Comstock Resources, Inc.

Comstock Resources produces natural gas primarily from the Haynesville and Bossier shale in North Louisiana and East Texas. It sells gas to customers and uses price hedges to manage part of its exposure to gas prices. Its controlled Pinnacle Gas Services venture gathers and treats gas in Western Haynesville.

Comstock trades on the New York Stock Exchange and NYSE Texas as CRK. Jerry Jones is its majority shareholder. Production is growing again, but the cash required to develop wells has been substantially greater than operating cash flow. Asset sales and partner funding are central to its current financial plan.

Production and earnings through three quarters

Q3 2026 production rose about 9% year over year and 8% sequentially. Lower realized gas prices limited sales growth, while higher depreciation and other costs weighed on operating profit. Adjusted net income was $5.9 million, versus $20.9 million a year earlier. It excludes unrealized hedge gains, exploration expense and related adjustments; realized cash hedges remain included.

Cash needs and borrowing

Operating cash flow over nine months was $622.4 million, versus $675.4 million a year earlier. Cash capital investment, including acquisitions and midstream assets, rose to $1.291 billion from $978.4 million. The excess over operating cash flow widened to $668.7 million from $303.0 million.

Debt principal at September 30 was $3.389 billion, including $800 million drawn on the upstream bank facility, up from $545 million in June. The debt carrying value after discounts and fees was $3.357 billion. Consolidated cash was $18.6 million, of which $16.4 million belonged to Pinnacle and was unavailable for Comstock's general corporate use.

The upstream bank facility has $1.5 billion of commitments and a $2 billion borrowing base. Its maturity was extended November 4 from November 15, 2027 to November 15, 2028. A further extension to November 15, 2031 requires the SOCAR sale and repayment of substantially all net proceeds toward debt, including at least $750 million of the 2029 notes; the amendment's conditions must be met by March 31, 2027. Comstock reported covenant compliance at September 30.

Pinnacle has a separate $150 million undrawn bank facility, maturing March 26, 2030. Its borrowing capacity is restricted to midstream activities.

SOCAR sale and earlier commitments

The September 1 letter of intent already specified the $1.65 billion price, the principal ownership terms and a July 1 economic effective date. A September 28 framework announcement anticipated signing by October 31. The definitive sale agreement was signed November 4, with closing still expected by year-end 2026, subject to conditions.

SOCAR would acquire 20% of Comstock's Legacy Haynesville interest, 15% of its Western Haynesville interest and 15% of Comstock's 73% Pinnacle stake. Comstock remains operator. The Western interest reduces to 7.5% after five years and a 15% return for SOCAR. Comstock expects a sale gain of $150 million to $250 million on closing.

The results presentation models total debt of about $1.7 billion after the transaction and repayments. Its model leaves $110 million on the upstream facility and retires $1 billion of 2029 notes; the quarterly report instead describes paying off the bank balance and retiring some 2029 notes. The final repayment allocation will matter for subsequent liquidity and interest costs.

Partner funding and the next cash-flow test

An August 31 drilling agreement with a Jones family partnership covers 27 wells: 18 Western Haynesville wells with 85% partner funding, and nine Legacy wells with 80% funding. Estimated partner spending is $300 million in 2026 and $150 million in 2027.

Comstock receives initial net revenues to recover about $180 million of earlier well costs, expected by the end of 2027. The partnership then receives net proceeds until it recovers its investment and a 15% return, after which half the well interests revert to Comstock. Management expects the arrangement to help generate positive free cash flow in Q4 2026.

The quarter's presentation forecasts Q4 production of 1.375 billion to 1.500 billion cubic feet equivalent a day. The important follow-up is whether partner funding improves cash flow while the company meets the conditions for its longer bank extension.

Completed change at Pinnacle

On June 15, Pinnacle redeemed Cactus Midstream's interest for $445 million. A new $600 million investment from Starville Evergreen, managed by Sixth Street Partners, funded that redemption and gave Starville a 27% interest. Comstock retained 73% and continues to consolidate Pinnacle. Starville's interest falls to 19.5% after specified return hurdles. This completed ownership change is separate from the pending SOCAR sale.