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PART I. Financial Information
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets - March 31, 2008 and December 31, 2007		4
Consolidated Statements of Operations - Three months ended March 31, 2008 and 2007		5
Consolidated Statement of Stockholders' Equity and Comprehensive Income - Three months ended March 31, 2008		6
Consolidated Statements of Cash Flows - Three months ended March 31, 2008 and 2007		7
Notes to Consolidated Financial Statements		8
Independent Accountants' Review Report		20
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3. Quantitative and Qualitative Disclosure About Market Risk		26
Item 4. Controls and Procedures		26
PART II. Other Information
Item 6. Exhibits		27
First Amendment to Second Amendment and Restated Credit Agreement
Awareness Letter of Ernst & Young LLP
Section 302 Certification of the Chief Executive Officer
Section 302 Certification of the Chief Financial Officer
Certification for the Chief Executive Officer as required by Section 906
Certification for the Chief Financial Officer as required by Section 906

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

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ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

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CONSOLIDATED BALANCE SHEETS

(Unaudited)

		March 31, 2008				December 31, 2007
		(In thousands)
ASSETS
Cash and Cash Equivalents		$	15,520			$	24,406
Accounts Receivable:
Oil and gas sales			98,234				73,873
Joint interest operations			14,539				16,788
Other Current Assets			12,836				9,438
Total current assets			141,129				124,505
Property and Equipment:
Unevaluated oil and gas properties			28,483				18,880
Oil and gas properties, successful efforts method			3,282,217				3,173,646
Other			10,217				9,777
Accumulated depreciation, depletion and amortization			(1,048,935	)			(979,428	)
Net property and equipment			2,271,982				2,222,875
Other Assets			6,505				7,007
		$	2,419,616			$	2,354,387

LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term Debt		$	—			$	2,588
Accounts Payable			101,162				109,195
Accrued Expenses			15,517				19,017
Short-term Derivative Instruments			13,125				—
Total current liabilities			129,804				130,800
Long-term Debt			736,000				760,000
Deferred Income Taxes Payable			400,964				371,896
Reserve for Future Abandonment Costs			53,435				52,606
Long-term Derivative Instruments			4,533				—
Minority Interest in Bois d'Arc Energy			287,819				267,441
Total liabilities			1,612,555				1,582,743
Commitments and Contingencies
Stockholders' Equity:
Common stock – $0.50 par, 50,000,000 shares authorized, 45,550,245 and 45,428,095 shares outstanding at March 31, 2008 and December 31, 2007, respectively			22,775				22,714
Additional paid-in capital			392,725				386,986
Retained earnings			403,039				361,944
Other comprehensive loss			(11,478	)			—
Total stockholders' equity			807,061				771,644
		$	2,419,616			$	2,354,387

 

 

The accompanying notes are an integral part of these statements.

 

4

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CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three Months Ended
		March 31,
		2008				2007
	(In thousands, except per share amounts)
Oil and gas sales		$	240,987			$	146,029
Operating expenses:
Oil and gas operating			36,640				27,083
Exploration			8,655				11,133
Depreciation, depletion and amortization			70,562				56,707
General and administrative, net			9,339				9,702
Loss on disposal of assets, net			240				—
Total operating expenses			125,436				104,625
Income from operations			115,551				41,404
Other income (expenses):
Interest income			244				296
Other income			157				130
Interest expense			(11,314	)			(8,449	)
Total other income (expenses)			(10,913	)			(8,023	)
Income before income taxes and minority interest			104,638				33,381
Provision for income taxes			(44,073	)			(14,824	)
Minority interest in earnings of Bois d'Arc Energy			(19,470	)			(5,999	)
Net income		$	41,095			$	12,558
Net income per share:
Basic		$	0.93			$	0.29
Diluted		$	0.91			$	0.28
Weighted average common and common stock equivalent shares outstanding:
Basic			44,179				43,364
Diluted			44,994				44,238

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these statements.

