crk-10q_20190930.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended September 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 001-03262

 

COMSTOCK RESOURCES, INC.

(Exact name of registrant as specified in its charter)

 

 

Nevada

 

94-1667468

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

5300 Town and Country Blvd., Suite 500, Frisco, Texas 75034

(Address of principal executive offices)

Telephone No.: (972) 668-8800

 

Securities registered pursuant to Section 12(b) of the Act:

 

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  

Accelerated filer  

Non-accelerated filer 

Smaller reporting  company  

Emerging growth company  

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes      No  

The number of shares outstanding of the registrant's common stock, par value $0.50, as of November 12, 2019 was 190,017,482.

 

 

 

 


 

COMSTOCK RESOURCES, INC.

QUARTERLY REPORT

For the Quarter Ended September 30, 2019

INDEX

 

 

Page

PART I. Financial Information

 

 

Item 1. Financial Statements (Unaudited):

 

Consolidated Balance Sheets as of September 30, 2019 (Successor) and December 31, 2018 (Successor)

 

4

 

Consolidated Statements of Operations  –  For the three months ended September 30, 2019 (Successor), for the period from August 14, 2018 through September 30, 2018 (Successor), for the period July 1, 2018 through August 13, 2018 (Predecessor), for the nine months ended September 30, 2019 (Successor), for the period August 14, 2018 through September 30, 2018 (Successor) and for the period January 1, 2018 through August 13, 2018 (Predecessor)

 

5

 

Consolidated Statements of Stockholders' Equity (Deficit) – For the three months and nine months ended September 30, 2019 (Successor), for the period from August 14, 2018 through September 30, 2018 (Successor) and for the period from January 1, 2018 through August 13, 2018 (Predecessor)

 

6

 

Consolidated Statements of Cash Flows – For the nine months ended September 30, 2019 (Successor), for the period from August 14, 2018 through September 30, 2018 (Successor) and for the period from January 1, 2018 through August 13, 2018 (Predecessor)

 

7

 

Notes to Consolidated Financial Statements

 

8

 

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

23

 

Item 3. Quantitative and Qualitative Disclosure About Market Risk

27

 

Item 4. Controls and Procedures

28

 

PART II. Other Information

 

 

Item 6. Exhibits

29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3


 

COMSTOCK RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

Successor

 

ASSETS

 

September 30,
2019

 

 

December 31,
2018

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

 

$

53,243

 

 

$

23,193

  

Accounts Receivable:

 

 

 

 

 

 

 

 

Oil and gas sales

 

 

97,750

 

 

 

87,611

  

Joint interest operations

 

 

23,282

 

 

 

9,175

  

From affiliates

 

 

13,635

 

 

 

 

Derivative Financial Instruments

 

 

62,277

 

 

 

15,401

 

Income Taxes Receivable

 

 

5,109

 

 

 

10,218

 

Other Current Assets

 

 

13,102

 

 

 

13,829

  

Total current assets

 

 

268,398

 

 

 

159,427

  

Property and Equipment:

 

 

 

 

 

 

 

 

Oil and gas properties, successful efforts method:

 

 

 

 

 

 

 

 

Proved

 

 

3,863,841

 

 

 

1,682,164

 

Unproved

 

 

421,239

 

 

 

191,929

 

Other

 

 

6,768

 

 

 

4,442

 

Accumulated depreciation, depletion and amortization

 

 

(374,838

)

 

 

(210,556

)

Net property and equipment

 

 

3,917,010

 

 

 

1,667,979

 

Goodwill

 

 

335,897

 

 

 

350,214

 

Income Taxes Receivable

 

 

5,109

 

 

 

10,218

 

Derivative Financial Instruments

 

 

21,983

 

 

 

 

Operating Lease Right-of-Use Assets

 

 

3,909

 

 

 

 

Other Assets

 

 

3

 

 

 

2

 

 

 

$

4,552,309

 

 

$

2,187,840

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts Payable

 

$

231,707

 

 

$

138,767

  

Accrued Expenses

 

 

155,756

 

 

 

68,086

 

Operating Leases

 

 

1,997

 

 

 

 

Total current liabilities

 

 

389,460

 

 

 

206,853

  

Long-term Debt

 

 

2,508,074

 

 

 

1,244,363

  

Deferred Income Taxes

 

 

188,218

 

 

 

161,917

  

Long-term Operating Leases

 

 

1,912

 

 

 

 

Reserve for Future Abandonment Costs

 

 

11,095

 

 

 

5,136

  

Other Noncurrent Liabilities

 

 

8,352

 

 

 

 

Total liabilities

 

 

3,107,111

 

 

 

1,618,269

  

Commitments and Contingencies

 

 

 

 

 

 

 

 

Mezzanine Equity:  

 

 

 

 

 

 

 

 

Preferred Stock — 5,000,000 shares authorized, 385,000 shares issued and outstanding at September 30, 2019:

 

 

 

 

 

 

 

 

Series A 10% Convertible Preferred Stock, 210,000 shares issued and outstanding

 

 

200,000

 

 

 

 

Series B 10% Convertible Preferred Stock, 175,000 shares issued and outstanding

 

 

175,000

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

Common stock — $0.50 par, 400,000,000 and 155,000,000 shares authorized, 185,524,301 and 105,871,064 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively

 

 

92,762

 

 

 

52,936

  

Additional paid-in capital

 

 

879,669

 

 

 

452,513

  

Accumulated earnings

 

 

97,767

 

 

 

64,122

 

Total stockholders' equity

 

 

1,070,198

 

 

 

569,571

 

 

 

$

4,552,309

 

 

$

2,187,840

  

 

The accompanying notes are an integral part of these statements.

