COMSTOCK RESOURCES INC

Previous wording

This report contains forward-looking statements that involve risks, uncertainties and assumptions that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 including those described under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025 (the "Annual Report"). All statements other than statements of historic facts contained, or incorporated by reference, in this report, may be forward-looking statements. Actual results may differ materially from those anticipated in our forward-looking statements due to many factors. Such forward-looking 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 we believe the expectations in such statements to be reasonable, there can be no assurance that such expectations will prove to be correct. You are cautioned not to place undue reliance on the forward-looking statements included in this report, which speak only as of the date made. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in our expectations with regard thereto or any change of events, conditions or circumstances on which any such statement was based, except as required by law. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in this report and in our Annual Report as well as with the Risk Factors contained in our Annual Report.

Current wording

This report contains forward-looking statements that involve risks, uncertainties and assumptions that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 including those described under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025 (the "Annual Report"). All statements other than statements of historic facts contained, or incorporated by reference, in this report, may be forward-looking statements. Actual results may differ materially from those anticipated in our forward-looking statements due to many factors. Such forward-looking 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 we believe the expectations in such statements to be reasonable, there can be no assurance that such expectations will prove to be correct. You are cautioned not to place undue reliance on the forward-looking statements included in this report, which speak only as of the date made. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in our expectations with regard thereto or any change of events, conditions or circumstances on which any such statement was based, except as required by law. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in this report and in our Annual Report as well as with the Risk Factors contained in our Annual Report.

Previous wording

Natural gas and oil sales of $419.0 million for the three months ended March 31, 2026 increased by $6.0 million (1%) as compared to $413.0 million for the first quarter of 2025. The increase was due to higher natural gas prices realized in the first quarter of 2026 as compared to the same period in 2025. The average realized price for our natural gas was $4.27 per thousand cubic feet ("Mcf"), which increased 19% from the average realized natural gas price in the first quarter of 2025. Our natural gas production for the first quarter of 2026 decreased 15% to 97.9 billion cubic feet ("Bcf") (1.1 Bcf per day). Natural gas production for the first quarter of 2025 was 115.0 Bcf (1.3 Bcf per day) and was sold at an average price of $3.58 per Mcf.

Current wording

Natural gas and oil sales of $288.2 million for the three months ended June 30, 2026 decreased by $51.7 million (15%) as compared to $340.0 million for the second quarter of 2025. The decrease was due to lower natural gas prices realized in the second quarter of 2026 as compared to the same period in 2025. The average realized price for our natural gas was $2.54 per thousand cubic feet ("Mcf"), which decreased 16% from the average realized natural gas price in the second quarter of 2025. Our natural gas production for the second quarter of 2026 increased 1% to 113.1 billion cubic feet ("Bcf") (1.2 Bcf per day). Natural gas production for the second quarter of 2025 was 112.2 Bcf (1.2 Bcf per day) and was sold at an average price of $3.02 per Mcf.

Previous wording

Gas service revenues of $166.5 million increased $66.6 million (67%) for the first quarter of 2026 from $99.9 million in the first quarter of 2025. The increases were primarily due to higher natural gas prices related to sales of natural gas purchased to utilize our excess transport capacity.

Current wording

Gas service revenues of $63.5 million decreased $66.8 million (51%) for the second quarter of 2026 from $130.3 million in the second quarter of 2025. Gas service revenues of $230.0 million decreased $0.2 million for the first six months of 2025 from $230.2 million for the first six months of 2025. The decreases were primarily due to lower natural gas prices related to sales of natural gas purchased to utilize our excess transport capacity.

Previous wording

Gas service expenses of $162.9 million increased $46.1 million (39%) for the first quarter of 2026 from $116.8 million in the first quarter of 2025. The increase was primarily due to higher natural gas prices related to purchases of third party natural gas for resale.

Current wording

Gas service expenses of $63.0 million decreased $63.7 million (50%) for the second quarter of 2026 from $126.7 million in the second quarter of 2025. Gas service expenses of $225.9 million decreased $17.6 million (7%) for the first six months of 2026 from $243.5 million for the first six months of 2025. The decreases were primarily due to lower natural gas prices and volumes related to purchases of third party natural gas for resale.

