Comstock Resources Inc 10-Q for FY2020 Q1

Comstock Resources Inc (CRK)

10-Q 2020-05-07 For: 2020-03-31

Added on April 07, 2026

About this 10-Q

Comstock Resources Inc filed this 10-Q on May 7, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $225.88M; up 78.0% from $126.88M a year earlier
Net income: $42.03M; up 209.6% from net income of $13.58M a year earlier
Diluted EPS: $0.15; up 15.4% from $0.13 a year earlier

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Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.50 (per share)	CRK	New York Stock Exchange

Large accelerated filer ☐	Accelerated filer ☒	Non-accelerated filer ☐	Smaller reporting company ☐
Emerging growth company ☐

	Page
PART I. Financial Information
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	4
Consolidated Statements of Operations – For the three months ended March 31, 2020 and 2019	5
Consolidated Statements of Stockholders' Equity – For the three months ended March 31, 2020 and 2019	6
Consolidated Statements of Cash Flows – For the three months ended March 31, 2020 and 2019	7
Notes to Consolidated Financial Statements	8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3. Quantitative and Qualitative Disclosure About Market Risk	21
Item 4. Controls and Procedures	22
PART II. Other Information
Item 1A. Risk Factors	23
Item 6. Exhibits	23

	March 31, 2020			December 31, 2019
ASSETS	(In thousands)
Cash and Cash Equivalents	$	15,527		$	18,532
Accounts Receivable:
Oil and gas sales		83,594			120,111
Joint interest operations		16,706			24,761
From affiliates		25,744			35,469
Derivative Financial Instruments		101,821			75,304
Income Taxes Receivable		10,218			5,109
Other Current Assets		14,227			10,399
Total current assets		267,837			289,685
Property and Equipment:
Oil and natural gas properties, successful efforts method:
Proved		4,234,229			4,077,513
Unproved		384,654			410,897
Other		6,821			6,866
Accumulated depreciation, depletion and amortization		(596,591	)		(486,473	)
Net property and equipment		4,029,113			4,008,803
Goodwill		335,897			335,897
Income Taxes Receivable		—			5,109
Derivative Financial Instruments		6,835			13,888
Operating Lease Right-of-Use Assets		3,828			3,509
Other Assets		231			231
	$	4,643,741		$	4,657,122
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable	$	215,338		$	252,994
Accrued Expenses		107,081			137,166
Operating Leases		2,157			1,994
Derivative Financial Instruments		3,043			222
Total current liabilities		327,619			392,376
Long-term Debt		2,507,284			2,500,132
Deferred Income Taxes		223,104			211,772
Derivative Financial Instruments		4,380			4,220
Long-term Operating Leases		1,671			1,515
Reserve for Future Abandonment Costs		18,613			18,151
Other Non-current Liabilities		4,594			6,351
Total liabilities		3,087,265			3,134,517
Commitments and Contingencies
Mezzanine Equity:
Preferred Stock — 5,000,000 shares authorized, 385,000 shares issued and outstanding at March 31, 2020 and December 31, 2019:
Series A 10% Convertible Preferred Stock, 210,000 shares issued and outstanding		207,083			204,583
Series B 10% Convertible Preferred Stock, 175,000 shares issued and outstanding		175,000			175,000
Stockholders' Equity:
Common stock—$0.50 par, 400,000,000 shares authorized, 189,980,509 and 190,006,776 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively		94,990			95,003
Additional paid-in capital		910,851			909,423
Accumulated earnings		168,552			138,596
Total stockholders' equity		1,174,393			1,143,022
	$	4,643,741		$	4,657,122