 

 

4


 

COMSTOCK RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

Successor

 

 

Predecessor

 

 

Successor

 

 

Predecessor

 

 

 

Three Months Ended

September 30, 2019

 

 

For the Period from August 14, 2018 through September 30, 2018

 

 

For the Period from July 1, 2018 through

August 13, 2018

 

 

Nine Months Ended

September 30, 2019

 

 

For the Period from August 14, 2018 through September 30, 2018

 

 

For the Period from January 1, 2018 through

August 13, 2018

 

 

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas sales

 

$

193,506

 

 

$

36,393

 

 

$

32,089

 

 

$

375,589

 

 

$

36,393

 

 

$

147,897

 

Oil sales

 

 

30,938

 

 

 

33,730

 

 

 

499

 

 

 

103,852

 

 

 

33,730

 

 

 

18,733

 

Total oil and gas sales

 

 

224,444

 

 

 

70,123

 

 

 

32,588

 

 

 

479,441

 

 

 

70,123

 

 

 

166,630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production taxes

 

 

6,966

 

 

 

4,051

 

 

 

707

 

 

 

18,732

 

 

 

4,051

 

 

 

3,659

 

Gathering and transportation

 

 

23,414

 

 

 

3,450

 

 

 

3,109

 

 

 

41,346

 

 

 

3,450

 

 

 

11,841

 

Lease operating

 

 

29,111

 

 

 

7,016

 

 

 

3,418

 

 

 

58,448

 

 

 

7,016

 

 

 

21,139

 

Exploration

 

 

241

 

 

 

 

 

 

 

 

 

241

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

80,247

 

 

 

17,820

 

 

 

14,082

 

 

 

164,684

 

 

 

17,820

 

 

 

68,032

 

General and administrative

 

 

8,105

 

 

 

3,303

 

 

 

3,044

 

 

 

22,760

 

 

 

3,303

 

 

 

15,699

 

Loss (gain) on sale of oil and gas properties

 

 

 

 

 

(98

)

 

 

 

 

 

25

 

 

 

(98

)

 

 

35,438

 

Total operating expenses

 

 

148,084

 

 

 

35,542

 

 

 

24,360

 

 

 

306,236

 

 

 

35,542

 

 

 

155,808

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

76,360

 

 

 

34,581

 

 

 

8,228

 

 

 

173,205

 

 

 

34,581

 

 

 

10,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) from derivative financial instruments

 

 

24,858

 

 

 

(2,015

)

 

 

(83

)

 

 

31,945

 

 

 

(2,015

)

 

 

881

 

Other income

 

 

92

 

 

 

42

 

 

 

284

 

 

 

340

 

 

 

42

 

 

 

677

 

Transaction costs

 

 

(39,657

)

 

 

 

 

 

(2,549

)

 

 

(41,100

)

 

 

 

 

 

(2,866

)

Interest expense

 

 

(51,015

)

 

 

(14,845

)

 

 

(22,140

)

 

 

(107,434

)

 

 

(14,845

)

 

 

(101,203

)

Total other income (expenses)

 

 

(65,722

)

 

 

(16,818

)

 

 

(24,488

)

 

 

(116,249

)

 

 

(16,818

)

 

 

(102,511

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

10,638

 

 

 

17,763

 

 

 

(16,260

)

 

 

56,956

 

 

 

17,763

 

 

 

(91,689

)

Provision for income taxes

 

 

(3,847

)

 

 

(3,940

)

 

 

(605

)

 

 

(15,183

)

 

(3,940

)

 

 

(1,065

)

Net income (loss)

 

 

6,791

 

 

 

13,823

 

 

 

(16,865

)

 

 

41,773

 

 

 

13,823

 

 

 

(92,754

)

Preferred stock dividends

 

 

(8,128

)

 

 

 

 

 

 

 

 

(8,128

)

 

 

 

 

 

 

Net income (loss) available
to common stockholders

 

$

(1,337

)

 

$

13,823

 

 

$

(16,865

)

 

$

33,645

 

 

$

13,823

 

 

$

(92,754

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.01

)

 

$

0.13

 

 

$

(1.09

)

 

$

0.26

 

 

$

0.13

 

 

$

(6.08

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

171,487

 

 

 

105,448

 

 

 

15,468

 

 

 

127,709

 

 

 

105,448

 

 

 

15,262

 

Diluted

 

 

171,487

 

 

 

105,463

 

 

 

15,468

 

 

 

127,709

 

 

 

105,463

 

 

 

15,262

 

 

 

 

The accompanying notes are an integral part of these statements.

 

 

5


 

COMSTOCK RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

(Unaudited)

 

 

 

 

Common
Stock
(Shares)

 

  

Common
Stock –
Par Value

 

  

Additional
Paid-in
Capital

 

  

Accumulated Earnings

 

  

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Successor Company:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2019

 

 

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

 

Stock-based compensation

 

 

74

 

 

 

37

 

 

 

586

 

 

 

 

 

 

623

 

Net income

 

 

 

 

 

 

 

 

 

 

 

21,407

 

 

 

21,407

 

Balance at June 30, 2019

 

 

105,942

 

 

 

52,971

 

 

 

453,749

 

 

 

99,104

 

 

 

605,824

 

Issuance of common stock

 

 

78,833

 

 

 

39,416

 

 

 

428,392

 

 

 

 

 

 

467,808

 

Stock-based compensation

 

 

780

 

 

 

391

 

 

 

697

 

 

 

 

 

 

1,088

 

Income tax withholdings related to equity awards

 

 

(31

)

 

 

(16

)

 

 

(151

)

 

 

 

 

 

(167

)

Jones contribution adjustment

 

 

 

 

