Business Context and Reporting Period
Comstock Resources, Inc. filed this Form 8-K on December 9, 1997, to report the acquisition of working interests in producing offshore Louisiana oil and gas properties and undeveloped leases from Bois d'Arc Resources and affiliates. The transaction was executed through a newly formed subsidiary, Comstock Offshore, LLC.
Key Financial Metrics
- Acquisition Cost: Approximately $203.4 million in cash consideration.
- Assets Acquired: 38 wells (24.0 net wells), eight production complexes, and six undrilled prospects (valued at approximately $30 million).
- Financing: Funded via a new five-year $290.0 million revolving credit facility, which also refinanced $77.0 million of existing debt.
- Pro Forma Revenue (1996): $124.857 million (including $41.002 million from the acquired assets).
- Pro Forma Net Income (1996): $33.087 million attributable to common stock.
- Pro Forma Revenue (9 months 1997): $105.259 million (including $44.311 million from the acquired assets).
- Pro Forma Net Income (9 months 1997): $20.019 million attributable to common stock.
- Pro Forma Debt: Long-term debt increased to $287.442 million as of September 30, 1997.
- Reserves: Total proved reserves post-acquisition (as of Nov 1, 1997) include 14.628 million barrels of oil and 30.584 million Mcf of gas.
Material Changes Versus Prior Period
The filing does not provide historical consolidated financial statements for Comstock Resources for the full year 1997 to allow for a direct year-over-year comparison of the company's total performance. However, the pro forma data indicates that the acquisition significantly increased the company's asset base and revenue potential. The transaction added approximately $203.4 million in assets and increased long-term debt by roughly $204.4 million relative to the historical balance sheet as of September 30, 1997.
Guidance, Outlook, and Risks
- Management Commentary: The pro forma financial statements are unaudited and not necessarily indicative of future results. They assume the acquisition occurred at the beginning of the respective periods.
- Risks and Contingencies: Future results may vary significantly due to normal production declines, changes in oil and gas prices, and future transactions. The standardized measure of discounted future net cash flows for the acquired reserves is $194.781 million, based on September 1997 prices.
- Unusual Items: The acquisition includes $30 million attributed to undrilled prospects, representing exploration risk.
Investor Verification Checklist
- Verify the terms and interest rates of the new $290.0 million revolving credit facility.
- Confirm the independent petroleum engineers' estimates of the 14.628 million barrels of proved oil reserves.
- Review the sensitivity of the $194.781 million discounted future net cash flows to changes in oil and gas prices.
- Assess the development timeline and capital requirements for the six undrilled prospects valued at $30 million.
- Examine the full text of the Credit Agreement (Exhibit 10) for covenants and restrictions.