 

5

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CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

AND COMPREHENSIVE INCOME

For the Three Months Ended March 31, 2008

(Unaudited)

 

		Common Stock (Shares)				Common Stock Par Value				Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Loss				Total
		(In thousands)
Balance at January 1, 2008		$	45,428			$	22,714			$	386,986			$	361,944				—			$	771,644
Exercise of stock options			125				63				2,389				—				—				2,452
Tax benefit from stock-based compensation			—				—				670				—				—				670
Stock-based compensation			(3	)			(2	)			2,680				—				—				2,678
Net income			—				—				—				41,095				—				41,095
Unrealized hedging losses, net of income taxes			—				—				—				—				(11,478	)			(11,478	)
Comprehensive income			—				—				—				—				—				29,617
Balance at March 31, 2008		$	45,550			$	22,775			$	392,725			$	403,039			$	(11,478	)		$	807,061

 

 

 

 

 

 

 

The accompanying notes are an integral part of these statements.

 

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		Three Months Ended
		March 31,
		2008				2007
		(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	41,095			$	12,558
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes			31,821				12,437
Dry hole costs and leasehold impairments			2,666				8,250
Depreciation, depletion and amortization			70,562				56,707
Loss on disposal of assets, net			240				—
Debt issuance cost amortization			329				281
Stock-based compensation			4,052				4,312
Excess tax benefit from stock-based compensation			(670	)			(166	)
Minority interest in earnings of Bois d'Arc Energy			19,470				5,999
Increase in accounts receivable			(22,112	)			(4,874	)
Increase in other current assets			(1,392	)			(1,237	)
Decrease in accounts payable and accrued expenses			(18,124	)			(15,521	)
Net cash provided by operating activities			127,937				78,746
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(114,220	)			(133,727	)
Proceeds from asset sales			11				—
Net cash used for investing activities			(114,209	)			(133,727	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings			—				58,000
Principal payments on debt			(24,000	)			(2,000	)
Proceeds from issuance of common stock			2,452				139
Excess tax benefit from stock-based compensation			670				166
Proceeds from issuance of shares by Bois d'Arc Energy			1,273				—
Repurchase of common shares by Bois d'Arc Energy			(3,009	)			—
Debt issuance costs			—				(36	)
Net cash provided by (used for) financing activities			(22,614	)			56,269
Net increase (decrease) in cash and cash equivalents			(8,886	)			1,288
Cash and cash equivalents, beginning of period			24,406				10,715
Cash and cash equivalents, end of period		$	15,520			$	12,003

 

 

 

The accompanying notes are an integral part of these statements.

 

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COMSTOCK RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2008

(Unaudited)

(1)  SIGNIFICANT ACCOUNTING POLICIES –

Basis of Presentation

In management's opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position of Comstock Resources, Inc. and subsidiaries ("Comstock" or the "Company") as of March 31, 2008 and the related results of operations and cash flows for the three months ended March 31, 2008 and 2007.

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to those rules and regulations, although Comstock believes that the disclosures made are adequate to make the information presented not misleading.  These unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto of the Company included in Comstock's Annual Report on Form 10-K for the year ended December 31, 2007.

The results of operations for the three months ended March 31, 2008 are not necessarily an indication of the results expected for the full year.

These unaudited consolidated financial statements include the accounts of Comstock and subsidiaries in which it has a controlling interest.  Intercompany balances and transactions have been eliminated in consolidation.  Comstock has voting control of Bois d'Arc Energy, Inc. ("Bois d'Arc Energy") through the combined share ownership of the Company and members of its board of directors.

