On this page of StockholderLetter.com we present the 4/24/2023 shareholder letter from COMSTOCK RESOURCES INC — ticker symbol CRK. Reading current and past CRK letters to shareholders can bring important insights into the investment thesis.

 •  4/24/2023 Letter Continued (Full PDF)
 •  4/29/2024 CRK Stockholder Letter
 •  4/22/2025 CRK Stockholder Letter
 •  4/22/2026 CRK Stockholder Letter
 •  More "Oil & Gas Exploration & Production" Category Stockholder Letters
 •  CRK Benford's Law Stock Score = 96

CRK 4/24/2023 Shareholder/Stockholder Letter Transcript:

H AY N E S V I L L E
B O S S I E R
TEXAS

S H A L E
LOUISIANA
Comstock Resources is a leading independent
natural gas producer with operations focused
on the development of the Haynesville shale
in North Louisiana and East Texas

natural gas per day with our second Western
Haynesville well averaging 42 million cubic
feet per day.
TO OUR STOCKHOLDERS:
2022 was a break-out year for the
Company driven by strong natural gas
prices. We were able to exceed the goals we
put in place for the year for generating free
cash flow and strengthening our balance
sheet. We also were able to advance our
Western Haynesville exploratory play by
adding 98,000 net acres in the play and
drilling two very successful wells.
CREATING A STRONG BALANCE SHEET
We signi   cantly strengthened our balance sheet in 2022
using the $673 million of free cash flow we generated to
retire $506 million of debt. We improved our leverage ratio to
1.1x, down from 2.4x in 2021, exceeding our goal of reducing
leverage to under 1.5x that we had established for 2022.
In November, we entered into a new    ve-year credit facility
with 17 banks, which lowered our interest costs and
GREW PROVED RESERVE BASE AT LOW
FINDING COSTS
Our 2022 drilling activity added 1.1 trillion
cubic feet of natural gas equivalent (   Tcfe   )
of proved reserve additions at a low    nding
cost of 95   per Mcfe. Our proved reserves
grew 9% in 2022 to 6.7 Tcfe and we replaced
216% of our 2022 production. The present value discounted
at 10% of our proved reserves was $15.5 billion on December
31, 2022.
STRONG FINANCIAL RESULTS
Our adjusted net income increased in 2022 by 238% from 2021
to $1 billion or $3.73 per diluted share. Net income was
adjusted to exclude certain items not related to normal
We signi   cantly strengthened our balance sheet
in 2022 using the $673 million of free cash flow
we generated to retire $506 million of debt.
increased our availability. We repaid the outstanding
borrowings on the bank credit facility and retired $271
million of our outstanding senior notes. We extended the
date of the earliest maturity of our debt to 2029.
The $175 million of preferred stock that helped fund the
Covey Park acquisition was converted into common stock,
which further enhanced our balance sheet.
operating activities, which in 2022 was primarily losses from
the early retirement of debt and the unrealized loss related to
ADJUSTED NET INCOME ($ IN MILLIONS)
2022
2021
2020
$1,023
$303
$50
SOLID RESULTS FROM OUR 2022 DRILLING PROGRAM
We had another strong year with the drill bit in the Haynesville
and Bossier shales, drilling 73 or 57.0 net wells in 2022. We
drilled two very successful exploratory wells in our Western
Haynesville play. The results so far of both wells put them
among the best wells ever drilled in the Haynesville.
We increased the average lateral length of the wells we drilled
by 14% compared to 2021 to almost 10,000 feet. We set a new
corporate record with our record longest lateral to date of
15,726 feet. By continuing to execute our long lateral strategy,
we are able to offset some of the higher service costs that we
experienced in 2022. The wells we put on sales in 2022 had an
average initial production rate of 26 million cubic feet of
EPS
2022
2021
2020
$3.73
$1.16
$0.23
ADJUSTED EBITDAX ($ IN MILLIONS)
2022
2021
2020
$1,924
$1,120
$723


our contracts to hedge future
natural gas prices.
We produced 501 billion cubic feet
equivalent of natural gas in 2022.
Stronger natural gas prices drove a 58%
growth in our natural gas and oil sales,
after hedging, to $2.3 billion. We generated
Adjusted EBITDAX of $1.9 billion, which
increased 72% over 2021. Our operating cash flow in 2022 of
$1.7 billion grew 90% over 2021. Our EBITDAX margin in 2022
was 85%, one of the highest in the industry. We also achieved
a 28% return on average capital employed and a 62% return
on average equity.
SUBSTANTIAL FREE CASH FLOW GENERATION AND
RETURN OF CAPITAL
We generated free cash flow from operations of $673 million
in 2022, representing a free cash flow yield of 39%. Including
the acquisition and divestitures we completed in 2022, we
successful. In 2022, we added 98,000 net acres that are
prospective for the Haynesville and Bossier shales to our
Western Haynesville area for $54.1 million, or $550 per acre.
ENVIRONMENTAL STEWARDSHIP
We are committed to environmental stewardship and a
responsible energy future. We already have a low green
house gas emissions pro   le and we have several initiatives
ongoing to continue to improve, including using cleaner
burning natural gas rather than diesel fuel to reduce
emissions in our drilling and completion operations. In 2022,
we deployed BJ Energy Solutions    next generation hydraulic
fracturing fleet, which is fueled by 100% natural gas, in our
Haynesville shale development program and will add a
second fleet in 2023.
Our most signi   cant environmental initiative is our
partnership with MiQ to certify our natural gas production
under the MiQ methane standard. MiQ oversees an
independent, third-party audited assessment of methane
We reinstated our quarterly common
stock dividend of 12.5   in the fourth quarter
of 2022.
generated a total of $605 million in free cash flow. We used
the free cash flow toward debt reduction, and we reinstated
our quarterly common stock dividend of 12.5   in the fourth
quarter of 2022.
INDUSTRY LEADING LOW OPERATING COST STRUCTURE
We continue to have one of the industry   s lowest operating
cost structures. Our total operating cost per Mcfe produced
averaged 76   in 2022. Our gathering and transportation
costs averaged 31   per Mcfe in 2022, which is substantially
lower than any other signi   cant natural gas producer. Our
general and administrative costs averaged only 7   per Mcfe
in 2022 and our other operating costs per Mcfe, including
production taxes, averaged 38   per Mcfe in 2022.
emissions from our natural gas production activities. We
achieved independent certi   cation for 100% of our operated
CASH FLOW ($ IN MILLIONS)
2022
2021
2020
$1,722
$908
$521
CFPS
2022
2021
2020
$6.21
$3.29
$2.08
SUBSTANTIAL UPSIDE FROM EXPLORATION PROGRAM
We are conducting an active exploration program and we are
investing a part of our annual capital budget to expand our
acreage holdings and delineate the emerging Western
Haynesville and Bossier shale play in East Texas. Our    rst
two Haynesville and Bossier shale wells in this play were very
FREE CASH FLOW ($ IN MILLIONS)
2022
2021
2020
$673
$262
$12

4/24/2023 Letter Continued (Full PDF)

 

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