82](index=82&type=chunk) - ASU 2024-03, 'Disaggregation of Income Statement Expenses,' effective after December 15, 2026, is still being evaluated for its impact on financial statement disclosures[83](index=83&type=chunk) [Long-Term Debt](index=28&type=page&id=Long-Term%20Debt) Comstock's long-term debt includes 6.75% Senior Notes due 2029, 5.875% Senior Notes due 2030, and a bank credit facility, with $475.0 million outstanding and compliance with all financial covenants Long-Term Debt Composition (June 30, 2025, in thousands) | Debt Type | Principal | | :-------------------------- | :---------- | | 6.75% Senior Notes due 2029 | $1,623,880 | | 5.875% Senior Notes due 2030 | $965,000 | | Bank Credit Facility | $475,000 | | **Total (excluding discount/costs)** | **$3,063,880** | - Bank credit facility: **$475.0 million** outstanding, **$1.5 billion** aggregate commitments, **$2.0 billion** borrowing base (redetermined April 29, 2025)[85](index=85&type=chunk)[121](index=121&type=chunk) - The company was in compliance with all financial covenants (leverage ratio < 3.75 to 1.0, adjusted current ratio >= 1.0 to 1.0) as of June 30, 2025[85](index=85&type=chunk)[123](index=123&type=chunk) [Commitments and Contingencies](index=30&type=page&id=Commitments%20and%20Contingencies) Comstock entered into agreements for two new drilling rigs, one capitalized as a right-of-use lease asset and another with a remaining commitment of $9.6 million, and is involved in routine litigation - New drilling rig agreements: one three-year term rig capitalized as a right-of-use lease asset, and one one-year term rig with a remaining commitment of **$9.6 million**[90](index=90&type=chunk) - Resolution of litigation is not expected to have a material effect on the company's financial position, results of operations, or cash flows[91](index=91&type=chunk)[135](index=135&type=chunk) [Related Party Transactions](index=30&type=page&id=Related%20Party%20Transactions) Comstock operates natural gas and oil properties for partnerships owned by its majority stockholder, providing services for a fee, with receivables from these partnerships at $3.3 million - Provides drilling, operating, and marketing services to partnerships owned by its majority stockholder[92](index=92&type=chunk) - Received **$260 thousand** for Q2 2025 and **$599 thousand** for H1 2025 for services, reducing general and administrative expenses[92](index=92&type=chunk) - Receivable from partnerships: **$3.3 million** at June 30, 2025, down from **$5.5 million** at December 31, 2024[93](index=93&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, liquidity, and capital resources, detailing the drivers behind changes in revenues, expenses, and cash flows [Results of Operations](index=31&type=page&id=Results%20of%20Operations) The company experienced significant increases in natural gas sales and gas services revenues for both the three and six months ended June 30, 2025, primarily due to higher natural gas prices [Revenues](index=31&type=page&id=Revenues) Natural gas and oil sales increased substantially due to higher realized natural gas prices, despite a decrease in production volumes, with gas service revenues also seeing significant growth - Natural gas and oil sales increased by **$122.4 million** (56%) to **$340.0 million** for Q2 2025 compared to Q2 2024[97](index=97&type=chunk) - Average realized natural gas price was **$3.02 per Mcf** for Q2 2025, an **83% increase** from **$1.65 per Mcf** in Q2 2024[97](index=97&type=chunk) - Natural gas production decreased by **14%** to **112.2 Bcf** for Q2 2025[97](index=97&type=chunk) - Gas service revenues increased by **$101.1 million** (346%) to **$130.3 million** for Q2 2025[100](index=100&type=chunk) [Costs and Expenses](index=32&type=page&id=Costs%20and%20Expenses) Production and ad valorem taxes, along with gathering and transportation costs, decreased due to lower production, while gas service expenses rose significantly with higher natural gas prices - Production and ad valorem taxes decreased by **$8.7 million** (45%) to **$10.6 million** for Q2 2025, due to lower Louisiana tax rates and reduced production[101](index=101&type=chunk) - Gathering and transportation costs decreased by **$7.6 million** (15%) to **$41.8 million** for Q2 2025, primarily due to lower production[102](index=102&type=chunk) - Lease operating expense was **$31.1 million** (**$0.28 per Mcfe**) for Q2 2025, comparable to Q2 2024, but the rate per Mcfe increased due to fixed costs and lower production[103](index=103&type=chunk) - Gas service expenses increased by **$95.2 million** (302%) to **$126.7 million** for Q2 2025, driven by higher natural gas prices for purchased gas[104](index=104&type=chunk) - Depreciation, depletion and amortization (DD&A) decreased by **$35.9 million** to **$158.4 million** for Q2 2025, due to lower natural gas production and higher estimated proved undeveloped reserves[105](index=105&type=chunk) - General and administrative expenses increased to **$12.3 million** for Q2 2025, primarily due to higher employee and stock-based compensation[106](index=106&type=chunk) [Derivative Financial Instruments](index=32&type=page&id=Derivative%20Financial%20Instruments) The company reported net gains of $235.8 million from derivative financial instruments in Q2 2025, a significant reversal from losses in Q2 