 

 

 

 

(1,969

)

 

 

 

 

 

(1,969

)

Equity issuance costs

 

 

 

 

 

 

 

 

(1,049

)

 

 

 

 

 

(1,049

)

Net income

 

 

 

 

 

 

 

 

 

 

 

6,791

 

 

 

6,791

 

Payment of preferred dividends

 

 

 

 

 

 

 

 

 

 

 

(8,128

)

 

 

(8,128

)

Balance at September 30, 2019

 

 

185,524

 

 

$

92,762

 

 

$

879,669

 

 

$

97,767

 

 

$

1,070,198

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common
Stock
(Shares)

 

  

Common
Stock –
Par Value

 

 

Common

Stock

Warrants

 

  

Additional
Paid-in
Capital

 

  

Accumulated Earnings (Deficit)

 

  

Total

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Predecessor Company:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2018

 

15,428

 

 

$

7,714

 

 

$

3,557

 

 

$

546,696

 

 

$

(927,239

)

 

$

(369,272

)

Stock-based compensation

 

523

 

 

 

261

 

 

 

 

 

 

1,340

 

 

 

 

 

 

1,601

 

Income tax withholdings related to equity awards

 

(53

)

 

 

(26

)

 

 

 

 

 

(339

)

 

 

 

 

 

(365

)

Common stock warrants exercised

 

260

 

 

 

130

 

 

 

(2,228

)

 

 

2,098

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(41,886

)

 

 

(41,886

)

Balance at March 31, 2018

 

16,158

 

 

 

8,079

 

 

 

1,329

 

 

 

549,795

 

 

 

(969,125

)

 

 

(409,922

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

1,508

 

 

 

 

 

 

1,508

 

Income tax withholdings related to equity awards

 

 

 

 

 

 

 

 

 

 

(4

)

 

 

 

 

 

(4

)

Common stock warrants exercised

 

103

 

 

 

52

 

 

 

(888

)

 

 

836

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(34,003

)

 

 

(34,003

)

Balance at June 30, 2018

 

16,261

 

 

 

8,131

 

 

 

441

 

 

 

552,135

 

 

 

(1,003,128

)

 

 

(442,421

)

Stock-based compensation

 

100

 

 

 

50

 

 

 

 

 

 

753

 

 

 

 

 

 

803

 

Common stock warrants exercised

 

16

 

 

 

7

 

 

 

(131

)

 

 

124

 

 

 

 

 

 

 

Common stock issued for debt conversions

 

2

 

 

 

1

 

 

 

 

 

 

28

 

 

 

 

 

 

29

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,865

)

 

 

(16,865

)

Balance at August 13, 2018

 

16,379

 

 

$

8,189

 

 

$

310

 

 

$

553,040

 

 

$

(1,019,993

)

 

$

(458,454

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Successor Company:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Successor common stock

 

16,379

 

 

$

8,189

 

 

$

310

 

 

$

132,032

 

 

$

 

 

$

140,531

 

Vesting of equity awards

 

1,029

 

 

 

514

 

 

 

 

 

 

8,312

 

 

 

 

 

 

8,826

 

Income tax withholdings related to equity awards

 

(547

)

 

 

(272

)

 

 

 

 

 

(4,423

)

 

 

 

 

 

(4,695)

 

Jones contribution

 

88,571

 

 

 

44,286

 

 

 

 

 

 

318,406

 

 

 

 

 

 

362,692

 

Stock-based compensation

 

423

 

 

 

211

 

 

 

 

 

 

118

 

 

 

 

 

 

329

 

Stock issuance costs

 

 

 

 

 

 

 

 

 

 

(395

)

 

 

 

 

 

(395

)

Common stock warrants exercised and expired

 

24

 

 

 

12

 

 

 

(310

)

 

 

298

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

13,823

 

 

 

13,823

 

Balance at September 30, 2018

 

105,879

 

 

$

52,940

 

 

$

 

 

$

454,348

 

 

$

13,823

 

 

$

521,111

 

 

 

 

 

 

 

The accompanying notes are an integral part of these statements.

 

6


 

COMSTOCK RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Successor

 

 

Predecessor

 

 

 

Nine Months Ended September 30, 2019

 

 

For the Period from August 14, 2018 through

September 30, 2018

 

 

For the Period from January 1, 2018 through August 13, 2018

 

 

 

(In thousands)

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

41,773

 

 

$

13,823

 

 

$

(92,754

)

Adjustments to reconcile net income (loss) to net cash provided
by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

15,205

 

 

 

3,883

 

 

 

1,052

 

Loss (gain) on sale of oil and gas properties

 

 

25

 

 

 

(98

)

 

 

35,438

 

Depreciation, depletion and amortization

 

 

164,684

 

 

 

17,820

 

 

 

68,032

 

(Gain) loss on derivative financial instruments

 

 

(31,945

)

 

 

2,015

 

 

 

(881

)

Cash settlements of derivative financial instruments

 

 

33,382

 

 

 

191

 

 

 

2,842

 

Amortization of debt discount and issuance costs

 

 

9,206

 

 

 

822

 

 

 

29,457

 

Interest paid in-kind

 

 

 

 

 

 

 

 

25,004

 

Stock-based compensation

 

 

2,359

 

 

 

329

 

 

 

3,912

 

Decrease (increase) in accounts receivable

 

 

48,404

 

 

 

(44,884

)

 

 

2,834

 

Decrease (increase) in other current assets

 

 

7,137

 

 

 

(1,326

)

 

 

337

 

(Decrease) increase in accounts payable and accrued expenses

 

 

(7,424

)

 

 

11,034

 

 

 

10,462

 

Net cash provided by operating activities

 

 

