Comstock Resources, Inc. - 10-K Summary (Fiscal Year Ended Dec 31, 1995)
Business Context and Reporting Period
Company: Comstock Resources, Inc.
Reporting Period: Fiscal year ended December 31, 1995.
Business Model: Independent oil and gas company engaged in the acquisition, development, and production of oil and natural gas properties in the U.S., alongside natural gas gathering, processing, and marketing operations.
Operations: The Company operates through wholly-owned subsidiaries, managing 759 producing wells across Texas, Louisiana, Oklahoma, and the Gulf of Mexico. It also operates a gas marketing subsidiary (CNG) and holds interests in pipeline infrastructure.
Key Financial Metrics
| Metric | 1995 | 1994 |
|---|---|---|
| Total Revenues | $75.7 million | $32.7 million |
| Net Loss (Attributable to Common) | $(28.1) million | $(1.5) million |
| Operating Cash Flow | $8.4 million | $7.4 million |
| Total Debt | $71.8 million | $37.9 million |
| Working Capital | $(17.9) million (Deficit) | $(5.9) million (Deficit) |
| Proved Reserves (End of Period) | 195.8 MMcfe | 123.6 MMcfe |
| Production (1995) | 11.4 MMcfe | 8.1 MMcfe |
Margins & Costs: Average lifting costs were $0.65 per Mcfe in 1995, down from $0.75 in 1994. Net general and administrative expenses were 17 cents per Mcfe of production.
Material Changes vs. Prior Period
- Significant Loss: The Company reported a net loss of $28.1 million in 1995, a sharp deterioration from the $1.5 million loss in 1994. This was primarily driven by a $29.2 million non-cash impairment charge recorded in Q4 1995 due to the adoption of SFAS No. 121 (Accounting for the Impairment of Long-Lived Assets).
- Revenue Growth: Total revenues increased 131% to $75.7 million, driven by a 31% increase in oil and gas sales (due to higher production volumes) and the full-year impact of gas marketing operations (revenues of $50.1 million vs. $15.0 million in 1994).
- Debt Expansion: Total debt nearly doubled to $71.8 million to fund acquisitions, including a $50.6 million purchase from Sonat Inc. and a $10 million term loan.
- Production Increase: Oil and gas production rose 41% (on an Mcfe basis) due to acquisitions completed in late 1994 and 1995.
Guidance, Outlook, and Risks
Outlook & Acquisitions: The Company is pursuing a growth strategy via acquisitions. A pending $102.9 million acquisition of Black Stone Oil Company (expected to close May 1996) is planned to be financed under a new $175 million credit facility. The Company anticipates $12 million in developmental capital expenditures for 1996 but has no specific acquisition budget.
Risks & Contingencies:
- Liquidity: The Company had a working capital deficit of $17.9 million at year-end. Refinancing of existing debt is contingent on the closing of the Black Stone acquisition.
- Price Sensitivity: Results are highly sensitive to natural gas prices. A 10-cent decrease in average gas price would reduce net income by approximately $879,000.
- Regulatory & Environmental: Operations are subject to extensive environmental laws and potential liabilities under CERCLA, though no material expenditures are currently anticipated.
Investor Verification Checklist
- Impairment Charge: Verify the $29.2 million impairment charge related to SFAS 121 adoption and its impact on asset valuation.
- Debt Refinancing: Confirm the status of the $175 million credit facility commitment required to close the Black Stone acquisition and refinance existing debt.
- Working Capital: Assess the sustainability of the $17.9 million working capital deficit and the reliance on the pending acquisition for liquidity.
- Reserve Estimates: Review the independent reserve engineering report (Lee Keeling and Associates) regarding the 195.8 MMcfe proved reserves and the 7.3 reserve replacement ratio.
- Gas Marketing Margins: Analyze the gross margins of the gas marketing subsidiary, which contributed significantly to revenue but operates in a highly competitive, deregulated market.