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What changed in COMSTOCK RESOURCES INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of COMSTOCK RESOURCES INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+123 added−129 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-17)

Top changes in COMSTOCK RESOURCES INC's 2023 10-K

123 paragraphs added · 129 removed · 114 edited across 4 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

33 edited+2 added−2 removed59 unchanged
Biggest changeCompanies that do not adapt to or comply with investor or other stakeholder expectations and standards, which are evolving, or that are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition, and/or stock price of such a company could be materially and adversely affected.
Biggest changeCompanies that do not adapt to or comply with investor or other ‎stakeholder expectations ‎and standards, which are evolving, or that are perceived to have not ‎responded appropriately to the growing concern for ESG issues, ‎regardless of whether there is a ‎legal requirement to do so, may suffer from reputational damage and the business, financial ‎‎condition, and/or stock price of such a company could be materially and adversely affected.‎ We face pressures from our stockholders, who are increasingly focused on climate change, to ‎prioritize sustainable energy ‎practices, reduce our carbon footprint and promote sustainability. ‎Our stockholders may require us to implement new ESG procedures or ‎standards in order to continue ‎engaging with us, to remain invested in us or before they may make further investments in us. ‎‎Additionally, we may face reputational challenges in the event our ESG procedures or standards ‎do not meet the standards set by certain constituencies.
Also, we may not be able to obtain needed capital or financing on satisfactory terms, which could lead to a limitation of our future business opportunities and a decline in our oil and natural gas reserves. We expect to expend substantial capital in the acquisition of, exploration for and development of natural gas reserves.
Also, we may not be able to obtain needed capital or financing on satisfactory terms, which could lead to a limitation of our future business opportunities and a decline in our natural gas and oil reserves. We expect to expend substantial capital in the acquisition of, exploration for and development of natural gas reserves.
If our revenues decrease as a result of lower natural gas prices, operating difficulties or declines in reserves, our ability to obtain the capital necessary to undertake or complete future exploration and development programs and to pursue other opportunities may be limited, which could result in a curtailment of our operations relating to exploration and development of our prospects, which in turn could result in a decline in our oil and natural gas reserves.
If our revenues decrease as a result of lower natural gas prices, operating difficulties or declines in reserves, our ability to obtain the capital necessary to undertake or complete future exploration and development programs and to pursue other opportunities may be limited, which could result in a curtailment of our operations relating to exploration and development of our prospects, which in turn could result in a decline in our natural gas and oil reserves.
The regulatory burden on the oil and natural gas industry from these environmental laws and regulations increases our cost of doing business and consequently affects our profitability.
The regulatory burden on the natural gas and oil industry from these environmental laws and regulations increases our cost of doing business and consequently affects our profitability.
ITEM 1A. RISK FACTORS You should carefully consider the following material risk factors as well as the other information contained or incorporated by reference in this report, as these important factors, among others, could cause our actual results to differ from our expected or historical results. It is not possible to predict or identify all such factors.
ITEM 1A. R ISK FACTORS You should carefully consider the following material risk factors as well as the other information contained or incorporated by reference in this report, as these important factors, among others, could cause our actual results to differ from our expected or historical results. It is not possible to predict or identify all such factors.
Cyber-security attacks in particular are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data.
Cybersecurity attacks in particular are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data.
In addition, our hedging transactions are subject to the following risks: • we may be limited in receiving the full benefit of increases in natural gas prices as a result of these transactions; • a counterparty may not perform its obligation under the applicable derivative financial instrument or may seek bankruptcy protection; • there may be a change in the expected differential between the underlying commodity price in the derivative instrument and the actual price received; and • the steps we take to monitor our derivative financial instruments may not detect and prevent violations of our risk management policies and procedures, particularly if deception or other intentional misconduct is involved. 27 COMSTOCK RESOURCES, INC.
In addition, our hedging transactions are subject to the following risks: • we may be limited in receiving the full benefit of increases in natural gas prices as a result of these transactions; • a counterparty may not perform its obligation under the applicable derivative financial instrument or may seek bankruptcy protection; • there may be a change in the expected differential between the underlying commodity price in the derivative instrument and the actual price received; and • the steps we take to monitor our derivative financial instruments may not detect and prevent violations of our risk management policies and procedures, particularly if deception or other intentional misconduct is involved.
If any of these programs or systems were to fail or create erroneous information in our hardware or software network infrastructure, possible consequences include loss of our communication links, our inability to find, produce, process and sell oil and natural gas and the inability to automatically process commercial transactions or engage in similar automated or computerized business activities.
If any of these programs or systems were to fail or create erroneous information in our hardware or software network infrastructure, possible consequences include loss of our communication links, our inability to find, produce, process and sell natural gas and oil and the inability to automatically 27 COMSTOCK RESOURCES, INC. process commercial transactions or engage in similar automated or computerized business activities.
Any of these consequences could have a material effect on our business. Our business could be negatively impacted by security threats, including cyber-security threats and other disruptions.
Any of these consequences could have a material effect on our business. Our business could be negatively impacted by security threats, including cybersecurity threats and other disruptions.
Our business could also be affected by the potential for lawsuits against companies that emit greenhouse gases, based on links drawn between greenhouse gas emissions and climate change. To the extent financial markets view climate change and GHG emissions as a financial risk, this could negatively impact our cost of and access to capital. 23 COMSTOCK RESOURCES, INC.
Our business could also be affected by the potential for lawsuits against companies that emit greenhouse gases, based on links drawn between greenhouse gas emissions and climate change. To the extent financial markets view climate change and GHG emissions as a financial risk, this ‎could ‎negatively impact our cost of and access to capital.
As an oil and natural gas producer, we face various security threats, including cyber-security threats to gain unauthorized access to sensitive information or to render data or systems unusable, threats to the safety of our employees, threats to the security or operation of our facilities and infrastructure or third party facilities and infrastructure, such as processing plants and pipelines, and threats from terrorist acts.
As a natural gas and oil producer, we face various security threats, including cybersecurity threats to gain unauthorized access to sensitive information or to render data or systems unusable, threats to the safety of our employees, threats to the security or operation of our facilities and infrastructure or third party facilities and infrastructure, such as processing plants and pipelines, and threats from terrorist acts.
Our cash flow from operations and access to capital is subject to a number of variables, including: 22 COMSTOCK RESOURCES, INC. • our estimated proved reserves; • the level of natural gas we are able to produce from existing wells; • our ability to extract natural gas liquids from the natural gas we produce; • the prices at which natural gas liquids and natural gas are sold; and • our ability to acquire, locate and produce new reserves.
Our cash flow from operations and access to capital is subject to a number of variables, including: • our estimated proved reserves; • the level of natural gas we are able to produce from existing wells; • our ability to extract natural gas liquids from the natural gas we produce; • the prices at which natural gas liquids and natural gas are sold; and • our ability to acquire, locate and produce new reserves.
We may be subject to physical and financial risks associated with climate change. Changing climate may create physical and financial risks to our business. Energy needs vary with weather conditions. To the extent weather conditions may be affected by climate change, energy use could increase or decrease depending on the duration and magnitude of any changes.
We may be subject to physical and financial risks associated with climate change. Changing climate may create physical and financial risks to our business. ‎Energy needs vary with weather ‎conditions. To the extent weather conditions may be affected ‎by climate change, energy use could increase or decrease depending on ‎the 24 COMSTOCK RESOURCES, INC. duration and ‎magnitude of any changes.
Furthermore, we have adopted a policy that requires, and our revolving credit facility also requires, that we enter into derivative transactions related to only a portion of our expected production volumes and, as a result, we will continue to have direct commodity price exposure on the portion of our production volumes not covered by these derivative financial instruments.
Furthermore, we have adopted a policy that requires that we enter into derivative transactions related to only a portion of our expected production volumes and, as a result, we will continue to have direct commodity price exposure on the portion of our production volumes not covered by these derivative financial instruments.
Furthermore, while our revenues may increase if prevailing oil and natural gas prices increase significantly, our finding costs for additional reserves could also increase. Substantial exploration and development activities could require significant outside capital, which could dilute the value of our common shares and restrict our activities.