Previous wording

Depreciation, depletion and amortization ("DD&A") decreased $26.4 million to $141.5 million in the first quarter of 2026 from $167.9 million in the first quarter of 2025 due to lower natural gas production in the first quarter of 2026. Our DD&A per equivalent Mcf produced was $1.45 per Mcfe for the quarter ended March 31, 2026 which was comparable to $1.46 for the quarter ended March 31, 2025.

Current wording

Depreciation, depletion and amortization ("DD&A") increased $9.1 million to $167.4 million in the second quarter of 2026 from $158.4 million in the second quarter of 2025. Our DD&A per equivalent Mcf produced was $1.48 per Mcfe for the quarter ended June 30, 2026 as compared to $1.41 per Mcfe for the quarter ended June 30, 2025. The increase was due primarily to higher finding and development costs in 2026. DD&A decreased $17.3 million to $309.0 million for the first six months of 2026 from $326.3 million during the first six months of 2025. Our DD&A per equivalent Mcf produced was $1.46 per Mcfe for the six months ended June 30, 2026, which was comparable to $1.44 per Mcfe for the six months ended June 30, 2025.

Previous wording

We use derivative financial instruments as part of our price risk management program to protect our capital investments. During the quarter ended March 31, 2026, we had net gains related to our derivative financial instruments of $2.4 million, as compared to net losses on derivative financial instruments of $330.3 million during the quarter ended March 31, 2025, resulting from the decline in future natural gas prices since December 31, 2025. Realized net losses from our price risk management program were $80.4 million for the quarter ended March 31, 2026 as compared to realized net losses of $8.0 million for the quarter ended March 31, 2025.

Current wording

We use derivative financial instruments as part of our price risk management program to protect our capital investments. During the quarter ended June 30, 2026, we had net gains related to our derivative financial instruments of $44.4 million, as compared to net gains on derivative financial instruments of $235.8 million during the quarter ended June 30, 2025, resulting from the decrease in future natural gas prices since June 30, 2025. Realized net gains from our price risk management program were $43.3 million for the quarter ended June 30, 2026 as compared to realized net gains of $4.3 million for the quarter ended June 30, 2025. Net gains on derivative financial instruments were $46.8 million for the first six months of 2026 as compared to net losses of $94.5 million for the first six months of 2025, resulting from a decrease in future natural gas prices since December 31, 2025. Realized net losses from our price risk management program were $37.1 million for the first six months of 2026 as compared to realized net losses of $3.7 million for the first six months of 2025.

Previous wording

Interest expense was $53.1 million and $54.8 million for the quarters ended March 31, 2026 and 2025, respectively. The decrease in interest expense was due primarily to decreased borrowings on our bank credit facility.

Current wording

Interest expense was $55.0 million and $55.2 million for the quarters ended June 30, 2026 and 2025, respectively, and $108.1 million and $110.0 million for six months ended June 30, 2026 and 2025, respectively. The decrease in interest expense was due primarily to decreased borrowings on our bank credit facility.

Previous wording

Exploration expense was $9.3 million for the first quarter of 2026 as compared to $2.2 million for the first quarter of 2025, which was related to the acquisition of seismic data in our Western Haynesville area.

Current wording

Exploration expense was $4.4 million for the second quarter of 2026, and exploration expense was $13.8 million and $2.2 million for the six months ended June 30, 2026 and 2025, respectively, which were related to the acquisition of seismic data in our Western Haynesville area.

Previous wording

Income taxes for the quarters ended March 31, 2026 and 2025 were a provision of $12.0 million and a benefit of $143.3 million, respectively. Income taxes for the quarters ended March 31, 2026 and 2025 reflect an effective tax rate of 9.6% and 55.4%, respectively. The difference between the federal statutory tax rate of 21% and our effective rate is primarily attributable to research and development and other tax credits, release of valuation allowance on deferred tax assets, state income taxes, changes in certain nondeductible items and the income attributable to noncontrolling interest.

