Comstock Resources, Inc. Reports Fourth Quarter And Annual 2012 Financial And Operating Results And Restatement Of 2012 Quarterly Results

Feb 11, 2013, 16:05 ET from Comstock Resources, Inc.

FRISCO, Texas, Feb. 11, 2013 /PRNewswire/ -- Comstock Resources, Inc. ("Comstock" or the "Company") (NYSE: CRK) today reported financial and operating results for the three months and year ended December 31, 2012.  Comstock also announced that it is restating results for the first three quarters of 2012 to reflect a change in the method used to account for the Company's crude oil derivative financial instruments.

Financial Results for the Three Months and Year Ended December 31, 2012

Low natural gas prices continue to adversely impact the Company's financial results for the fourth quarter of 2012 as Comstock reported a net loss of $78.2 million or $1.68 per share as compared to the net loss of $41.1 million or 89¢ per share for the three months ended December 31, 2011.  The fourth quarter of 2012 results include impairments of certain natural gas producing properties and exploratory acreage of $78.6 million ($51.1 million after tax or $1.10 per share) and an unrealized loss from derivatives of $2.0 million ($1.3 million after tax or 3¢ per share), while results for the three months ended December 31, 2011 included impairments of $60.8 million ($39.5 million after tax or 86¢ per share) and a gain on sale of marketable securities of $2.9 million ($1.9 million after tax or 4¢ per share). 

Comstock's oil production in the fourth quarter of 2012 increased 62% to 561,000 barrels as compared to 346,000 barrels in the fourth quarter of 2011.  Conversely, oil production in the fourth quarter of 2012, which averaged 6,100 barrels of oil per day, decreased from the 7,200 barrels per day of production in the third quarter of 2012.  Comstock's oil production in the fourth quarter was negatively impacted by approximately 750 barrels per day, primarily from the shut-in of Eagle Ford shale wells during the quarter for fracing operations and for artificial lift installation.  Limited growth of oil production in the fourth quarter had been expected with respect to horizontal drilling activity in West Texas and pad drilling in the Eagle Ford shale resulting in a small number of wells coming on line in the quarter.  The Company's natural gas production decreased 24% to 17.9 billion cubic feet ("Bcf") as compared to 23.4 Bcf in the fourth quarter of 2011.  The decrease was primarily due to the sale of properties in May 2012 that averaged 9 million cubic feet ("MMcf") per day 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 price for natural gas of $3.05 per Mcf for the fourth quarter of 2012 was 10% lower than the $3.40 per Mcf realized for the fourth quarter of 2011.  The Company's average realized price for oil for the fourth quarter of 2012, including hedging gains, was $101.56 per barrel, which was 1% higher than the average price of $100.18 per barrel in the fourth quarter of 2011.  Total oil and gas sales for the fourth quarter of 2012 of $106.6 million combined with realized gains from oil hedges of $5.1 million, or $111.7 million, decreased by $2.8 million or 2% as compared to 2011's fourth quarter sales of $114.5 million.  Oil sales composed 51% of total sales in the fourth quarter of 2012 as compared to only 30% in the fourth quarter of 2011.  Operating cash flow (before changes in working capital accounts) of $64.7 million in the fourth quarter of 2012 was 18% lower than operating cash flow of $78.8 million for the fourth quarter of 2011, and EBITDAX, or earnings before interest, taxes, depreciation, depletion, amortization, exploration expense and other noncash expenses, of $82.4 million in the fourth quarter of 2012 decreased 8% from EBITDAX of $89.9 million in the fourth quarter of 2011. 

