Comstock Resources, Inc.

Thank you for standing by, and welcome to the ComStock Resources first quarter 2023 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentations, there'll be a question and answer session. To ask a question at that time, please press star 11 on your telephone. As a reminder, today's call is being recorded. I would now like to turn the conference over to your host, Mr. Jay Allison, Chairman and CEO. Please go ahead.

Perfect. Thank you, and good morning, everyone. I'd like to welcome all of you to the Comstock Resources first quarter 2023 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 First Quarter 2023 Results. I have Jay Allison, Chief Executive Officer of Comstock with me as Roland Burns, our President and Chief Financial Officer. Dan Harrison, our Chief Operating Officer. Ron Mills, our VP of Finance and Investor Relations. If you'll flip over to slide two, please refer to slide two in our presentation and note that our discussion today will include forward-looking statements. than 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 slip over to slide three, I want to kind of address the issues. You know, I've read, I think, all of the analyst reports that have been published and understand the concerns. You know, none are new concerns. We understand them. If you look at where oil is today plus yesterday, it's down $7. Look at where natural gas is yesterday and today, it's down 20 cents. So, you know, we all know that we're experiencing pressure with low natural gas prices currently in the short term. However, we're extremely positive on the outlook for natural gas in the future. Looking ahead several years, we recognize the growing need for natural gas around the world. Our long-term goal is to be a significant supplier to the growing LNG market that is developing several hundred miles from our Hainesville Shield operations, including our emerging Western Hainesville area. Around the world today, over a trillion dollars of natural gas infrastructure is being built. Over the next five years in the United States, we see more than $100 billion worth of new LNG plants being operational. We're currently in discussions to enter into long-term contracts with major LNG shippers who are following our new play with significant interest. To accomplish that goal, we must be great, great stewards of managing our dollars in this low gas price environment. while at the same time continuing to delineate our Western Angel asset. To that effect, we're continuing to run a two-rig program that should result in 14 drilled wells by year-end 2023. We also plan to wrap up our leasing efforts that we started almost three years ago. In the first quarter, we made great strides by materially adding to our acreage position, as you've noted. The well results in our traditional Hainesville area where we had six to seven rigs running continue to be very solid. Now we'll be down to five rigs in the next couple of weeks. The first quarter still has some inflation baked into the well cost, but we see that abating in the next several quarters. We're continuing to reevaluate our rig count in our traditional Hainesville area, as well as our completion timing to be responsive to the weak price environment we're in. as we're very focused on maintaining the strong balance sheet that we've worked so hard to create last year. In summary, we're implementing a practical business plan focused on the longer-term cycle to position Comstock to benefit from the future growth in the LNG market. We'll monitor our plan to delineate our Western Hainesville play. We'll adjust it based upon the results that we achieve. We'll continue to prioritize our longer-term goals while being very proactive to protect our strong balance sheet, which is allowing us to weather the current short-term headwinds we see. If you go to slide three, we'll include some of the first quarter highlights. Our production increased 11% to 1.4 billion cubic feet of gas equivalent per day. We had oil and gas sales of $390 million, and operating cash flow of $255 million, or 92 cents per diluted share. Adjusted EBITDAX for the quarter was $293 million. Our adjusted net income for the first quarter was $92 million, or 33 cents per share. The financial results in the quarter reflect the weaker natural gas prices following the warm winter weather that we had. In the first quarter, we drilled 18 or 13.7 net operated Hainesville and Bossier horizontal wells, which had an average lateral length of 12,075 feet. Since our last update, we've connected 15 or 9.8 net operated wells to cells with an average initial production rate of 23 million cubic feet per day. These wells include six wells with lower IP rates in the liquid-rich area of Panola County, which has associated liquid production. We also announced our third successful exploratory well in our Western Hainesville play, the Gamble Well, which had an initial production rate of 36 million cubic feet per day, which is a rate that we expect to produce it at. We had an active quarter requiring additional acreage in our Western Hainesville play. So now I'll turn it over to Roland to discuss the financial results. Roland?

Thanks, Jay. On slide four, we covered A quick summary of our financial results that we reported for the first quarter. As Jay said, our production in the first quarter increased 11% to 1.4 BCF per day as compared to the first quarter of 2022. Oil and gas sales in the quarter, including hedging gains, decreased by 4% to $390 million as lower natural gas prices offset the production growth that we had in the quarter. Our EVA DACs decreased by 12% to $293 million, and we generated $255 million of cash flow during the quarter, 14% less than 2022's first quarter. We reported adjusted net income of $92 million for the first quarter, and our earnings per share came in at 33 cents as compared to 51 cents in the first quarter of 2022. On slide five, we provide a breakdown of our natural gas price realizations in the quarter. During the first quarter, the quarterly NYMEX settlement price, which averaged $3.42, was substantially higher than the average Henry Hub spot price in the daily market of $2.67. During the quarter, we nominated 82% of our gas to be sold at the index prices tied to that contract settlement price, and we sold the other 18% of our gas in the daily spot market. So the estimated NYMEX reference price for our sales in the first quarter would have been $3.29. Our Realaz gas price during the first quarter averaged $2.98, reflecting a $0.31 differential to the reference price. That differential was higher than normal for us due to the continued weaker Houston ship channel and KD hub prices that persisted during a good bit of the first quarter. due to the Freeport LNG facility shutdown. With the Freeport startup late in the quarter, we've seen these price differentials along the Texas Gulf Coast tighten up somewhat. About 57% of our gas is tied to the Gulf Coast market indexes, and we are currently selling 21% of our gas directly to LNG shippers. In the first quarter, we were also 53% hedged, which improved our realized gas price to $3.07. We've been using some of our excess transportation in the Hainesville to buy and resell third-party gas. This generated about $9 million of profits and improved our average gas price realization by another $0.07. On slide six, we detail our operating costs per MCFE and our EBITDAX margin. Our operating costs for MCFE averaged 83 cents in the first quarter, seven cents higher than our fourth quarter rate. The increased unit costs are related probably to startup, the startup phase that we're having in our western Hainesville area, where fixed costs are being spread over lower production volumes. We expect them to come down as our production grows in that area. Our gathering costs increased by four cents during the quarter, and our lifting costs increased by three cents. Our production taxes remained the same as we had in the fourth quarter. Our EBITDAX margin after hedging came in at 73% in the first quarter, down from the 82% we had in the fourth quarter, where we had substantially stronger gas prices. In slide seven, we recap our spending on our drilling and other development activity in the first quarter. During the quarter, we spent a total of $325 million on development activities, including $278 million spent on our operated Hainesville and Bossier Shale drilling program. We also spent another $32 million on non-operated wells. Spending on other development activity, which includes installing production tubing, offset frack protection, and other workovers, totaled $14 million in the quarter. In the first quarter, we drilled 18 or 13.7 net to our interests, operated horizontal Hainesville-Bossier wells, and we turned 19 wells, or 11.6 net operated wells, to sales. These wells had an average initial production rate of 24 million cubic feet per day. On slide 8, we recap our balance sheet at the end of the first quarter. We ended the quarter with no borrowings outstanding under our credit facility and with $2.2 billion in long-term debt. In April, the 17 banks in our bank group reaffirmed our $2 billion borrowing base with $1.5 billion of electric commitments. Our revolving credit facility matures in 2027. So we ended the first quarter with financial liquidity of more than $1.5 billion. I'll now turn it over to Dan to discuss our operations in more detail.