Furthermore, while our revenues may increase if prevailing natural gas and oil prices increase significantly, our finding costs for additional reserves could also increase. 23 COMSTOCK RESOURCES, INC. Substantial exploration and development activities could require significant outside capital, which could dilute the value of our common shares and restrict our activities.
A variety of factors, both geological and market-related, can cause a well to become uneconomical or only marginally economical. In addition to their costs, unsuccessful wells can hurt our efforts to replace production and reserves. 25 COMSTOCK RESOURCES, INC.
A variety of factors, both geological and market-related, can cause a well to become uneconomical or only marginally economical. In addition to their costs, unsuccessful wells can hurt our efforts to replace production and reserves.
These covenants limit our ability to, among other things: • borrow additional money; • merge, consolidate or dispose of assets; • make certain types of investments; • enter into transactions with our affiliates; and • pay dividends.
These covenants limit our ability to, among other things: • borrow additional money; • merge, consolidate or dispose of assets; • make certain types of investments; • enter into transactions with our affiliates; and • pay dividends. 26 COMSTOCK RESOURCES, INC.
Our debt service requirements could adversely affect our operations and limit our growth. We had $2.2 billion principal amount of debt as of December 31, 2022.
Our debt service requirements could adversely affect our operations and limit our growth. We had $2.7 billion principal amount of debt as of December 31, 2023.
As such, there can be no assurance that material cost and liabilities will not be incurred in the future. Our hedging transactions could result in financial losses or could reduce our income.
As such, there can be no assurance that material cost and liabilities will not be incurred in the future. 28 COMSTOCK RESOURCES, INC. Our hedging transactions could result in financial losses or could reduce our income.
Future laws or regulations, adverse changes in the interpretation of existing laws and regulations or our failure to comply with existing legal 26 COMSTOCK RESOURCES, INC. requirements may harm our business, results of operations and financial condition.
Future laws or regulations, adverse changes in the interpretation of existing laws and regulations or our failure to comply with existing legal requirements may harm our business, results of operations and financial condition.
Further, we cannot assure you that future acquisitions by us will be integrated successfully into our operations or will increase our profits.
Further, we cannot assure you that future acquisitions by us will be integrated successfully into our operations or will increase our profits. 25 COMSTOCK RESOURCES, INC.
We pursue acquisitions as part of our growth strategy and there are risks associated with such acquisitions. Our growth has been attributable in part to acquisitions of producing properties and companies. Recently we have been focused on acquiring acreage for our drilling program. We expect to continue to evaluate and, where appropriate, pursue acquisition opportunities on terms we consider favorable.
Our growth has been attributable in part to acquisitions of producing properties and companies. Recently we have been focused on acquiring acreage for our drilling program. We expect to continue to evaluate and, where appropriate, pursue acquisition opportunities on terms we consider favorable.
Additionally, adverse effects upon the oil and gas industry related to the worldwide social and political environment, including uncertainty or instability resulting from climate change, changes in political leadership and environmental policies, changes in geopolitical-social views toward fossil fuels and renewable energy, concern about the environmental impact of climate change, and investors' expectations regarding ESG matters, may also adversely affect demand for our products.
If we do not meet our stockholders' expectations, our business, ability to ‎access capital, and/or our stock price ‎could be harmed.‎ Additionally, adverse effects upon the oil and gas industry related to the worldwide social and ‎political environment, including ‎uncertainty or instability resulting from climate change, ‎changes in political leadership and environmental policies, changes in ‎geopolitical-social views ‎toward fossil fuels and renewable energy, concern about the environmental impact of climate ‎change, and ‎investors' expectations regarding ESG matters, may also adversely affect demand ‎for our products.
Additionally, many climate models indicate that global warming is likely to result in rising sea levels and increased frequency and severity of weather events, which may lead to higher insurance costs, or a decrease in available coverage, for our assets in areas subject to severe weather.
Extreme ‎weather conditions in general require more equipment redundancy, adding to costs, and can ‎‎contribute to increased risk of delivery disruptions. ‎ Additionally, many climate models indicate that global warming is likely to result in rising sea ‎levels and increased frequency ‎and severity of weather events, which may lead to higher ‎insurance costs, or a decrease in available coverage, for our assets in areas ‎subject to severe ‎weather.
Additionally, significant acquisitions can change the nature of our operations and business depending upon the character of the acquired properties, which may be substantially different in operating and geologic characteristics or geographic location than our existing properties.
Additionally, significant acquisitions can change the nature of our operations and business depending upon the character of the acquired properties, which may be substantially different in operating and geologic characteristics or geographic location than our existing properties. While our current operations are focused in Texas and Louisiana, we may pursue acquisitions or properties located in other geographic areas.
The prices we receive for our natural gas production depend on numerous factors beyond our control, including the following: • the domestic and foreign supply of natural gas; • weather conditions; • the price and quantity of exports of natural gas; • political conditions and events in other natural gas-producing countries, including embargoes and other sustained military campaigns, and acts of terrorism or sabotage; • domestic government regulation, legislation and policies; • the level of global natural gas inventories; • technological advances affecting energy consumption; • the price and availability of alternative fuels; and • overall economic conditions.
The prices we receive for our natural gas production depend on numerous factors beyond our control, including the following: • the domestic and foreign supply of natural gas; • weather conditions; • the price and quantity of exports of natural gas; • political conditions and events in other natural gas-producing countries, including embargoes and other sustained military campaigns, and acts of terrorism or sabotage; • domestic government regulation, legislation and policies; • the level of global natural gas inventories; • technological advances affecting energy consumption; • the price and availability of alternative fuels; and • overall U.S. and global economic and political conditions, including inflationary pressures, further increases in interest rates, a general economic slowdown or recession, political tensions and war (including future developments in the ongoing Russia-Ukraine and Israel-Hamas conflicts).
We are subject to extensive governmental laws and regulations that may adversely affect the cost, manner or feasibility of doing business. Our operations and facilities are subject to extensive federal, state and local laws and regulations relating to the exploration for, and the development, production and transportation of, oil and natural gas, as well as the safe operations thereof.
Our operations and facilities are subject to extensive federal, state and local laws and regulations relating to the exploration for, and the development, production and transportation of, natural gas and oil, as well as the safe operations thereof.
Market conditions or the unavailability of satisfactory natural gas transportation arrangements may hinder our access to natural gas markets or delay our production. The availability of a ready market for our natural gas production depends on a number of factors, including the demand for and supply of natural gas and the proximity of reserves to pipelines and processing facilities.
The availability of a ready market for our natural gas production depends on a number of factors, including the demand for and supply of natural gas and the proximity of reserves to pipelines and processing facilities.
Any long-term material adverse effect on the oil and natural gas industry could have a significant financial and operational adverse impact on our business. The occurrence of any of the foregoing could have a material adverse effect on the price of our stock and our business and financial condition.
Any long-term material adverse ‎effect on the natural gas and oil industry could have a ‎significant financial and operational adverse impact on our business.‎ The occurrence of any of the foregoing could have a material adverse effect on the price of our ‎stock and our business and ‎financial condition.‎ We pursue acquisitions as part of our growth strategy and there are risks associated with such acquisitions.
Increased energy use due to weather changes may require us to invest in more infrastructure to serve increased demand. A decrease in energy use due to weather changes may affect our financial condition through decreased revenues. Extreme weather conditions in general require more equipment redundancy, adding to costs, and can contribute to increased risk of delivery disruptions.
Increased energy use due to weather changes may require us to ‎invest in more infrastructure to serve increased demand. A decrease in energy use due to ‎weather changes may affect our financial ‎condition through decreased revenues.
Additionally, we may face reputational challenges in the event our ESG procedures or standards do not meet the standards set by certain constituencies. We have adopted certain practices and metrics as highlighted on our website, including with respect to air emissions, land use, environmental, health and safety management and corporate governance.
