COMSTOCK RESOURCES INC [CRK] Filings

10-Q 1 crk-20240630.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 001-03262

COMSTOCK RESOURCES, INC.

(Exact name of registrant as specified in its charter)

    Nevada

    94-1667468

    (State or other jurisdiction of
incorporation or organization)

    (I.R.S. Employer
Identification Number)

5300 Town and Country Blvd., Suite 500, Frisco, Texas 75034

(Address of principal executive offices)

Telephone No.: (972) 668-8800

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.50 (per share)	CRK	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated ☐	Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares outstanding of the registrant's common stock, par value $0.50, as of July 31, 2024 was 292,260,645.

COMSTOCK RESOURCES, INC.

QUARTERLY REPORT

For the Quarter Ended June 30, 2024

INDEX


	Page
PART I. Financial Information
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	4
Consolidated Statements of Operations – for the three months and six months ended June 30, 2024 and 2023	5
Consolidated Statements of Stockholders' Equity – for the three months and six months ended June 30, 2024 and 2023	6
Consolidated Statements of Cash Flows – for the six months ended June 30, 2024 and 2023	7
Notes to Consolidated Financial Statements	8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3. Quantitative and Qualitative Disclosure About Market Risk	23
Item 4. Controls and Procedures	23
PART II. Other Information
Item 1. Legal Proceedings	24
Item 1A. Risk Factors	24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3. Defaults upon Senior Securities	24
Item 4. Mine Safety Disclosures	24
Item 5. Other Information	24
Item 6. Exhibits	24
SIGNATURES	25

PART 1 — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

COMSTOCK RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS


	As of
	June 30, 2024			December 31, 2023
	(Unaudited)
	(In thousands)

ASSETS
Cash and cash equivalents	$	19,270		$	16,669
Accounts receivable:
Natural gas and oil sales and gas services		113,413			166,639
Joint interest operations		30,902			48,704
From affiliates		10,884			16,087
Derivative financial instruments		79,649			126,775
Other current assets		69,289			86,619
Total current assets		323,407			461,493
Property and equipment:
Natural gas and oil properties, successful efforts method:
Proved		7,617,670			7,126,519
Unproved		408,705			343,419
Other		79,841			62,382
Accumulated depreciation, depletion and amortization		(2,531,599	)		(2,147,549	)
Net property and equipment		5,574,617			5,384,771
Goodwill		335,897			335,897
Operating lease right-of-use assets		90,604			71,462
	$	6,324,525		$	6,253,623

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	377,909		$	523,260
Accrued costs		139,414			134,466
Operating leases		34,952			23,765
Total current liabilities		552,275			681,491
Long-term debt		2,856,045			2,640,391
Deferred income taxes		415,604			470,035
Derivative financial instruments		47,366			—
Long-term operating leases		55,621			47,742
Reserve for future abandonment costs		31,709			30,773
Total liabilities		3,958,620			3,870,432
Commitments and contingencies
Stockholders' equity:
Common stock—$0.50 par, 400,000,000 shares authorized, 292,260,645 and 278,429,463 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		146,130			139,214
Additional paid-in capital		1,358,549			1,260,930
Accumulated earnings		815,639			958,270
Total stockholders' equity attributable to Comstock		2,320,318			2,358,414
Noncontrolling interest		45,587			24,777
Total stockholders' equity		2,365,905			2,383,191
	$	6,324,525		$	6,253,623

The accompanying notes are an integral part of these statements.

COMSTOCK RESOURCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
	(In thousands, except per share amounts)
Revenues:
Natural gas sales	$	216,527		$	228,892		$	503,610		$	606,924
Oil sales		1,074			860			1,950			2,802
Total natural gas and oil sales		217,601			229,752			505,560			609,726
Gas services		29,229			58,459			77,042			168,063
Total revenues		246,830			288,211			582,602			777,789
Operating expenses:
Production and ad valorem taxes		19,244			19,599			37,152			34,505
Gathering and transportation		49,361			45,395			96,460			90,969
Lease operating		34,805			34,031			69,877			68,861
Exploration		—			—			—			1,775
Depreciation, depletion and amortization		194,242			140,177			384,931			274,160
Gas services		31,494			55,390			80,174			156,685
General and administrative		10,177			10,038			19,348			22,406
Loss (gain) on sale of assets		—			648			—			(125	)
Total operating expenses		339,323			305,278			687,942			649,236
Operating income (loss)		(92,493	)		(17,067	)		(105,340	)		128,553
Other income (expenses):
Gain (loss) from derivative financial instruments		(25,252	)		(4,495	)		14,055			61,914
Other income		322			598			653			1,058
Interest expense		(51,932	)		(39,188	)		(101,489	)		(77,458	)
Total other income (expenses)		(76,862	)		(43,085	)		(86,781	)		(14,486	)
Income (loss) before income taxes		(169,355	)		(60,152	)		(192,121	)		114,067
(Provision for) benefit from income taxes		46,106			14,446			54,398			(25,270	)
Net income (loss)		(123,249	)		(45,706	)		(137,723	)		88,797
Net income attributable to noncontrolling interest		(3,061	)		—			(4,908	)		—
Net income (loss) available to Comstock	$	(126,310	)	$	(45,706	)	$	(142,631	)	$	88,797

