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, 1997. The company is incorporated in Nevada with principal executive offices in Dallas, Texas. As of May 6, 1997, there were 24,175,203 shares of common stock outstanding.
Key Financial Metrics
| Metric | Q1 1997 | Q1 1996 |
|---|---|---|
| Revenues | $23.7 million | $9.6 million |
| Net Income (Attributable to Common) | $7.8 million | $2.4 million |
| Net Income Per Share (Diluted) | $0.30 | $0.15 |
| Operating Cash Flow | $20.5 million | $3.2 million |
| Cash and Equivalents (End of Period) | $13.0 million | $0.7 million |
| Total Debt Outstanding | $60.1 million | $80.1 million |
| Capital Expenditures | $7.7 million | $2.4 million |
Liquidity: The company maintains a $166.0 million revolving credit facility with a borrowing base of $166.0 million as of March 31, 1997. Current utilization is approximately $60.0 million.
Material Changes vs. Prior Period
- Revenue Surge: Oil and gas sales increased 145% to $23.4 million, driven by a 184% increase in oil production and a 78% increase in gas production, primarily from the Double A Wells field acquired in May 1996.
- Profitability: Net income attributable to common stock more than tripled to $7.8 million. This was aided by higher production volumes, increased commodity prices, and a reduction in interest expense (down 35% due to lower rates).
- Debt Reduction: The company made significant principal payments of $20.0 million on its bank credit facility, reducing total debt from $80.1 million to $60.1 million.
- Asset Sales: The company sold non-strategic properties for approximately $5.0 million, recognizing a gain of $48,000.
Outlook, Risks, and Management Commentary
- Acquisition Activity: In March 1997, the company entered into agreements to acquire working interests in the Lisbon Field, Louisiana, for $25.0 million. The deal is expected to close in May 1997 and will be funded via the bank credit facility. The assets include 13 producing wells and estimated proved reserves of 317,000 barrels of oil and 25.9 billion cubic feet of natural gas.
- Capital Plan: Management anticipates spending an additional $25.3 million on development and exploration for the remainder of 1997. Internally generated cash flow is expected to fund these expenditures, while significant acquisitions will be debt-financed.
- Risks: The borrowing base is subject to semiannual redetermination by lenders based on property performance and commodity prices. The credit facility contains covenants restricting cash dividends and limiting consolidated debt.
- Tax Provision: A provision for deferred income taxes of $4.3 million was recorded in Q1 1997 (estimated rate 35%), whereas no provision was made in Q1 1996 due to net operating loss carryforwards.
Investor Verification Checklist
- Verify the closing of the $25.0 million Lisbon Field acquisition and the associated reserve estimates.
- Monitor the semiannual borrowing base redetermination to ensure the $166.0 million facility remains sufficient for planned capital expenditures.
- Track commodity price sensitivity, as revenue growth was heavily dependent on increased oil and gas prices alongside volume growth.
- Confirm the sustainability of the 184% oil production increase from the Double A Wells field.
- Review the impact of the new deferred tax provision on future cash flows compared to the prior year's tax asset utilization.