Comstock Resources, Inc.

Thank you for standing by and welcome to Comstock Resources' fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference may be recorded. Should you require any further assistance, please press star zero. I would now like to hand the conference over Over to your host, Chairman and CEO, Jay Allison. Please go ahead.

Thank you for that introduction. You know, on behalf of the 200 and say four or five Comstock employees and the Board of Directors, I'd like a few opening comments and then we'll go to the results. First, you know, Comstock shift, I think as Ron Mills has talked about the analyst, I mean, Comstock shift to longer laterals, you know, the 10,500 foot laterals in 2022 versus the 800 foot laterals in 2021. You know, you should all know that it's expected to create a great value on a per well basis going forward. You know, we have better cost efficiencies. We should have a lower decline curve, thus an increase in well performance. You will review that on this call later on. The higher capital efficiencies associated with the longer laterals did allow us to more than offset the impact of higher service costs in the fourth quarter of 2021. So you can see that in the numbers. And we have seen higher service costs. You know, we will use commitment from the board and from management. We'll use the free cash flow to pay off the revolver and redeem the remaining $244 million of the 2025 bonds. That's our goal. We do have a target. continue to have the salvage ratio at 1.5 or less. We think we can get there in the second half of 2022. And that does open discussions up on returning capital to shareholders. I know we may have that question. You know, our drilling inventory, which is the holy grail of V&P companies, I think that's why you have a lot of M&As in the last year or two years, but our drilling inventory has never been more valuable or stronger than Because in 2021, we made great strides in extending our lateral length per location by 25% from our average lateral length at the end of 2020. It was 6,840 feet, and today it's about 8,520 feet. If you look at that, 25 years worth of drilling inventory based upon our 2022 activity, we've got 1,633 net locations. 53% of those are Hainesville. 47% are Bossier. And just think, I mean, 902 net locations with lateral lengths 8,000 feet or longer. On the operational front, which is I think that's the nucleus of this company, on that front we increased our drilling footage per day by 25%. We went from 800 feet to 1,001 feet per day, and that's how you make money. Our average lateral length at the wells in the fourth quarter, 11,443 feet, and the reason is we drilled four 15,000 foot lateral wells, two Sainsville, two Bossier. Two Sainsville wells we report on, and we just, as of this morning, we put the two 15,000 foot Bossier wells to sales. You know, again, in spite of higher service costs, we're able to lower our drilling and completion costs due to improved operational performance and improved capital efficiencies associated with the longer laterals drilled into fourth quarter 2021, which that will be carried over into 2022. You know, we have a few slides to take you back to 2018 and be accountable for our performance. That was kind of a turnaround year. That's the year that Jerry Jones and his family invested in Comstock. And since that time, Comstock has surfaced as the only pure play Hainesville producer. So welcome to the Comstock Resources fourth quarter 2021 financial and operating results conference call. You can view a slide presentation during or after this call by going to our website at www.comstockresources.com and downloading the quarterly result presentation. There you'll find a presentation entitled Fourth Quarter 2021 Results. I'm Jay Allison, Chief Executive Officer of Comstock. With me is Roland Barnes, our President and Chief Financial Officer, Dan Harrison, our Chief Operating Officer, and Ron Mills, our VP of Finance and Best Relations. If you slip to slide two, refer to slide two in our presentation and note that our discussions today will include forward-looking statements within the meaning of securities laws. While we believe the expectations and such statements should be reasonable, There can be no assurance that such expectations will prove to be correct. Our fourth quarter 2021 highlights, slide three. We cover the highlights on the fourth quarter on slide three. In the fourth quarter, we generated $105 million of free cash flow from operating activities, increasing our total free cash flow generation for 2021 to $262 million. Including the impact of our acquisition and divestiture activity, our total free cash flow for the year was $343 million. For the quarter, we reported adjusted net income of $99 million, or $0.37 per diluted share. Our operating cash flow for the quarter was $250 million, or $0.90 per diluted share. Our revenues, including our realized hedging losses, increased 37%. to $380 million. Our adjusted EBITDAX in the fourth quarter was $297 million, 41% higher than the fourth quarter of last year. Our production increased 12% in the quarter to 1.348 BCF a day. In the fourth quarter, we completed two 15,000-foot Hainesville wells, which had IP rates of 48 and 41 million cubic feet equivalent per day. both of which are new corporate records that Dan Harrison will review in a moment. During the quarter, we also closed on the sale of our blocking properties and closed a bolt-on acquisition for $35 million. If you'll flip over to slide four, we'll go over some of the major accomplishments in 2021. You know, we significantly reduced our cost of capital by refinancing $2 billion of our senior notes in March and June, which saved us $48 million in cash interest expense and extended our average maturity from 4.7 years to 7.1 years. We also reduced the amount outstanding under our bank credit facility by $265 million with our free cash flow and asset sale proceeds and improved our leverage ratio to 2.2 times as compared to 3.8 times in 2020. With another successful year in our Hainesville Shell drilling program, We drilled 64 gross or 51.9 net wells, including four 15,000-foot laterals. The wells we put to sales had an average IP rate of 23 million cubic feet equivalent per day. We grew our SEC-approved reserves by 9% to 6.1 TCFE with a PV10 value of $6.8 billion. We replaced 199% of our production at a low all-in finding cost of $0.60 per MCFA. Highlighting our attractive cost structure, we achieved a 78% EBITDAX margin, one of the highest in the industry. In addition, we achieved a 12% return on average capital employed and a 27% return on average equity. In 2021, we added 49,000 net acres to our acreage position perspective for the Hainesville and Bossier through a leasing program and acquisitions totaling $57.7 million or $1,178 per acre. We took several big steps in 2021 on the environmental front. Early in 2021, we partnered with BJ Energy Solutions to deploy its next-generation natural gas-powered Titan FRAC fleet, which is expected to be put in service in April. The most significant step we took was to partner with MIQ to certify our natural gas production under the MIQ methane standard. Flip over to slide five, and we recap the bolt-on acquisition in East Texas that we did close late December for a purchase price of $35 million. The acquisition included 18.1 net producing wells and 17,331 net acres in Harrison, Leon, Panola, Robertson, and Russ counties. Over the acquisition, we added 57.9 net drilling locations, which represents approximately one year's worth of our drilling inventory. The acreage is 94% held by production. The acquisition also added the lateral length on 44 of our existing drilling locations to be increased. I'll now turn the call over to Roland to discuss financial results. Roland?

Yeah, thanks, Jay. On slide six in the presentation, we compare some of our fourth quarter financial measures to the fourth quarter of 2020. Our production increased 12 percent to 1.35 BCFE a day. Adjusted EBITDA grew 41 percent to $297 million. We generated $250 million of discretionary cash flow during the quarter, 62% higher than 2020's fourth quarter. And our adjusted net income totaled $99 million during the quarter, 186% increase from the fourth quarter of 2020. We generated $105 million of free cash flow from operations in the quarter, or $204 million if you include the impact of of the acquisition and divestiture activity, which most of that occurred in the fourth quarter. This free cash flow contributed to an improvement in our leverage ratio, which improved to 2.2 times, down from 3.2 times at the end of 2020. Our cash flow per share during the quarter was 90 cents per share, up from 56 cents in the fourth quarter of 2020. and adjusted earnings per share was 37 cents per share as compared to 14 cents in the fourth quarter of 2020. On slide seven, we show how much Comstock has changed since 2018 when Jerry Jones and his family invested in the company. Production growth has averaged 117% over the last three years. EBITDAX has gone from $287 million to $1.1 billion. at a compounded annual growth rate of 97%. Cash flow has grown from $206 million back in 2018 to $908 million this year in 2021, averaging 114% over the last three years. Adjusted net income has grown from $29 million to $303 million at a compounded annual growth rate of 319%. And free cash flow from operations has grown to $262 million, and our leverage ratio has improved from 4.5 times to 2.4 times. On a per share basis, cash flow has gone from $1.96 to $3.29, and earnings has gone from $0.27 to $1.16. On slide 8... we provide a breakdown of our natural gas price realizations. And