Comstock reported a net loss of $100.1 million or $2.16 per share for the year ended December 31, 2012 as compared to a net loss of $33.5 million or 73¢ per share for the year ended December 31, 2011.  The 2012 results include a net gain of $24.3 million ($15.8 million after tax or 34¢ per share) from the sale of oil and gas properties, which generated net proceeds of $166.7 million, a gain of $26.6 million ($17.3 million after tax or 37¢ per share) on the sale of marketable securities which generated net proceeds of $37.7 million and an unrealized gain from derivatives of $11.5 million ($7.5 million after tax or 16¢ per share).  The 2012 financial results also include impairments of oil and gas properties and unevaluated leases of $86.7 million ($56.3 million after tax or $1.21 per share).  Results for the year ended December 31, 2011 included a gain on sale of marketable securities of $35.1 million ($22.8 million after tax or 50¢ per share), impairments of $70.6 million ($45.9 million after tax or $1.00 per share), and a loss on early extinguishment of debt of $1.1 million ($0.7 million after tax or 2¢ per share).

Comstock's oil production in 2012 of 2.3 million barrels increased 175% over production in 2011.  Oil comprised 14% of equivalent production during 2012 as compared to only 5% in 2011.  Natural gas production of 82.5 Bcf for the year ended December 31, 2012 decreased by 9% from the year ended December 31, 2011.  Natural gas prices were substantially weaker in 2012 as compared to 2011.  Comstock's average realized natural gas price decreased 36% to $2.52 per Mcf for 2012 as compared to $3.91 per Mcf for 2011.  The Company's average realized oil price for 2012 of $101.18 per barrel, including hedging gains, was 6% above 2011's average realized price of $95.73.  Total 2012 oil and gas sales of $431.9 million, combined with realized gains from oil hedges of $9.8 million, or $441.7 million, increased $7.3 million or 2% as compared to 2011's sales of $434.4 million.  Revenues from oil sales of $233.6 million for the year ended December 31, 2012 increased by $153.4 million or 191% from the year ended December 31, 2011, while revenues from natural gas sales decreased by $146.1 million or 41% from the year ended December 31, 2011.  Operating cash flow (before changes in working capital accounts) of $261.3 million in 2012 decreased 12% from operating cash flow of $297.6 million in 2011.  EBITDAX, or earnings before interest, taxes, depreciation, depletion, amortization, exploration expense and other noncash expenses, decreased 5% to $320.6 million in 2012 from EBITDAX of $336.3 million in 2011.  The lower natural gas prices not only caused cash flow, EBITDAX and earnings to decline but also resulted in an increase to the Company's depreciation, depletion and amortization expense due to the significant reduction in the Company's undeveloped natural gas reserves throughout 2012. 

2012 Drilling Results

Comstock reported on the results of its 2012 drilling program.  The Company spent $489.7 million in 2012 on its drilling activities and $35.1 million to acquire leases for future exploration and production and drilled 85 wells (54.2 net) and completed 74 wells (49.3 net).  As of December 31, 2012 the company also had five oil wells (3.8 net) in the process of being drilled in South Texas and West Texas. 

In the South Texas region, Comstock drilled 30 wells (20.5 net) during 2012, all of which were horizontal Eagle Ford shale wells.  During 2012, Comstock completed 28 horizontal Eagle Ford shale wells, which were put on production at an average per well initial production of 647 barrels of oil equivalent ("BOE") per day.  As of December 31, 2012, Comstock had six (3.8 net) Eagle Ford shale wells waiting on completion.  The six new Eagle Ford wells reported on this quarter averaged 682 BOE per day with the Gloria Wheeler A #2H, the Gloria Wheeler B #2H and the Cutter Creek A #1H in McMullen County having the highest initial production rates at 987, 872 and 765 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. 

In the West Texas region, the Company drilled 48 (30.5 net) wells in 2012, two (1.9 net) of which were horizontal Wolfcamp wells.  Of the wells drilled, Comstock completed 29 (26.3 net) operated wells in 2012.  These wells had an average per well initial production rate of 356 BOE per day.  Comstock also participated in 16 (3.1 net) non-operated Wolfbone vertical wells which had an average initial production rate of 369 BOE per day.  At December 31, 2012, Comstock had three wells (1.0 net) awaiting completion.  Since the last update, Comstock has completed eight additional wells in its Wolfbone field which had an initial production rate of 319 BOE per day.  Comstock's second horizontal well testing the Middle Wolfcamp shale, the Dale Evans 196 #2H, was disappointing with an initial rate of 212 BOE per day.  Comstock's third horizontal well targeting the Wolfcamp "A" shale, the Gaucho 15 #1H, was drilled to a vertical depth of 10,665 feet with a 6,837 foot lateral.  As of February 11, 2013, this well has been fracture stimulated with 18 stages and is being prepared for flow.   