Asset Retirement Obligations

 

Comstock's primary asset retirement obligations relate to future plugging and abandonment expenses on its oil and gas properties and related facilities disposal.  The following table summarizes the changes in Comstock's total estimated liability during the three months ended March 31, 2008 and 2007:

		Three Months Ended
		March 31,
		2008				2007
		(In thousands)
Reserve for future abandonment costs — Beginning of period		$	52,606			$	57,116
Accretion expense			797				881
New wells placed on production and changes in estimates			643				213
Liabilities settled			(611	)			(97	)
Reserve for future abandonment costs — end of period		$	53,435			$	58,113

 

 

 

 

 

 

 

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COMSTOCK RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Derivative Instruments and Hedging Activities

Comstock periodically uses swaps, floors and collars to hedge oil and natural gas prices and interest rates.  Swaps are settled monthly based on differences between the prices specified in the instruments and the settlement prices of futures contracts.  Generally, when the applicable settlement price is less than the price specified in the contract, Comstock receives a settlement from the counter party based on the difference multiplied by the volume or amounts hedged.  Similarly, when the applicable settlement price exceeds the price specified in the contract, Comstock pays the counter party based on the difference.  Comstock generally receives a settlement from the counter party for floors when the applicable settlement price is less than the price specified in the contract, which is based on the difference multiplied by the volume amounts hedged.  For collars, generally Comstock receives a settlement from the counter party when the settlement price is below the floor and pays a settlement to the counter party when the settlement price exceeds the cap.  No settlement occurs when the settlement price falls between the floor and cap.

In January 2008, Comstock entered into natural gas swaps which fix the price at $8.00 per Mmbtu (at the Houston Ship Channel) for 520,000 Mmbtu's per month of production from certain properties in South Texas for the period February 2008 through December 2009.  The Company designated these swaps at their inception as cash flow hedges.  Realized gains and losses are included in oil and natural gas sales in the month of production.  Changes in the fair value of derivative instruments designated as cash flow hedges to the extent they are effective in offsetting cash flows attributable to the hedged risk are recorded in other comprehensive income until the hedged item is recognized in earnings.  Any change in fair value resulting from ineffectiveness is recognized currently in oil and natural gas sales as unrealized gains (losses).  The Company realized losses of $244,000 on the swaps during the three months ended March 31, 2008, which are included in oil and gas sales in the accompanying Consolidated Statements of Operations.  As of March 31, 2008, the estimated fair value of the Company's derivative financial instruments, which equals their carrying value, was a liability of $17.7 million, of which $13.1 million was classified as current and $4.6 million was classified as long-term.  

 

The Company had no derivative financial instruments outstanding during the three months ended March 31, 2007.

 

   Stock-Based Compensation

Comstock and Bois d'Arc Energy maintain separate incentive compensation plans under which they grant common stock and stock options to key employees and directors.

Comstock accounts for employee stock-based compensation under the fair value method.  Compensation cost is measured at the grant date based on the fair value of the award and is recognized over the award vesting period.  During the three months ended March 31, 2008 and 2007, the Company recognized  $4.1 million and $4.3 million, respectively, in stock-based compensation expense within general and administrative expenses related to stock option and restricted stock grants, including $1.4 million and $1.7 million, respectively, attributable to Bois d'Arc Energy's incentive plan.  The excess income tax benefit realized from tax deductions associated with stock-based compensation totaled $0.7 million and $0.2 million in the three months ended March 31, 2008 and March 31, 2007, respectively.

The fair value of stock option grants is estimated on the date of the grant using a Black-Scholes option pricing model.  Some of the inputs to the option valuation model are subjective, including assumptions regarding expected stock price volatility.  There were no grants of options to purchase shares or restricted stock by either Comstock or Bois d'Arc Energy during the three months ended March 31, 2008.

 

 

 

 

 

 

 

 

 

 

 

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COMSTOCK RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

As of March 31, 2008, total unrecognized compensation cost related to nonvested Comstock stock options of $1.8 million is expected to be recognized over a weighted average period of 2.7 years.  As of March 31, 2008, Comstock had 1,280,000 shares of unvested restricted stock outstanding at a weighted average grant date fair value of $31.58 per share.  Total unrecognized compensation cost related to Comstock unvested restricted stock grants of $27.7 million as of March 31, 2008 is expected to be recognized over a period of 3.8 years.

