Comstock Resources Inc. 10-Q Summary
Business Context and Reporting Period
This filing is a Quarterly Report (Form 10-Q) for Comstock Resources Inc., an oil and gas exploration and production company, for the period ended March 31, 1996. The company is headquartered in Dallas, Texas, and operates primarily in the United States. The financial statements are unaudited.
Key Financial Metrics
| Metric | Q1 1996 | Q1 1995 |
|---|---|---|
| Total Revenues | $35,264,598 | $14,588,827 |
| Net Income (Loss) | $3,009,211 | $(431,563) |
| Net Income Attributable to Common | $2,376,065 | $(720,673) |
| Diluted EPS (Common) | $0.15 | $(0.06) |
| Operating Cash Flow | $3,192,838 | $167,362 |
| Capital Expenditures | $(2,406,929) | $(738,959) |
| Cash and Equivalents (End of Period) | $657,816 | $936,890 |
| Total Debt (Current + Long-term) | $69,766,191 | N/A |
| Working Capital | $(8,299,996) | N/A |
Note: Working capital is calculated as Current Assets ($20.9M) minus Current Liabilities ($29.2M).
Material Changes vs. Prior Period
- Revenue Surge: Total revenues increased 142% to $35.3 million, driven by a 150% increase in oil and gas sales ($9.6M vs $3.8M) and a 142% increase in gas marketing sales ($25.4M vs $10.5M).
- Production Growth: Oil production rose 66% (105 MBbls vs 64 MBbls) and gas production rose 90% (3,109 MMcf vs 1,635 MMcf), largely due to 1995 property acquisitions.
- Profitability Turnaround: The company moved from a net loss of $432,000 in Q1 1995 to a net income of $3.0 million in Q1 1996.
- Expense Increases: Interest expense nearly doubled (89% increase) to $1.8 million due to higher average debt balances. Depreciation, depletion, and amortization (DD&A) increased 46% to $2.6 million due to higher production volumes.
- Liquidity Position: Cash and cash equivalents decreased by $1.26 million during the quarter. The company reported a working capital deficit of approximately $8.3 million at March 31, 1996, primarily due to the classification of a $10 million bridge loan as current debt.
Outlook, Management Commentary, and Risks
- Major Acquisition (Subsequent Event): On May 1 and May 2, 1996, the company acquired Black Stone Oil Company and related interests for approximately $104 million. This added 98.5 Bcf of natural gas and 5.3 million barrels of oil reserves.
- Refinancing: The acquisition was financed via a new $176 million credit facility ($166M revolving, $10M bridge). The new facility refinanced existing debt and funded the acquisition.
- Asset Sales: The company entered into letters of intent in April 1996 to sell properties for approximately $9.5 million. Proceeds are expected to retire the new $10 million bridge loan in Q2 1996.
- Capital Expenditure Guidance: Management anticipates funding approximately $12 million in developmental capital expenditures for the remainder of 1996 using internal cash flow and credit facility borrowings.
- Risks: The company faces a short-term liquidity constraint due to the working capital deficit, though management expects to resolve this via pending asset sales. Debt levels are significant, with interest rates tied to prime/base rates.
Investor Verification Checklist
- Verify the closing of the $9.5 million asset sales and the subsequent retirement of the $10 million bridge loan.
- Confirm the integration and production performance of the newly acquired Black Stone Oil Company assets.
- Monitor the company's borrowing base redetermination under the new $176 million credit facility.
- Review the impact of the $104 million acquisition on future leverage ratios and interest coverage.
- Assess the sustainability of the 150% revenue growth rate given the one-time nature of the production increase from 1995 acquisitions.