Comstock Resources, Inc.

Thank you for standing by and welcome to Comstock Resources second quarter fiscal year 2022 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're willing to press star 1 1 on your telephone. I would now like to hand the call over to Jay Allison, Chairman and CEO. Please go ahead.

All right. Thank you. You got a good tone this morning. You started everybody off right. Let me tell you, we're thankful to be a natural gas producer in the Hainesville, which we think is the best base in North America to have dry natural gas. So anyhow, welcome to the Comstock Resources second quarter 2022 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 results presentation. There you'll find our presentation titled Second Quarter 2022 Results. I have Jay Allison, the Chief Executive Officer of Comstock, and with me is Roland Burns, our President and Chief Financial Officer, Dan Harrison, our Chief Operating Officer, and Ron Mills, our VP of Finance and Investment Relations. If you'll flip over to two, please 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 in such statements to be reasonable, there could be no assurance that such expectations will prove to be correct. Now, start the real presentation. Slide three, the second quarter 2022 highlights. We'll cover the highlights of the second quarter on slide three. In the second quarter, we generated $190 million of operating free cash flow. We also retired $271 million of our senior notes, including the redemption of our seven and a half senior notes we assumed when we acquired Covey Park, and we repurchased $26 million of our six and three quarter senior notes in the open market. We brought our leverage down to 1.2 times. Our EBITDAX for the quarter came in at $515 million or 105% higher than last year. Our operating cash flow increased 133% to $458 million or $1.65 per diluted share. Revenues after hedging for the quarter were $604 million and 86% higher than last year. Our adjusted net income for the quarter was $274 million, or a dollar per diluted share. Our Hainesville drilling program is going well, as demonstrated by the 14, or 12.6, net operated wells that we reported on this quarter, with an average initial production rate of 26 billion cubic feet per day. We completed a very attractive bolt-on acquisition, which included approximately 60,000 net acres prospective for the Hangel and Bossier Shell and a 145-mile high-pressure pipeline and natural gas treating plant for $36 million. We also achieved certification for our natural gas production under the MIQ standard for methane emissions measurement, which demonstrates environmental stewardship. I will now turn the call over to Roland Barnes to comment on our financial results. Roland?

All right. Thanks, Jay. On slide four, we recapped the very strong financial results we had for the second quarter. Pro forma for the sale of our Balkan properties, which we completed last October, our production increased by 1% to 1.4 feet equivalent per day. On a pro forma basis, our adjusted EBITDAX for the quarter grew by 122% over 2021's second quarter to $515 million, and it was driven mostly by stronger natural gas prices. We generated $458 million of cash flow during the quarter, a 159% increase over 2021's second quarter on a pro forma basis. Our cash flow per share during the quarter was $1.65, up from 71 cents for the second quarter of 2021. Our adjusted debt income for the second quarter was $274 million, a 454% increase from the second quarter of 2021, and earnings per share came in at $1 as compared to 20 cents in the second quarter of 2021. We generated $190 million of free cash flow from operations in the quarter, 586% higher than the second quarter of last year. The growth in EBITDAX and the retirement of our senior notes in the quarter drove a substantial improvement to our leverage ratio, which improved in the quarter to 1.2 times, down from 2.9 times in the second quarter of 2021. Improved natural gas prices were the primary factor driving the strong financial results in the quarter. A breakdown of our gas price realizations is presented on slide five. During the second quarter, the quarterly NYMEX settlement price averaged $7.17, and the average Henry Hub spot price averaged $7.39. So during the quarter, we nominated 83% of our gas to be sold at index prices tied to the contract settlement price, and we sold the remaining 17% of our gas in the daily spot market. Therefore, the expected NYMEX reference price for our sales in the second quarter would have been $7.21. Our real odds price during the second quarter averaged $6.93, reflecting that 28 cent differential. Our differential stayed tight in the quarter, as we only have 10% of our production subject to the wider regional indexes at Perryville and Carthage. In the second quarter, we were 54% hedged, which reduced our real odds price to $4.85. We also generated $2 million of margin from third-party market in the quarter, which added two cents to our average price realization. On slide six, we detail our operating costs per MCFE and our EBITDAX margin. Our operating costs per MCFE averaged 74 cents in the second quarter, five cents higher than our first quarter rate. The increase is directly related to the higher natural gas prices we're realizing as production taxes increased by six cents in the second quarter. Our gathering cost increased by two cents in the quarter, which was primarily due to the impact of higher fuel cost or the higher value of natural gas that's used in transportation. And that was offset by a three cent drop in our other lifting cost. Our G&A cost came in at six cents, the same as our first quarter rate. And our EBITDAX margin after hedging came in at 85% in the second quarter, up from 81% in the first quarter. On slide seven, we recap our first half of this year spending on drilling and other development activity. In the first six months of this year, we spent $487 million on development activities, including $426 million on our operated Hainesville and Bossier Shale drilling program. $263 million of our CapEx was spent in the second quarter. In the first half of this year, we've drilled 31 wells or 27.7 net wells operated horizontal Hainesville wells. And we've turned 36 or 29.1 net operated wells to sales. These wells had an average IP rate of 26 million cubic feet per day. We also had an additional 1.2 net non-operated wells that we turned to sales in the first half of this year. Slide 8 recaps our balance sheet at the end of the second quarter. We had $350 million drawn on our revolving credit facility at the end of the second quarter after having used Revolver to fund part of the redemption of our 2025 senior notes on May 15th. We also repurchased $26.1 million in principal amount of our 2029 senior notes at a discount for $25 million during the quarter. So in total, we retired $271 million in principal of senior notes during the second quarter. The reduction in our debt and the growth in our EBITDAX drove our leverage ratio down to 1.2 times in the quarter as compared to 2.9 times in the second quarter of last year. We plan on retiring the remaining $350 million outstanding on a revolver later this year using free cash flow from operations. And then we ended the second quarter with financial equity of almost $1.1 billion. I'll now turn the call over to Dan discuss the operations.