As of March 31, 2008, total unrecognized compensation cost related to nonvested Bois d'Arc Energy stock options of $6.2 million is expected to be recognized over a weighted average period of 4.7 years.  As of March 31, 2008, Bois d'Arc Energy had 650,000 shares of unvested restricted stock outstanding at a weighted average grant date fair value of $6.80 per share.  Total unrecognized compensation cost related to Bois d'Arc Energy unvested restricted stock grants of $2.8 million as of March 31, 2008 is expected to be recognized over a period of 1.3 years.

Income Taxes

Deferred income taxes are provided to reflect the future tax consequences or benefits of differences between the tax basis of assets and liabilities and their reported amounts in the financial statements using enacted tax rates.  The difference between the Company's customary rate of 35% and the effective tax rate on income before income taxes and minority interest is due to the following:

		Three Months Ended
		March 31,
		2008				2007
Tax at statutory rate			35.0%				35.0%
Tax effect of:
Undistributed earnings of Bois d'Arc Energy, not consolidated for federal income tax purposes			6.3%				6.3%
Nondeductible stock-based compensation			0.8%				2.9%
State income taxes, net of federal benefit			0.4%				0.7%
Other			(0.4%	)			(0.5%	)
Effective tax rate			42.1%				44.4%

 

The following is an analysis of consolidated income tax expense:

		Three Months Ended
		March 31,
		2008				2007
		(In thousands)
Current provision		$	12,252			$	2,387
Deferred provision			31,821				12,437
Provision for Income Taxes		$	44,073			$	14,824

 

 

 

 

 

 

 

 

 

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COMSTOCK RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Comprehensive Income

Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.  The Company's other comprehensive income consists of unrealized gains or losses on cash flow hedges.

Earnings Per Share

Basic earnings per share is determined without the effect of any outstanding potentially dilutive stock options, unvested restricted stock or other convertible securities and diluted earnings per share is determined with the effect of outstanding stock options, unvested restricted stock and other convertible securities that are potentially dilutive.  Basic and diluted earnings per share for the three months ended March 31, 2008 and 2007 respectively, were determined as follows:

 

		Three Months Ended March 31,
		2008												2007
										Per												Per
		Income				Shares				Share				Income				Shares				Share
		(In thousands, except per share amounts)
Basic Earnings Per Share:
Net Income		$	41,095				44,179			$	0.93			$	12,558				43,364			$	0.29
Diluted Earnings Per Share:
Net Income		$	41,095				44,179							$	12,558				43,364
Effect of Dilutive Securities:
Stock Grants and Options			(314	)			815								(95	)			874
Net Income Available to Common Stockholders
With Assumed Conversions		$	40,781				44,994			$	0.91			$	12,463				44,238			$	0.28

 

Stock options to purchase common stock at exercise prices in excess of the average actual stock price for the period that were anti-dilutive and that were excluded from the determination of diluted earnings per share are as follows:

		Three Months Ended
		March 31,
		2008				2007
		(In thousands except per share data)
Weighted average anti-dilutive stock options			175				231
Weighted average exercise price		$	32.89			$	32.81

 

   Fair Value Measurements

In September 2006, the Financial Accounting Standards Board (the "FASB") issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157").  This statement establishes a framework for fair value measurements in the financial statements by providing a single definition of fair value, provides guidance on the methods used to estimate fair value and increases disclosures about estimates of fair value.  The Company adopted SFAS 157 and its related amendments for financial assets and liabilities effective as of January 1, 2008.  SFAS 157 will be effective for non-financial assets and liabilities in financial statements issued for fiscal years beginning after November 15, 2008.

 

 

 

 

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COMSTOCK RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 establishes a three-level hierarchy for disclosure to show the extent and level of judgment used to estimate fair value measurements:

Level 1 – Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date.

Level 2 – Inputs used to measure fair value, other than quoted prices included in Level 1, are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active.  Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.

Level 3 – Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment.  These values are generally determined using pricing models for which the assumptions utilize management's estimates of market participant assumptions.