Restatement of Previously Issued Unaudited Quarterly Financial Statements in 2012

On February 8, 2013, the Company's audit committee concluded that it is necessary for the Company to amend and restate its financial statements for each of the fiscal quarters ended March 31, June 30, and September 30, 2012 with respect to the accounting and disclosures for certain derivative financial transactions under Accounting Standards Codification Topic 815, Derivatives and Hedging ("ASC 815").  Management recently determined that the formal documentation it had prepared to support its initial hedge designations for effectiveness in connection with the Company's crude oil hedging program were not compliant with the technical documentation requirements to qualify for cash flow hedge accounting treatment in accordance with ASC 815, and as a result, the Company was not permitted to utilize hedge accounting treatment in the preparation of its financial statements.  The restatements eliminate hedge accounting treatment which had been applied in 2012 and reflect other immaterial adjustments to oil and gas sales.  Management intends to restate the quarterly results for the first three quarters of 2012 in connection with the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 2012.

Under ASC 815, the fair value of hedge contracts is recognized in the Company's consolidated balance sheet as an asset or liability, as the case may be, and the amounts received or paid under the hedge contracts are reflected in earnings during the period in which the underlying production occurs.  If the hedge contracts qualify for hedge accounting treatment, the fair value of the hedge contract is recorded in "accumulated other comprehensive income", and changes in the fair value do not affect net income in the period.  If the hedge contract does not qualify for hedge accounting treatment, the change in the fair value of the hedge contract is reflected in earnings during the period as unrealized gain or loss from derivatives.  Under the cash flow hedge accounting treatment used by the Company, the fair value of the hedge contracts were recognized in the consolidated balance sheet with the resulting unrealized gain or loss recorded initially in "accumulated other comprehensive income" and later reclassified through earnings when the hedged production impacted earnings.  As a result of the determination that the documentation failed to meet the requirements necessary to utilize cash flow hedge accounting treatment, the unrealized gain or loss should have been recorded in the consolidated statements of operations as a component of earnings.  The Company has also been recognizing realized gains and losses from its derivative financial instruments in oil and gas sales, and is reclassifying these amounts as a separate component of non-operating income and expense.

The Company will restate its consolidated unaudited quarterly financial statements for each of the quarters ended March 31, 2012, June 30, 2012 and September 30, 2012 as part of its Annual Report on Form 10-K for the fiscal year ended December 31, 2012.  The Company expects the restatement will have the following effects on its results of operations for the three months ended March 31, 2012, the three months ended June 30, 2012 and the three and nine months ended September 30, 2012:

 

Comstock Resources, Inc.

Restatement of Historical Financial Results

(Unaudited)

Three Months Ended

March 31, 2012

Three Months Ended

June 30, 2012

Three Months Ended

September 30, 2012

Nine Months Ended

September 30, 2012

As

Restated

As

 Reported

As

Restated

As

Reported

As

 Restated

As

 Reported

As

Restated

As

Reported

Oil and gas sales

$

111,689

$

110,335

$

100,736

$

104,690

$

112,895

$

117,129

$

325,320

$

332,154

Realized gain (loss) from derivatives

$

(1,354)

$

$

2,719

$

$

3,293

$

$

4,658

$

Unrealized gain (loss) from derivatives

$

(10,187)

$

$

34,797

$

$

(11,112)

$

$

13,498

$

Net income (loss)

$

1,375

$

6,859

$

7,165

$

(10,304)

$

(30,449)

$

(25,988)

$

(21,909)

$

(29,433)