Net income (loss) per share:
Basic	$	(0.43	)	$	(0.17	)	$	(0.49	)	$	0.32
Diluted	$	(0.43	)	$	(0.17	)	$	(0.49	)	$	0.32
Weighted average shares outstanding:
Basic		289,670			276,669			283,816			276,610
Diluted		289,670			276,669			283,816			276,610
Dividends per share	$	—		$	0.125		$	—		$	0.25

The accompanying notes are an integral part of these statements.

COMSTOCK RESOURCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)


	Common Shares			Common Stock- Par Value			Additional Paid-in Capital			Accumulated Earnings			Noncontrolling Interest			Total
	(In thousands)
Balance at January 1, 2023		277,517		$	138,759		$	1,253,417		$	886,138		$	—		$	2,278,314
Stock-based compensation		(7	)		(4	)		2,050			—			—			2,046
Net income		—			—			—			134,503			—			134,503
Common stock dividends		—			—			—			(34,688	)		—			(34,688	)
Balance at March 31, 2023		277,510		$	138,755		$	1,255,467		$	985,953		$	—		$	2,380,175
Stock-based compensation		983			491			(85	)		—			—			406
Net loss		—			—			—			(45,706	)		—			(45,706	)
Common stock dividends		—			—			—			(34,689	)		—			(34,689	)
Balance at June 30, 2023		278,493		$	139,246		$	1,255,382		$	905,558		$	—		$	2,300,186

Balance at January 1, 2024		278,430		$	139,214		$	1,260,930		$	958,270		$	24,777		$	2,383,191
Stock-based compensation		1,272			637			2,778			—			—			3,415
Issuance of common stock		12,500			6,250			94,200			—			—			100,450
Net income (loss)		—			—			—			(16,321	)		1,847			(14,474	)
Contributions from noncontrolling interest		—			—			—			—			6,000			6,000
Balance at March 31, 2024		292,202		$	146,101		$	1,357,908		$	941,949		$	32,624		$	2,478,582
Stock-based compensation		59			29			680			—			—			709
Stock issuance costs		—			—			(39	)		—			—			(39	)
Net income (loss)		—			—			—			(126,310	)		3,061			(123,249	)
Contributions from noncontrolling interest		—			—			—			—			11,000			11,000
Distribution to noncontrolling interest		—			—			—			—			(1,098	)		(1,098	)
Balance at June 30, 2024		292,261		$	146,130		$	1,358,549		$	815,639		$	45,587		$	2,365,905

The accompanying notes are an integral part of these statements.

COMSTOCK RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
	2024			2023
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(137,723	)	$	88,797
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Deferred income taxes		(54,431	)		25,270
Gain on sale of assets		—			(125	)
Depreciation, depletion and amortization		384,931			274,160
Gain on derivative financial instruments		(14,055	)		(61,914	)
Cash settlements of derivative financial instruments		108,547			65,877
Amortization of debt discount and issuance costs		5,383			3,991
Stock-based compensation		7,497			4,351
Decrease in accounts receivable		76,231			316,210
Decrease in other current assets		4,846			1,201
Increase (decrease) in accounts payable and accrued expenses		(126,112	)		56
Net cash provided by operating activities		255,114			717,874
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and acquisitions		(588,208	)		(743,858	)
Prepaid drilling costs		12,484			(8,624	)
Proceeds from sales of assets		—			41,295
Net cash used for investing activities		(575,724	)		(711,187	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on bank credit facility		430,000			160,000
Repayments of bank credit facility		(585,000	)		(140,000	)
Issuance of Senior Notes		372,000			—
Issuance of common stock		100,450			—
Common stock dividends paid		—			(69,377	)
Debt and stock issuance costs		(6,768	)		(144	)
Income tax withholdings on equity awards		(3,373	)		(1,899	)
Contributions from noncontrolling interest		17,000			—
Distribution to noncontrolling interest		(1,098	)		—
Net cash provided by (used for) financing activities		323,211			(51,420	)
Net increase (decrease) in cash and cash equivalents		2,601			(44,733	)
Cash and cash equivalents, beginning of period		16,669			54,652
Cash and cash equivalents, end of period	$	19,270		$	9,919

The accompanying notes are an integral part of these statements.