 

At January 1, 2008, the Company had no financial assets and liabilities that were accounted for at fair value.  Accordingly, adoption of SFAS 157 had no impact on the carrying amounts of the Company's assets and liabilities.  As of March 31, 2008, the Company had derivative instruments, in the form of natural gas swap agreements, which are required to be measured at fair value on a recurring basis.  The Company's natural gas swaps are not traded on a public exchange.  The value of natural gas swap agreements is determined utilizing a discounted cash flow model based on inputs that are not readily available in public markets and, accordingly, these swap agreements have been categorized as Level 3 within the valuation hierarchy.  

 

The following table summarizes the changes in the fair values of the natural gas swaps, which are Level 3 liabilities, for the three months ended March 31, 2008:

		(In thousands)
Balance at January 1, 2008		$	—
Purchases and settlements (net)			244
Total realized or unrealized losses:
Included in earnings			(244	)
Included in other comprehensive income			(17,658	)
Balance at March 31, 2008		$	(17,658	)

 

 

 

 

 

 

 

 

 

 

 

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COMSTOCK RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Supplementary Information With Respect to the Consolidated Statements of Cash Flows -

For the purpose of the consolidated statements of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.  At March 31, 2008 and December 31, 2007 the Company's cash investments consisted of prime shares in an institutional preferred money market fund with a bank and overnight Eurodollar deposits with a bank.

 The following is a summary of cash payments made for interest and income taxes:

		Three Months Ended
		March 31,
		2008				2007
		(In thousands)
Cash Payments -
Interest payments		$	14,159			$	11,771
Income tax payments		$	5,707			$	3,910

(2)  LONG-TERM DEBT  –

At March 31, 2008, long-term debt was comprised of the following:

		(In thousands)
Comstock Revolving Bank Credit Facility		$	505,000
Bois d'Arc Energy Revolving Bank Credit Facility			56,000
Comstock 6⅞% Senior Notes due 2012			175,000
		$	736,000

Comstock has an $850.0 million bank credit facility with Bank of Montreal, as the administrative agent.  The credit facility is a five-year revolving credit commitment that matures on December 15, 2011.  Indebtedness under the credit facility is secured by Comstock and its wholly-owned subsidiaries' oil and gas properties and is guaranteed by all of its wholly-owned subsidiaries.  The credit facility is subject to borrowing base availability, which is re-determined semiannually based on the banks' estimates of the future net cash flows of Comstock's oil and natural gas properties.  The borrowing base may be affected by the performance of Comstock's properties and changes in oil and natural gas prices.  The determination of the borrowing base is at the sole discretion of the administrative agent and the bank group.  As of March 31, 2008, the borrowing base was $575.0 million, $70.0 million of which was available.  Effective April 30, 2008, the borrowing base was increased to $625.0 million which increased the availability to $120.0 million.  Borrowings under the credit facility bear interest, based on the utilization of the borrowing base, at Comstock's option at either (1) LIBOR plus 1.0% to 1.75% or (2) the base rate (which is the higher of the prime rate or the federal funds rate) plus 0% to 0.25%.  A commitment fee of 0.25% to 0.375%, based on the utilization of the borrowing base, is payable on the unused borrowing base.  The credit facility contains covenants that, among other things, restrict the payment of cash dividends in excess of $40.0 million, limit the amount of consolidated debt that Comstock may incur and limit the Company's ability to make certain loans and investments.  The only financial covenants are the maintenance of a ratio of current assets, including availability under the bank credit facility, to current liabilities of at least one-to-one and maintenance of a minimum tangible net worth.  The Company was in compliance with these covenants as of March 31, 2008.

 

 

 

 

 

 

 

 

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COMSTOCK RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

 

