Comstock Resources, Inc. Reports Third Quarter 2012 Financial And Operating Results

FRISCO, Texas, Oct. 29, 2012 /PRNewswire/ -- Comstock Resources, Inc. ("Comstock" or the "Company") (NYSE: CRK) today reported financial and operating results for the three months and nine months ended September 30, 2012. 

Financial Results for the Three Months and Nine Months Ended September 30, 2012

Low natural gas prices continue to adversely impact the Company's financial results for the third quarter of 2012 as Comstock reported a net loss of $26.0 million or 56 cents per share as compared to net income of $1.3 million or 3 cents per diluted share for the three months ended September 30, 2011.  The third quarter of 2012 results include a loss of $2.8 million ($1.8 million after tax or 4 cents per diluted share) from the sale of oil and gas properties and costs incurred in connection with the formation of the Company's Eagle Ford shale joint venture, and impairments of unevaluated properties of $1.4 million ($0.9 million after tax or 2 cents per diluted share).  Results for the three months ended September 30, 2011 included a gain on sale of marketable securities of $2.5 million ($1.6 million after tax or 4 cents per diluted share). 

Comstock's oil production in the third quarter of 2012 increased 238% to 659,000 barrels as compared to 195,000 barrels in 2011's third quarter.  Oil production in the third quarter of 2012, which averaged 7,200 barrels of oil per day, also increased from the 6,400 barrels per day produced in the second quarter of 2012.  The Company's natural gas production decreased 19% to 20 billion cubic feet ("Bcf") as compared to 25 Bcf in 2011's third quarter.  The decrease is due to the sale of 10 million cubic feet ("MMcf") per day in May 2012 and declines resulting from the decrease in the Company's natural gas directed drilling due to the very low natural gas prices in 2012.

Comstock's average realized natural gas price of $2.46 per Mcf for the third quarter of 2012 was 40% lower than the $4.09 per Mcf realized for the third quarter of 2011.  The Company's average realized oil price for the third quarter of 2012, including hedging gains, was $102.08 per barrel, and was 17% higher than the average price of $87.55 per barrel in the third quarter of 2011.  Total oil and gas sales for the third quarter of 2012 decreased by 2% to $117.1 million as compared to 2011's third quarter sales of $119.4 million.  Comstock's oil revenues in the third quarter of 2012 increased by $50.3 million from the third quarter of 2011.  The increase in oil revenues only partially offset the effect of the extraordinarily low natural gas prices, as revenues from natural gas sales decreased by $52.6 million or 51% from the third quarter of 2011.  Oil sales composed 57% of total sales in the third quarter of 2012 as compared to only 14% in the third quarter of 2011.  Operating cash flow (before changes in working capital accounts) of $70.8 million in the third quarter of 2012 was 17% lower than operating cash flow of $85.5 million for the third quarter of 2011, and EBITDAX, or earnings before interest, taxes, depreciation, depletion, amortization, exploration expense and other noncash expenses, of $86.7 million in the third quarter of 2012 decreased 8% from EBITDAX of $94.2 million in the third quarter of 2011.  The lower natural gas prices not only caused revenues, cash flow, EBITDAX and earnings to decline but also resulted in an increase to the Company's depreciation, depletion and amortization expense in the quarter due to the exclusion of approximately 434 Bcf of the Company's undeveloped natural gas reserves from proved reserves. 

Comstock reported a net loss of $29.4 million or 63 cents per share for the first nine months of 2012 as compared to net income of $7.7 million or 16 cents per diluted share for the nine months ended September 30, 2011.  The 2012 results include a net gain of $24.3 million ($15.8 million after tax or 34 cents per diluted share) from the sale of oil and gas properties, which generated net proceeds of $142.9 million, and a gain of $26.6 million ($17.3 million or 37 cents per share) on the sale of marketable securities which generated net proceeds of $37.7 million.  The nine months 2012 financial results also include impairments of oil and gas properties and unevaluated leases of $8.0 million ($5.2 million after tax, or 11 cents per diluted share).  Results for the nine months ended September 30, 2011 included a gain on sale of marketable securities of $32.2 million ($20.9 million after tax or 46 cents per diluted share), impairments of unevaluated leases of $9.8 million ($6.4 million after tax or 14 cents per share), and a loss on early extinguishment of debt of $1.1 million ($0.7 million after tax or 2 cents per share).