Current wording

Income taxes for the quarters ended June 30, 2026 and 2025 were a benefit of $2.8 million and a provision of $141.5 million, respectively. Income taxes for the six months ended June 30, 2026 and 2025 were a provision of $9.2 million and a benefit of $1.8 million, respectively. Income taxes for the quarters ended June 30, 2026 and 2025 reflect an effective tax rate of (23.3)% and 52.0%, respectively, and income taxes for the six months ended June 30, 2026 and 2025 reflect an effective tax rate of 6.7% and (13.2)%, respectively. The difference between the federal statutory tax rate of 21% and our effective rate is primarily attributable to research and development and other tax credits, release of valuation allowance on deferred tax assets, state income taxes, changes in certain nondeductible items and the income attributable to noncontrolling interest.

Previous wording

Cash flows from operating activities. Net cash provided by our operating activities increased $97.2 million (56%) to $272.0 million in the first three months of 2026 from $174.7 million in the same period in 2025. The increase was due primarily to higher natural gas prices.

Current wording

Cash flows from operating activities. Net cash provided by our operating activities decreased $80.1 million (15%) to $442.2 million in the first six months of 2026 from $522.3 million in the same period in 2025. The decrease was due primarily to lower natural gas production and lower realized natural gas prices.

Previous wording

We drilled 17 (15.3 net) wells and completed 13 (11.7 net) Haynesville and Bossier shale operated wells during the first three months of 2026. We currently expect to spend an additional $1.1 billion to $1.2 billion in the remaining nine months of 2026 on drilling, completion, infrastructure and other activity.

Current wording

We drilled 34 (30.9 net) wells and completed 29 (24.4 net) Haynesville and Bossier shale operated wells during the first six months of 2026. We currently expect to spend an additional $720 million to $820 million in the remaining six months of 2026 on drilling, completion, infrastructure and other activity.

Previous wording

As of March 31, 2026, we had $1.27 billion of liquidity, comprised of $1.15 billion of unused borrowing capacity under our bank credit facilities and $14.8 million of cash and cash equivalents on hand. $103 million of unused borrowing capacity under our PGS bank credit facility is restricted to PGS midstream activities. Our short and long-term capital requirements consist primarily of funding our development, exploration and midstream activities, acquisitions, payments of contractual obligations and debt service.

Current wording

As of June 30, 2026, we had $1.2 billion of liquidity, comprised of $1.1 billion of unused borrowing capacity under our bank credit facilities and $45.0 million of cash and cash equivalents on hand. $150 million of unused borrowing capacity under our PGS bank credit facility is restricted to PGS midstream activities. Our short and long-term capital requirements consist primarily of funding our development, exploration and midstream activities, acquisitions, payments of contractual obligations and debt service.

Previous wording

As of March 31, 2026, we had $350.0 million outstanding under the Comstock bank credit facility. Aggregate commitments under this bank credit facility are $1.5 billion, which matures on November 15, 2027. Borrowings under our bank credit facility are subject to a borrowing base that is currently set at $2.0 billion. The borrowing base is re-determined on a semi-annual basis and upon the occurrence of certain other events. Borrowings under the Comstock bank credit facility are secured by substantially all of our assets and those of our subsidiaries, except for PGS, and bear interest at our option at either adjusted SOFR plus 2.25% to 3.25% or an alternate base rate plus 1.25% to 2.25%, in each case depending on the utilization of the borrowing base. We also pay a commitment fee of 0.375% to 0.5%, which is dependent on the utilization of the borrowing base. Comstock's bank credit facility places certain restrictions upon our and our subsidiaries' ability to, among other things, incur additional indebtedness, pay cash dividends, repurchase common stock, make certain loans, investments and divestitures and redeem the senior notes. The only financial covenants are the maintenance of a leverage ratio of less than 3.5 to 1.0, and an adjusted current ratio of at least 1.0 to 1.0. We were in compliance with the covenants as of March 31, 2026.