Bois d'Arc Energy has a bank credit facility with The Bank of Nova Scotia and several other banks.  Borrowings under the credit facility are limited to a borrowing base that is re-determined semi-annually based on the banks' estimate of the future net cash flows of Bois d'Arc Energy's oil and natural gas properties.  The determination of the borrowing base is at the sole discretion of the administrative agent and the bank group.  The borrowing base was $350.0 million as of March 31, 2008, $294.0 million of which was available.  The Bois d'Arc Energy credit facility matures on May 11, 2009.  Borrowings under the credit facility bear interest at Bois d'Arc Energy's option of either (1) LIBOR plus a margin that varies from 1.25% to 2.0% depending upon the ratio of the amounts outstanding to the borrowing base or (2) the base rate (which is the higher of the prime rate or the federal funds rate) plus a margin that varies from 0% to 0.75% depending upon the ratio of the amounts outstanding to the borrowing base.  A commitment fee ranging from 0.375% to 0.50% (depending upon the ratio of the amounts outstanding to the borrowing base) is payable on the unused borrowing base.  Indebtedness under the credit facility is secured by substantially all of Bois d'Arc Energy and its subsidiaries' assets, and all of the Bois d'Arc Energy's subsidiaries are guarantors of the indebtedness.  The Bois d'Arc Energy credit facility contains covenants that restrict the payment of cash dividends in excess of $5.0 million, borrowings, sales of assets, loans to others, capital expenditures, investments, merger activity, hedging contracts, liens and certain other transactions without the prior consent of the lenders and requires Bois d'Arc Energy to maintain a ratio of current assets, including the availability under the bank credit facility, to current liabilities of at least one-to-one and a ratio of indebtedness to earnings before interest, taxes, depreciation, depletion, and amortization, exploration and impairment expense of no more than 2.5-to-one.  Bois d'Arc Energy was in compliance with these covenants as of March 31, 2008.

(3)  COMMITMENTS AND CONTINGENCIES –

 

From time to time, Comstock is involved in certain litigation that arises in the normal course of its operations.  The Company records a loss contingency for these matters when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.  The Company does not believe the resolution of these matters will have a material effect on the Company's financial position or results of operations.  In connection with its exploration and development activities, the Company contracts for drilling rigs and for the acquisition of seismic data under terms of up to three years.  The Company has commitments to acquire seismic data totaling $5.5 million through December 2008.  As of March 31, 2008, the Company had commitments for contracted drilling services of $32.8 million through September 2008.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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COMSTOCK RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(4)  CONSOLIDATING FINANCIAL STATEMENTS –

Comstock Resources, Inc. ("Parent") has $175.0 million of 6⅞% senior notes outstanding which are guaranteed by all of the Parent's wholly-owned subsidiaries.  There are no restrictions on the Parent's ability to obtain funds from any of the guarantor subsidiaries or on a guarantor subsidiary's ability to obtain funds from the Parent or their direct or indirect subsidiaries.  The 6⅞% senior notes are not guaranteed by Bois d'Arc Energy and its subsidiaries (the non-guarantor subsidiaries).  The following condensed consolidating balance sheets, statements of operations and statements of cash flows are provided for the Parent, all guarantor subsidiaries and all non-guarantor subsidiaries.  The information has been presented as if the Parent accounted for its ownership of the guarantor and non-guarantor subsidiaries using the equity method of accounting.

Balance Sheet:		As of March 31, 2008
		Comstock Resources				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminating Entries				Consolidated
		(In thousands)
Assets:
Cash and cash equivalents		$	—			$	1,555			$	13,965			$	—			$	15,520
Accounts receivable			—				64,307				48,466				—				112,773
Other current assets			689				8,050				4,097				—				12,836
Total current assets			689				73,912				66,528				—				141,129
Net property and equipment			28,601				1,325,869				917,512				—				2,271,982
Investment in subsidiaries			839,569				—				—				(839,569	)			—
Intercompany receivables			665,581				—				—				(665,581	)			—
Other assets			3,741				—				2,764				—				6,505
Total assets		$	1,538,181			$	1,399,781			$	986,804			$	(1,505,150	)		$	2,419,616
Liabilities and Stockholders' Equity:
Accounts payable		$	4			$	59,041			$	42,117			$	—			$	101,162
Accrued expenses			3,951				731				10,835				—				15,517
Short-term derivative instruments			—				13,125				—				—				13,125
Total current liabilities			3,955				72,897				52,952				—				129,804
Long-term debt			680,000				—				56,000				—				736,000
Intercompany payables			—				665,581				—				(665,581	)			—
Deferred income taxes payable			35,687				174,086				191,191				—				400,964
Reserve for future abandonment costs			—				7,827				45,608				—				53,435
Long-term derivative instruments			—				4,533				—				—				4,533
Minority interest			—				—				—				287,819				287,819
Total liabilities			719,642				924,924				345,751				(377,762	)			1,612,555
Stockholders' equity			818,539				474,857				641,053				(1,127,388	)			807,061
Total liabilities and     stockholders' equity		$	1,538,181			$	1,399,781			$	986,804			$	(1,505,150	)		$	2,419,616