COMSTOCK RESOURCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These unaudited consolidated financial statements include the accounts of Comstock Resources, Inc. and its wholly-owned subsidiaries (collectively, "Comstock" or the "Company"). In management's opinion, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of Comstock as of June 30, 2024, and the related results of operations and cash flows for the periods being presented. Net income (loss) and comprehensive income (loss) are the same in all periods presented. All adjustments are of a normal recurring nature unless otherwise disclosed.

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to those rules and regulations, although Comstock believes that the disclosures made are adequate to make the information presented not misleading. These unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in Comstock's Annual Report on Form 10-K for the year ended December 31, 2023. The results of operations for the period through June 30, 2024 are not necessarily an indication of the results expected for the full year.

Pinnacle Gas Services ("PGS") is a joint venture entity formed by the Company and an affiliate of Quantum Capital Solutions. PGS provides gathering and treating services for natural gas production in the Company's Western Haynesville area. Comstock directs the activities that most significantly impact the performance of PGS and has the obligation to absorb losses or right to receive benefits that could potentially be significant to PGS. Accordingly, Comstock is considered the primary beneficiary and consolidates the assets, liabilities and results of operations of PGS in the accompanying consolidated financial statements. PGS assets that cannot be used by Comstock for general corporate purposes include $71.4 million and $54.9 million of other property and equipment as of June 30, 2024 and December 31, 2023, respectively. Other PGS assets that cannot be used by Comstock and PGS liabilities for which creditors do not have recourse to Comstock's assets are not material to the Company's consolidated financial statements. The portions of PGS net income and stockholders' equity not attributable to Comstock's controlling interest are shown separately as noncontrolling interests in the accompanying consolidated statements of operations and statements of stockholders' equity.

Other Current Assets

Other current assets at June 30, 2024 and December 31, 2023 consisted of the following:


	As of
	June 30, 2024		December 31, 2023
	(In thousands)
Prepaid drilling costs	$	57,640	$	70,124
Income tax receivable		4,625		8,312
Production tax refunds receivable		4,915		5,745
Prepaid expenses		2,109		2,438
	$	69,289	$	86,619

Property and Equipment

The Company follows the successful efforts method of accounting for its natural gas and oil properties. Costs incurred to acquire natural gas and oil leases and to drill and complete developmental wells are capitalized.

Exploratory well costs are initially capitalized as proved property in the consolidated balance sheets but charged to exploration expense if and when the well is determined not to have found commercial proved natural gas and oil reserves.

COMSTOCK RESOURCES, INC.

The changes in capitalized exploratory well costs are as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
	(In thousands)
Beginning capitalized exploratory well costs	$	58,034		$	30,557		$	96,233		$	867
Additions to exploratory well costs pending the determination of proved reserves		52,392			74,622			158,848			104,312
Determined to have found proved reserves		(40,626	)		(70,983	)		(185,281	)		(70,983	)
Ending capitalized exploratory well costs	$	69,800		$	34,196		$	69,800		$	34,196

As of June 30, 2024 and December 31, 2023, the Company had no exploratory wells for which costs have been capitalized for a period greater than one year.

The Company assesses the need for an impairment of the capitalized costs for its proved natural gas and oil properties on a property basis. No impairments were recognized to adjust the carrying value of the Company's proved natural gas and oil properties during any of the periods presented. Unproved natural gas and oil properties are also periodically assessed and any impairment in value is charged to expense. The costs related to unproved properties are transferred to proved natural gas and oil properties and amortized on an equivalent unit-of-production basis when they are reflected in proved natural gas and oil reserves.

