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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Schedule of Other Current Assets

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

 

 

As of

 

 

September 30,
2024

 

 

December 31,
2023

 

 

(In thousands)

 

Prepaid drilling costs

 

$

41,135

 

 

$

70,124

 

Income tax receivable

 

 

6,587

 

 

 

8,312

 

Production tax refunds receivable

 

 

3,957

 

 

 

5,745

 

Other receivables

 

 

3,757

 

 

 

 

Prepaid expenses

 

 

2,943

 

 

 

2,438

 

 

$

58,379

 

 

$

86,619

 

Capitalized Exploratory Well Costs

The changes in capitalized exploratory well costs are as follows:

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

(In thousands)

 

Beginning capitalized exploratory well costs

 

$

69,800

 

 

$

34,196

 

 

$

96,233

 

 

$

867

 

Additions to exploratory well costs pending the determination of proved reserves

 

 

60,930

 

 

 

74,737

 

 

 

219,778

 

 

 

179,049

 

Determined to have found proved reserves

 

 

(837

)

 

 

(71,838

)

 

 

(186,118

)

 

 

(142,821

)

Ending capitalized exploratory well costs

 

$

129,893

 

 

$

37,095

 

 

$

129,893

 

 

$

37,095

 

Summary of Lease Cost Recognized

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

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

(In thousands)

 

Operating lease cost included in general and administrative expense

 

$

423

 

 

$

445

 

 

$

1,263

 

 

$

1,334

 

Operating lease cost included in lease operating expense

 

 

564

 

 

 

523

 

 

 

1,652

 

 

 

1,533

 

Operating lease cost included in natural gas and oil properties

 

 

9,171

 

 

 

18,659

 

 

 

25,473

 

 

 

41,339

 

Variable lease cost (drilling rig and completion costs included in natural gas and oil properties)

 

 

1,306

 

 

 

25,970

 

 

 

4,670

 

 

 

31,032

 

Short-term lease cost (drilling rig costs included in natural gas and oil properties)

 

 

5,582

 

 

 

20,098

 

 

 

21,096

 

 

 

73,986

 

 

$

17,046

 

 

$

65,695

 

 

$

54,154

 

 

$

149,224

 

Summary of Liabilities Under Contracts That Contain Operating Leases

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

 

(In thousands)

 

October 1 to December 31, 2024

 

$

10,049

 

2025

 

 

40,056

 

2026

 

 

34,015

 

2027

 

 

3,821

 

2028

 

 

1,560

 

Total lease payments

 

 

89,501

 

Imputed interest

 

 

(7,448

)

Total lease liability

 

$

82,053

 

 

Summary of Accrued Costs

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

 

As of

 

 

September 30,
2024

 

 

December 31,
2023

 

 

(In thousands)

 

Accrued transportation costs

 

$

34,088

 

 

$

32,294

 

Accrued interest payable

 

 

22,086

 

 

 

54,912

 

Accrued income and other taxes

 

 

21,215

 

 

 

1,894

 

Accrued drilling costs

 

 

16,369

 

 

 

35,876

 

Accrued employee compensation

 

 

6,998

 

 

 

6,700

 

Accrued lease operating expenses

 

 

3,646

 

 

 

2,299

 

Other

 

 

1,655

 

 

 

491

 

 

$

106,057

 

 

$

134,466

 

Summary of Changes in Total Estimated Asset Retirement Obligation Liability The following table summarizes the changes in Comstock's total estimated liability for such obligations during the periods presented:

 

 

Nine Months Ended
September 30,

 

 

2024

 

 

2023

 

 

(In thousands)

 

Reserve for future abandonment costs at beginning of period

 

$

30,773

 

 

$

29,114

 

New wells placed on production

 

 

109

 

 

 

114

 

Liabilities settled

 

 

(40

)

 

 

(42

)

Wells sold

 

 

(157

)

 

 

 

Accretion expense

 

 

1,331

 

 

 

1,248

 

Reserve for future abandonment costs at end of period

 

$

32,016

 

 

$

30,434

 

Schedule of Natural Gas Price Derivative

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

 