Current wording

As of June 30, 2026, we had $545.0 million outstanding under the Comstock bank credit facility. Aggregate commitments under this bank credit facility are $1.5 billion, which matures on November 15, 2027. Borrowings under our bank credit facility are subject to a borrowing base that is currently set at $2.0 billion. The borrowing base is re-determined on a semi-annual basis and upon the occurrence of certain other events. Borrowings under the Comstock bank credit facility are secured by substantially all of our assets and those of our subsidiaries, except for PGS, and bear interest at our option at either adjusted SOFR plus 2.25% to 3.25% or an alternate base rate plus 1.25% to 2.25%, in each case depending on the utilization of the borrowing base. We also pay a commitment fee of 0.375% to 0.5%, which is dependent on the utilization of the borrowing base. Comstock's bank credit facility places certain restrictions upon our and our restricted subsidiaries' ability to, among other things, incur additional indebtedness, pay cash dividends, repurchase common stock, make certain loans, investments and divestitures and redeem the senior notes. The only financial covenants are the maintenance of a leverage ratio of less than 3.5 to 1.0, and an adjusted current ratio of at least 1.0 to 1.0. We were in compliance with the covenants as of June 30, 2026.

Previous wording

As of March 31, 2026, PGS had $47.0 million outstanding under a bank credit facility. Aggregate commitments under the PGS bank credit facility are $150 million, which matures on March 26, 2030. Borrowings under the PGS bank credit facility bear interest at our option, at either SOFR plus 2.5% to 3.5% or an alternate base rate plus 1.5% to 2.5%, in each case depending on a consolidated net leverage ratio. PGS also pays a commitment fee of 0.375% to 0.5%, which is dependent on the PGS consolidated net leverage ratio. The PGS bank credit facility contains financial covenants that require the maintenance of an interest coverage ratio of at least 2.5 to 1.0 and a consolidated net leverage ratio of less than 4.0 to 1.0.

Current wording

As of June 30, 2026, PGS had no borrowings outstanding under its bank credit facility. Aggregate commitments under the PGS bank credit facility are $150 million, which matures on March 26, 2030. Borrowings under the PGS bank credit facility bear interest at our option, at either SOFR plus 2.5% to 3.5% or an alternate base rate plus 1.5% to 2.5%, in each case depending on a consolidated net leverage ratio. PGS also pays a commitment fee of 0.375% to 0.5%, which is dependent on the PGS consolidated net leverage ratio. The PGS bank credit facility contains financial covenants that require the maintenance of an interest coverage ratio of at least 2.5 to 1.0 and a consolidated net leverage ratio of less than 4.0 to 1.0. PGS was in compliance with the covenants as of June 30, 2026.

Previous wording

At March 31, 2026, we had $1.5 billion in U.S. federal net operating loss ("NOL") carryforwards and $1.9 billion in certain state NOL carryforwards. As a result of the change of control in August 2018, our ability to use NOLs to reduce taxable income is limited. If we do not generate a sufficient level of taxable income prior to the expiration of the pre-2018 NOL carryforward periods, then we will lose the ability to apply those NOLs as offsets to future taxable income. We estimate that $720.7 million of the U.S. federal NOL carryforwards and $1.2 billion of the estimated state NOL carryforwards will expire unused.

Current wording

At June 30, 2026, we had $1.5 billion in U.S. federal net operating loss ("NOL") carryforwards and $2.0 billion in certain state NOL carryforwards. As a result of the change of control in August 2018, our ability to use NOLs to reduce taxable income is limited. If we do not generate a sufficient level of taxable income prior to the expiration of the pre-2018 NOL carryforward periods, then we will lose the ability to apply those NOLs as offsets to future taxable income. We estimate that $720.7 million of the U.S. federal NOL carryforwards and $1.2 billion of the estimated state NOL carryforwards will expire unused.

Previous wording

Our management’s discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities as of the date of the financial statements. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

Current wording

States ("GAAP"). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities as of the date of the financial statements. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

Previous wording

In Part II, Item 7 of our 2025 Annual Report, we disclosed our critical accounting policies and estimates, which are made in accordance with GAAP, involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operation. There have been no significant changes to our critical accounting policies and estimates during the three months ended March 31, 2026, as compared to those disclosed in the 2025 Annual Report.

Current wording

In Part II, Item 7 of the Annual Report, we disclosed our critical accounting policies and estimates, which are made in accordance with GAAP, involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operation. There have been no significant changes to our critical accounting policies and estimates during the six months ended June 30, 2026, as compared to those disclosed in the Annual Report.