Company: CRK
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000950170-25-024783
Chunk: 121

Company: COMSTOCK RESOURCES INC
Filing Date: 2025-02-21
Form: 10-K
Item: Item 1B
Chunk 121
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COMSTOCK RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)Summary of Significant Accounting Policies Accounting policies used by Comstock Resources, Inc. and subsidiaries reflect natural gas and oil industry practices and conform to accounting principles generally accepted in the United States of America.Basis of Presentation and Principles of ConsolidationThe consolidated financial statements include the accounts of Comstock Resources, Inc., its wholly owned or controlled subsidiaries and a variable interest entity for which Comstock is the primary beneficiary (collectively, "Comstock" or the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. The Company accounts for its undivided interest in natural gas and oil properties using the proportionate consolidation method, whereby its share of assets, liabilities, revenues and expenses are included in its financial statements. Net income (loss) and comprehensive income (loss) are the same in all periods presented. All adjustments are of a normal recurring nature unless otherwise disclosed. Certain amounts in prior period footnote disclosures have been reclassified to conform with current period presentation.Comstock entered into an agreement with an affiliate of Quantum Capital Solutions ("Quantum"), in 2023 to form Pinnacle Gas Services, LLC ("PGS"), a midstream company in Comstock's Western Haynesville area. As part of the transaction, Comstock contributed a high-pressure pipeline and a natural gas treating plant. Quantum committed to contribute up to $300 million to fund future expansion costs. Quantum is entitled to a 12% dividend on its invested capital and 80% of any distributions from Pinnacle until an investment return hurdle is met. After the return hurdle is met, Quantum's ownership reduces to 30%. Comstock operates and manages PGS pursuant to a management services agreement. The Board of PGS is comprised of five members: three selected by Comstock and two selected by Quantum. PGS is considered a variable interest entity to Comstock.Comstock has the power to direct the activities that most significantly impact the performance of PGS and has the obligation to absorb losses or right to receive benefits that could potentially be significant to PGS. Accordingly, Comstock is considered the primary beneficiary and consolidates the assets, liabilities and results of operations of PGS in the accompanying consolidated financial statements. PGS assets that cannot be used by Comstock include $140.3 million of other property and equipment as of December 31, 2024. Other PGS assets that cannot be used by Comstock