Thank you for standing by and welcome to Comstock Resources Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your host, Chairman and CEO, Jay Allison. Please go ahead.

Thank you for that introduction. On behalf of the Comstock employees and the Board of Directors, I have a few opening comments before we discuss the results. First, Comstock is shifting to longer laterals as Ron Mills mentioned to the analysts. We are now using 10,500-foot laterals in 2022 compared to 8,800-foot laterals in 2021. This shift is expected to create significant value on a per well basis moving forward. We anticipate better cost efficiencies, a lower decline curve, and an increase in well performance. We will review this later in the call. The higher capital efficiencies from the longer laterals allowed us to more than counteract the impact of rising service costs in the fourth quarter of 2021, as reflected in the numbers. We acknowledge the higher service costs. With the commitment from the board and management, we will use our free cash flow to pay down the revolver and redeem the remaining $244 million of the 2025 bonds; that’s our objective. We aim to maintain a leverage ratio of 1.5 or less and believe we can achieve that in the second half of 2022, which would facilitate discussions about returning capital to shareholders. I understand this may be a topic of interest. Our drilling inventory, which is crucial for E&P companies, has never been more valuable or robust. We made significant progress in extending our lateral length per location by 25% from the end of 2020. The average lateral length has grown from 6,840 feet to about 8,520 feet today. Based on our 2022 activity, we have a drilling inventory of 1,633 net locations, with 53% in Haynesville and 47% in Bossier. On the operational side, which is central to our success, we increased our drilling footage per day by 25%, rising from 800 feet to 1,001 feet per day, which is essential for profitability. In the fourth quarter, our average lateral length for wells reached 11,443 feet, as we drilled 415,000 feet per lateral well—two in Haynesville and two in Bossier. Just this morning, we brought two significant wells into production. Despite higher service costs, we successfully reduced our drilling and completion costs through enhanced operational performance and better capital efficiencies linked to the longer laterals drilled in the fourth quarter of 2021, benefits that will carry over into 2022. We have prepared some slides to review our performance since 2018, the year Jerry Jones and his family invested in Comstock, positioning us as the only pure-play Haynesville producer. Welcome to the Comstock Resources Fourth Quarter 2021 financial and operating results conference call. You can access a slide presentation during or after this call by visiting our website at www.comstockresources.com and downloading the quarterly results presentation, which contains details on the fourth-quarter results. I am Jay Allison, the CEO of Comstock, joined by Roland Burns, our President and CFO, Daniel Harrison, our COO, and Ron Mills, our VP of Finance and Investor Relations. I will now hand it over to Roland.

Yes. Thanks, Jay. On Slide 6 in the presentation, we compare some of our fourth-quarter financial measures to the fourth quarter of 2020. Our production increased 12% to 1.35 BCF a day. Adjusted EBITDAX grew 41% to $297 million. We generated $250 million of discretionary cash flow during the quarter, 62% higher than 2020's fourth quarter, and adjusted net income totaled $99 million during the quarter, a 186% increase from the fourth quarter of 2020. We generated $105 million of free cash flow from operations in the quarter, or $204 million if you include the impact of the acquisition and divestiture activity, which occurred mostly in the fourth quarter. This free cash flow contributed to an improvement in our leverage ratio, which improved to 2.2 times, down from 3.2 times at the end of 2020. Our cash flow per share during the quarter was $0.90 per share, up from $0.56 in the fourth quarter of 2020. And adjusted earnings per share was $0.37 per share compared to $0.14 in the fourth quarter of 2020. On Slide 7, we show how much Comstock has changed since 2018 when Jerry Jones and his family invested in the company. Production growth has averaged 117% over the last three years. EBITDAX has gone from $287 million to $1.1 billion at a compound annual growth rate of 97%. Cash flow has grown from $206 million back in 2018 to $908 million this year in 2021, averaging a 114% over the last three years. Adjusted net income has grown from $29 million to $303 million at a compounded annual growth rate of 319%. And free cash flow from operations has grown to $262 million, and our leverage ratio has improved from 4.5 times to 2.4 times. On a per-share basis, cash flow has gone from $1.96 to $3.29, and earnings has gone from $0.27 to $1.16.