	Three Months Ended March 31,
	2020			2019
	(In thousands, except per share amounts)
Revenues:
Natural gas sales	$	207,239		$	90,132
Oil sales		18,639			36,749
Total oil and gas sales		225,878			126,881
Operating expenses:
Production taxes		5,567			5,939
Gathering and transportation		28,411			7,430
Lease operating		28,712			14,885
Depreciation, depletion and amortization		110,425			37,590
General and administrative		8,719			7,814
Exploration		27			—
Gain on sale of oil and gas properties		—			(1	)
Total operating expenses		181,861			73,657
Operating income		44,017			53,224
Other income (expenses):
Gain (loss) from derivative financial instruments		61,899			(7,657	)
Other income		313			93
Interest expense		(52,810	)		(27,851	)
Total other income (expenses)		9,402			(35,415	)
Income before income taxes		53,419			17,809
Provision for income taxes		(11,391	)		(4,234	)
Net income		42,028			13,575
Preferred stock dividends and accretion		(12,072	)		—
Net income available to common stockholders	$	29,956		$	13,575

Net income per share:
Basic	$	0.16		$	0.13
Diluted	$	0.15		$	0.13
Weighted average shares outstanding:
Basic		188,916			105,457
Diluted		285,166			105,457

	Common Shares			Common Stock- Par Value			Additional Paid-in Capital			Accumulated Earnings			Total
	(In thousands)
Balance at December 31, 2018		105,871		$	52,936		$	452,513		$	64,122		$	569,571
Stock-based compensation		(3	)		(2	)		650			—			648
Net income		—			—			—			13,575			13,575
Balance at March 31, 2019		105,868		$	52,934		$	453,163		$	77,697		$	583,794

Balance at December 31, 2019		190,007		$	95,003		$	909,423		$	138,596		$	1,143,022
Stock-based compensation		(24	)		(12	)		1,442			—			1,430
Income tax withholdings related to equity awards		(2	)		(1	)		(14	)		—			(15	)
Net income		—			—			—			42,028			42,028
Preferred dividend accretion		—			—			—			(2,500	)		(2,500	)
Payment of preferred dividends		—			—			—			(9,572	)		(9,572	)
Balance at March 31, 2020		189,981		$	94,990		$	910,851		$	168,552		$	1,174,393

	Pro Forma
	Three Months Ended
	March 31, 2019
	(In thousands, except per share amount)
Revenues:	$	315,303
Net Income	$	62,077

Net income per share:
Basic	$	0.28
Diluted	$	0.22

	Three Months Ended
	March 31, 2020
	(In thousands)
Operating lease cost included in general and administrative expense	$	411
Operating lease cost included in lease operating expense		137
Short-term lease cost (drilling rig costs included in proved oil and gas properties)		12,309
	$	12,857

	(In thousands)
April 1 to December 31, 2020	$	2,293
2021		1,518
2022		196
Total lease payments		4,007
Imputed interest		(179	)
Total lease liability	$	3,828


	As of March 31, 2020		As of December 31, 2019
	(In thousands)
Accrued interest payable	$	29,906	$	39,501
Accrued drilling costs		29,003		42,193
Accrued transportation costs		26,359		26,907
Accrued transaction costs		6,690		10,830
Accrued employee compensation		4,562		8,653
Accrued lease operating expenses		6,200		4,990
Other		4,361		4,092
	$	107,081	$	137,166

	Future Production Period
	Nine Months Ending December 31, 2020			Year Ending December 31, 2021			Total
Natural Gas Swap Contracts:
Volume (MMBtu)		78,222,890			62,883,140			141,106,030
Average Price per MMBtu		$2.73			$2.57			$2.66
Natural Gas 2-Way Collar Contracts:
Volume (MMBtu)		7,200,000		—				7,200,000
Price per MMBtu:
Average Ceiling		$2.92		—				$2.92
Average Floor		$2.41		—				$2.41
Natural Gas 3-Way Collar Contracts:
Volume (MMBtu)		13,750,000		—				13,750,000
Price per MMBtu:
Average Ceiling		$2.99		—				$2.99
Average Floor		$2.63		—				$2.63
Average Put		$2.32		—				$2.32
Natural Gas Swaptions Contracts:
Volume (MMBtu)		57,750,000	(a)		23,650,000	(b)		81,400,000
Average Price per MMBtu		$2.52			$2.52			$2.52
Crude Oil Collar Contracts:
Volume (Barrels)		820,600		—				820,600
Price per Barrel:
Average Ceiling		$64.13		—				$64.13
Average Floor		$49.51		—				$49.51