We have adopted certain practices and ‎metrics as highlighted on our website, including with respect to air emissions, land use, ‎environmental, health and safety management and corporate governance. It is possible, ‎however, that our stockholders might not be satisfied with our sustainability efforts or the ‎speed ‎of their adoption.
If any of these events were to materialize, either to the Company or a third party upon which we rely, they could lead to losses of sensitive information, critical infrastructure, personnel or capabilities, essential to our operations and could have a material adverse effect on our reputation, financial position, results of operations, or cash flows.
Any of the foregoing could have a material adverse effect on our reputation, financial position, results of operations, or cash flows. We are subject to extensive governmental laws and regulations that may adversely affect the cost, manner or feasibility of doing business.
While our current operations are focused in Texas and Louisiana, we may pursue acquisitions or properties located in other geographic areas. 24 COMSTOCK RESOURCES, INC. Market conditions or operational impediments may hinder our access to natural gas markets or delay our production.
Market conditions or operational impediments may hinder our access to natural gas markets or delay our production. Market conditions or the unavailability of satisfactory natural gas transportation arrangements may hinder our access to natural gas markets or delay our production.
Removed
We face pressures from our stockholders, who are increasingly focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. Our stockholders may require us to implement new ESG procedures or standards in order to continue engaging with us, to remain invested in us or before they may make further investments in us.
Added
Furthermore, our bank credit facility is subject to various interest rates that are tied to adjusted SOFR or an alternate base rate, at our option. Any increase in these interest rates would have an adverse impact on our results of operations and cash flow.
Removed
It is possible, however, that our stockholders might not be satisfied with our sustainability efforts or the speed of their adoption. If we do not meet our stockholders' expectations, our business, ability to access capital, and/or our stock price could be harmed.
Added
If any of these events were to materialize, either to the Company or a third party upon which we rely, they could lead to: • Loss of or damage to our data, intellectual property, or other proprietary or confidential information; • Interruption or degradation of our operations, services, or systems availability; • Compromise or corruption of our data or systems integrity; • Reputational harm or loss of customer trust or confidence; • Legal liability, regulatory fines, penalties, or sanctions; • Remediation or mitigation costs, such as increased security expenditures, investigation expenses, or litigation fees; • Increased insurance premiums or difficulty in obtaining adequate insurance coverage; or • Other negative consequences.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−2 removed0 unchanged
Biggest changeCOMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN (1) Among Comstock, the NYSE Composite Index and the S&P Oil & Gas Exploration and Production ETF Index As of December 31, Total Return Analysis 2017 2018 2019 2020 2021 2022 Comstock $100.00 $53.55 $97.28 $51.65 $95.63 $163.16 NYSE Composite $100.00 $91.05 $114.28 $122.26 $147.54 $133.75 SPDR S&P Oil and Gas Exploration and Production ETF $100.00 $71.90 $65.11 $41.41 $69.05 $100.37 _______________ (1) The data contained in the above graph is deemed to be furnished and not filed pursuant to Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. 28 COMSTOCK RESOURCES, INC.
Biggest changeCOMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN (1) Among Comstock, the NYSE Composite Index and the S&P Oil & Gas Exploration and Production ETF Index As of December 31, Total Return Analysis 2018 2019 2020 2021 2022 2023 Comstock $ 100.00 $ 181.68 $ 96.47 $ 178.59 $ 304.71 $ 206.02 NYSE Composite $ 100.00 $ 125.51 $ 134.28 $ 162.04 $ 146.89 $ 167.12 SPDR S&P Oil and Gas Exploration and Production ETF $ 100.00 $ 90.56 $ 57.59 $ 96.03 $ 139.60 $ 144.57 _______________ (1) The data contained in the above graph is deemed to be furnished and not filed pursuant to Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.
Stockholder Return Performance The following graph compares the yearly percentage change in the cumulative total stockholder return on our common stock during the five years ended December 31, 2022 with the cumulative returns during the same period for the New York Stock Exchange Index and the SPDR Standard & Poor's ("S&P") Oil and Gas Exploration and Production ETF.
Stockholder Return Performance The following graph compares the yearly percentage change in the cumulative total stockholder return on our common stock during the five years ended December 31, 2023 with the cumulative returns during the same period for the New York Stock Exchange Index and the SPDR Standard & Poor's ("S&P") Oil and Gas Exploration and Production ETF.
The graph assumes that $100.00 was invested on the last trading day of 2017, and that dividends, if any, were reinvested.
The graph assumes that $100.00 was invested on the last trading day of 2018, and that dividends, if any, were reinvested.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed for trading on the New York Stock Exchange under the symbol "CRK". As of February 16, 2023, we had 277,510,165 shares of common stock outstanding, which were held by 162 holders of record.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed for trading on the New York Stock Exchange under the symbol "CRK". As of February 16, 2024, we had 278,429,463 shares of common stock outstanding, which were held by 161 holders of record.
However, the declaration and payment of future dividends will be at the discretion of the board of directors and will depend upon the results of our operations, capital requirements, our financial condition and such other factors as our board of directors may deem relevant.
During 2023, we paid quarterly cash dividends on our common stock of 12.5¢ per share. The declaration and payment of future dividends will be at the discretion of the board of directors and will depend upon the results of our operations, capital requirements, our financial condition and such other factors as our board of directors may deem relevant.
Removed
On November 1, 2022, we reinstated a quarterly cash dividend of 12.5¢ per share on our common stock commencing with the fourth quarter of 2022. We paid cash dividends on our common stock on December 15, 2022, resulting in total dividends paid of $34.7 million.
Removed
We currently intend to continue to pay dividends to the holders of our common stock in the future.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

68 edited+7 added−10 removed23 unchanged
Biggest changeResults of Operations Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Our operating data for the year ended December 31, 2022 and 2021 are summarized below: Year Ended December 31, 2022 2021 (In thousands except per unit amounts) Net Production Data: Natural gas (MMcf) 500,616 489,274 Oil (MBbls) 82 1,210 Natural gas equivalent (MMcfe) 501,107 496,534 Revenues: Natural gas sales $ 3,117,094 $ 1,775,768 Oil sales 7,597 74,962 Total natural gas and oil sales $ 3,124,691 $ 1,850,730 Gas services $ 503,366 $ — Expenses: Production and ad valorem taxes $ 77,917 $ 49,141 Gathering and transportation $ 155,679 $ 130,940 Lease operating $ 111,134 $ 103,467 Exploration $ 8,287 $ — Gas services $ 465,044 $ — Average Sales Price: Natural gas (per Mcf) $6.23 $3.63 Oil (per Bbl) $92.65 $61.95 Average equivalent (Mcfe) $6.24 $3.73 Expenses ($ per Mcfe): Production and ad valorem taxes $0.16 $0.10 Gathering and transportation $0.31 $0.26 Lease operating $0.22 $0.21 Natural gas and oil sales.
Biggest changeResults of Operations Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Our operating data for the year ended December 31, 2023 and 2022 are summarized below: Year Ended December 31, 2023 2022 (In thousands except per unit amounts) Net Production Data: Natural gas (MMcf) 524,467 500,616 Oil (MBbls) 70 82 Natural gas equivalent (MMcfe) 524,890 501,107 Revenues: Natural gas sales $ 1,259,450 $ 3,117,094 Oil sales 5,161 7,597 Total natural gas and oil sales $ 1,264,611 $ 3,124,691 Expenses: Production and ad valorem taxes $ 91,803 $ 77,917 Gathering and transportation $ 184,906 $ 155,679 Lease operating $ 132,203 $ 111,134 Exploration $ 1,775 $ 8,287 Average Sales Price: Natural gas (per Mcf) $ 2.40 $ 6.23 Oil (per Bbl) $ 73.73 $ 92.65 Average equivalent (Mcfe) $ 2.41 $ 6.24 Expenses ($ per Mcfe): Production and ad valorem taxes $ 0.18 $ 0.16 Gathering and transportation $ 0.35 $ 0.31 Lease operating $ 0.25 $ 0.22 Gas Services: Gas services revenue $ 300,498 $ 503,366 Gas services expense $ 282,050 $ 465,044 Natural gas and oil sales.
Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this report, particularly in "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements." Overview We are an independent energy company engaged in the acquisition, exploration, development and production of oil and natural gas in the United States.
Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this report, particularly in "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements." Overview We are an independent energy company engaged in the acquisition, exploration, development and production of natural gas and oil in the United States.
We use the successful efforts method of accounting, which allows only for the capitalization of costs associated with developing proven oil and natural gas properties as well as exploration costs associated with successful exploration activities.
We use the successful efforts method of accounting, which allows only for the capitalization of costs associated with developing proven natural gas and oil properties as well as exploration costs associated with successful exploration activities.
We generally sell our oil and natural gas at current market prices at the point our wells connect to third party purchaser pipelines or terminals. We have entered into certain transportation and treating agreements with midstream and pipeline companies to transport a substantial portion of our natural gas production to long-haul gas pipelines.
We generally sell our natural gas and oil at current market prices at the point our wells connect to third party purchaser pipelines or terminals. We have entered into certain transportation and treating agreements with midstream and pipeline companies to transport a substantial portion of our natural gas production to long-haul gas pipelines.
Like all oil and natural gas exploration and production companies, we face the challenge of replacing our reserves.
Like all natural gas and oil exploration and production companies, we face the challenge of replacing our reserves.
Our operations and facilities are subject to extensive federal, state and local laws and regulations relating to the exploration for, and the development, production and transportation of, oil and natural gas, and operating safety.
Our operations and facilities are subject to extensive federal, state and local laws and regulations relating to the exploration for, and the development, production and transportation of, natural gas and oil, and operating safety.
Prices for oil and natural gas have been highly volatile in recent years but we expect our natural gas production to increase, assuming we maintain a sufficient development program to offset expected production declines from our producing wells. The level of our drilling activity is dependent on natural gas prices.
Prices for natural gas and oil have been highly volatile in recent years but we expect our natural gas production to increase, assuming we maintain a sufficient development program to offset expected production declines from our producing wells. The level of our drilling activity is dependent on natural gas prices.
The availability and attractiveness of debt or equity financing will depend upon a number of factors, some of which will relate to our financial condition and performance and some of which will be beyond our control, such as prevailing interest rates, oil and natural gas prices and other market conditions.
The availability and attractiveness of debt or equity financing will depend upon a number of factors, some of which will relate to our financial condition and performance and some of which will be beyond our control, such as prevailing interest rates, natural gas and oil prices and other market conditions.
We are required to select among alternative acceptable accounting policies. There are two generally acceptable methods for accounting for oil and gas producing activities. The full cost method allows the capitalization of all costs associated with finding oil and natural gas reserves, including certain general and administrative expenses.
We are required to select among alternative acceptable accounting policies. There are two generally acceptable methods for accounting for natural gas and oil producing activities. The full cost method allows the capitalization of all costs associated with finding natural gas and oil reserves, including certain general and administrative expenses.
The successful efforts method allows only for the capitalization of costs associated with developing proven oil and natural gas properties as well as exploration costs associated with successful exploration projects. Costs related to exploration that are not successful are expensed when it is determined that commercially productive oil and gas reserves were not found.
The successful efforts method allows only for the capitalization of costs associated with developing proven natural gas and oil properties as well as exploration costs associated with successful exploration projects. Costs related to exploration that are not successful are expensed when it is determined that commercially productive oil and gas reserves were not found.
We have elected to use the successful efforts method to account for our oil and gas activities and we do not capitalize any of our general and administrative expenses. Oil and natural gas reserve quantities.
We have elected to use the successful efforts method to account for our oil and gas activities and we do not capitalize any of our general and administrative expenses. Natural gas and oil reserve quantities.
The determination of depreciation, depletion and amortization expense is highly dependent on the estimates of the proved oil and natural gas reserves attributable to our properties. The determination of whether impairments should be recognized on our oil and gas properties is also dependent on these estimates, as well as estimates of probable reserves.
The determination of depreciation, depletion and amortization expense is highly dependent on the estimates of the proved natural gas and oil reserves attributable to our properties. The determination of whether impairments should be recognized on our oil and gas properties is also dependent on these estimates, as well as estimates of probable reserves.
Reserve engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot be precisely measured. The accuracy of any reserve estimate depends on the quality of available data, production history and engineering and geological interpretation and judgment.
Reserve engineering is a subjective process of estimating underground accumulations of natural gas and oil that cannot be precisely measured. The accuracy of any reserve estimate depends on the quality of available data, production history and engineering and geological interpretation and judgment.
The information regarding present value of the future net cash flows attributable to our proved oil and natural gas reserves are estimates only and should not be construed as the current market value of the estimated oil and natural gas reserves attributable to our properties.
The information regarding present value of the future net cash flows attributable to our proved natural gas and oil reserves are estimates only and should not be construed as the current market value of the estimated natural gas and oil reserves attributable to our properties.
Expected future cash flows are determined using estimated future prices based on market based forward prices applied to projected future production volumes. The projected production volumes are based on the property's proved and risk adjusted probable oil and natural gas reserves estimates at the end of the period.
Expected future cash flows are determined using estimated future prices based on market based forward prices applied to projected future production volumes. The projected production volumes are based on the property's proved and risk adjusted probable natural gas and oil reserves estimates at the end of the period.
The oil and natural gas prices used for determining asset impairments will generally differ from those used in the standardized measure of discounted future net cash flows because the standardized measure requires the use of the average first day of the month historical price for the year.
The natural gas and oil prices used for determining asset impairments will generally differ from those used in the standardized measure of discounted future net cash flows because the standardized measure requires the use of the average first day of the month historical price for the year.
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 oil and gas reserves, results of future drilling activities, future prices for oil and natural gas, and increases or decreases in production and capital costs.
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.
Borrowings under the bank credit facility are secured by substantially all of our assets and those of our subsidiaries and bear interest at our option, at either adjusted SOFR plus 1.75% to 2.75% or an alternate base rate plus 0.75% to 1.75%, in each case depending on the utilization of the borrowing base.
Borrowings under the bank credit facility are secured by substantially all of our assets and those of our restricted subsidiaries and bear interest at our option, at either adjusted SOFR plus 1.75% to 2.75% or an alternate base rate plus 0.75% to 1.75%, in each case depending on the utilization of the borrowing base.
Any future downward revisions could adversely affect our financial condition, our future prospects and the value of our common stock. Impairment of oil and gas properties. We evaluate our proved properties for potential impairment when circumstances indicate that the carrying value of an asset may not be recoverable.
Any future downward revisions could adversely affect our financial condition, our future prospects and the value of our common stock. Impairment of natural gas and oil properties. We evaluate our proved properties for potential impairment when circumstances indicate that the carrying value of an asset may not be recoverable.
If we are unable to offset production declines with the new wells we plan to drill in 2023 and future periods, our production volumes and cash flows from our operating activities may not be sufficient to fund our capital expenditures, and thus, we may need to either curtail drilling activity or seek additional borrowings, which would result in an increase in our interest expense in 2023 and future periods.
If we are unable to offset production declines with the new wells we plan to drill in 2024 and future periods, our production volumes and cash flows from our operating activities may not be sufficient to fund our capital expenditures, and thus, we may need to either curtail drilling activity or seek additional borrowings, which would result in an increase in our interest expense in 2024 and future periods.
If oil or natural gas prices decrease, drilling efforts are unsuccessful or our market capitalization declines, it is reasonably possible that impairments would need to be recognized. We performed a quantitative assessment of goodwill as of October 1, 2022 and determined there was no goodwill impairment. Income Taxes.
If oil or natural gas prices decrease, drilling efforts are unsuccessful or our market capitalization declines, it is reasonably possible that impairments would need to be recognized. We performed a quantitative assessment of goodwill as of October 1, 2023 and determined there was no goodwill impairment. Income Taxes.
Our short and long-term capital requirements 33 COMSTOCK RESOURCES, INC. consist primarily of funding our development and exploration activities, acquisitions, payments of contractual obligations, and debt service. We expect to fund our future development and exploration activities with future operating cash flow. The timing of most of our capital expenditures is mostly discretionary.