282,806

 

 

 

3,609

 

 

 

85,735

 

 

Cash Flows From Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(308,742

)

 

 

(59,017

)

 

 

(150,106

)

Acquisition of Covey Park Energy LLC, net of cash acquired

 

 

(693,869

)

 

 

 

 

 

 

Prepaid drilling costs

 

 

9,319

 

 

 

(4,768

)

 

 

(3,692

)

Proceeds from sale of oil and gas properties

 

 

390

 

 

 

13,739

 

 

 

103,593

 

Net cash used for investing activities

 

 

(992,902

)

 

 

(50,046

)

 

 

(50,205

)

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings under bank credit facility

 

 

887,000

 

 

 

450,000

 

 

 

865,577

 

Repayments

 

 

(72,000

)

 

 

(1,291,352

)

 

 

(49,679

)

Repayments of Covey Park Energy LLC outstanding borrowings and preferred equity

 

 

(533,390

)

 

 

 

 

 

 

Issuance of common stock

 

 

300,000

 

 

 

 

 

 

 

Issuance of Series B Convertible Preferred Stock

 

 

175,000

 

 

 

 

 

 

 

Preferred stock dividends paid

 

 

(8,128

)

 

 

 

 

 

 

Jones contribution

 

 

 

 

 

36,365

 

 

 

 

Debt and stock issuance costs

 

 

(8,169

)

 

 

(6,288

)

 

 

(18,127

)

Income taxes related to equity awards

 

 

(167

)

 

 

(4,695

)

 

 

(369

)

Net cash provided by (used in) financing activities

 

 

740,146

 

 

 

(815,970

)

 

 

797,402

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

30,050

 

 

 

(862,407

)

 

 

832,932

 

Cash and cash equivalents, beginning of period

 

 

23,193

 

 

 

894,187

 

 

 

61,255

 

Cash and cash equivalents, end of period

 

$

53,243

 

 

$

31,780

 

 

$

894,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these statements.

 

 

7


 

COMSTOCK RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(Unaudited)

 

 

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –

Basis of Presentation

These unaudited consolidated financial statements include the accounts of Comstock Resources, Inc. and its wholly-owned subsidiaries (collectively, "Comstock" or the "Company").  In management's opinion, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of Comstock as of September 30, 2019, and the related results of operations and cash flows for the Predecessor and Successor periods being presented.  Net income (loss) and comprehensive income (loss) are the same in all periods presented.  All adjustments are of a normal recurring nature unless otherwise disclosed.

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to those rules and regulations, although Comstock believes that the disclosures made are adequate to make the information presented not misleading. These unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in Comstock's Annual Report on Form 10-K for the year ended December 31, 2018.

The results of operations for the period through September 30, 2019 are not necessarily an indication of the results expected for the full year.

Jones Contribution

On August 14, 2018, Arkoma Drilling, L.P. and Williston Drilling, L.P. (collectively, the "Jones Partnerships") contributed certain oil and gas properties in North Dakota and Montana (the "Bakken Shale Properties") in exchange for 88,571,429 newly issued shares of common stock representing 84% of the Company's then outstanding common stock (the "Jones Contribution"). The Jones Partnerships are wholly owned and controlled by Dallas businessman Jerry Jones and his children (collectively, the "Jones Group").  

The Company assessed the Bakken Shale Properties to determine whether they met the definition of a business under US generally accepted accounting principles, determining that they did not meet the definition of a business. As a result, the Jones Contribution was not accounted for as a business combination. Upon the issuance of the shares of Comstock common stock, the Jones Group obtained control over Comstock through their ownership of the Jones Partnerships. Through the Jones Partnerships, the Jones Group owns a majority of the voting common stock as well as the ability to control the composition of the majority of the board of directors of Comstock. As a result of the change of control that occurred upon the issuance of the common stock, the Jones Group controls Comstock and, thereby, continues to control the Bakken Shale Properties.

Accordingly, the basis of the Bakken Shale Properties recognized by Comstock was the historical basis of the Jones Group. The historical cost basis of the Bakken Shale Properties contributed was $397.6 million, which was comprised of $554.3 million of capitalized costs less $156.7 million of accumulated depletion, depreciation and amortization.  The change in control of Comstock resulted in a new basis for Comstock as the Company elected to apply pushdown accounting pursuant to ASC 805, Business Combinations. The new basis was pushed down to Comstock for financial reporting purposes, resulting in Comstock's assets, liabilities and equity accounts being recognized at fair value upon the closing of the Jones Contribution.

References to "Successor" or "Successor Company" relate to the financial position and results of operations of the Company subsequent to August 13, 2018.  Reference to "Predecessor" or "Predecessor Company" relate to the financial position and results of operations of the Company on or prior to August 13, 2018. The Company's consolidated financial statements and related footnotes are presented with a black line division which delineates the lack of comparability between amounts presented after August 13, 2018 and dates prior thereto.