 

Future Production Period

 

Three Months Ending
December 31, 2024

 

Year Ending
December 31, 2025

 

Year Ending
December 31, 2026

 

Total

Natural Gas Price Swap Contracts:

 

 

 

 

 

 

 

 

Volume (MMBtu)

 

64,400,000

 

136,875,000

 

109,500,000

 

310,775,000

Average Price per MMBtu

 

$3.54

 

$3.51

 

$3.51

 

$3.51

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

 

Subsequent to September 30, 2024, the Company entered into natural gas swap contracts to hedge an additional 7,300,000 MMBtu of natural gas production from January 2025 to December 2025 at an average price of $3.40 per MMBtu.

Schedule of Derivative Instruments

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

 

 

 

 

As of

 

Type

 

Consolidated Balance Sheet Location

 

September 30,
2024

 

 

December 31,
2023

 

 

 

 

(In thousands)

 

Asset Derivative Financial Instruments:

 

 

 

 

 

 

Natural gas price derivatives

 

Derivative Financial Instruments – current

 

$

71,704

 

 

$

126,775

 

Natural gas price derivatives

 

Derivative Financial Instruments – long-term

 

$

4,828

 

 

$

 

 

 

 

 

 

 

 

 

 

Liability Derivative Financial Instruments:

 

 

 

 

 

 

Natural gas price derivatives

 

Derivative Financial Instruments – long-term

 

$

20,495

 

 

$

 

Schedule of Gains and Losses from Derivative Contracts

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
September 30,

 

 

Nine Months Ended
September 30,

 

Gain (loss) on Derivatives Recognized in Earnings

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

(In thousands)

 

Natural gas price derivatives

 

$

75,163

 

 

$

14,276

 

 

$

89,218

 

 

$

76,190

 

 

$

75,163

 

 

$

14,276

 

 

$

89,218

 

 

$

76,190

 

Consolidated Income Tax Benefit (Provision)

The following is an analysis of the consolidated income tax provision (benefit):

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

(In thousands)

 

Current - Federal

 

$

(1,962

)

 

$

 

 

$

(1,962

)

 

$

 

Current - State

 

 

 

 

 

 

 

 

37

 

 

 

 

Deferred - Federal

 

 

(8,662

)

 

 

3,999

 

 

 

(50,242

)

 

 

28,350

 

Deferred - State

 

 

(4,072

)

 

 

(391

)

 

 

(16,927

)

 

 

528

 

 

$

(14,696

)

 

$

3,608

 

 

$

(69,094

)

 

$

28,878

 

Difference Between Federal Statutory Rate and Effective Tax Rate

The difference between the federal statutory rate of 21% and the effective tax rate is due to the following:

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Tax at statutory rate

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

Tax effect of:

 

 

 

 

 

 

 

 

 

 

 

 

Valuation allowance on deferred tax assets

 

 

 

 

 

5.5

 

 

 

(0.2

)

 

 

1.7

 

State income taxes, net of federal benefit

 

 

10.2

 

 

 

(8.2

)

 

 

7.8

 

 

 

(1.6

)

Nondeductible stock-based compensation

 

 

(0.2

)

 

 

1.7

 

 

 

(0.9

)

 

 

0.8

 

Other

 

 

5.4

 

 

 

(0.3

)

 

 

2.0

 

 

 

(0.1

)

Effective tax rate

 

 

36.4

%

 

 

19.7

%

 

 

29.7

%

 

 

21.8

%

Summary of Carrying Amounts and Fair Values of Financial Instruments

The following presents the carrying amounts and the fair values of the Company's financial instruments as of September 30, 2024 and December 31, 2023:

 

As of

 

 

September 30, 2024

 

 

December 31, 2023

 

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

 

 

(In thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Commodity-based derivatives (1)

 

$

76,532

 

 

$

76,532

 

 

$

126,775

 

 

$

126,775

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Commodity-based derivatives (1)

 

$

20,495

 

 

$

20,495

 

 

$

 

 

$

 

Bank credit facility (2)

 

$

415,000

 

 

$

415,000

 

 