Our short and long-term capital 36 COMSTOCK RESOURCES, INC. requirements consist primarily of funding our development and exploration activities, acquisitions, payments of contractual obligations, and debt service. We expect to fund our future development and exploration activities with future operating cash flow. The timing of most of our capital expenditures is mostly discretionary.
We may need to recognize impairments of our oil and natural gas properties if oil and natural gas prices decline, and as a result, the expected future cash flows from these properties becomes insufficient to recover their carrying value. 29 COMSTOCK RESOURCES, INC.
We may need to recognize impairments of our natural gas and oil properties if natural gas and oil prices decline, and as a result, the expected future cash flows from these properties becomes insufficient to recover their carrying value. 32 COMSTOCK RESOURCES, INC.
Unproved properties are evaluated for impairment based upon the results of drilling, planned future drilling and the terms of our oil and gas leases. It is reasonably possible that our estimates of undiscounted future net cash flows attributable to its oil and gas properties may change in the future.
Unproved properties are evaluated for impairment based upon the results of drilling, planned future drilling and the terms of our natural gas and oil leases. It is reasonably possible that our estimates of undiscounted future net cash flows attributable to our natural gas and oil properties may change in the future.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our selected historical consolidated financial data and our accompanying consolidated financial statements and the notes to those financial statements included elsewhere in this report.
ITEM 7. MANAGEMENT'S DI SCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our selected historical consolidated financial data and our accompanying consolidated financial statements and the notes to those financial statements included elsewhere in this report.
The only financial covenants are the maintenance of a leverage ratio of less than 3.5 to 1.0 and an adjusted current ratio of at least 1.0 to 1.0. We were in compliance with the covenants as of December 31, 2022.
The only financial covenants are the maintenance of a leverage ratio of less than 3.5 to 1.0 and an adjusted current ratio of at least 1.0 to 1.0. We were in compliance with the covenants as of December 31, 2023.
If we do not generate a sufficient level of taxable income prior to the expiration of the pre-2018 NOL carry-forward periods, then we will lose the ability to apply those NOLs as offsets to future taxable income. We estimate that $766.2 million of the U.S. federal NOL carryforwards and $1.2 billion of the estimated state NOL carryforwards will expire unused.
If we do not generate a sufficient level of taxable income prior to the expiration of the pre-2018 NOL carry-forward periods, then we will lose the ability to apply those NOLs as offsets to future taxable income. We estimate that $740.6 million of the U.S. federal NOL carryforwards and $1.2 billion of the estimated state NOL carryforwards will expire unused.
Because all reserve estimates are to some degree imprecise, the quantities and timing of oil and natural gas that are ultimately recovered, production and operating costs, the amount and timing of future development expenditures and future oil and natural gas prices may all differ materially from those assumed in these estimates.
Because all reserve estimates are to some degree imprecise, the quantities and timing of natural gas and oil that are ultimately recovered, production and operating costs, the amount and timing of future development expenditures and future natural gas and oil prices may all differ materially from 37 COMSTOCK RESOURCES, INC. those assumed in these estimates.
In 2022, we retired all of our outstanding 7.5% senior notes due in 2025 for $248.9 million, which included premiums paid over face value of $4.5 million, and we retired $26.1 million principal amount of our 6.75% senior notes for $24.9 million.
In 2022, we retired all of our outstanding 7.5% senior notes due in 2025 for $248.9 million, which included premiums paid over face value of $4.5 million, and we retired $26.1 million principal amount of our 6.75% senior notes for $24.9 million. Common stock and preferred stock dividends.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 Discussions of 2021 items and year-to-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on February 17, 2022.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Discussions of 2022 items and year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on February 17, 2023. 34 COMSTOCK RESOURCES, INC.
We utilize natural gas and oil price derivative financial instruments to manage our exposure to changes in prices of natural gas and oil and to protect returns on investment from our drilling activities.
We utilize natural gas derivative financial instruments to manage our exposure to changes in prices of natural gas to protect returns on investment from our drilling activities.
Our effective tax rate of 19% in 2022 and (5)% in 2021 differed from the federal income tax rate of 21% primarily due to changes in our valuation allowance on our federal and state net operating loss carryforwards and state income taxes. Net income.
Our effective tax rate of 14% in 2023 and 19% in 2022 differed from the federal income tax rate of 21% primarily due to changes in our valuation allowance on our federal and state net operating loss carryforwards and state income taxes. Net income.
Our federal income tax returns for the years subsequent to December 31, 2018 remain subject to examination. Our income tax returns in major state income tax jurisdictions remain subject to examination for various periods subsequent to December 31, 2018.
Our federal income tax returns for the years subsequent to December 31, 2019 remain subject to examination. Our income tax returns in major state income tax jurisdictions remain subject to examination for various periods subsequent to December 31, 2020.
Derivative financial instruments. We use derivative financial instruments as part of our price risk management program to protect the cash flow we generate from our operating activities. We had net losses on derivative financial instruments of $662.5 million for 2022 as compared to $560.6 million for 2021.
We use derivative financial instruments as part of our price risk management program to protect the cash flow we generate from our operating activities. We had net gains on derivative financial instruments of $187.6 million for 2023 as compared to net losses on derivative financial instruments of $662.5 million for 2022.
Our assets are concentrated in the Haynesville and Bossier shale located in North Louisiana and East Texas, a premier natural gas basin with superior economics due to the geographic proximity to Gulf Coast natural gas markets. We own interests in 2,393 producing oil and natural gas wells (1,464.7 net) and we operate 1,633 of these wells.
Our assets are concentrated in the Haynesville and Bossier shale located in North Louisiana and East Texas, a premier natural gas basin with superior economics due to the geographic proximity to Gulf Coast natural gas markets. We own interests in 2,478 producing natural gas and oil wells (1,516.7 net to us) and we operate 1,703 of these wells.
Federal and State Taxation At December 31, 2022, we had $909.9 million in U.S. federal net operating loss carryforwards and $1.5 billion in certain state net operating loss carryforwards. As a result of a change of control in August 2018, our ability to use U.S. federal net operating losses ("NOLs") to reduce taxable income is limited.
Federal and State Taxation At December 31, 2023, we had $754.1 million in U.S. federal net operating loss carryforwards and $1.7 billion in certain state net operating loss carryforwards. As a result of a change of control in August 2018, our ability to use U.S. federal net operating losses ("NOLs") to reduce taxable income is limited.
The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those deferred income tax assets would be deductible.
The ultimate realization of deferred income tax assets is dependent 38 COMSTOCK RESOURCES, INC. upon the generation of future taxable income during the periods in which those deferred income tax assets would be deductible.
We will continue to assess the valuation allowances against deferred tax assets considering all available information obtained in future reporting periods. 35 COMSTOCK RESOURCES, INC.
We will continue to assess the valuation allowances against deferred tax assets considering all available information obtained in future reporting periods.
As a result of premiums paid over face value and costs associated with the retirements and repurchases, we recognized a loss on early retirement of debt of $46.8 million and $352.6 million during 2022 and 2021, respectively. Income taxes. Our income tax provision was $261.1 million and $11.4 million in 2022 and 2021, respectively.
As a result of premiums paid over face value and costs associated with the retirements, we recognized a loss on early retirement of debt of $46.8 million during 2022. Income taxes. Our income tax provision was $35.1 million and $261.1 million in 2023 and 2022, respectively.
The present value of the estimated future costs to plug and abandon our oil and gas wells and to dismantle and remove our production facilities is included in our reserve for future abandonment costs, which was $29.1 million as of December 31, 2022.
The present value of the estimated future costs to plug and abandon our natural gas and oil wells and to dismantle and remove our production facilities is included in our reserve for future abandonment costs, which was $30.8 million as of December 31, 2023.
Proved reserve estimates included in this report were prepared by the Company's engineers and audited by independent petroleum engineers. 34 COMSTOCK RESOURCES, INC.