 


8


 

The following table represents the allocation of fair value related to the assets acquired and the liabilities assumed after giving consideration for final purchase accounting adjustments based on the fair value of Comstock:

 

 

(In thousands)

 

 

 

 

 

 

Fair Value of Comstock's Common Stock

 

$

149,357

 

 

 

 

 

 

Fair Value of Liabilities Assumed –

 

 

 

 

Current Liabilities

 

 

180,452

 

Long-Term Debt

 

 

2,059,560

 

Deferred Income Taxes

 

 

49,391

 

Reserve for Future Abandonment Costs

 

 

4,440

 

Net Liabilities Assumed

 

 

2,293,843

 

 

 

 

 

 

Fair Value of Assets Acquired –

 

 

 

 

Current Assets

 

 

936,026

 

Oil and Gas Properties

 

 

1,147,749

 

Other Property & Equipment

 

 

4,440

 

Income Taxes Receivable

 

 

19,086

 

Other Assets

 

 

2

 

Total Assets

 

 

2,107,303

 

Goodwill

 

$

335,897

 

The goodwill that was recognized was primarily attributable to the excess of the fair value of Comstock's common stock over the identifiable assets acquired net of liabilities assumed, measured in accordance with generally accepted accounting principles in the United States. The fair value of oil and gas properties, a Level 3 measurement, was determined using discounted cash flow valuation methodology.  Key inputs to the valuation included average oil prices of $79.72 per barrel, average natural gas prices of $3.87 per thousand cubic feet and discount factors of 10% - 25%. The combination of the Bakken Shale Properties with Comstock's Haynesville shale properties results in a Company with adequate resources and liquidity to fully exploit its Haynesville/Bossier shale asset base and to continue to expand its opportunity set with future acquisitions and leasing activity in the basin.

During the quarter ended September 30, 2019, the Company finalized the deferred income taxes that were related to the Jones Contribution.  Deferred income taxes and goodwill were reduced by $14.3 million in the final valuation.  

Covey Park Acquisition

On July 16, 2019, Comstock acquired Covey Park Energy LLC ("Covey Park") for total consideration of $700.0 million of cash, the issuance of Series A Convertible Preferred Stock with a redemption value of $210.0 million, and the issuance of 28,833,000 shares of common stock (the "Covey Park Acquisition").  In addition to the consideration paid, Comstock assumed $625.0 million of Covey Park's 7.5% senior notes, repaid $380.0 million of Covey Park's then outstanding borrowings under its bank credit facility and redeemed all of Covey Park's preferred equity for $153.4 million. Based on the fair value of the preferred stock issued and the closing price of the Company's common stock of $5.82 per share on July 16, 2019, the transaction was valued at approximately $2.2 billion.  Covey Park's operations are focused primarily in the Haynesville / Bossier shale in East Texas and North Louisiana.

Funding for the Covey Park Acquisition was provided by the sale of 50.0 million newly issued shares of common stock for $300.0 million and 175,000 shares of newly issued Series B Convertible Preferred Stock for $175.0 million to the Company's majority stockholder and by borrowings under Comstock's amended and restated bank credit facility and cash on hand.

In connection with the Covey Park Acquisition, Comstock incurred $41.1 million of advisory and legal fees and other acquisition-related costs. These acquisition costs are included in transaction costs in the Company's consolidated statements of operations.  

The transaction has been accounted for as a business combination, using the acquisition method.  Certain information to finalize the purchase price is not yet available, including the final tax return of Covey Park.  The Company expects to complete the purchase price allocation within the twelve month period following the acquisition date, during which time the value of the net assets and liabilities acquired may be revised as appropriate. The following table presents the Company's preliminary purchase price allocation of the assets acquired and liabilities assumed based on their fair values as of the acquisition date:

 


9


 

 

 

 

(In thousands)

 

 

 

 

 

 

Consideration:

 

 

 

 

Cash Paid

 

$

700,000

 

Fair Value of Common Stock Issued

 

 

167,808

 

Fair Value of Series A Preferred Stock Issued

 

 

200,000

 

Total Consideration

 

 

1,067,808

 

 

 

 

 

 

Liabilities Assumed:

 

 

 

 

Accounts Payable and Accrued Liabilities

 

 

129,622

 

Derivative Financial Instruments

 

 

388

 

Other Current Liabilities

 

 

9,930

 

Long Term Debt

 

 

826,625

 

Covey Park Preferred Equity

 

 

153,390

 

Non-current Derivative Financial Instruments

 

 

186

 

Asset Retirement Obligations

 

 

5,374

 

Deferred Income Taxes

 

 

23,466

 

Other Non-current Liabilities

 

 

9,893

 

Liabilities Assumed

 

 

1,158,874

 

Total Consideration and Liabilities Assumed

 

$

2,226,682

 

 

 

 

 

 

Assets Acquired:

 

 

 

 

Cash and Cash Equivalents

 

$

6,131

 

Accounts Receivable

 

 

86,285

 

Current Derivative Financial Instruments

 

 

51,004

 

Other Current Assets

 

 

5,511

 

Proved Oil and Natural Gas Properties

 

 

1,818,413

 

Unproved Oil and Natural Gas Properties

 

 

237,210

 

Other Property, Plant and Equipment

 

 

2,262

 

Non-current Derivative Financial Instruments

 

 

19,866

 

Total Assets Acquired

 

$

2,226,682

 

The Series A Convertible Preferred Stock was issued with a face value of $210.0 million.  Management retained a third-party valuation firm to assess the fair value of the preferred stock.  A yield methodology using Level 2 inputs of the Company's publicly traded debt, including the assumption of Covey Park's 7.5% senior notes, resulted in a fair value of $200.0 million.

The fair values determined for accounts receivable, accounts payable, accrued drilling costs and other current liabilities were equivalent to the carrying value due to their short-term nature.

The fair value of the proved and unproved oil and natural gas properties was derived from estimated future discounted net cash flows, a Level 3 measurement, based on existing production curves and timing of development of those properties. The key factors used in deriving the estimated future cash flows include estimated recoverable reserves, production rates, future operating and development costs, and future commodity prices. Key inputs to the valuation included average oil prices of $74.80 per barrel and average natural gas prices of $3.32 per Mcf utilizing a combination of third-party price estimates and management price forecasts as of the acquisition date.  The resulting estimated future cash flows from the acquired assets were discounted at rates ranging from 10% - 25% depending on risk characteristics of reserve categories acquired. Management utilized the assistance of an independent reserve firm and internal resources to estimate the fair value of the oil and natural gas properties.