 

 

 

 

 

 

 

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COMSTOCK RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Balance Sheet:		Year Ended December 31, 2007
		Comstock Resources				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminating Entries				Consolidated
		(In thousands)
Assets:
Cash and cash equivalents		$	—			$	5,565			$	18,841			$	—			$	24,406
Accounts receivable			—				48,651				42,010				—				90,661
Other current assets			1,546				2,441				5,451				—				9,438
Total current assets			1,546				56,657				66,302				—				124,505
Net property and equipment			28,268				1,307,337				887,270				—				2,222,875
Investment in subsidiaries			782,530				—				—				(782,530	)			—
Intercompany receivables			674,732				—				—				(674,732	)			—
Other assets			3,943				—				3,064				—				7,007
Total assets		$	1,491,019			$	1,363,994			$	956,636			$	(1,457,262	)		$	2,354,387
Liabilities and Stockholders' Equity:
Short-term debt		$	—			$	—			$	2,588			$	—			$	2,588
Accounts payable			17				71,518				37,660				—				109,195
Accrued expenses			10,698				1,190				7,129				—				19,017
Total current liabilities			10,715				72,708				47,377				—				130,800
Long-term debt			680,000				—				80,000				—				760,000
Intercompany payables			—				674,732				—				(674,732	)			—
Deferred income taxes payable			28,660				161,569				181,667				—				371,896
Reserve for future abandonment costs			—				7,512				45,094				—				52,606
Minority interest			—				—				—				267,441				267,441
Total liabilities			719,375				916,521				354,138				(407,291	)			1,582,743
Stockholders' equity			771,644				447,473				602,498				(1,049,971	)			771,644
Total liabilities and     stockholders' equity		$	1,491,019			$	1,363,994			$	956,636			$	(1,457,262	)		$	2,354,387

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16

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COMSTOCK RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Statement of Operations:
		Three Months Ended March 31, 2008
		Comstock Resources				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminating Entries				Consolidated
		(In thousands)
Oil and gas sales		$	—			$	127,721			$	113,266			$	—			$	240,987
Operating expenses:
Oil and gas operating			—				21,202				15,438				—				36,640
Exploration			—				2,238				6,417				—				8,655
Depreciation, depletion and amortization			823				41,371				28,368				—				70,562
General and administrative, net			8,981				(2,817	)			3,175				—				9,339
Loss on disposal of assets			—				240				—				—				240
Total operating expenses			9,804				62,234				53,398				—				125,436
Income from operations			(9,804	)			65,487				59,868				—				115,551
Other income (expenses):
Interest income			—				161				83				—				244
Other income			—				22				135				—				157
Interest expense			(9,950	)			(1	)			(1,363	)			—				(11,314	)
Intercompany interest income (expense)			5,554				(5,554	)			—				—				—
Total other income (expenses)		776	(4,396	)			(5,372	)			(1,145	)			—				(10,913	)
Income (loss) before income taxes and minority interest in earnings of Bois d'Arc Energy			(14,200	)			60,115				58,723				—				104,638
(Provision for) benefit from income taxes			(2,246	)			(21,253	)			(20,574	)			—				(44,073	)
Minority interest in earnings of Bois d'Arc Energy			—				—				—				(19,470	)			(19,470	)
Equity in earnings of subsidiaries			57,541				—				—				(57,541	)			—
Net income		$	41,095			$	38,862			$	38,149			$	(77,011	)		$	41,095