Proved reserve estimates included in this report were prepared by the Company's engineers and audited by independent petroleum engineers.
Interest expense was $171.1 million for 2022 as compared to $218.5 million for 2021. Included in interest expense was amortization of the premiums or discounts on our senior notes and the debt issuance cost amortization associated with our outstanding debt. The non-cash interest expense for 2022 totaled $10.3 million compared with $21.7 million for 2021.
Interest expense was $169.0 million for 2023 as compared to $171.1 million for 2022. Included in interest expense was amortization of the premiums or discounts on our senior notes and the debt issuance cost amortization associated with our outstanding debt. The non-cash interest expense for 2023 totaled $8.0 million compared with $10.3 million for 2022.
As of December 31, 2022, we had $1.6 billion of liquidity, comprised of $1.5 billion of unused borrowing capacity under our bank credit facility and $54.7 million of cash and cash equivalents on hand.
As of December 31, 2023, we had $1.0 billion of liquidity, comprised of $1.0 billion of unused borrowing capacity under our bank credit facility and $16.7 million of cash and cash equivalents on hand.
Realized net losses from our oil and natural gas price risk management program were $862.7 million in 2022 as compared to $419.9 million in 2021. We recognized unrealized gains on derivative financial instruments in 2022 of $200.2 million and unrealized losses of $140.9 million in 2021. Interest expense.
Realized net gains from our natural gas price risk management program were $80.3 million in 2023 as compared to $862.7 million of realized net losses in 2022. We recognized unrealized gains on derivative financial instruments of $107.3 million and $200.2 million in 2023 and 2022, respectively. Interest expense.
Natural gas and oil sales of $3.1 billion in 2022 increased by $1.3 billion, or 69%, as compared to $1.9 billion in 2021. The increase was primarily due to higher prices received for our natural gas production and increased natural gas production.
Natural gas and oil sales of $1.3 billion in 2023 decreased by $1.9 billion, or 60%, as compared to $3.1 billion in 2022. The decrease was primarily due to lower prices received for our natural gas production.
We cannot provide any assurance that we will be able to obtain such capital, or if such capital is available, that we will be able to obtain it on acceptable terms. Our contractual obligations consist primarily of natural gas transportation and gathering contracts and drilling and completion contracts.
We cannot provide any assurance that we will be able to obtain such capital, or if such capital is available, that we will be able to obtain it on acceptable terms. Our contractual obligations consist primarily of natural gas transportation and gathering contracts, principal and interest payments on our senior notes and bank credit facility and other operating lease obligations.
Aggregate commitments under the new credit facility were $1.5 billion and mature on November 15, 2027. Borrowings under the new bank credit facility are subject to a borrowing base, which was initially set at $2.0 billion. The borrowing base is re-determined on a semi-annual basis and upon the occurrence of certain other events.
Borrowings under the bank credit facility are subject to a borrowing base, which is currently set at $2.0 billion. The borrowing base is re-determined on a semi-annual basis and upon the occurrence of certain other events.
Gas services revenues. Gas services revenues of $503.4 million in 2022 include sales of natural gas purchased from unaffiliated third parties for resale and fees received from unaffiliated third parties for natural gas transportation and treating services.
Gas services revenues of $300.5 million in 2023 decreased $202.9 million (40%) from $503.4 million in 2022. Gas services activities include sales of natural gas purchased from unaffiliated third parties for resale and fees received from unaffiliated third parties for natural gas gathering and treating services.
As a result of these changes, there may be impairments in the carrying values of our proved and unproved oil and gas properties in the future. Goodwill. We have goodwill of $335.9 million as of December 31, 2022 that was recorded in 2018. Goodwill represents the excess of purchase price over fair value of net tangible and identifiable intangible assets.
As a result of these changes, there may be impairments in the carrying values of our proved and unproved natural gas and oil properties in the future. Goodwill. We have goodwill of $335.9 million as of December 31, 2023 that was recorded in 2018.
The bank credit facility places certain restrictions upon our and our subsidiaries' ability to, among other things, incur additional indebtedness, pay cash dividends, repurchase common stock, make certain loans, investments and divestitures and redeem the senior notes.
We also pay a commitment fee of 0.375% to 0.5% on the unused portion of the committed borrowing base. The bank credit facility places certain restrictions upon our and our restricted subsidiaries' ability to, among other things, incur additional indebtedness, pay cash dividends, repurchase common stock, make certain loans, investments and divestitures and redeem our senior notes.
Cash Flows, Liquidity and Capital Resources Cash Flows The following table summarizes sources and uses of cash and cash equivalents: Year Ended December 31, 2022 2021 (in thousands) Sources of cash and cash equivalents: Operating activities $ 1,698,388 $ 859,005 Proceeds from asset sales 4,186 138,394 Issuance of new senior notes — 2,222,500 Total $ 1,702,574 $ 3,219,899 Uses of cash and cash equivalents: Capital expenditures $ 1,101,869 $ 689,210 Retirement of senior notes 273,920 2,210,626 Repayments on bank credit facility, net of borrowings 235,000 265,000 Common stock dividends 34,688 — Preferred stock dividends 16,014 17,500 Debt issuance costs 10,839 35,604 Other 6,255 1,568 Total $ 1,678,585 $ 3,219,508 Cash flows from operating activities.
Cash Flows, Liquidity and Capital Resources Cash Flows The following table summarizes sources and uses of cash and cash equivalents: Year Ended December 31, 2023 2022 (in thousands) Sources of cash and cash equivalents: Operating activities $ 1,016,846 $ 1,698,388 Borrowings on bank credit facility, net of repayments 480,000 — Proceeds from asset sales 41,295 4,186 Contributions from noncontrolling interest 24,000 — Total $ 1,562,141 $ 1,702,574 Uses of cash and cash equivalents: Capital expenditures $ 1,459,096 $ 1,101,869 Retirement of senior notes — 273,920 Repayments on bank credit facility, net of borrowings — 235,000 Common stock dividends 138,985 34,688 Preferred stock dividends — 16,014 Debt issuance costs 144 10,839 Other 1,899 6,255 Total $ 1,600,124 $ 1,678,585 Cash flows from operating activities.
The following table presents our natural gas and oil prices before and after the effect of cash settlements of our derivative financial instruments: Year Ended December 31, 2022 2021 Average Realized Natural Gas Price: Natural gas, per Mcf $ 6.23 $ 3.63 Cash settlements on derivative financial instruments, per Mcf (1.73) (0.84) Price per Mcf, including cash settlements on derivative financial instruments $ 4.50 $ 2.79 Average Realized Oil Price: Crude oil per Bbl $ 92.65 $ 61.95 Cash settlements on derivative financial instruments, per Bbl — (6.67) Price per Bbl, including cash settlements on derivative financial instruments $ 92.65 $ 55.28 30 COMSTOCK RESOURCES, INC.
The following table presents our natural gas prices before and after the effect of cash settlements of our derivative financial instruments: Year Ended December 31, 2023 2022 Average Realized Natural Gas Price: Natural gas, per Mcf $ 2.40 $ 6.23 Cash settlements on derivative financial instruments, per Mcf 0.15 (1.73 ) Price per Mcf, including cash settlements on derivative financial instruments $ 2.55 $ 4.50 Gas services revenues.
Net cash provided by our operating activities increased $839.4 million (98%) to $1,698.4 million in 2022 from $859.0 million in 2021. The increase was primarily due to higher realized natural gas prices in 2022. Proceeds from asset sales. In 2022, we sold certain non-operated properties for net proceeds of $4.1 million.
Net cash provided by our operating activities decreased $681.5 million (40%) to $1.0 billion in 2023 from $1.7 billion in 2022. The decrease was primarily due to the lower realized natural gas prices we had in 2023. Proceeds from asset sales. In 2023, we sold certain non-operated properties for net proceeds of $41.3 million.
We reported net income available to common stockholders of $1.1 billion or $4.11 per diluted share in 2022 and a net loss available to common stockholders of $259.2 million or $1.12 per diluted share in 2021. The net income in 2022 is primarily due to our higher natural gas and oil sales.