The fair value measurements of long-term debt were estimated based on market prices and represent Level 2 inputs. The fair value measurements of derivative instruments assumed were determined based on fair value measurements consistent with managements valuation methodologies including implied market volatility, contract terms and prices and discount factors as of the close date.  These inputs represent Level 2 inputs. The fair values of commodity derivative instruments in an asset position include a measure of counterparty nonperformance risk and the derivative instruments in a liability position include a measure of the Company's own nonperformance risk, each based on the current published credit default swap rates.

The fair value of the asset retirement obligations of $5.4 million is included in the oil and natural gas properties with the corresponding liability in the table above. The fair value was based on a discounted cash flow model that included assumptions of current abandonment costs, inflation rates, discount rates and timing of actual abandonment and restoration activities. Due to the inputs and significant assumptions associated with the estimation of asset retirement obligations, the estimates made by management represent Level 3 inputs.

  

10


 

The Covey Park Acquisition qualified as a tax free merger whereby the Company acquired carryover tax basis in Covey Park's assets and liabilities, adjusted for differences between the purchase price allocated to the assets acquired and liabilities assumed based on the fair value and the carryover tax basis.

The Company's results of operations from the closing date on July 16, 2019 through September 30, 2019 include approximately $117.2 million of operating revenues and approximately $20.6 million of operating income, excluding general and administrative and interest expenses, attributable to the Covey Park assets.

Pro forma Results

The pro forma condensed combined financial information for the three and nine months ended September 30, 2019 gives effect to the Covey Park Acquisition as if the acquisition had occurred on January 1, 2019. The pro forma condensed combined financial information for the three and nine months ended September 30, 2018 give effect to the Covey Park Acquisition and the Jones Contribution as if the transactions had occurred on January 1, 2018. The unaudited pro forma information reflects adjustments for the issuance of the Company's common stock and preferred stock, debt incurred in connection with the transaction, impact of the fair value of properties acquired and related depletion other adjustments the Company believes are reasonable for the pro forma presentation.

In addition, the pro forma earnings exclude acquisition-related costs. The unaudited pro forma results do not reflect any cost savings or other synergies that may arise in the future.

 

 

 

Pro Forma
Three Months
Ended
September 30, 2019

 

 

Pro Forma
Three Months
Ended
September 30, 2018

 

 

Pro Forma
Nine Months
Ended
September 30, 2019

 

 

Pro Forma
Nine Months
Ended
September 30, 2018

 

 

 

(In thousands, except per share amount)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

247,192

 

 

$

293,266

 

 

$

858,042

 

 

$

790,653

 

Net income

 

$

36,755

 

 

$

54,242

 

 

$

201,338

 

 

$

92,037

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.15

 

 

$

0.24

 

 

$

0.93

 

 

$

0.34

 

Diluted

 

$

0.13

 

 

$

0.19

 

 

$

0.72

 

 

$

0.33

 

 

Subsequent Event

On November 1, 2019, the Company acquired a privately-held limited liability company which owns oil and gas properties in North Louisiana that are prospective for Haynesville and Bossier shale development in exchange for 4,500,000 newly issued shares of common stock.  The properties acquired were producing 12 million cubic feet of natural gas and include approximately 3,000 net acres with 12.7 net future drilling locations.

 

Property and Equipment

The Company follows the successful efforts method of accounting for its oil and natural gas properties. Costs incurred to acquire oil and gas leasehold are capitalized.

In April 2018, Comstock completed the sale of its producing Eagle Ford shale oil and gas properties in McMullen, LaSalle, Frio, Atascosa, Wilson, and Karnes counties, Texas for $106.4 million. During the three and nine months ended September 30, 2018, the Company recognized a loss on sale of oil and gas properties of $35.4 million to reduce the carrying value of these assets held for sale to their fair value less costs to sell.

11


 

Results of operations for properties that were sold in 2018 were as follows:

 

 

 

Predecessor

 

 

 

For the Period from July 1, 2018 through August 13, 2018

 

 

For the Period from January 1, 2018 through August 13, 2018

 

 

 

(In thousands)

 

Total oil and gas sales

 

$

 

 

$

17,747

 

Total operating expenses(1)

 

 

 

 

 

(6,134

)

Operating income

 

$

 

 

$

11,613

 

 

 

 

 

(1)

Includes direct operating expenses, depreciation, depletion and amortization and exploration expense and excludes interest and general and administrative expense.  No depreciation, depletion and amortization expense has been provided for subsequent to the date the assets were designated as held for sale.

 

The Company assesses the need for an impairment of the capitalized costs for its proved oil and gas properties on a property basis.  No impairments were recognized to adjust the carrying value of the Company's proved oil and gas properties during any of the periods presented. Unproved oil and gas properties are also periodically assessed and any impairment in value is charged to expense. The costs of unproved properties are transferred to oil and gas properties and amortized on an equivalent unit-of-production basis as wells are drilled on these properties.

The Company determines the fair values of its oil and gas properties using a discounted cash flow model and proved and risk-adjusted probable oil and natural gas reserves.  Undrilled acreage can also be valued based on sales transactions in comparable areas.  Significant Level 3 assumptions associated with the calculation of discounted future cash flows included in the cash flow model include management's outlook for oil and natural gas prices, production costs, capital expenditures, and future production as well as estimated proved oil and gas reserves and risk-adjusted probable oil and natural gas reserves.  Management's oil and natural gas price outlook is developed based on third-party longer-term price forecasts as of each measurement date.  The expected future net cash flows are discounted using an appropriate discount rate in determining a property's fair value.

