CRK

Business Context and Reporting Period

Company: Comstock Resources, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: March 24, 2005 (Events reported through March 28, 2005)
Context: The filing discloses the entry into a material definitive agreement to acquire oil and gas assets and the announcement of a planned public equity offering.

Key Financial Metrics and Transaction Details

• Acquisition Cost: $192.5 million in cash (subject to adjustment).
• Target Assets: Producing properties in East Texas, Louisiana, and Mississippi from EnSight Energy Partners and affiliates.
• Reserves Acquired: Approximately 120.2 billion cubic feet of gas equivalent (Bcfe) in proved reserves (57% natural gas, 43% oil).
• Development Status: Approximately 37% of proved reserves are in the proved developed category.
• Probable Reserves: Estimated at 85.6 Bcfe, relating to 133 additional drilling locations.
• Planned Equity Offering: Approximately $125.0 million of common stock.
• Transaction Timeline: Effective April 1, 2005; expected closing in May 2005.

Material Changes and Strategic Actions

The primary material change is the agreement to acquire significant oil and gas reserves from EnSight. This represents a major expansion of Comstock's asset base. Additionally, the company announced a strategic shift in capital structure planning, intending to raise equity to reduce debt levels prior to funding the acquisition.

Guidance, Outlook, and Financing Strategy

Financing Plan:

1. Proceeds from the $125.0 million public offering will be used to repay amounts outstanding under Comstock's credit facility.
2. Following the equity raise, Comstock expects to use borrowings under its credit facility and proceeds from a previously announced refinancing of debt owed by Bois d'Arc Energy, LLC to fund the $192.5 million EnSight acquisition.

Management Commentary: The filing indicates a clear strategy to leverage existing credit facilities and new equity to execute growth acquisitions while managing leverage ratios.

Investor Verification Checklist

• Verify the final closing date of the EnSight acquisition (expected May 2005) and any adjustments to the $192.5 million purchase price.
• Confirm the completion and net proceeds of the $125.0 million public offering of common stock.
• Review the terms of the refinancing of debt owed by Bois d'Arc Energy, LLC to ensure sufficient liquidity for the acquisition.
• Assess the impact of the acquisition on Comstock's total proved reserves and production profile post-closing.
• Monitor the company's credit facility utilization following the equity offering and subsequent debt drawdowns.