We reported net income available to common stockholders of $211.9 million or $0.76 per diluted share in 2023 and a net income available to common stockholders of $1.1 billion or $4.11 per diluted share in 2022. The decrease in net income in 2023 is primarily due to the impact of lower natural gas prices in 2023.
Our capital expenditures are summarized in the following table: Year Ended December 31, 2022 2021 (in thousands) Acquisitions: Proved property $ 500 $ 21,781 Unproved property 54,120 35,871 Exploration and development: Developmental leasehold costs 13,727 12,953 Exploratory drilling and completion costs 63,520 6,966 Development drilling and completion costs 901,026 569,141 Other development costs 53,693 39,168 Asset retirement obligations 686 5,608 Total exploration and development 1,087,272 691,488 Other property 18,775 192 Total capital expenditures $ 1,106,047 $ 691,680 Change in accrued capital expenditures and other (37,561) 3,138 Prepaid drilling costs 34,069 — Asset retirement obligations (686) (5,608) Total cash capital expenditures $ 1,101,869 $ 689,210 We currently expect to spend approximately $950 million to $1.15 billion in 2023 on our development and exploration projects primarily focused on the continued development of our Haynesville/Bossier shale properties including our exploration and development of our Western Haynesville acreage.
Our capital expenditures are summarized in the following table: Year Ended December 31, 2023 2022 (in thousands) Acquisitions: Proved property $ — $ 500 Unproved property 98,553 54,120 Exploration and development: Developmental leasehold costs 27,905 13,727 Exploratory drilling and completion costs 244,129 63,520 Development drilling and completion costs 974,664 901,026 Other development costs 25,130 53,693 Asset retirement obligations (19 ) 686 Total exploration and development 1,370,362 1,087,272 Midstream property 35,694 17,972 Other property 491 803 Total capital expenditures $ 1,406,547 $ 1,106,047 Change in accrued capital expenditures and other 18,562 (37,561 ) Prepaid drilling costs 34,010 34,069 Asset retirement obligations (23 ) (686 ) Total cash capital expenditures $ 1,459,096 $ 1,101,869 We currently expect to spend approximately $750 million to $850 million in 2024 on our development and exploration projects primarily focused on the continued development of our Haynesville/Bossier shale properties including the exploration and development of our Western Haynesville acreage.
Our natural gas transportation and gathering contracts extend to 2031 and commitments under these contracts are $57.0 million for 2023, $57.5 million for 2024, $45.7 million for 2025, $40.9 million for 2026, $40.7 million for 2027 and $124.3 million for commitments thereafter.
Our natural gas transportation and gathering contracts extend to 2031 and commitments under these contracts are $97.8 million for 2024, $89.6 million for 2025, $63.9 million for 2026, $62.7 million for 2027, $56.3 million for 2028 and $96.4 million for commitments thereafter.
We are not required to amortize goodwill as a charge to earnings; however, we are required to conduct an annual review of goodwill for impairment. We determine the potential for impairment of our goodwill by initially preparing a qualitative fair value assessment of our business value.
We determine the potential for impairment of our goodwill by initially preparing a qualitative fair value assessment of our business value.
General and administrative expenses. General and administrative expense, which is reported net of overhead reimbursements, increased to $39.4 million in 2022 from $34.9 million in 2021 due primarily to higher personnel costs. Stock-based compensation included in general and administrative expense was $6.6 million and $6.8 million in 2022 and 2021, respectively. Gain (loss) on sale of assets.
General and administrative expenses, which are reported net of overhead reimbursements, decreased to $38.0 million in 2023 from $39.4 million in 2022 due primarily to lower personnel costs. Stock-based compensation included in general and administrative expenses was $9.9 million and $6.6 million in 2023 and 2022, respectively. Derivative financial instruments.
Our 2022 natural gas production was 500.6 Bcf (1.4 Bcf per day), which was sold at an average price of $6.23 per Mcf as compared to 489.3 Bcf (1.3 Bcf per day) sold at an average price of $3.63 in 2021. In October 2021, we sold our Bakken shale properties, which represented most of our oil production.
Our 2023 natural gas production increased 5% to 524.5 Bcf (1.4 Bcf per day), and was sold at an average price of $2.40 per Mcf as compared to 500.6 Bcf (1.4 Bcf per day) sold at an average price of $6.23 in 2022.
On November 30, 2022, all of the outstanding shares of our Series B Redeemable Convertible Preferred Stock were converted into 43,750,000 shares of common stock. Debt issuance costs. In 2022, we entered into a new five-year bank credit facility and we incurred $10.8 million of issuance costs associated with the new bank credit facility.
In 2023, we paid a quarterly cash dividend of 12.5¢ per share of common stock. On December 15, 2022, we paid a cash dividend of 12.5¢ per share of common stock. On November 30, 2022, all of the outstanding shares of our Series B Redeemable Convertible Preferred Stock were converted into 43,750,000 shares of common stock. Debt issuance costs.
Depreciation, depletion and amortization expense ("DD&A"). DD&A expense increased $20.1 million (4%) to $489.5 million in 2022 from $469.4 million in 2021 and our DD&A expense per equivalent Mcf produced was $0.98 per Mcfe in 2022 as compared to $0.95 per Mcfe in 2021. The increase in DD&A rate was primarily due to higher drilling costs incurred in 2022.
DD&A expense increased $118.5 million (24%) to $607.9 million in 2023 from $489.5 million in 2022 and our DD&A expense per equivalent Mcf produced was $1.16 per Mcfe in 2023 as compared to $0.98 per Mcfe in 2022.
During 2022, we retired $244.4 million principal amount of our 7.5% senior notes and $26.1 million principal amount of our 6.75% senior notes. In 2021, we refinanced $375.0 million principal amount of our 7.5% senior notes and $1.65 billion principal amount of our 9.75% senior notes.
The decrease in interest expense in 2023 was due primarily to the retirement of our 7.5% senior notes in 2022. Loss on early retirement of debt. During 2022, we retired $244.4 million principal amount of our 7.5% senior notes and $26.1 million principal amount of our 6.75% senior notes.
Income from operations in 2022 increased to $2.3 billion as compared to $900.8 million in 2021. 31 COMSTOCK RESOURCES, INC.
Income from operations in 2023 decreased to $226.6 million as compared to $2.3 billion in 2022.
This increase was primarily related to the increase in natural gas sales and higher production tax rates enacted in the state of Louisiana during 2022. Gathering and transportation. Gathering and transportation costs increased $24.7 million (19%) to $155.7 million in 2022 as compared to $130.9 million in 2021.
Gathering and transportation costs increased $29.2 million (19%) to $184.9 million in 2023 as compared to $155.7 million in 2022. This increase was due to production growth in areas with higher average gathering and transportation rates. Lease operating expenses.
These activities commenced in 2022 with the acquisition of a pipeline and gas treating plant and the opportunity to utilize our excess transport capacity in North Louisiana. Production and ad valorem taxes. Our production and ad valorem taxes increased $28.8 million (59%) to $77.9 million in 2022 from $49.1 million in 2021.
These activities commenced in 2022 with the acquisition of a pipeline and natural gas treating plant and the opportunity to utilize our excess transport capacity in North Louisiana. Gas services revenues decreased in 2023 due primarily to lower natural gas prices on sales of natural gas purchased to utilize our excess transport capacity. 33 COMSTOCK RESOURCES, INC.
This increase was due to higher average transportation rates including higher value of fuel used to transport our natural gas during 2022. Lease operating expenses. Our lease operating expense of $111.1 million in 2022 was $7.7 million or 7% higher than the lease operating expenses in 2021 of $103.5 million due to higher natural gas production.
Our lease operating expense of $132.2 million ($0.25 per Mcfe) in 2023 was $21.1 million, or 19%, higher than lease operating expenses in 2022 of $111.1 million ($0.22 per Mcfe). The increase in lease operating expense was due to higher production and increased water disposal costs and other production costs. Gas services expenses.