The Company determines the fair value of its natural gas and oil properties using a discounted cash flow model and proved and risk-adjusted probable natural gas and oil reserves. Undrilled acreage can also be valued based on sales transactions in comparable areas. Significant Level 3 assumptions associated with the calculation of discounted future cash flows included in the cash flow model include management's outlook for natural gas and oil prices, production costs, capital expenditures, and future production as well as estimated proved natural gas and oil reserves and risk-adjusted probable natural gas and oil reserves. Management's natural gas and oil price outlook is developed based on third-party longer-term price forecasts as of each measurement date. The expected future net cash flows are discounted using an appropriate discount rate in determining a property's fair value.

It is reasonably possible that the Company's estimates of undiscounted future net cash flows attributable to its natural gas and oil properties may change in the future. The primary factors that may affect estimates of future cash flows include future adjustments, both positive and negative, to proved and appropriate risk-adjusted probable natural gas and oil reserves, results of future drilling activities, future prices for natural gas and oil, and increases or decreases in production and capital costs. As a result of these changes, there may be future impairments in the carrying values of these or other properties.

Goodwill

The Company had goodwill of $335.9 million as of June 30, 2024 that was recorded in 2018. The Company is not required to amortize goodwill as a charge to earnings; however, the Company is required to conduct an annual review of goodwill for impairment. The Company performs an annual assessment of goodwill on October 1 of each year and performs interim assessments if indicators of impairment are present. If the carrying value of goodwill exceeds the fair value, an impairment charge would be recorded for the difference between fair value and carrying value.

Leases

The Company has right-of-use lease assets of $90.6 million related to its corporate office, certain office equipment, vehicles and drilling rigs with corresponding short-term and long-term liabilities. The value of the lease assets and liabilities are determined based upon discounted future minimum cash flows contained within each of the respective contracts. The Company determines if contracts contain a lease at inception of the contract. To the extent that contract terms representing a lease are identified, leases are identified as being either an operating lease or a finance-type lease. Comstock currently has no finance-type leases. Right-of-use lease assets representing the Company's right to use an underlying asset for the lease term and the related lease liabilities represent our obligation to make lease payments under the terms of the contracts. Short-term leases that have an initial term of one year or less are not capitalized; however, amounts paid for those leases are included as part of its lease cost disclosures. Short-term lease costs exclude expenses related to leases with a lease term of one month or less. Leases for the right to explore for and develop natural gas and oil reserves and the related rights to use the land associated with those leases are reflected as natural gas and oil properties.

Comstock contracts for a variety of equipment used in its natural gas and oil exploration and development activities. Contract terms for this equipment vary broadly, including the contract duration, pricing, scope of services included along with the equipment, cancellation terms, and rights of substitution, among others. The Company's drilling and completion operations routinely change due to changes in commodity prices, demand for natural gas and oil, and the overall operating and economic environment. Accordingly,

COMSTOCK RESOURCES, INC.

Comstock manages the terms of its contracts for drilling rigs and completion equipment so as to allow for maximum flexibility in responding to these changing conditions. The Company's hydraulic fracturing fleet contracts are on terms of less than one year and include rights of substitution. The Company has three drilling rig contracts with a three year term with options to extend the term by mutual agreement at mutually acceptable terms or terminate the contracts at any time without default by the lessor. The Company's other drilling rig contracts are presently either for periods of less than one year, or they are on terms that provide for cancellation with 30 or 45 days advance notice without a specified expiration date. The Company has elected not to recognize right-of-use lease assets for contracts less than one year. The costs associated with drilling and completion operations are accounted for under the successful efforts method, which generally require that these costs be capitalized as part of our proved natural gas and oil properties on our balance sheet unless they are incurred on exploration wells that are unsuccessful, in which case they are charged to exploration expense.

Lease costs recognized during the three months and six months ended June 30, 2024 and 2023 were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(In thousands)
Operating lease cost included in general and administrative expense	$	421	$	444	$	840	$	889
Operating lease cost included in lease operating expense		566		502		1,088		1,010
Operating lease cost included in natural gas and oil properties		9,171		13,230		16,303		22,680
Variable lease cost (drilling rig and completion costs included in natural gas and oil properties)		848		3,301		3,365		5,062
Short-term lease cost (drilling rig costs included in natural gas and oil properties)		4,241		24,496		15,513		53,888
	$	15,247	$	41,973	$	37,109	$	83,529

Cash payments for operating leases associated with right-of-use lease assets included in net cash provided by operating activities were $1.0 million and $0.9 million for the three months ended June 30, 2024 and 2023, respectively, and $1.9 million for both the six months ended June 30, 2024 and 2023, respectively. Cash payments for operating leases associated with right-of-use lease assets included in net cash used for investing activities were $14.3 million and $41.0 million for the three months ended June 30, 2024 and 2023, respectively, and $35.2 million and $81.6 million for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024 and December 31, 2023, the operating leases had a weighted-average term of 2.5 years and 2.9 years, respectively, and the weighted-average discount rate used to determine the present value of future operating lease payments was 7.3% and 7.2%, respectively. As of June 30, 2024, the Company also had expected future payments for short term leased drilling services of $2.6 million.