Okay. Thanks, Roland. I'll flip over to Slide 13. This is where we show our average lateral length. We drilled by year going back to 2017, along with our estimated average lateral length for this year and also our record longest lateral that we've completed to-date. In 2017, our average lateral length was 6,233 feet, as we were drilling primarily a mix of 4,500-foot and 7,500-foot laterals. We had just started drilling our first 10,000-foot laterals. In subsequent years through 2020, we slowly increased the number of 10,000-foot laterals that we were drilling, which allowed us to gradually increase the average lateral length. In late 2020, we successfully drilled and completed our first laterals exceeding 12,500 feet, and our average lateral length in 2020 had increased to 8,751 feet. Now, through the end of 2021, we have successfully drilled and completed four 15,000-foot laterals with two drilled to the Haynesville and two drilled into the Bossier. In 2021, our average lateral length increased to 8,800 feet. Our record longest laterals today is 15,155 feet and was drilled and completed in the Haynesville in late 2021. Building on the success of our 15,000-foot laterals, we now anticipate our average lateral length to increase by 19% in 2022, up to 10,484 feet. In 2022, we anticipate drilling approximately 21 wells with laterals longer than 11,000 feet, nine of these being 15,000-foot laterals. By continuing to execute our long lateral strategy, we'll be better able to maintain our low-cost structure into the higher-price environment. Our average lateral length for the quarter was 11,443 feet. This is the longest quarterly average lateral length we've achieved to-date and was accomplished primarily due to the completion of our first 215,000-foot laterals that were turned to sales during the fourth quarter. Our capital efficiencies associated with the longer lateral allowed us to offset the impact of the higher service costs during the quarter. On Slide 16, is a map outlining our fourth-quarter well activity. Since the last call, we have completed and turned 16 new wells to sales. The wells were drilled with lateral lengths ranging from 8,504 feet to 15,155 feet with an average lateral of 10,508 feet. The wells were tested at the IP rates that ranged from 12 million up to 48 million a day with a 23 million cubic feet per day average IP.

Well, like we said earlier, our drilling inventory, which Daniel just said, is the holy grail of the big companies and has never been more valuable and stronger than it is today. If you look at Slide 18, I direct you to the summary for our outlook for 2022. We expect our 2022 drilling program to generate 4% to 5% production growth year-over-year and we would expect to generate an excess of $500 million of free cash flow at current commodity prices.

Thanks, Jay. On Slide 19, we provide the financial guidance. The first quarter production guidance is 1.24 to 1.29 BCF a day and the full-year guidance is 1.39 to 1.45 BCF a day. During the first quarter, we only plan to turn to sales about 15% of the planned wells to be turned to sales for the year, and those wells have a little bit lower working interest than the wells later in the year. As a result, the majority of our wells turned to sales and production growth are expected to occur during the second and third quarters of this year.

With my first question, I wanted to focus on the outputs of your 2022 plan and your confidence in executing against it. When we analyze the balance of the year for Comstock, the setup certainly seems positive to us based on potential positive production revisions in the institution on a return of capital program, and specifically on production. Your 2022 production plan on average appears to be outpacing consensus estimates by about 2% for the balance of the year after adjusting for Q1 guidance. With that said and with your activity being more steady-state relative to past years, could you speak to your confidence in executing against this in light of the tighter labor and service price environment?

We're fairly confident we can execute the way that we've got it planned. We factor our scheduling based on the most recent cadence that we've been at, and we've had a little bit of that already built into the numbers at the end of last year. So we foresee that to be at the same pace going into this year. So I'd say yeah, we feel pretty strongly we can execute the way that we've got laid out this year.

We did have a few hiccups due to the weather a week or so ago with hauling sand and some driver issues. I mean, we have seen that, but I don't think it has impacted our overall schedule.

The key is we do have our drilling contractors lined up, and we do have our frac service companies lined up. After achieving your targeted 1.5 times net debt to EBITDA leverage ratio later this year, we see additional free cash flow that the company will be generating later in the year. We're still evolving in our return on capital theory. Our first goal will be to establish a sustainable dividend. We are excited to put that back in place. So as this year progresses and we see where gas prices land, we'll know the right time to put that dividend in.

Our leverage ratio would allow us to open those discussions up, to talk about that, I mean, that's a beautiful thing to talk about, and I think we will be there more sooner than later.

I think what I heard is that you are in the process of adding two rigs right now, and I'm curious about how or what the implications are for how your production is going to progress over the year? I think Ron mentioned that Q2 and Q3 are going to be the big growth quarters. But can you tell us how should we think about how you're bringing those rigs on, when they're going to be contributing to production, and what the shape of the year looks like?

We have returned to our first quarter production plan, although the number of completions is lower. Moving forward, we expect to see fairly predictable growth as we transition from shorter laterals to longer laterals. This transition takes time but is more cost-efficient. In the upcoming quarters, if we can reduce the decline rate from 40% to the thirties, it will be beneficial.

The first our 6 rig basically started yesterday, and the 7th rig will probably be online late next week. Both of those rigs are going to work in our Logansport area.

Thanks, guys, great details.

Just wanted to get a sense of what your appetite is these days on the M&A side. Obviously, you've done some deals for the last several years to really increase the size of the company, the inventory. What do you think the outlook is? Are there other Haynesville properties out there you think might be a good fit for Comstock?

We are always asked if we're looking outside the basin, and the answer's no. We do shop all the time. I think you've got to shop in order to not be a compulsive buyer. As of right now, I think our 2022, 2023 plan is continuing to add incremental valuable acreage around our existing footprint that will enhance our laterals.

I was wondering if you could give some numbers around base decline trends into year-end '22 and beyond?

We're currently experiencing about a 40% decline. Over time, as we shift to longer laterals, we expect this to positively impact the decline rate. I’m not sure how much of an effect 2022 will have, but we anticipate it starting to be noticeable in 2023 and 2024.

We plan on retiring $479 million of debt in 2022, and we ended 2021 with financial liquidity of almost $1.2 billion. So it should be a watershed year, '23 should be incredible. Our inventory is strong, so again, we thank you for your support.