Comstock Resources, Inc.

Good day and thank you for standing by. Welcome to the third quarter 2022 Comstock Resources Earnings Conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Jay Allison, Chairman and CEO. Please go ahead.

Good morning, everyone, and thank you. Welcome to the Comstock Resources third 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 a presentation entitled Third Quarter 2022 Results, I am Jay Allison, 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. Please refer to slide two in our presentation to note that our discussions today will include forward-looking statements within the meaning of securities laws. While we believe the expectations of such statements to be reasonable, There can be no assurance that such expectations will prove to be correct. If you'll flip over to slide three, you know, I'd like to announce to you that Comstock Resources just posted the greatest quarterly results in our 30-plus year history as a public company, with our revenues almost exclusively coming from selling natural gas. We set new corporate highs in almost all financial metrics, including operating cash flow, free cash flow, net income, EBITDAX, and oil and gas revenues. Our balance sheet has now become a fortress. We leveraged down to 0.9 times, and a quarterly dividend is now possible. You know, to have a day like today, you have to rely upon many of you and many of you that are not even on the call. We say thank you to our equity stakeholders who trust us with your hard-earned money, and especially the Jerry Jones family. We say thank you to our banks that provide us with a credit facility and our bondholders, along with all the hundreds of oilfield service companies who assist us in promoting excellence in drilling and completing our Hainesville and Bossier wells. Now, many of you have asked about our Western Hainesville region. The Circle M well in Robertson County started producing in April of this year and has continued to have a flat production rate of around 30 million cubic feet of gas per day. We've also drilled our second well in this region, which is near the Circle M, called the KZ Black, which was successfully drilled and completed that is expected to be turned to cells this month. Note that the Circle M well was shut in for 30 days while we were completing the KC Blackwell. The Comstock team of 240 worked hard to produce Tier 1 results, which I'll share with you starting on slide three. We cover the highlights of the third quarter on this slide three. Our operating cash flow of $533 million, or $1.92 for diluted share, was the highest in our corporate history. After funding our drilling and completion activities, we generated $286 million of operating free cash flow. This allowed us to retire $250 million of bank debt, which brought our leverage down to 0.9 times. Our adjusted net income for the quarter was $326 million, or $1.18 for diluted share, and our EBITDAX for the quarter came in at $598 million, 93% higher than last year's third quarter. Revenues after hedging for the quarter came in at $692 million, 76% higher than last year's third quarter. Our Hainesville Shell Drilling Program is going well, as demonstrated by the 17 or 15.2 net operated wells that were reported on this quarter with an average initial production rate of 29 million cubic feet per day. I'm excited to announce the reinstatement of a quarterly dividend to common stakeholders. Our Board of Directors approved a quarterly dividend of 12.5 cents per share to be paid to our common shareholders on December the 15th, representing a yield of approximately 2.5% at our current stock price. I'll now turn the call over to Roland Barnes to comment on our financial results. Roland?

Thanks, Jay. We recap the very strong third quarter financial results we achieved. Pro forma for the sale of our Balkan properties, which was completed last October, our production increased 1% to 1.4 BCFE per day in this recently completed third quarter. Our record high EBITDAX in the quarter grew by 107% over 2021's pro forma third quarter to $598 million. driven mostly by stronger natural gas prices. We generated $533 million of cash flow during the quarter, a 126% increase over 2021's third quarter on a pro forma basis. That's another corporate record. Our cash flow per share during the quarter was $1.92. It's up a dollar from the third quarter of 2021. We reported adjusted net income of $326 million for the third quarter, That's more than two and a half times higher than the third quarter of 2021. And our earnings per share came in at $1.18 as compared to 35 cents in the third quarter of 2021. We generated $286 million of free cash flow from operations in the quarter, 218% higher than the third quarter of 2021. And the growth in EBITDAX and the retirement of $250 million of debt in the quarter drove our leverage ratio down to 101 times as compared to 2.3 times in the third quarter of 2021. Improved natural gas prices were the primary factor driving the strong financial results in the quarter. On slot five, we provide a breakdown of our natural gas price realizations in the quarter. During the third quarter, the quarterly NYMEX settlement price averaged $8.20 and the average Henry Hub spot price averaged $7.96. So during the third quarter, we nominated 77% of our gas to be sold at index prices tied to that contract settlement price, and then we sold 23% of our gas in the daily spot market. So the expected NYMEX reference price for sales in the third quarter would have been $8.14. Our realized gas price during the third quarter averaged $7.72, which reflects a 42-cent differential. That was a little higher than normal due to wider regional differentials and most significantly due to weaker Houston Ship Channel prices, which are all due to the Freeport shutdown. Houston Ship Channel and other Texas Gulf Coast indexes are usually some of our premium markets. In the third quarter, we were also 49% hedged, which reduced our realized gas price to $5.36. We have been using some of our excess transportation in Hainesville to buy and resell third-party natural gas. This generated about $11 million of additional income in the quarter, and that added about $0.09 to our average price realization in the quarter. On slide six, we detail our operating costs per MCFE and our EBITDAX margin. Our operating costs per MCFE averaged 82 cents in the third quarter, eight cents higher than the second quarter. Our gathering costs increased by five cents. That's primarily due to the impact of higher fuel costs used in the transportation of our gas, but also due to higher production from some of our higher gathering rate areas. Our lifting costs increased two cents and our production taxes increased one cent due to the combination of higher realized prices and an increase in the statutory severance tax rate in Louisiana that became effective in July. G&A costs came in at six cents, the same as our second quarter rate. Our EBITDAX margin after hedging came in at 85% in the third quarter, the same as the second quarter. On slide seven, we recap the first nine months of this year and what we spent on our drilling and other development activity. In the first nine months, we spent $729 million on development activities, including $653 million on our operated Hainesville and Bossier Shale drilling program. We also spent $23 million on non-operated wells and $54 million on other development activity, including installing production tubing, offset frac protection, and other workovers. In the first nine months of this year, we drilled 52 or 42.5 net operated horizontal Hainesville wells, and then we turned 53 or 44.2 net operated wells to sales. These wells had an average initial production rate of 27 million cubic feet per day. We also had an additional two net non-operated wells that we turned to sales. In the third quarter, we spent $242 million on our development and exploratory activities, including $227 million on our operated Hainesville and Bossier Shale drilling program. We also spent $4 million on non-operated wells and $11 million on other development activity. On slide eight, we show our balance sheet at the end of the third quarter of this year. We had $100 million drawn under our revolving credit facility at the end of the third quarter. The reduction in our debt balance and the growth of EBITDAX drove our leverage ratio down to 0.9 times in the quarter on an annualized basis as compared to the 2.3 times that we were at for the third quarter of 2021. We plan on retiring the remaining $100 million outstanding on our revolver in the fourth quarter using our free cash flow. So we ended the third quarter with financial liquidity of more than $1.3 billion. I'll now turn it over to Dan to discuss the operating results in more detail.