As of June 30, 2024, expected future payments related to contracts that contain operating leases were as follows:


	(In thousands)
July 1 to December 31, 2024	$	20,313
2025		40,016
2026		33,950
2027		3,775
2028		1,560
Total lease payments		99,614
Imputed interest		(9,041	)
Total lease liability	$	90,573

COMSTOCK RESOURCES, INC.

Accrued Costs

Accrued costs at June 30, 2024 and December 31, 2023 consisted of the following:


	As of
	June 30, 2024		December 31, 2023
	(In thousands)
Accrued interest payable	$	60,669	$	54,912
Accrued transportation costs		31,153		32,294
Accrued drilling costs		21,508		35,876
Accrued income and other taxes		15,789		1,894
Accrued employee compensation		4,665		6,700
Accrued lease operating expenses		3,890		2,299
Other		1,740		491
	$	139,414	$	134,466

Reserve for Future Abandonment Costs

Comstock's asset retirement obligations relate to future plugging and abandonment expenses on its natural gas and oil properties and disposal of other facilities. The following table summarizes the changes in Comstock's total estimated liability for such obligations during the periods presented:


	Six Months Ended June 30,
	2024			2023
	(In thousands)
Reserve for future abandonment costs at beginning of period	$	30,773		$	29,114
New wells placed on production		87			67
Liabilities settled		(31	)		(42	)
Accretion expense		880			825
Reserve for future abandonment costs at end of period	$	31,709		$	29,964

Derivative Financial Instruments and Hedging Activities

All of the Company's derivative financial instruments are used for risk management purposes and, by policy, none are held for trading or speculative purposes. Comstock minimizes credit risk to counterparties of its derivative financial instruments through formal credit policies, monitoring procedures, and diversification. The Company is not required to provide any credit support to its counterparties other than cross collateralization with the assets securing its bank credit facility. None of the Company's derivative financial instruments involve payment or receipt of premiums. The Company classifies the fair value amounts of derivative financial instruments as net current or noncurrent assets or liabilities, whichever the case may be, by commodity contract. None of the Company's derivative contracts were designated as cash flow hedges. All of Comstock's natural gas derivative financial instruments are tied to the Henry Hub-NYMEX price index.

The Company had the following natural gas price derivative financial instruments at June 30, 2024:


	Future Production Period
	Six Months Ending December 31, 2024	Year Ending December 31, 2025	Year Ending December 31, 2026	Total
Natural Gas Price Swap Contracts:
Volume (MMBtu)	101,200,000	136,875,000	109,500,000	347,575,000
Average Price per MMBtu	$3.54	$3.51	$3.51	$3.52
Natural Gas Price Collar Contracts:
Volume (MMBtu)		54,750,000	91,250,000	146,000,000
Average Price per MMBtu:
Average Ceiling		$3.80	$3.98	$3.92
Average Floor		$3.50	$3.50	$3.50

COMSTOCK RESOURCES, INC.

The classification of derivative financial instruments of assets or liabilities, consists of the following:


		As of
Type	Consolidated Balance Sheet Location	June 30, 2024		December 31, 2023
		(In thousands)
Asset Derivative Financial Instruments:
Natural gas price derivatives	Derivative Financial Instruments – current	$	79,649	$	126,775
Liability Derivative Financial Instruments:
Natural gas price derivatives	Derivative Financial Instruments – long-term	$	47,366	$	—

The Company recognized cash settlements and changes in the fair value of its derivative financial instruments as a single component of other income (expenses).