		Three Months Ended March 31, 2007
		Comstock Resources				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminating Entries				Consolidated
		(In thousands)
Oil and gas sales		$	—			$	69,847			$	76,182			$	—			$	146,029
Operating expenses:
Oil and gas operating			—				14,055				13,028				—				27,083
Exploration			—				398				10,735				—				11,133
Depreciation, depletion and amortization			926				27,266				28,515				—				56,707
General and administrative, net			8,537				(2,287	)			3,452				—				9,702
Total operating expenses			9,463				39,432				55,730				—				104,625
Income from operations			(9,463	)			30,415				20,452								41,404
Other income (expenses):
Interest income			—				191				105				—				296
Other income			—				38				92				—				130
Interest expense			(6,284	)			(1	)			(2,164	)			—				(8,449	)
Intercompany interest income (expense)			7,060				(7,060	)			—				—				—
Total other income (expenses)			776				(6,832	)			(1,967	)			—				(8,023	)
Income (loss) before income taxes and minority interest in earnings of Bois d'Arc Energy			(8,687	)			23,583				18,485				—				33,381
Provision for income taxes			148				(8,360	)			(6,612	)			—				(14,824	)
Minority interest in earnings of Bois d'Arc Energy			—				—				—				(5,999	)			(5,999	)
Equity in earnings of subsidiaries			21,097				—				—				(21,097	)			—
Net income		$	12,558			$	15,223			$	11,873			$	(27,096	)		$	12,558

 

 

 

 

 

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COMSTOCK RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Statement of Cash Flows:
		Three Months Ended March 31, 2008
		Comstock				Guarantor				Non-Guarantor				Eliminating
		Resources				Subsidiaries				Subsidiaries				Entries				Consolidated
		(In thousands)
Net Cash Provided by (Used for) Operating Activities		$	(11,890	)		$	66,247			$	72,812			$	768			$	127,937
Cash Flows From Investing Activities:
Capital expenditures			(383	)			(61,117	)			(52,720	)			—				(114,220	)
Proceeds from sale of assets			—				11				—				—				11
Net Cash Used for Investing Activities			(383	)			(61,106	)			(52,720	)			—				(114,209	)
Cash Flows From Financing Activities:
Principal payments on debt			—				—				(24,000	)			—				(24,000	)
Advances to (from) parent			9,151				(9,151	)			—				—				—
Proceeds from issuance of common stock			2,452				—				—				—				2,452
Excess tax benefit from stock-based compensation			670				—				768				(768	)			670
Proceeds from issuance of stock by Bois d'Arc Energy			—				—				1,273				—				1,273
Repurchase of shares by Bois d'Arc Energy			—				—				(3,009	)			—				(3,009	)
Net Cash Provided by Financing Activities			12,273				(9,151	)			(24,968	)			(768	)			(22,614	)
Net increase in cash and cash equivalents			—				(4,010	)			(4,876	)			—				(8,886	)
Cash and cash equivalents, beginning of period			—				5,565				18,841				—				24,406
Cash and cash equivalents, end of period		$	—			$	1,555			$	13,965			$	—			$	15,520

		Three Months Ended March 31, 2007
		Comstock				Guarantor				Non-Guarantor				Eliminating
		Resources				Subsidiaries				Subsidiaries				Entries				Consolidated
		(In thousands)
Net Cash Provided by (Used for) Operating Activities		$	(11,119	)		$	58,408			$	31,457			$	—			$	78,746
Cash Flows From Investing Activities:
Capital expenditures			(645	)			(83,616	)			(49,466	)			—				(133,727	)
Net Cash Used for Investing Activities			(645	)			(83,616	)			(49,466	)			—				(133,727	)
Cash Flows From Financing Activities:
Borrowings			36,000				—				22,000				—				58,000
Principle payments on debt			—				—				(2,000	)			—				(2,000	)
Advances to (from) parent			(24,541	)			24,541				—				—				—
Proceeds from issuance of common stock			139				—				—				—				139
Excess tax benefit from stock-based compensation			166				—				—				—