2024, but net losses for the first six months of 2025 - Net gains related to derivative financial instruments were **$235.8 million** for Q2 2025, compared to net losses of **$25.3 million** for Q2 2024[107](index=107&type=chunk)[109](index=109&type=chunk) - Net losses on derivative financial instruments were **$94.5 million** for H1 2025, compared to net gains of **$14.1 million** for H1 2024[109](index=109&type=chunk) - Realized net gains from price risk management were **$4.3 million** for Q2 2025, down from **$60.6 million** for Q2 2024[109](index=109&type=chunk) [Interest Expense](index=34&type=page&id=Interest%20Expense) Interest expense increased to $55.2 million for Q2 2025 and $110.0 million for H1 2025, primarily due to the issuance of an additional $400.0 million principal amount of senior notes in Q2 2024 - Interest expense was **$55.2 million** for Q2 2025, up from **$51.9 million** for Q2 2024[110](index=110&type=chunk) - Interest expense was **$110.0 million** for H1 2025, up from **$101.5 million** for H1 2024[110](index=110&type=chunk) - The increase in interest expense was primarily due to the issuance of an additional **$400.0 million** principal amount of senior notes in Q2 2024[110](index=110&type=chunk) [Income Taxes](index=34&type=page&id=Income%20Taxes) The company recorded an income tax provision of $141.5 million for Q2 2025 and a benefit of $1.8 million for H1 2025, with effective tax rates varying significantly from the statutory rate - Income tax provision was **$141.5 million** for Q2 2025, compared to a benefit of **$46.1 million** for Q2 2024[111](index=111&type=chunk) - Income tax benefit was **$1.8 million** for H1 2025, compared to **$54.4 million** for H1 2024[111](index=111&type=chunk) - Effective tax rates were **52.0%** for Q2 2025 and **(13.2)%** for H1 2025, with significant variance from the **21% statutory rate**[111](index=111&type=chunk) [Net Income (Loss)](index=34&type=page&id=Net%20Income%20(Loss)) Comstock reported net income of $130.7 million ($0.44 diluted EPS) for Q2 2025, a significant improvement from a net loss in Q2 2024, primarily driven by derivative financial instrument gains - Net income was **$130.7 million** (**$0.44 diluted EPS**) for Q2 2025, compared to a net loss of **$123.2 million** (**$0.43 diluted EPS**) for Q2 2024[112](index=112&type=chunk) - Net income was **$15.3 million** (**$0.05 diluted EPS**) for H1 2025, compared to a net loss of **$137.7 million** (**$0.49 diluted EPS**) for H1 2024[112](index=112&type=chunk) [Cash Flows, Liquidity and Capital Resources](index=34&type=page&id=Cash%20Flows,%20Liquidity%20and%20Capital%20Resources) This section details the company's cash flow generation, liquidity position, capital expenditure plans, and debt management, noting significantly increased operating cash flows and strong liquidity [Cash Flows](index=34&type=page&id=Cash%20Flows) Net cash provided by operating activities increased significantly due to higher natural gas prices, with capital expenditures rising and financing activities including substantial noncontrolling interest contributions - Net cash provided by operating activities increased by **$267.2 million** (105%) to **$522.3 million** for H1 2025[113](index=113&type=chunk) - Capital expenditures increased to **$639.3 million** for H1 2025 from **$575.7 million** for H1 2024[117](index=117&type=chunk) - Contributions from noncontrolling interest totaled **$92.5 million** for H1 2025, primarily to fund the Western Haynesville midstream system build-out[116](index=116&type=chunk) - The company drilled **19 (17.5 net) wells** and completed **24 (20.3 net) Haynesville and Bossier shale operated wells** during H1 2025[117](index=117&type=chunk) [Liquidity and Capital Resources](index=36&type=page&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, Comstock had $1.05 billion in liquidity, comprising unused borrowing capacity and cash, expecting to fund future activities with operating cash flow and its bank credit facility - Total liquidity was **$1.05 billion** as of June 30, 2025, consisting of **$1.02 billion** unused borrowing capacity under the bank credit facility and **$25.9 million** cash[118](index=118&type=chunk) - Expected capital expenditures for the remaining six months of 2025 are **$550 million to $650 million** for drilling, completion, infrastructure, and other activities[117](index=117&type=chunk) - The bank credit facility has **$475.0 million** outstanding, **$1.5 billion** aggregate commitments, and a **$2.0 billion** borrowing base[121](index=121&type=chunk) - The company was in compliance with all bank credit facility covenants as of June 30, 2025[123](index=123&type=chunk) [Federal and State Taxation](index=38&type=page&id=Federal%20and%20State%20Taxation) Comstock holds significant U.S. federal and state net operating loss (NOL) carryforwards, but their utilization is limited due to a 2018 change of control, with a substantial portion expected to expire unused - U.S. federal net operating loss (NOL) carryforwards: **$743.0 million** at June 30, 2025[124](index=124&type=chunk) - State NOL carryforwards: **$1.8 billion** at June 30, 2025[124](index=124&type=chunk) - Estimated **$740.6 million** of federal and **$1.2 billion** of state NOL carryforwards are expected to expire unused due to change of control