Comstock Resources, Inc.

Good day, and thank you for standing by, and welcome to the Q3 2023 Comstock Resources, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to introduce your host for today's call, Jay Allison, Chairman and CEO. Please go ahead.

Good morning, everyone. In Frisco, Texas, this morning, it's 34 degrees. The Texas Rangers took the lead in the World Series, and I saw natural gas prices were up about 20 cents this morning, so we're all smiles here. We started out the day the right way. The world of natural gas... is something that is a big part of our business. Report a profitable third quarter with a realized gas price of only $2.41, with only 18% of our gas hedged, highlights our extremely low operating cost structure and our high margins. The 18 net operated wells returned to sales since our last update on our extensive Hainesville-Boger acreage position. continued to deliver solid results from our legacy area, as well as the emerging Western Hainesville. The two Western Hainesville wells we recently turned to sales were, quote, top-of-the-class wells, as were the other five that we turned to sales, starting with our Western Hainesville well, the Circle M, which started production April of 2022. Make no mistake about it, we're extremely pleased with the results of all the Western Hainesville wells we have turned to sell so far. This year, we're focused on proving up the Western Hainesville and continuing to build our extensive acreage position. During this time of weak natural gas prices, we're providing a dividend to our stakeholders, holding our legacy production steady, while being accountable to our bank lending group who just reaffirmed our $2 billion borrowing base improving up a much-needed new gadget resource near the expanding LNG export facilities along the Texas and Louisiana Gulf Coast. A major step in the development of our Western Hainesville play is finding the right partner for the midstream build-out needed to support our Western Hainesville drilling program, and we're excited to partner with Quantum Capital Solutions to that end. We want to publicly thank them for entering into this new adventure with us. If you'll go to the main slides, we welcome you to the Comstock Resources Third 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 titled Third Quarter 2023 Results. I have Jay Allison, Chief Executive Officer of Comstock, and with me is Roland Burns, our President, and CFO Dan Harrison, our COO, and Ron Mills, our VP of Finance and Investor Relations. If you go to slide two, please refer to slide two in our presentations and note that our discussions today 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. Now, if you'll flip to slide three, What we'll do is we'll summarize the highlights of the third quarter. The financial results were heavily impacted by the continued low natural gas prices we realized in the quarter. Oil and gas sales including hedging were $316 million in the quarter. We generated cash flow from operations of $116 million or 60 cents per share and adjusted EBITDA was $209 million. Our adjusted net income was four cents for the quarter. We continue to have strong results from our drilling program. We drilled 13 or 10.2 net successful operated Hainesville and Bossier Shell horizontal wells in the quarter with an average lateral length of 11,644 feet. Since the last conference call, we've connected 21 or 18.1 net operated wells to sales with an average initial production rate of 29 million cubic feet per day. We're having great success in our Western Hainesville exploratory play. Our sixth and seventh wells were recently turned to cells with strong initial production rates, both of which were drilled in the Bossier shell. We recently entered into a new venture with Quantum Capital Solutions to fund the midstream build out to support our Western Hainesville drilling program which I'll expand on the next slide. If everyone would turn to slide four, this visibly shows our Bethel plant, which is part of the Pinnacle gathering and treating system we acquired last year. Pinnacle combined with our processing we have in the area will allow us to grow our Western Hainesville production up to 500 million cubic feet per day. Given how prolific these wells have been, We see running out of capacity in this area by 2025. We're excited to partner with Quantum Capital Solutions, an affiliate of Quantum Capital Group, to build out this system to handle future growth. To that effect, we've set up a mid-spring partnership with QL to build out the system to increase the capacity fourfold. We'll contribute the pinnacle gathering and treating system to the partnership and QOL will contribute 100% of the capital required, up to $300 million, for the build-out of the gathering and treating system. We'll operate the partnership, which will be called Pinnacle Gas Services. It will direct its activities. Quantum receives a preferred return in 80% of distributions until the investment hurdle is achieved. Then that reduces to 30%. I'll now turn it over to Roland to cover the third quarter financial results. Roland?

All right. Thanks, Jay. On slide five, we covered the third quarter financial results. Our production in the third quarter was 1.4 BCFE per day, which was 1% higher as compared to the third quarter of last year and 3% higher than the second quarter. Low natural gas prices significantly impacted our oil and gas sales in the quarter, which came in at $316 billion, which is 54% lower than the third quarter of 2022. EBITDAX was $209 million, and we generated $167 million of cash flow during the quarter. We reported adjusted net income of $12 million for the third quarter, as compared to only $1 million in the second quarter of this year, and then $326 million in the third quarter of last year. Slide six, we have our financial results for the first nine months of this year. Production for the first nine months averaged 1.4%, BCFE per day. That was 4% higher as compared to the same period in 2022. Oil and gas sales in the first nine months of this year totaled $991 million, which is 42% lower than last year's sales in the same period. And EBITDAX was $685 million, and we generated $568 million of cash flow for the first three quarters of this year. We reported adjusted net income of $105 million for the first three quarters of this year as compared to $735 million for the same period in 22. On slide 7, we detail our natural gas price realizations that we had in the third quarter. NYMEX settlement price in the third quarter averaged $2.55. It was very close to the average spot price in the quarter, which averaged $2.58. Our realized gas price in the third quarter averaged $2.33, reflecting a 22-cent differential to the settlement price and a 23-cent differential to the reference price. The differential this quarter returned to more normal levels due to improvements and the Houston Ship Channel and Katy Hub prices following the restart of the Freeport LNG facility. In the third quarter, we were 18% hedged, which improved our realized gas price to $2.41. We've been using some of our excess transportation in the Haynesville to buy and resell third-party gas. We generated about $2.5 million of profits from this activity, which improved our average gas price realization by another two cents. On slide eight, we detail our operating cost per MCFE produced in our EBITDAX margin. Our operating cost averaged 85 cents per MCFE in the third quarter. It's 1% higher than our second quarter rate. The increased unit costs relate to higher production taxes and higher ad valorem taxes imposed in the state of Louisiana. Our gathering costs were flat this quarter at 36 cents. And our other lifting costs were 3% lower than the second quarter rate at $0.24. Our production and ad valorem taxes increased $0.05 this quarter compared to the second quarter level. G&A came in at $0.05 per MCFE. That was $0.01 lower than the rate we had in the second quarter. And our EBITDAX margin after hedging came in at 65% in the third quarter. as compared to 63% in the second quarter of this year. On slide nine, we recap our spending on drilling and other development activity for the first nine months of this year. So far, we spent $958 million on our development activities, including $919 million on our operated Hainesville and Bossier Shale drilling program. Spending on other development activity has totaled $38 million so far this year. In the first nine months of this year, we've drilled 52 wells or 41.3 wells net to our interest in our operated drilling program. And we've turned 57 or 43 net operated wells to sales. The wells that we turned to sales had an average IP rate of 25 million cubic feet per day. On slide 10, we recap our balance sheet at the end of the third quarter. We ended the quarter with $345 million of borrowings, outstanding under our credit facility, giving us a total of $2.5 billion in total debt. Our $2 billion borrowing base was recently reaffirmed by our bank group this month, and we ended the third quarter with financial liquidity of almost $1.2 billion. I'll now turn it over to Dan to discuss the operations in more detail.