Comstock's oil production in the first nine months of 2012 of 1.7 million barrels increased by 255% over the oil produced in the first nine months of 2011.  Oil comprised 14% of equivalent production during the first nine months of 2012 as compared to only 4% in 2011.  Natural gas production of 65 Bcf for the nine months ended September 30, 2012 decreased by 4% from the nine months ended September 30, 2011.  Natural gas prices were substantially weaker in the first nine months of 2012 as compared to 2011's first nine months.  Comstock's average realized natural gas price decreased 42% to $2.37 per Mcf for the first nine months of 2012 as compared to $4.09 per Mcf for the first nine months of 2011.  The Company's average realized oil price for the first nine months of 2012 of $102.30 per barrel, including hedging gains, was 10% above 2011's average realized price of $92.59.  Total oil and gas sales increased by 4% to $332.2 million in the first nine months of 2012 as compared to 2011's first nine months sales of $319.9 million.  Revenues from oil sales of $178.8 million for the nine months ended September 30, 2012 increased by $133.3 million or 293% from the nine months ended September 30, 2011, while revenues from natural gas sales decreased by $121.0 million or 44% from the nine months ended September 30, 2011.  Operating cash flow (before changes in working capital accounts) of $198.8 million in the first nine months of 2012 decreased 9% from operating cash flow of $218.8 million in the first nine months of 2011.  EBITDAX, or earnings before interest, taxes, depreciation, depletion, amortization, exploration expense and other noncash expenses, decreased 2% to $240.4 million in 2012's first nine months from 2011's first nine months EBITDAX of $246.4 million. 

2012 Drilling Results

Comstock reported on the results to date of its 2012 drilling program.  During the first nine months of 2012, Comstock spent $401.9 million on development and exploration activities, net of amounts the Company received from the Eagle Ford shale joint venture, and $27.4 million for acreage and other acquisition costs.  Comstock drilled 56 wells (38.3 net) and had seven wells (4.8 net) drilling at September 30, 2012.  On September 30, 2012, the Company's five operated drilling rigs were all drilling oil wells in South Texas and West Texas as the Company suspended its natural gas drilling operations until natural gas prices improve.

Since the beginning of 2012, the Company has completed 50 oil wells, including 27 vertical Wolfbone wells and one horizontal Wolfcamp shale well in its West Texas region, and 22 wells in the horizontal Eagle Ford shale program in the South Texas region.  The 22 Eagle Ford shale wells that were completed had an average per well initial production rate of 638 barrels of oil equivalent ("BOE") per day.  The six new Eagle Ford wells reported on this quarter averaged 816 BOE per day with the Swenson C #1H, the Hill A #3H and the Hubberd #1H in McMullen County having the highest initial production rates at 1,002, 829 and 786 BOE per day, respectively.  These wells are being produced under the Company's restricted choke program and the initial tests were obtained with a 16/64 inch choke.  The first 35 wells, which have been producing for more than 90 days, had an average initial production rate of 686 BOE per day.  The 30 day per well production rate for these wells averaged 517 BOE per day and the 90 day per well production rate averaged 448 BOE per day, or 65% of the initial 24 hour test rate.

Since closing on the acquisition of acreage in Reeves County in West Texas, Comstock has drilled and completed 20 operated vertical Wolfbone wells and one horizontal Wolfcamp shale well.  These vertical wells were drilled to total depths of 11,250 to 12,786 feet and completed with 5 to 11 frac stages.  These wells have an average per well initial production rate of 356 BOE per day (79% oil).  Of the eight new operated wells reported on in the third quarter, the Ponderosa State 25 #1 and the Jesse James 4 #2 each had an initial production rate of 511 BOE per day.  Comstock also participated in five non-operated Wolfbone vertical wells which had an average initial production rate of 350 BOE per day.

Comstock has drilled its first horizontal well, the Monroe 35 #1-H, targeting the Wolfcamp shale formation and the results have been very positive with an initial production rate of 653 BOE per day.  The well was completed with fifteen frac stages over a 3,627 foot lateral.  Comstock's second horizontal well targeting the Wolfcamp shale, the Dale Evans 196 #2H, has reached total depth at 14,584 feet with a 3,428 foot lateral and is currently waiting to be completed.

Comstock has planned a conference call for 9:30 a.m. Central Time on October 30, 2012, to discuss the operational and financial results for the third quarter of 2012.  Investors wishing to participate should visit the Company's website at www.comstockresources.com for a live web cast or dial 800-659-1942 (international dial-in use 617-614-2710) and provide access code 67921574 when prompted.  If you are unable to participate in the original conference call, a web replay will be available approximately 24 hours following the completion of the call on Comstock's website at www.comstockresources.com.  The web replay will be available for approximately one week.  A replay of the conference call will be available beginning at 12:30 p.m. ET October 30, 2012 and will continue until 11:59 p.m. November 6, 2012.  To hear the replay, call 888-286-8010 (617-801-6888 if calling from outside the US).  The conference call ID number is 22637143.

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.  Although the Company believes the expectations in such statements to be reasonable, there can be no assurance that such expectations will prove to be correct. 

Comstock Resources, Inc. is an independent energy company based in Frisco, Texas and is engaged in oil and gas acquisitions, exploration and development primarily in Texas and Louisiana.  The Company's stock is traded on the New York Stock Exchange under the symbol CRK.  For additional information, please visit Comstock's website at www.comstockresources.com.

SOURCE Comstock Resources, Inc.