Gains and losses related to cash settlements and changes in the fair value recognized on the Company's derivative contracts recognized in the consolidated statement of operations were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
Gain (loss) on Derivatives Recognized in Earnings	2024			2023			2024		2023
	(In thousands)
Natural gas price derivatives	$	(25,252	)	$	(4,495	)	$	14,055	$	61,914
	$	(25,252	)	$	(4,495	)	$	14,055	$	61,914

Stock-Based Compensation

Comstock accounts for employee stock-based compensation under the fair value method. Compensation cost is measured at the grant date based on the fair value of the award and is recognized over the award vesting period and included in general and administrative expenses for awards of restricted stock and performance stock units ("PSUs") to the Company's employees and directors. The Company recognized $4.1 million and $2.3 million of stock-based compensation expense within general and administrative expenses related to awards of restricted stock and PSUs to its employees and directors during the three months ended June 30, 2024 and 2023, respectively, and $7.5 million and $4.4 million for the six months ended June 30, 2024 and 2023, respectively.

In February 2024, the Company granted an aggregate of 1,272,811 shares of restricted stock to its directors and employees, which were valued at $7.63 per share. In June 2024, the Company granted an aggregate of 43,173 shares of restricted stock to its directors, which were valued at $12.16 per share. As of June 30, 2024, Comstock had 2,091,087 shares of unvested restricted stock outstanding at a weighted average grant date fair value of $9.25 per share. Total unrecognized compensation cost related to unvested restricted stock grants of $17.8 million as of June 30, 2024 is expected to be recognized over a period of 2.1 years.

In February 2024, the Company granted an aggregate of 705,603 PSUs to its executive officers at a value of $9.69 per unit. As of June 30, 2024, Comstock had 1,290,755 PSUs outstanding with a weighted average grant date fair value of $13.21 per unit. The number of shares of common stock to be issued related to the PSUs is based on the Company's stock price performance as compared to its peers which could result in the issuance of anywhere from zero to 2,581,510 shares of common stock. Total unrecognized compensation cost related to these grants of $11.1 million as of June 30, 2024 is expected to be recognized over a period of 2.4 years.

Revenue Recognition

Comstock produces natural gas and oil and reports revenues separately for each of these two primary products in its statements of operations. Revenues are recognized upon the transfer of produced volumes to the Company's customers, who take control of the volumes and receive all the benefits of ownership upon delivery at designated sales points.

Gas services revenues represent sales of natural gas purchased for resale from unaffiliated third parties and fees received for gathering and treating services provided by PGS to third parties. Revenues are recognized upon completion of the gathering and treating of contracted natural gas volumes and delivery of purchased natural gas volumes to the Company's customers. Profits and losses earned from the gathering and treating of natural gas produced by the Company's natural gas wells are eliminated in consolidation. Revenues and expenses associated with natural gas purchased for resale are presented on a gross basis in the Company's consolidated statements of operations as the Company acts as the principal in the transaction by assuming the risks and rewards from ownership of the natural gas volumes purchased and the responsibility to deliver the natural gas volumes to their sales point.

COMSTOCK RESOURCES, INC.

All natural gas and oil and gas services revenues are subject to contracts that have commercial substance, contain specific pricing terms, and define the enforceable rights and obligations of both parties. These contracts typically provide for cash settlement within 25 days following each production month and are cancellable upon 30 days' notice by either party for oil and vary for natural gas based upon the terms set out in the confirmations between both parties. Prices for sales of natural gas and oil are generally based upon terms that are common in the oil and gas industry, including index or spot prices, location and quality differentials, as well as market supply and demand conditions. As a result, prices for natural gas and oil routinely fluctuate based on changes in these factors. Prices for gathering and treating services are generally fixed in nature but can vary due to the quality of the gas being treated. Each unit of production (thousand cubic feet of natural gas and barrel of crude oil) represents a separate performance obligation under the Company's contracts since each unit has economic benefit on its own and each is priced separately according to the terms of the contracts.

Comstock has elected to exclude all taxes from the measurement of transaction prices, and its revenues are reported net of royalties and exclude revenue interests owned by others because the Company acts as an agent when selling natural gas and oil, on behalf of royalty owners and working interest owners. Revenue is recorded in the month of production based on an estimate of the Company's share of volumes produced and prices realized. Gas services revenue is recorded in the month the services are performed and purchased gas is sold based on an estimate of natural gas volumes and contract prices. The Company recognizes any differences between estimates and actual amounts received in the month when payment is received. Historically, differences between estimated revenues and actual revenues received have not been significant. The amount of natural gas or oil sold may differ from the amount to which the Company is entitled based on its revenue interests in the properties. The Company did not have any significant imbalance positions at June 30, 2024 or December 31, 2023.

The Company recognized accounts receivable of $113.4 million and $166.6 million as of June 30, 2024 and December 31, 2023, respectively, from purchasers for contracts where performance obligations have been satisfied and an unconditional right to consideration exists.