We also expect to spend $75 million to $125 million on infrastructure, including upgrades to our Western Haynesville pipeline and processing facilities, and for other development costs. Under our current operating plan, we expect to drill 67 operated horizontal wells (50.5 net) and to turn 69 wells (49.2 net) to sales in 2023.
We also expect to spend $125.0 million to $150.0 million in our Western Haynesville midstream partnership. Under our 2024 operating plan, we currently expect to run five operated drilling rigs and to drill 46 operated horizontal wells (35.9 net) and to turn 44 operated wells (38.2 net) to sales in 2024. Retirement of senior notes.
The proceeds from the note offerings were used to redeem $2,025.0 million principal amount of outstanding senior notes for $2,198.1 million, including premiums paid over face value and costs related to a tender offer. 32 COMSTOCK RESOURCES, INC. Capital expenditures. The increase in capital expenditures of $412.7 million is primarily due to higher drilling, completion and acquisition activities in 2022.
The increase in capital expenditures of $357.2 million is primarily due to higher drilling, completion and acquisition activities in 2023. 35 COMSTOCK RESOURCES, INC.
Removed
Our lease operating expense of $0.22 per Mcfe produced for 2022 was comparable to the 2021 rate of $0.21 per Mcfe. Gas services expenses. Gas services expenses were $465.0 million during 2022, which include the cost of unaffiliated third party natural gas purchased for resale and the operating expenses of the pipeline and natural gas treating plant acquired in 2022.
Added
Production and ad valorem taxes. Our production and ad valorem taxes increased $13.9 million (18%) to $91.8 million in 2023 from $77.9 million in 2022. This increase was primarily related to increases in the Louisiana production tax rate and higher ad valorem taxes. Gathering and transportation.
Removed
We reported a gain on the sale of assets in 2022 of $0.3 million, which was primarily related to the sale of certain nonstrategic, non-operated natural gas and oil properties. We reported a loss on the sale of assets of $162.1 million for 2021 which was primarily related to our divestiture of our Bakken shale assets in November 2021.
Added
Gas services expenses of $282.1 million in 2023 were $183.0 million (39%) lower than gas services expenses in 2022 of $465.0 million. The decrease was due primarily to lower natural gas prices for purchases of third party natural gas for resale. Depreciation, depletion and amortization expense ("DD&A").
Removed
The decrease in interest expense in 2022 was due primarily to the refinancing of our senior notes in 2021, the early retirements of senior notes in May and June 2022 and the repayment of borrowings under our bank credit facility. Loss on early retirement of debt.
Added
The increase in DD&A rate was primarily due to higher drilling and completion costs incurred for wells turned to sales in 2023 combined with lower estimated proved reserves resulting from the low natural gas price used in the determination of proved reserves at December 31, 2023. General and administrative expenses.
Removed
In 2021, we sold our non-operated properties in the Bakken shale and certain other properties for $138.4 million after selling expenses. Issuance of new senior notes and retirement of senior notes.
Added
In 2022, we sold certain non-operated properties for net proceeds of $4.2 million. Contributions from noncontrolling interest. During the fourth quarter of 2023, we formed a midstream partnership to fund the future build-out of our Western Haynesville midstream system over the next several years. During 2023, the noncontrolling interest contributed $24.0 million to the midstream partnership. Capital expenditures.
Removed
In 2021, we issued $1.25 billion principal amount of 6.75% senior notes due in 2029 and $965.0 million principal amount of 5.875% senior notes due in 2030.
Added
In 2022, we entered into a new five-year bank credit facility and we incurred $10.8 million of issuance costs associated with the new bank credit facility Liquidity and Capital Resources As of December 31, 2023, we had $480.0 million outstanding under a bank credit facility. Aggregate commitments under the credit facility are $1.5 billion, which matures on November 15, 2027.
Removed
The Company also expects to spend an additional $25 million to $35 million on acquiring acreage in 2023. Common stock and preferred stock dividends. On December 15, 2022, we paid a cash dividend of $0.125 per share of common stock.
Added
Interest payments under our senior notes and bank credit facility are $175.1 million for 2024 through 2026, $170.6 million for 2027, $139.3 million for 2028 and $72.8 million for all periods thereafter.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeNone of our derivative contracts have margin requirements or collateral provisions that could require funding prior to the scheduled cash settlement date. An increase of 10% in the market price of natural gas on December 31, 2022 would decrease the fair value of our natural gas collars by approximately $9.9 million.
Biggest changeAs of December 31, 2023, we had natural gas price swap agreements to hedge approximately 146.4 Bcf of our 2024 production at an average price of $3.55 per MMBtu. None of our derivative contracts have margin requirements or collateral provisions that could require funding prior to the scheduled cash settlement date.
Factors influencing oil and natural gas prices include the level of global demand for oil, the foreign supply of natural gas and oil, the establishment of and compliance with production quotas by oil exporting countries, weather conditions that determine the demand for natural gas, the price and availability of alternative fuels and overall economic conditions.
Factors influencing natural gas and oil prices include the level of global demand for oil, the foreign supply of natural gas and oil, the establishment of and compliance with production quotas by oil exporting countries, weather conditions that determine the demand for natural gas, the price and availability of alternative fuels and overall economic conditions.
Any reduction in our natural gas and oil reserves, including reductions due to price fluctuations, can have an adverse effect on our ability to obtain capital for our exploration and development activities. Similarly, any improvements in oil and natural gas prices can have a favorable impact on our financial condition, results of operations and capital resources.
Any reduction in our natural gas and oil reserves, including reductions due to price fluctuations, can have an adverse effect on our ability to obtain capital for our exploration and development activities. Similarly, any improvements in natural gas and oil prices can have a favorable impact on our financial condition, results of operations and capital resources.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our financial condition, results of operations and capital resources are highly dependent upon the prevailing market prices of natural gas and oil. These commodity prices are subject to wide fluctuations and market uncertainties due to a variety of factors, some of which are beyond our control.
ITEM 7A. QUANTITATIVE AND QUA LITATIVE DISCLOSURES ABOUT MARKET RISK Our financial condition, results of operations and capital resources are highly dependent upon the prevailing market prices of natural gas and oil. These commodity prices are subject to wide fluctuations and market uncertainties due to a variety of factors, some of which are beyond our control.
Interest Rates At December 31, 2022, we had approximately $2.2 billion principal amount of long-term debt outstanding. $965.0 million of our long-term debt bear interest at a fixed rate of 5.875% and $1.22 billion of our long-term debt bear interest at a fixed rate of 6.75%.
Interest Rates At December 31, 2023, we had approximately $2.7 billion principal amount of long-term debt outstanding. $965.0 million of our long-term debt bear interest at a fixed rate of 5.875% and $1.2 billion of our long-term debt bear interest at a fixed rate of 6.75%.
The fair market value of the senior notes due 2030 and senior notes due 2029 as of December 31, 2022 were $846.8 million and $1.1 billion, respectively, based on the market price of approximately 87.8% and 92.3% of the face amount of such debt.
The fair market value of the senior notes due 2030 and senior notes due 2029 as of December 31, 2023 were $849.2 million and $1.1 billion, respectively, based on the market price of approximately 88% and 93% of the face amount of such debt.
A decrease of 10% in the market price of natural gas on December 31, 2022 would increase the fair value of our natural gas collars by approximately $11.6 million.
A change of 10% in the market price of natural gas on December 31, 2023 would change the fair value of our natural gas swaps by approximately $38.2 million.
At December 31, 2022, we had no outstanding borrowings under our bank credit facility, which is subject to variable rates of interest that are tied to adjusted SOFR or an alternate base rate, at our option.
At December 31, 2023, we had $480.0 million of outstanding borrowings under our bank credit facility, which is subject to variable rates of interest that are tied to adjusted SOFR or an alternate base rate, at our option. Any increase in these interest rates would have an adverse impact to our results of operations and cash flow.
Removed
As of December 31, 2022, we had natural gas price collars outstanding to hedge approximately 174.9 Bcf of our 2023 natural gas production with an average floor price of $2.99 per MMBtu and an average ceiling price of $9.96 per MMBtu.

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