Net income (loss)

per share:

Basic

$

0.03

$

0.14

$

0.15

$

(0.22)

$

(0.66)

$

(0.56)

$

(0.47)

$

(0.63)

Diluted

$

0.03

$

0.14

$

0.15

$

(0.22)

$

(0.66)

$

(0.56)

$

(0.47)

$

(0.63)

Comstock has planned a conference call for 9:30 a.m. Central Time on February 12, 2013, to discuss the operational and financial results for the fourth quarter of 2012.  Investors wishing to participate should visit the Company's website at www.comstockresources.com for a live web cast or dial 866-700-0161 (international dial-in use 617-213-8832) and provide access code 59409137 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 February 12, 2013 and will continue until 11:59 p.m. February 19, 2013.  To hear the replay, call 888-286-8010 (617-801-6888 if calling from outside the US).  The conference call ID number is 25712510.

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.

 

 

 

COMSTOCK RESOURCES, INC.

OPERATING RESULTS

(In thousands, except per share amounts)

Three Months Ended December 31,

Year Ended December 31,

2012

2011

2012

2011

Oil and gas sales

$

106,603

$

114,456

$

431,923

$

434,367

Gain on sale of oil and gas properties

24,271

Total revenues

106,603

114,456

456,194

434,367

Operating expenses:

Production taxes

3,148

1,440

14,021

3,670

Gathering and transportation

5,700

8,151

27,312

28,491

Lease operating

16,420

10,040

60,620

46,552

Exploration(a)

58,652

82

61,449

10,148

Depreciation, depletion and amortization

96,876

78,244

365,286

290,776

General and administrative

7,825

9,199

33,798

35,172

Impairment of oil and gas properties

20,018

60,817

25,368

60,817

Loss on sale of oil and gas properties

57

Total operating expenses

208,639

167,973

587,854

475,683

Operating loss

(102,036)

(53,517)

(131,660)

(41,316)

Other income (expenses):

Gain on sale of marketable securities

2,905

26,621

35,118

Realized gain from derivatives

5,108

9,766

Unrealized gain (loss) from derivatives

(2,008)

11,490

Other income

269

210

944

790

Interest expense

(19,274)

(12,006)

(64,575)

(42,688)

Total other income (expenses)

(15,905)

(8,891)

(15,754)

(6,780)

Loss before income taxes

(117,941)

(62,408)

(147,414)

(48,096)

Benefit from income taxes

39,790

21,274

47,354

14,624

Net loss

$

(78,151)

$

(41,134)

$

(100,060)

$

(33,472)

Net loss per share:

Basic

$

(1.68)

$

(0.89)

$

(2.16)

$

(0.73)

Diluted

$

(1.68)

$

(0.89)

$

(2.16)

$

(0.73)

Weighted average shares outstanding:

Basic

46,446

46,011

46,422

45,997

Diluted(b)

46,446

46,011

46,422

45,997

(a)

Includes impairments of unevaluated leases of $58.6 million and $61.3 million in the three months and year ended December 31, 2012, respectively.

(b)    

Diluted shares outstanding is the same as basic due to the net loss in the periods.

 

 

 

COMSTOCK RESOURCES, INC.

OPERATING RESULTS

(In thousands)

Three Months Ended December 31,

Year Ended December 31,

2012

2011

2012

2011

OPERATING CASH FLOW:

Net loss

$

(78,151)

$

(41,134)

$

(100,060)

$

(33,472)

Reconciling items: 

Deferred income taxes

(39,839)

(21,245)

(47,192)

(14,652)

Depreciation, depletion and amortization

96,876

78,244

365,286

290,776

Impairment of oil and gas properties

20,018

60,817

25,368

60,817

Dry hole costs and leasehold impairments

58,615

61,300

9,819

Loss (gain) on sale of assets

(2,905)

(50,892)

(35,061)

Unrealized loss (gain) from derivatives

2,008

(11,490)

