Comstock Resources, Inc.

Thank you for standing by and welcome to the CompStock Resources fourth quarter 2023 earnings conference call. At this time, all participants are in 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 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Jay Ellison.

chairman and ceo please go ahead sir all right jonathan i love that broadcasting voice uh kind of starts the day off right uh our corporate team of 255 strong i want to thank you for joining the call this morning and we wish you a happy valentine's day being a pure play natural gas company in a sub two dollar natural gas market calls for decisive actions to weather the volatility and at the same time continue positioning CompSoc to benefit from the longer-term growth in natural gas demand in the foreseeable future. America will need to deliver an additional 10 billion cubic feet of natural gas per day to the LNG facilities currently under construction in the next few years, actions taken so far as we batten down the hatches to protect our balance sheet. Number one, In January, we released a frack crew. Number two. Several months ago, we gave notice to release two rigs, and they will both be finished, their work, by the end of this month. Number three. We suspended our quarterly dividend until natural gas prices improved. Number four. We continually evaluate our activity level as we plan to fund our drilling program within operating cash flow, if possible. Number five. We formed our midstream joint venture last year that allows us to build out the Western Hainesville midstream assets to be funded by the midstream partnership and not burden our operating cash flow at Comstock. Number six, we're positioned Comstock to have very few rigs needed to hold all of our corporate acres, including the 250 plus thousand net acres in the Western Hainesville. Number seven, We're bullish on the long-term outlook for natural gas and are growing our resource base in the advantage proximity to the Gulf Coast market. Number eight, lastly, our Western Hainesville, quote, box of chocolate on its Valentine's Day allows us to maturely grow our drilling inventory organically versus through the M&A market. I can also assure you that our majority stockholder The Jerry Jones family is in 100% approval of all of our prior actions, as well as our recent moves to protect our balance sheet in this volatile natural gas market. They are in the cockpit with us, helping fly this plane with a steady hand on the throttle, looking into the future where global natural gas markets are counting on our U.S. gas to provide needed clean energy. Our goal is to look back on this point in time in the future years and say we handled it well and continue to create corporate value in a weak period for natural gas. Now I'll go over to the corporate script. Welcome to the Comstock Resources Fourth 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 will find a presentation entitled Fourth Quarter 2023 Results. I'm Jay Allison, Chief Executive Officer of Comstock. 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 Investor Relations. Please refer to slide two in our presentations and note that our discussions today will include forward-looking statements within a meeting 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. Fourth quarter 2023 highlights. On slide three, we summarize the highlights of the fourth quarter. The financial results continue to be heavily impacted by the continued weak natural gas prices. Oil and gas sales, including hedging, were $354 million in the quarter. We generated cash flow from operations of $207 million, or $0.75 per share, and adjusted EBITDAX was $244 million. Our adjusted net income was $0.10 for the quarter. We continue to have very strong results from our drilling program. In the fourth quarter, we drilled 13.3 net successful operated Hainesville and Bossier Shell horizontal wells in the quarter with an average lateral length of 8,994 feet since the last conference call. We've connected 22 or 16.5 net operated Welsh to cells with an average initial production rate of 24 million cubic feet per day and an average lateral length of 11,966 feet. Our 2023 drilling program replaced 109% of our 2023 production with new approved reserves ads. We are continuing to make progress in our Western Angel exploratory plate We added 23,000 net acres to our expensive Western Hainesville acreage position in the fourth quarter alone, increasing our total acreage position in the play to over 250,000 net acres. We recently turned our H well to cells. The Nela well was completed in the Hainesville formation and is currently producing at 31 million cubic feet per day. Three additional wells, the Harrison, Glass, and Farley wells, are expected to come on production by the end of the first quarter. I'll now have Roland go over the fourth quarter and the annual financial results. Roland?