Type	Consolidated Balance Sheet Location	March 31, 2020		December 31, 2019
		(in thousands)
Fair Value of Derivative Instruments
Asset Derivatives:
Natural gas price derivatives	Derivative Financial Instruments – current	$	85,349	$	75,123
Oil price derivatives	Derivative Financial Instruments – current		16,472		181
		$	101,821	$	75,304
Natural gas price derivatives	Derivative Financial Instruments – long-term	$	6,835	$	13,888
Liability Derivatives:
Natural gas price derivatives	Derivative Financial Instruments – current	$	3,043	$	222
Natural gas price derivatives	Derivative Financial Instruments – long-term	$	4,380	$	4,220


Gain/(Loss) Recognized in	Three Months Ended March 31,
Earnings on Derivatives	2020		2019
	(In thousands)
Swaps	$	22,147	$	3,157
Collars		24,087		(10,814	)
Swaptions		15,665		—
	$	61,899	$	(7,657	)


	March 31, 2020				December 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:	(In thousands)
Commodity-based derivatives (a)(b)	$	108,656	$	108,656	$	89,192	$	89,192
Liabilities:
Commodity-based derivatives (a)(b)		7,423		7,423		4,442		4,442
Bank credit facility (c)		1,250,000		1,250,000		1,250,000		1,250,000
7.5% senior notes due 2025 (d)		461,023		362,500		455,768		534,375
9.75% senior notes due 2026 (d)		820,854		569,500		820,057		765,000

	(In thousands)
7½% Senior Notes due 2025:
Principal		625,000
Discount, net of amortization		(163,977	)
9¾% Senior Notes due 2026:
Principal		850,000
Discount, net of amortization		(29,146	)
Bank Credit Facility:
Principal		1,250,000
Debt issuance costs, net of amortization		(24,593	)
	$	2,507,284


	Three Months Ended March 31,
	2020			2019
Tax at statutory rate	21.0%			21.0%
Tax effect of:
Valuation allowance on deferred tax assets		(0.5	)		1.5
State income taxes, net of federal benefit		0.3			0.7
Nondeductible stock-based compensation		0.5			0.6
Effective tax rate		21.3	%		23.8	%

Exhibit No.		Description
10.1*		Borrowing Base Redetermination Agreement and Second Amendment to Amended and Restated Credit Agreement dated as of May 6, 2020, among the Company, Bank of Montreal as Administrative Agent and the lenders party thereto from time to time.
31.1*		Section 302 Certification of the Chief Executive Officer.
31.2*		Section 302 Certification of the Chief Financial Officer.
32.1†		Certification for the Chief Executive Officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.
32.2†		Certification for the Chief Financial Officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		XBRL Instance Document
101.SCH*		XBRL Schema Document
101.CAL*		XBRL Calculation Linkbase Document
101.LAB*		XBRL Labels Linkbase Document
101.PRE*		XBRL Presentation Linkbase Document
101.DEF*		XBRL Definition Linkbase Document

	COMSTOCK RESOURCES, INC.
Date: May 7, 2020	/s/ M. JAY ALLISON
	M. Jay Allison, Chairman, Chief
	Executive Officer (Principal Executive Officer)
Date: May 7, 2020	/s/ ROLAND O. BURNS
	Roland O. Burns, President, Chief Financial
	Officer and Secretary (Principal Financial and Accounting Officer)


Borrowing Base Utilization Percentage	≤25.0%	>25%, but ≤50%	>50%, but ≤75%	>75% but ≤90%	>90%
Base Rate Loans	1.25%	1.50%	1.75%	2.00%	2.25%
Eurodollar Loans	2.25%	2.50%	2.75%	3.00%	3.25%
Commitment Fee Rate	0.375%	0.375%	0.50%	0.50%	0.50%