Debt issuance cost and discount amortization

1,588

949

5,277

4,300

Stock-based compensation

3,539

4,074

13,728

15,032

Operating cash flow

64,654

78,800

261,325

297,559

Excess income taxes from stock-based compensation

20

1,701

612

(Increase) decrease in accounts receivable

7,973

(4,088)

11,975

(9,046)

(Increase) decrease  in other current assets

750

1,036

(4,309)

3,311

Decrease in accounts payable and accrued expenses

(36,866)

(8,393)

(8,463)

(7,532)

Net cash provided by operating activities

$

36,531

$

67,355

$

262,229

$

284,904

EBITDAX:

Net loss

$

(78,151)

$

(41,134)

$

(100,060)

$

(33,472)

Interest expense

19,274

12,006

64,575

42,688

Benefit from income taxes

(39,790)

(21,274)

(47,354)

(14,624)

Depreciation, depletion and amortization

96,876

78,244

365,286

290,776

Exploration

58,652

82

61,449

10,148

Impairment of oil and gas properties

20,018

60,817

25,368

60,817

Gain on sale of assets

(2,905)

(50,892)

(35,061)

Unrealized loss (gain) from derivatives

2,008

(11,490)

Stock-based compensation

3,539

4,074

13,728

15,032

EBITDAX

$

82,426

$

89,910

$

320,610

$

336,304

As of December 31,

2012

2011

BALANCE SHEET DATA:

Cash and cash equivalents

$

4,471

$

8,460

Marketable securities

12,312

47,642

Derivative financial instruments

11,651

459

Other current assets

48,712

56,529

Property and equipment, net

2,470,053

2,509,845

Other

19,944

16,949

Total assets

$

2,567,143

$

2,639,884

Accounts payable and accrued expenses

$

139,058

$

187,207

Long-term debt

1,324,383

1,196,908

Deferred income taxes

149,901

201,705

Other non-current liabilities

20,267

16,439

Stockholders' equity

933,534

1,037,625

Total liabilities and stockholders' equity

$

2,567,143

$

2,639,884

 

 

 

COMSTOCK RESOURCES, INC.

REGIONAL OPERATING RESULTS

(In thousands, except per unit amounts)

For the Three Months Ended December 31, 2012

For the Three Months Ended December 31, 2011

East Texas/

North

Louisiana

South

Texas

West

Texas

Other

Total

East Texas/

North

Louisiana

South

Texas

West

Texas

Other

Total

Oil production (Mbbls)

12

394

148

7

561

28

312

6

346

Gas production (MMcf)

15,340

1,833

254

496

17,923

20,177

2,659

595

23,431

Total production (MMcfe)

15,412

4,198

1,144

536

21,290

20,348

4,537

624

25,509

Oil sales

$

1,042

$

38,869

$

11,390

$

583

$

51,884

$

2,614

$

31,638

$

453

$

34,705

Hedging gains(a)

3,830

1,278

5,108

Total oil, including hedging

1,042

42,699

12,668

583

56,992

2,614

31,638

453

34,705

Natural gas sales

44,816

6,451

1,641

1,811

54,719

65,959

11,331

2,461

79,751

Total oil and gas sales and realized gain from derivatives

$

45,858

$

49,150

$

14,309

$

2,394

$

111,711

$

68,573

$

42,969

$

2,914

$

114,456

Average oil price (per barrel)

$

86.72

$

98.61

$

76.87

$

85.94

$

92.46

$

92.25

$

101.10

$

88.26

$

100.18

Average oil price including hedging (per barrel)

$

86.72

$

108.33

$

85.49

$

85.94

$

101.56

$

92.25

$

101.10

$

88.26

$

100.18

Average gas price (per Mcf)

$

2.92

$

3.52

$

6.46

$

3.65

$

3.05

$

3.27

$

4.26

$

4.14

$

3.40

Average price (per Mcfe)

$

2.98

$

10.79

$

11.39

$

4.47

$

5.01

$

3.37

$

9.47

$

4.67

$

4.49

Average price including hedging (per Mcfe)