It is reasonably possible that the Company's estimates of undiscounted future net cash flows attributable to its oil and gas properties may change in the future.  The primary factors that may affect estimates of future cash flows include future adjustments, both positive and negative, to proved and appropriate risk-adjusted probable oil and gas reserves, results of future drilling activities, future prices for oil and natural gas, and increases or decreases in production and capital costs.  As a result of these changes, there may be future impairments in the carrying values of these or other properties.

Goodwill

The Company had goodwill of $350.2 million as of December 31, 2018 that was recorded in connection with the Jones Contribution. Goodwill represents the excess of purchase price over fair value of net tangible and identifiable intangible assets. The Company is not required to amortize goodwill as a charge to earnings; however, the Company is required to conduct a review of goodwill annually and whenever indications of impairment exist.

During the three months ended September 30, 2019, the Company finalized the valuation of the Company's assets and liabilities in connection with the Jones Contribution, which reduced goodwill to $335.9 million as of September 30, 2019.

Leases

On January 1, 2019, the Company adopted Financial Accounting Standards Board Accounting Standards Codification 842, Leases ("ASC 842").  Comstock adopted this standard using the modified retrospective method of adoption, and it applied ASC 842 only to contracts that were not completed as of January 1, 2019. Upon adoption, there were no adjustments to the opening balance of stockholders' equity.

In adopting ASC 842, the Company utilized certain practical expedients available under ASC 842, including election to not apply the recognition requirements to short term leases (defined as leases with an initial lease term of twelve months or less which do not contain a purchase option), election to not separate lease and non-lease components, and election to not reassess certain land easements in existence prior to January 1, 2019.

Upon adoption of ASC 842, the Company recognized right-of-use lease assets of $5.2 million related to its corporate office lease, certain office equipment and leased vehicles used in oil and gas operations with corresponding short-term and long-term liabilities of $2.0 million and $3.2 million, respectively.  The beginning value of the lease assets and liabilities was determined based upon discounted future minimum cash flows contained within each of the respective contracts.  The Company utilized a discount rate of 5.0% in computing these discounted net future cash flows.  Recognition of these assets and liabilities was not material to the Company's consolidated balance sheet.  Adoption of ASC 842 did not impact our consolidated statements of operations, cash flows or stockholders' equity.

 

12


 

The Company determines if contracts contain a lease at inception of the contract. To the extent that contract terms representing a lease are identified, leases are identified as being either an operating lease or a finance-type lease. Comstock currently has no finance-type leases. Right-of-use lease assets representing the Company's right to use an underlying asset for the lease term and the related lease liabilities represent our obligation to make lease payments under the terms of the contracts.  Short-term leases that have an initial term of one year or less are not capitalized; however, amounts paid for those leases are included as part of its lease cost disclosures. Short-term lease costs exclude expenses related to leases with a lease term of one month or less. Leases applicable to our oil or natural gas operations that include the right to explore for and develop oil and natural gas reserves and the related rights to use the land associated with those leases, are not within the scope of ASC 842.

Comstock contracts for a variety of equipment used in its oil and natural gas exploration and development operations.  Contract terms for this equipment vary broadly, including the contract duration, pricing, scope of services included along with the equipment, cancellation terms, and rights of substitution, among others. In applying the accounting guidance within ASC 842, the Company has determined that its corporate office lease, certain office equipment, its vehicles leased for use in operations, and its drilling rigs meet the criteria of an operating lease which require recognition upon adoption of ASC 842.

The Company's drilling operations routinely change due to changes in commodity prices, demand for oil and natural gas, and the overall operating and economic environment.  Comstock accordingly manages the terms of its contracts for drilling rigs so as to allow for maximum flexibility in responding to these changing conditions.  The Company's rig contracts are presently either for periods of less than one year, or they are on terms that provide for cancellation with thirty days advance notice without a specified expiration date.  The Company has elected to apply the practical expedient available under ASC 842 for short-term leases and not recognize right-of-use lease assets for these rig contracts.  The costs associated with drilling rig operations are accounted for under the successful efforts method, which generally require that these costs be capitalized as part of our proved oil and natural gas properties on our balance sheet unless they are incurred on exploration wells that are unsuccessful, in which case they are charged to exploration expense.

Lease costs recognized during the three months and nine months ended September 30, 2019 were as follows:

  

 

Successor

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2019

 

 

 

 

(In thousands)

 

Operating lease cost included in general and administrative expense

 

$

411

 

 

$

1,234

  

Operating lease cost included in lease operating expense

 

 

99

 

 

 

291

  

Short-term lease cost (drilling rig costs included in proved oil and gas properties)

 

 

19,304

 

 

 

39,487

  

 

 

$

19,814

 

 

$

41,012

  

Cash payments for operating leases associated with right-of-use assets included in cash provided by operating activities were $0.5 million and $1.5 million for the three months and nine months ended September 30, 2019, respectively.

As of September 30, 2019, Comstock had the following liabilities under contracts that contain operating leases:

  

 

(In thousands)

 

October 1, 2019 to December 31, 2019

 

$

1,997

  

2020

 

 

1,740

  

2021

 

 

390

  

Total lease payments

 

 

4,127

 

Imputed interest

 

 

(218

)

Total lease liability

 

$

3,909

  

The weighted average term of these operating leases was 2.2 years and the weighted average rate used in lease computations was 5.0%. As of September 30, 2019, the Company also had expected future payments for contracted drilling services through April 2020 of $30.6 million.