Thanks, Jay. On slide four, we cover our fourth quarter financial results. Our production in the fourth quarter of 1.5 BCFE per day increased 6% for the fourth quarter of 2022 and grew 8% from the third quarter. Low natural gas prices resulted in our oil and gas sales in the quarter coming in at $354 million, declining 37% from 2022's fourth quarter, despite the higher production level. EBITDAX for the quarter came in at $244 million, and we generated $207 million of cash flow in the fourth quarter. We reported adjusted net income of $28 million for the fourth quarter, or 10 cents per share, as compared to a net income of $12 million in the third quarter of 2023, and $288 million in the fourth quarter of 2022. Slide 5, we show the financial results for the full year, 2023. Our production averaged 1.4 BCFE per day, which was a 5% increase from the prior year. Oil and gas sales in 2023 totaled $1.3 billion, and we're 41% lower than our sales in 2022 due to the lower gas prices we realized. Our EBITDA in 2023 was $928 million and we generated $774 million of cash flow for the year. We reported net income of $133 million for 2023 as compared to net income of $1 billion in 2022. Slide six, we show our natural gas price realizations that we had in the quarter. During the fourth quarter, the quarterly NYMEX settlement gas price averaged $2.88, which was 14 cents higher than the average Henry Hemp spot price in the quarter of $2.74. Our realized gas price during the fourth quarter averaged $2.48, reflecting a 40 cent differential to the settlement price and a 32 cent differential to our reference price. The differentials were a little wider in the quarter starting in October, which normally occurs as we reach the end of storage injection period. In the fourth quarter, we were 16% hedged, and that improved our realized gas price for the quarter to $2.51. We've also been using some of our excess transportation in the Hainesville to buy and resell third-party gas. We generated about $4.4 million of profits in the fourth quarter, and that approved our gas price realization by another $0.03 in the quarter. On slide seven, we detail the operating cost per MCFE and our EBITDAX margin. Our operating cost per MCFE averaged $0.81 in the fourth quarter, 4% lower than the third quarter. Lower gathering costs were offset though by higher production and ad valorem taxes. Our gathering costs were down $0.03 to $0.33 during the quarter, And our lifting costs were also one cent lower than the third quarter rate at 23 cents. Our production ad valorem taxes increased three cents from the third quarter level. And G&A came in at two cents per MCFE, which was three cents lower than the third quarter. Our EBITDAX margin after hedging came in at 68% in the fourth quarter, up from the 65% level we had in the previous quarter. On slide 8, we recap our spending on drilling and other development activity in 2023. We spent a total of $1.3 billion on our development activities, including $1.2 billion on our Hainesville and Bossier Shale drilling program. Spending on other development activity, including installing production tubing, offset frack protection, and other workovers, totaled $54 million. In 2023, we drilled 67 wells or 55.5 wells net to our interest. In turn, 74 or 55.7 net operated wells to sales. These wells had an overall average IP rate of 25 million cubic feet per day per well. On slide nine, we cover our natural gas and oil reserves that were determined using the required SEC prices. Our SEC-approved reserves decreased 26% in 2023 to 4.9 TCFE due to the low gas price used in that determination. The required SEC gas price decreased 60% for 2023 to $2.39 per MCF, down from the $6.03 that was used in 2022. Our 2023 drilling activity added 571 BCFE approved reserves to our year end reserves, which replaced 109% of our 2023 production. But we also had 1.8 TCFE of negative revisions due to the lower approved undeveloped reserves caused by our reduction in drilling activity and the low natural gas price that was used to determine which undrilled locations we would drill. In addition to the total 4.9 TCFE of SEC-approved reserves that we had at the end of the year, we have another half of TCFE-approved undeveloped reserves that aren't included as they are not expected to be drilled within the five-year required time period required by the SEC rules. We also have another almost TCFE of 2P or probable reserves and 4.6 TCFE of 3P or possible reserves for a total reserve base of around 10.9 TCFE on a P3 basis, all determined at the low SEC pricing. On slot 10, we've used a NYMEX gas price of $3.50 per MCF to determine the reserves to show the impact of the low prices on the year-end reserves. Using this price, our approved reserves would have been similar to last year at 6.6 TCFE. In addition, our overall reserves, we would have had an additional of another two TCFE-approved undeveloped reserves that are outside the five-year period. And then we would have 2.5 TCFE of 2P, or probable reserves, and another 8.7 TCFE of 3P, or possible reserves, for a total overall reserve base of 19.8 TCFE on a P3 basis, all determined at a 350 NYMEX gas price, which and our view lined up closer to the long-term futures prices for natural gas. On slide 11, we recap our balance sheet at the end of 2023. We did end the quarter with $580 million of borrowings under our credit facility, giving us a total of $2.7 billion in debt, including our outstanding senior notes. Our borrowing base for our bank credit facility is currently at $2 billion, of which we have an elected commitment of $1.5 billion of that amount. So we ended the year with overall financial liquidity of just over a billion dollars. I'll now turn it over to Dan to kind of discuss our operations in more detail.