$

480,000

 

 

$

480,000

 

6.75% senior notes due 2029 (3)

 

$

1,602,665

 

 

$

1,577,223

 

 

$

1,229,018

 

 

$

1,138,208

 

5.875% senior notes due 2030 (3)

 

$

965,000

 

 

$

897,450

 

 

$

965,000

 

 

$

849,200

 

 

(1)
The Company's commodity-based derivatives are classified as Level 2 and measured at fair value using third party pricing services and other active markets or broker quotes that are readily available in the public markets.
(2)
The carrying value of our floating rate debt outstanding approximates fair value.
(3)
The fair value of the Company's fixed rate debt was based on quoted prices as of September 30, 2024 and December 31, 2023, respectively, a Level 1 measurement.
Weighted Average Shares of Unvested Restricted Stock

Weighted average shares of unvested restricted stock outstanding were as follows:

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

(In thousands)

 

Unvested restricted stock

 

 

2,091

 

 

 

1,469

 

 

 

2,219

 

 

 

1,186

 

Common Stock and Convertible Stock Dilutive in Weighted average unearned PSUs outstanding The treasury stock method is used to measure the dilutive effect of PSUs.

 

Weighted average unearned PSUs outstanding were as follows:

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2024

 

2023

 

2024

 

2023

 

(In thousands, except per unit amounts)

Weighted average PSUs

 

1,291

 

744

 

1,266

 

631

Weighted average grant date fair value per unit

 

$13.21

 

$15.92

 

$13.21

 

$15.92

Schedule of Basic and Diluted Income (Loss) Per Share

Basic and diluted income (loss) per share for the three months and nine months ended September 30, 2024 and 2023 were determined as follows:

 

 

Three Months Ended September 30,

 

 

2024

 

 

2023

 

 

Loss

 

 

Shares

 

 

Per Share

 

 

Income

 

 

Shares

 

 

Per Share

 

 

(In thousands, except per share amounts)

 

Net income (loss) attributable to common stock

 

$

(25,718

)

 

 

 

 

 

 

 

$

14,720

 

 

 

 

 

 

 

Income allocable to unvested restricted shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income (loss) attributable to common stock

 

 

(25,718

)

 

 

290,170

 

 

$

(0.09

)

 

 

14,720

 

 

 

276,999

 

 

$

0.05

 

Diluted income (loss) attributable to common stock

 

$

(25,718

)

 

 

290,170

 

 

$

(0.09

)

 

$

14,720

 

 

 

276,999

 

 

$

0.05

 

 

 

Nine Months Ended September 30,

 

 

2024

 

 

2023

 

 

Loss

 

 

Shares

 

 

Per Share

 

 

Income

 

 

Shares

 

 

Per Share

 

 

(In thousands, except per share amounts)

 

Net income (loss) attributable to common stock

 

$

(163,441

)

 

 

 

 

 

 

 

$

103,517

 

 

 

 

 

 

 

Income allocable to unvested restricted shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income (loss) attributable to common stock

 

 

(163,441

)

 

 

285,949

 

 

$

(0.57

)

 

 

103,517

 

 

 

276,741

 

 

$

0.37

 

Diluted income (loss) attributable to common stock

 

$

(163,441

)

 

 

285,949

 

 

$

(0.57

)

 

$

103,517

 

 

 

276,741

 

 

$

0.37

 

Cash Payments Made for Interest and Income Taxes

Cash payments made for interest and income taxes and other non-cash investing activities for the nine months ended September 30, 2024 and 2023, respectively, were as follows:

 

 

Nine Months Ended
September 30,

 

 

2024

 

 

2023

 

 

(In thousands)

 

Cash payments for:

 

 

 

 

 

 

Interest payments

 

$

180,312

 

 

$

150,239

 

Income tax payments

 

$

37

 

 

$

29,796

 

Non-cash investing activities include:

 

 

 

 

 

 

Decrease in accrued capital expenditures

 

$

(19,507

)

 

$

(32,441

)

Liabilities assumed in exchange for right-of-use lease assets

 

$

34,321

 

 

$

157,789