this is an important slide to understand the quarterly results. And we've had a very volatile NYMEX contract, you know, during the fourth quarter, which has continued into the first quarter of this year. On this slide, we show how the NYMEX contract settlement price, and we show the average NYMEX spot price for each quarter. So during the fourth quarter, there was a very significant difference between the quarter's NYMEX settlement price of $5.83 and the average Henry Hub spot price of $4.74. So during the quarter, we nominated 67% of our gas to be sold at index prices, which are more tied to the contract settlement price or the final price that the contract comes off the market at. And then we also sold 33% of our gas in the daily spot market. So if you use those percentages, the approximate NYMEX reference price for looking at our activity in the fourth quarter would have been $5.47, not $5.83. So I realize pricing from the fourth quarter averaged $5.22 per which reflects a 25-cent differential from that reference price, which is fairly in line with our historical results. In the fourth quarter, we were also 72 percent hedged, so that reduced our final realized gas price to $3 for MCF. On slide nine, we detailed our operating costs for MCFE and the EVA-DAX margin. Operating costs for MCFE averaged 67 cents in the fourth quarter. That was two cents higher than the third quarter rate. Our lifting costs and gathering costs were both up by one cent, but production taxes were down by three cents. Higher G&A costs of eight cents was also higher in the quarter, and that's primarily related to year-end adjustments for bonuses. We do expect our G&A to go back to average somewhere between six to seven cents for MCFE in 2022. Our EBITDAX margin, including hedging, came in at 78 percent in the fourth quarter, unchanged from our third quarter margin. On slide 10, we recap our fourth quarter and full year 2021 drilling and completion cost. In the fourth quarter, we spent $140 million on development activities $114 million of that related to our operated Hainesville and Bossier Shale properties. We also spent $8 million on non-operated wells, and we had $15 million that we spent on other development activity in our Hainesville operations. We spent an additional $3 million for our properties outside of the Hainesville. For the full year, we spent $628 million on development activities, $554 million was related to our operated Hainesville and Bossier Shell properties. We also spent $74 million on non-operated activity and for other development activity outside of just drilling and completion. We drilled 51.9 net operated Hainesville horizontal wells, and we turned 54.2 net wells to sales in 2021. We also had an additional 2.2 net wells from our non-operated activity. In addition to funding our development program, we also spent $58 million on acquisitions, most of those acquisitions related by an undrilled Hainesville Shell acreage. Slot 11 covers our approved reserves at the end of 2021. We grew our SEC-approved reserves from 5.6 TCFE to 6.1 TCFE in 2021, and we replaced 199% of our production. Our 2021 drilling activity added 797 BCFE-approved reserves, and we had about 89 BCFE of positive price-related revisions. We also added 203 BCFE of approved reserves through our acquisition activity. The reserve additions were offset by a divestiture of 100 BCFE, which is primarily our Balkan shale properties. Our all-in finding cost for 2021 came in at a very attractive 60 cents per MCFE. Our drill pit finding cost for 21 came in at 71 cents per MCFE. Our reserves are almost 100% natural gas, following the sale of our Balkan properties. The PV10 value of our approved reserves at SEC pricing was $6.8 billion at the end of last year. In addition to the 6.1 TCFE of SEC-approved reserves, we have an additional 2.4 TCFE of approved undeveloped reserves, which are not included in that number as they're not expected to be drilled within the five-year window required by the SEC rules. We also have another 4.4 TCFE of 2P or probable reserves, and we have 7.2 TCFE of 3P or possible reserves for a total overall reserve base of 20.1 TCFE on a P3 basis. Slide 12 shows our balance sheet at the end of 2021. We had $235 million drawn on our revolving credit facility at the end of the year after repaying $265 million during 2021. The reduction in our debt and the growth of our EBITDAX drove a substantial improvement to our leverage ratio, which was down to 2.2 times in the fourth quarter on a standalone basis, as compared to 3.8 times in 2020. We plan on retiring $479 million of debt in 2022. That would include redeeming our 2025 senior notes. We're targeting to be below 1.5 times levered in 2022. And we ended 2021 with financial liquidity of almost $1.2 billion. I'll now turn it over to Dan to discuss our operations.