Comstock Resources Inc. 10-Q Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 1995. Comstock Resources Inc. is an oil and gas company engaged in exploration, production, and gas marketing activities. The company operates primarily in the Gulf of Mexico, East Texas, and North Louisiana.
Key Financial Metrics
| Metric | Q1 1995 | Q1 1994 |
|---|---|---|
| Total Revenues | $14,588,827 | $4,345,121 |
| Net Income (Loss) | $(431,563) | $314,387 |
| Net Loss Attributable to Common | $(720,673) | $188,387 |
| Diluted EPS (Common) | $(0.06) | $0.02 |
| Operating Cash Flow | $167,362 | $(727,914) |
| Cash and Equivalents (End) | $936,890 | $4,246,566 |
| Total Debt (Current + Long-term) | $35,941,469 | Filing text does not provide clear Q1 1994 total |
| Working Capital | $(6,740,593) | Filing text does not provide clear Q1 1994 value |
Revenue Composition: Q1 1995 revenues were driven by new gas marketing sales of $10.5 million. Traditional oil and gas sales were $3.8 million, down from $4.3 million in Q1 1994.
Material Changes vs. Prior Period
- Profitability: The company swung from a net income of $314,000 in Q1 1994 to a net loss of $432,000 in Q1 1995. This was primarily due to the inclusion of high-cost gas marketing activities and increased interest expenses.
- Revenue Growth: Total revenues increased 236% year-over-year, largely due to the commencement of gas marketing operations in June 1994.
- Liquidity: Cash and cash equivalents decreased by $2.5 million to $937,000. The working capital deficit widened to $6.7 million.
- Production Economics: Natural gas production volume remained flat (1.635 Bcf vs 1.644 Bcf), but the average sales price dropped from $2.00/Mcf to $1.69/Mcf. Oil production volume declined 15% (63,600 bbls vs 74,400 bbls), though the average price increased to $16.48/bbl.
- Expenses: Total expenses rose to $15.0 million from $4.0 million, driven by $10.2 million in natural gas purchases for marketing and higher interest costs ($977k vs $622k).
Outlook, Risks, and Subsequent Events
- Acquisitions:
- On April 13, 1995, the company agreed to acquire offshore Louisiana properties for $8.2 million, funded by bank borrowings.
- On April 21, 1995, the company entered a letter of intent to acquire East Texas/North Louisiana properties and gathering systems for $51.25 million. This deal is subject to FTC clearance and board approval.
- Debt Capacity: The company has a $50 million revolving credit facility with $35.6 million outstanding. The borrowing base was $36.8 million as of March 31, 1995, but is scheduled to decrease by $675,000 monthly until the next redetermination.
- Accounting Risk: The company noted the upcoming adoption of FASB Standard No. 121 (Impairment of Long-Lived Assets) in 1996, which may require fair value assessments of properties. The impact has not yet been determined.
- Management Commentary: Management attributes the net loss to the strategic expansion into gas marketing and lower natural gas prices. They emphasize that the working capital deficit includes current debt maturities expected to be repaid from operating cash flows.
Investor Verification Checklist
- Debt Covenants: Verify the impact of the monthly borrowing base reduction on the company's ability to fund the proposed $51.25 million acquisition.
- Gas Marketing Margins: Analyze the gross margin on the $10.5 million in gas marketing sales versus the $10.2 million in purchase costs to assess profitability of this new segment.
- Liquidity Position: Confirm the sufficiency of the $937,000 cash balance against the $6.7 million working capital deficit and upcoming debt principal payments.
- Regulatory Approval: Monitor the status of the Federal Trade Commission clearance for the East Texas acquisition.
- Preferred Dividends: Note the $289,000 preferred stock dividend obligation, which significantly impacts net income available to common shareholders.