$

2.98

$

11.71

$

12.51

$

4.47

$

5.25

$

3.37

$

9.47

$

4.67

$

4.49

Production taxes

$

407

$

1,992

$

627

$

122

$

3,148

$

(949)

$

2,228

$

161

$

1,440

Gathering and transportation

$

4,692

$

473

$

289

$

246

$

5,700

$

7,741

$

294

$

116

$

8,151

Lease operating

$

6,130

$

5,618

$

3,785

$

887

$

16,420

$

7,236

$

1,992

$

812

$

10,040

Production taxes (per Mcfe)

$

0.03

$

0.47

$

0.55

$

0.23

$

0.15

$

(0.05)

$

0.49

$

0.26

$

0.06

Gathering and transportation

(per Mcfe)

$

0.30

$

0.11

$

0.25

$

0.46

$

0.27

$

0.38

$

0.06

$

0.19

$

0.32

Lease operating (per Mcfe)

$

0.40

$

1.35

$

3.31

$

1.65

$

0.77

$

0.36

$

0.44

$

1.30

$

0.39

Oil and Gas Capital Expenditures:

Acquisitions

$

$

$

$

$

$

16,879

$

$

201,782

$

$

218,661

Exploratory leasehold

2,136

1,456

3,786

7,378

12,064

43,860

147,532

203,456

Development leasehold

218

58

276

420

420

Exploratory drilling

217

1,299

1,516

2,290

2,131

4,421

Development drilling

(59)

39,852

45,188

84,981

46,713

76,726

160

123,599

Other development

488

583

209

21

1,301

532

345

92

969

Total

$

3,000

$

43,248(b)

$

49,183

$

21

$

95,452(b)

$

78,898

$

123,062

$

349,314

$

252

$

551,526

(a)  

Reported as realized gain from derivatives in operating results.

(b)   

Net of reimbursements received of $8,685 under the Company's Eagle Ford shale joint venture.

 

 

 

COMSTOCK RESOURCES, INC.

REGIONAL OPERATING RESULTS

(In thousands, except per unit amounts)

For the Year Ended December 31, 2012

For the Year Ended December 31, 2011

East Texas/

North

Louisiana

South

Texas

West

Texas

Other

Total

East Texas/

North

Louisiana

South

Texas

West

Texas

Other

Total

Oil production (Mbbls)

81

1,679

517

32

2,309

117

697

24

838

Gas production (MMcf)

71,085

8,640

728

2,037

82,490

76,883

11,153

2,557

90,593

Total production (MMcfe)

71,574

18,712

3,830

2,229

96,345

77,585

15,338

2,699

95,622

Oil sales

$

7,756

$

170,242

$

42,701

$

3,165

$

223,864

$

10,614

$

67,523

$

2,107

$

80,244

Hedging gains(a)

7,422

2,344

9,766

Total oil, including hedging

7,756

177,664

45,045

3,165

233,630

10,614

67,523

2,107

80,244

Natural gas sales

170,254

26,923

4,408

6,474

208,059

290,028

51,789

12,306

354,123

Total oil and gas sales and realized gain from derivatives

$

178,010

$

204,587

$

49,453

$

9,639

$

441,689

$

300,642

$

119,312

$

14,413

$

434,367

Average oil price (per barrel)

$

95.27

$

101.41

$

82.60

$

98.66

$

96.95

$

90.74

$

96.81

$

88.63

$

95.73

Average oil price including hedging (per barrel)

$

95.27

$

105.83

$

87.14

$

98.66

$

101.18

$

90.74

$

96.81

$

88.63

$

95.73

Average gas price (per Mcf)

$

2.40

$

3.12

$

6.05

$

3.18

$

2.52

$

3.77

$

4.64

$

4.81

$

3.91

Average price (per Mcfe)

$

2.49

$

10.54

$

12.30

$

4.32

$

4.48

$

3.87

$

7.78

$

5.34

$

4.54

Average price including hedging (per Mcfe)