limitations[124](index=124&type=chunk) - Currently under examination by the United States Internal Revenue Service and the state of Louisiana[125](index=125&type=chunk) - Evaluating the impact of the One Big Beautiful Bill Act (OBBBA) on income tax disclosures and consolidated financial statements[126](index=126&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) This section details the company's exposure to market risks, primarily from fluctuations in natural gas and oil prices and interest rates, and its use of derivative financial instruments to hedge these risks [Natural Gas and Oil Prices](index=38&type=page&id=Natural%20Gas%20and%20Oil%20Prices) Comstock's financial performance is highly sensitive to volatile natural gas and oil prices, which are influenced by global demand, supply, geopolitical events, and economic conditions, with hedging strategies in place - Financial condition, results of operations, and capital resources are highly dependent upon prevailing market prices of natural gas and oil, which are subject to wide fluctuations[127](index=127&type=chunk) - Hedged approximately **100.3 Bcf** of 2025 natural gas production at an average price of **$3.48 per MMBtu** and **116.8 Bcf** of 2026 production at **$3.51 per MMBtu** via natural gas price swaps[128](index=128&type=chunk) - Hedged approximately **27.6 Bcf** of 2025 natural gas production (average ceiling **$3.80**, average floor **$3.50**) and **167.9 Bcf** of 2026 production (average ceiling **$4.35**, average floor **$3.50**) via natural gas collars[128](index=128&type=chunk) - A **10% increase** in natural gas market price would decrease the fair value of derivatives by approximately **$119.2 million**; a **10% decrease** would increase fair value by approximately **$118.5 million**[129](index=129&type=chunk) [Interest Rates](index=39&type=page&id=Interest%20Rates) Comstock has approximately $3.1 billion in long-term debt, with a significant portion bearing fixed interest rates, but $475.0 million outstanding under its bank credit facility is subject to variable interest rates - Approximately **$3.1 billion** principal amount of long-term debt outstanding at June 30, 2025[131](index=131&type=chunk) - **$965.0 million** of long-term debt bears a fixed interest rate of **5.875%**, and **$1.62 billion** bears a fixed rate of **6.75%**[131](index=131&type=chunk) - **$475.0 million** outstanding under the bank credit facility is subject to variable interest rates tied to SOFR or the corporate base rate[131](index=131&type=chunk) - Any increase in variable interest rates would adversely impact the company's results of operations and cash flow[131](index=131&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, concluding they were effective, with no material changes in internal controls - Disclosure controls and procedures were **effective** as of June 30, 2025, providing reasonable assurance for timely and accurate financial reporting[132](index=132&type=chunk) - No material changes in internal controls over financial reporting occurred during the three months ended June 30, 2025[132](index=132&type=chunk) [PART II. Other Information](index=40&type=section&id=PART%20II.%20Other%20Information) This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in certain litigation that arises in the normal course of its operations but does not anticipate any material effect on its financial position, results of operations, or cash flows - Involved in certain litigation that arises in the normal course of operations[135](index=135&type=chunk) - Resolution of these matters is not expected to have a material effect on the company's financial position, results of operations, or cash flows[135](index=135&type=chunk) [Item 1A. Risk Factors](index=40&type=page&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to the Risk Factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[136](index=136&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - None[137](index=137&type=chunk) [Item 3. Defaults upon Senior Securities](index=40&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - None[138](index=138&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[139](index=139&type=chunk) [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information) During the three months ended June 30, 2025, none of the company's directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" - No Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the three months ended June 30, 2025[140](index=140&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, incentive plans, and required certifications, along with Inline XBRL documents - Includes various corporate governance documents (Articles of Incorporation, Bylaws), incentive plans, and required certifications (Section 302, Section 906)[141](index=141&type=chunk) - Inline XBRL Instance Document, Taxonomy Extension Schema, and Cover Page Interactive Data File are filed herewith[141](index=141&type=chunk) [SIGNATURES](index=42&type=section&id=SIGNATURES) The report is duly signed on behalf of Comstock Resources, Inc. by M. Jay Allison, Chairman and Chief Executive Officer, and Roland O. Burns, President, Chief Financial Officer and Secretary - Signed by M. Jay Allison (Chairman and Chief Executive Officer) and Roland O. Burns (President, Chief Financial Officer and Secretary) on July 31, 2025[146](index=146&type=chunk)