Comstock Resources, Inc.

Good day and thank you for standing by. Welcome to the third quarter 2024 CompStack Resources earnings 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 the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised, that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jay Ellison, Chairman and CEO. Please go ahead.

Perfect. And welcome, everyone that's listening in. Welcome to the Comstock Resources third quarter 2024 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 2024 Results. I am Jay Allison, Chief Executive Officer of CompTalk, 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 Investor Relations. If you would, please refer to slide two in our presentations 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. If you would, turn to slide three before we start Going over this slide, I do want to make a few comments. On Tuesday, I was watching Bloomberg News, and the headline was, quote, big oil sees AI boom driving crazy demand for US natural gas. Now, by the way, I love that word crazy. Then on Wednesday, I read in the journal, quote, Wall Street giants to make $50 billion bet on AI and power projects with the quotes, quote, gas is going to be at the forefront of this, quote, natural gas can back up those intermittent renewables very nicely, and quote, natural gas-fired plants will be critical in supplying around-the-clock power to data centers. Now, since those headlines came out on Tuesday, Wednesday, I know they're not trick-or-treat headlines. So today is Halloween, everyone, so happy Halloween. It does make you smile a little bit having a pure natural gas company report results on Halloween. I told someone I was hoping tonight I'd see a kid in my front door dressed as a flame, either that or as a horseshoe. Either one's good with me. Anyhow, the good news or the treat for natural gas companies is that America and the world needs more natural gas. In the very near future, as demand for an additional 15 BCF of LNG increases, feed gas gets nearer along with growth in power demand being driven by the growth in data centers and AI. The question is though, here's the question, is where does ComSoc fit into this puzzle and how did we position ourselves over the past four years to be a difference maker in the US natural gas market? As one analyst stated on Monday, quote, The producing basins are facing inventory exhaustion." You either add inventory by M&A or exploratory drilling. Comstock has chosen four years ago to grow inventory through exploration in our new Western Hainesville play. Since 2020, we have secured 450,000 net acres In the western Hainesville area, it drilled 18 wells over an area of 26 miles to give birth to a major natural gas field close to the LNG demand corridor, which could potentially add decades of additional drilling inventory. I told someone that it's like a dog chasing a car and catching it. That's what we did in Western Hainesville. We caught the 450,000 net acres, and now we're learning how to drive the car, or in our case, develop the Western Hainesville well by well. The results today look very, very promising, so the future looks very bright. In fact, today, Dan Harrison, our COO, will report on our 13th Western Hainesville well and give you cost per foot, and yes, Number 13 is a lucky number for us today, even on Halloween. That kind of makes you smile too. So on this Halloween day, we're thankful to be the treat as the corner is being turned for natural gas demand. So now let me go back to the presentation on slide three. On slide three, we summarize the highlights of the third quarter. Our financial results continue to be heavily impacted by the continued weak natural gas prices, as our average realized gas price before hedging was $1.90 for the quarter. As a result, our oil and gas sales, including hedging, were $305 million in the quarter, and we generated cash flow from operations of $152 million, or 52 cents per share, and adjusted EBITDAX of $202 million. Our adjusted net loss was 17 cents per share for the quarter. Given the lower completion activity that was planned for this quarter, we had only eight operated wells turned to sales since the company's last update. These wells had an average initial production of 21 million cubic feet per day. One of those was our first Horseshoe Hainesville well, which had an initial IP rate of 31 million per day, which Dan will talk about later. We're continuing to advance our Western Hainesville exploratory play. Our acreage in the emerging play is now up to 453,881 net acres. Most importantly, we have substantially reduced the well cost in the Western Hainesville, with our 13th well recently completed at a cost of approximately $2,814 per lateral foot. This was a single well, with an 11,400-foot lateral, which did not get the cost savings that we see on a two-well pad. The next five wells in the Western Angel are expected to be turned to sales in late 2024 to early 2025. Four of those are on two-well pads. Now I'll give it over to Roland to go to the third quarter financial results. Roland?

All right. Thanks, Jay. On slide four, we cover our third quarter financial results. Our production in third quarter averaged 1.4 BCFE per day, which was 2% higher than the third quarter of 2023. Continued low natural gas prices resulted in our oil and gas sales in the quarter declining 3% to $305 million. EBITDAX for the quarter was $202 million, and we generated $152 million of cash flow in the third quarter. We reported an adjusted loss of $49 million for the third quarter of 17 cents per share. Higher depreciation, depletion, and amortization in the quarter really accounted for the loss. The higher amortization rate driving the increase in our DD&A was caused by a decrease in approved undeveloped reserves, which had to be determined under SEC rules based on the low natural gas prices we've had over the last 12 months. On slide five, we cover Our year-to-date financial results, production in this period averaged 1.5 BCFE per day, and that was 5% higher than the same period in 2023. Again, low natural gas prices caused our oil and gas sales in the first nine months of the year to decrease 7% to $919 million as compared to 2023. Our EBITDAX for the first nine months of this year is $598 million, and we generated about 452 million of cash flow. We reported a net loss of 121 million for the first nine months of this year, or 42 cents per share as compared to income of 105 million in the same period in 2023. On slide six, we break down our natural gas price realizations in the quarter. The quarterly NYMEX settlement price averaged $2.16 in the third quarter, and the average Henry Hub spot price averaged $2.09. Our realized gas price during the third quarter averaged $1.90, reflecting a 26-cent differential to the settlement price and a 23-cent differential to the reference price. In the third quarter, we were 28% hedged, which improved our realized gas price to $2.28. As we look ahead to the fourth quarter, we'll be 50% hedged. On slide seven, we detail our operating costs per MCFE and our EBITDAX margin. Our operating costs per MCFE averaged 77 cents in the third quarter. That's a seven cent improvement from the second quarter rate. And then our margin improved 67% in the third quarter as compared to 61% in the second quarter. A lot of that was driven by lower production and ad valorem taxes, which were down five cents reflecting a reduction in the statutory rate in Louisiana. Our lifting costs were also down 5 cents in the quarter. Our gathering costs were up 3 cents in the quarter, but this is solely due to some prior period adjustments from some of our transport agreements. So we expect to see that back to its kind of normal rate in the fourth quarter. And our G&A costs were unchanged from the second quarter. On slide eight, we recap our spending on our drilling and other development activity, we spent a total of $184 million on development activities in the third quarter. And for all of the first nine months of this year, we've drilled 23 or 18.6 net Hainesville wells and 12 or 11.1 Bossier wells. We've also turned 41 or 35.9 net operated wells to sales so far this year that had an average IP rate of 24 million per day. Slide 9 recaps our capitalization at the end of the third quarter. We ended the quarter with $415 million of borrowings outstanding under our credit facility, giving us $3 billion of total debt, including our outstanding senior notes. Yesterday, our bank group unanimously reaffirmed our borrowing base of $2 billion, and our elected commitment still remains at $1.5 million under the bank credit facility. And given the extended period of low natural gas prices that we've had, our bank group approved an amendment to loosen the covenant leverage ratio that we had. The new leverage ratio under the amendment increases to less than four times through the first quarter of next year, then steps back down to 3.75 times in the second quarter of 2025, and then to less than three and a half times by the third quarter of 2025. At the end of the third quarter, we ended the quarter with $1.1 billion of liquidity. I'll now turn the call over to Dan to discuss the operations.