 

 


13


 

Accrued Expenses

Accrued expenses at September 30, 2019 and December 31, 2018 consisted of the following:

 

 

Successor

 

 

 

As of
September 30,
2019

 

 

As of
December 31,
2018

 

 

 

(In thousands)

 

Accrued drilling costs

 

$

64,838

 

  

$

17,920

 

Accrued interest payable

 

 

30,681

  

  

 

35,461

  

Accrued transportation costs

 

 

18,686

 

 

 

4,632

 

Accrued transaction costs

 

 

15,475

 

 

 

 

Accrued lease operating expenses

 

 

13,577

 

 

 

2,130

 

Accrued employee compensation

 

 

8,476

 

 

 

6,045

 

Other

 

 

4,023

 

  

 

1,898

  

 

 

$

155,756

  

  

$

68,086

 

 

Reserve for Future Abandonment Costs

Comstock's asset retirement obligations relate to future plugging and abandonment expenses on its oil and gas properties and related facilities disposal. The following table summarizes the changes in Comstock's total estimated liability for such obligations during the periods presented:

 

 

 

Successor

 

 

Predecessor

 

 

 

Nine Months Ended September 30, 2019

 

 

For the Period from August 14, 2018 through September 30, 2018

 

 

For the Period from January 1, 2018 through

August 13, 2018

 

 

 

(In thousands)

 

Future abandonment costs — beginning of period

 

$

5,136

 

 

$

4,683

 

 

$

10,407

 

Wells acquired

 

 

5,374

 

 

 

45

 

 

 

346

 

New wells drilled

 

 

256

 

 

 

10

 

 

 

17

 

Accretion expense

 

 

369

 

 

 

 

 

 

 

Liabilities settled and assets disposed of

 

 

(40

)

 

 

 

 

 

(87

)

Future abandonment costs — end of period

 

$

11,095

 

 

$

4,738

 

 

$

10,683

 

 

Derivative Financial Instruments and Hedging Activities

All of the Company's derivative financial instruments are used for risk management purposes and, by policy, none are held for trading or speculative purposes.  Comstock minimizes credit risk to counterparties of its derivative financial instruments through formal credit policies, monitoring procedures, and diversification. The Company is not required to provide any credit support to its counterparties other than cross collateralization with the assets securing its bank credit facility. None of the Company's derivative financial instruments involve payment or receipt of premiums.  The Company classifies the fair value amounts of derivative financial instruments as net current or noncurrent assets or liabilities, whichever the case may be, by commodity contract.

All of Comstock's natural gas derivative financial instruments are tied to the Henry Hub-NYMEX price index and all of its crude oil derivative financial instruments are tied to the WTI-NYMEX index price. Basis swaps are tied to Henry Hub.  The Company had the following outstanding commodity-based derivative financial instruments, excluding basis swaps which are discussed separately below, at September 30, 2019:

 


14


 

 

 

Future Production Period

 

 

 

Three Months
Ending
December 31,
2019

 

 

Year Ending
December 31,
2020

 

 

Year Ending
December 31,
2021

 

 

Year Ending
December 31,
2022

 

 

Total

 

Natural Gas Swap Contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Volume (MMbtu)

 

 

41,818,281

 

 

 

99,144,209

 

 

 

20,908,140

 

 

 

10,950,000

 

 

 

172,820,630

 

Average Price per MMbtu

 

 

$2.85

 

 

 

$2.81

 

 

 

$2.87

 

 

 

$2.81

 

 

 

$2.83

 

Natural Gas 2-Way Collar Contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Volume (MMbtu)

 

 

9,916,000

 

 

 

16,350,000

 

 

 

 

 

 

 

 

 

26,266,000

 

Price per MMbtu

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Ceiling

 

 

$3.52

 

 

 

$3.46

 

 

 

 

 

 

 

 

 

$3.48

 

Average Floor

 

 

$2.39

 

 

 

$2.47

 

 

 

 

 

 

 

 

 

$2.44

 

Natural Gas 3-Way Collar Contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Volume (MMbtu)

 

 

12,880,000

 

 

 

26,510,000

 

 

 

 

 

 

 

 

 

39,390,000

 

Price per MMbtu

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Ceiling

 

 

$3.08

 

 

 

$2.99

 

 

 

 

 

 

 

 

 

$3.02

 

Average Floor

 

 

$2.79

 

 

 

$2.65

 

 

 

 

 

 

 

 

 

$2.69

 

Average Put

 

 

$2.41

 

 

 

$2.33

 

 

 

 

 

 

 

 

 

$2.36

 

Crude Oil Collar Contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Volume (Barrels)

 

 

284,200

 

 

 

1,125,100

 

 

 

 

 

 

 

 

 

1,409,300

 

Price per Barrel

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Ceiling

 

 

$65.63

 

 

 

$65.33

 

 

 

 

 

 

 

 

 

$65.39

 

Average Floor

 

 

$45.00

 

 

 

$48.48

 

 

 

 

 

 

 

 

 

$47.78

 

 

In addition to the swaps and collars above, at September 30, 2019, the Company had basis swap contracts that lock-in the differential between NYMEX Henry Hub and certain physical pricing indices.  These contracts settle monthly through December 2022 and include a total volume of 53,030,000 MMbtu.  The fair value of these contracts was a net asset of $3.2 million at September 30, 2019.

 

None of the Company's derivative contracts were designated as cash flow hedges. The aggregate fair value of the Company's derivative instruments reported in the accompanying consolidated balance sheets by type, including the classification between assets and liabilities, consists of the following:

 

Type

 

Consolidated

Balance Sheet Location

 

 

Fair

Value

 

 

 

 

 

 

 

(in thousands)

 

Successor Fair Value of Derivative Instruments as of September 30, 2019

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

Natural gas price derivatives

 

Derivative Financial Instruments  – current

 

 

$

60,002

 

Oil price derivatives