# TO OUR STOCKHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-e-p/NYSE_CRK_2019/NYSE_CRK_2019.mmd` · pages 2-8_

---

TO OUR STOCKHOLDERS:

We had another transformative year in 2019. We completed the largest acquisition in our corporate history, which more than doubled our size. We became the largest producer of natural gas in the Haynesville shale and in the state of Louisiana as a result of this acquisition.

## ACQUIRED COVEY PARK
ENERGY FOR $2.2 BILLION

In July 2019, we completed the acquisition of Covey Park Energy LLC for total consideration of $2.2 billion. This acquisition made us the basin leader in the Haynesville shale, which is North America's premier natural gas basin because of its superior economics and geographic proximity to the Gulf Coast. Our major stockholder, Jerry Jones, invested an additional $475 million in the Company to facilitate the acquisition. Covey Park had 249,000 net acres in the Haynesville/Bossier shale with approximately 1,200 net future drilling locations. The Covey Park acquisition increased our production by more than 700 MMcfee/day and added 2.9 Tcf to our proved SEC reserves.

## SUCCESSFULLY INTEGRATED
COVEY PARK OPERATIONS

Covey Park Energy LLC was larger than Comstock at the time of the merger. Despite the significant size, we were able to successfully integrate Covey Park operations in less than six months. We also were able to meet and exceed the goals that were set for the acquisition, including reducing combined general and administrative expenses from $61 million to $30 million. In addition, we lowered drilling and completion costs and the gathering and transportation costs of the combined companies. With the merger, we reconstituted our senior management team and brought over four Covey Park Vice Presidents. When combining

![](images/2_0.jpg)

the staffs of the two companies, we selected department leaders by objectively looking at the best person available. We also selected the best practices from each company and were focused on creating an efficient / low overhead company.

## ACHIEVED INDUSTRY
LEADING LOW OPERATING
COST STRUCTURE

The additional size and scale we gained from the Covey Park acquisition allowed us to achieve the industry leading low

![](images/2_1.jpg)

<--- Page Split --->

operating cost structure following the merger. Our general and administrative costs, excluding stock-based compensation, averaged only 4¢ per Mcfe produced in the fourth quarter of 2019, the first full quarter to include the Covey Park operations. This amount is substantially less than any of our competitors. Our gathering and transportation costs averaged 24¢ per Mcfe in the fourth quarter, which is substantially lower than any other significant natural gas producer. Our remaining operating costs, including production taxes and other lifting costs, averaged 31¢ per Mcfe, reflecting the low cost nature of our Haynesville operations.

## GENERATED STRONG RESULTS FROM 2019 DRILLING PROGRAM

We had another strong year with the drill bit. Comstock and Covey Park, on a combined basis have drilled 217 horizontal Haynesville/Bossier wells since 2015, more than any other operator in the play. Under our 2019 Haynesville/Bossier shale drilling program, we drilled 64 (46.5 net to us) successful operated wells, which had an average per well initial production rate of 25 MMcf per day. The drilling activities allowed us to grow pro forma production by 37% in 2019.

## COMPLETED VALUE ADDED
BOLT-ON HAYNESVILLE SHALE
ACQUISITION

In November 2019, we completed a bolt-on Haynesville acquisition by issuing 4.5 million shares of common stock in exchange for a private company. The acquisition added 3,155 net acres with 44 (12.7 net to us) undrilled locations and 76 Bcfe of proved oil and gas reserves.

## GREW PROVED RESERVE BASE
AT LOW FINDING COSTS OF
72¢ PER MCFE

The combination of the acquisitions and the successful drilling program allowed us to grow our proved oil and natural gas reserves in 2019 by 125% to 5.4 trillion cubic feet of natural gas equivalent. The PV 10 Value of our proved reserves grew by 85% to $3.3 billion. The growth in proved reserves from the acquisitions and the drilling program was achieved at low finding costs of 72¢ per Mcfe, excluding price-related revisions to reserves.

## DELIVERED STRONG
FINANCIAL RESULTS

The Jerry Jones contribution in 2018, the excellent results from our Haynesville drilling program and the acquisition of Covey Park all combined to deliver strong financial results in 2019. We reported net income available to common stockholders of $74.5 million or 52¢ per diluted share for 2019. Excluding certain items not related to normal operating activities primarily due to the closing of the Covey Park acquisition, our net income was $122.3 million or 77¢ per diluted share.

![](images/3_0.jpg)

<--- Page Split --->

![](images/4_0.jpg)

<--- Page Split --->

We produced 292.8 Bcf of natural gas and 2.7 million barrels of oil in 2019. Our natural gas production increased by 192% and oil production was 61% higher. Natural gas production averaged 802 MMcf per day and oil production averaged 7,356 barrels per day in 2019. On a pro forma basis, assuming the Covey Park acquisition had been completed on January 1, 2019, natural gas and oil production would have been 1,190 MMcf per day and 7,416 barrels per day, respectively. Our realized natural gas price, after hedging, decreased by 18% to \(2.35 per Mcf and our oil price, after hedging, of \)49.64 per barrel decreased by 16% from 2018. Oil and gas sales (including hedging) increased 112% to \(821 million and EBITDAX grew 114% to \)614 million. Adjusted operating cash flow (excluding working capital changes) increased 124% to $468 million. With the higher production, our lifting costs increased 137% to $188 million and our depreciation, depletion and amortization expense increased by 127% to $277 million.

## 2020 OUTLOOK

With the significant decline in oil and natural gas prices in late 2019 and early 2020, we are primarily focused on free cash flow generation and managing the Company through the current low price environment. Our Haynesville drilling program generates economic returns even with low natural gas prices. We have cut back the number of wells that we plan to drill in 2020 in order to generate free cash flow that we will use to pay down our debt and strengthen our balance sheet. The strength we have is our industry leading low cost structure and well economics. We still expect 6%-8% pro forma production growth in 2020 even with the reduced activity. We have prioritized free cash flow goals in 2020 over production growth, but have maintained adequate investment to keep our production flat on a longer term basis. We have hedged almost half of our production in 2020 and entered the year with adequate liquidity of $269 million.

The directors and management of Comstock want to thank the stockholders for their continued support.

![](images/5_0.jpg)

M. Jay Allison
Chairman and
Chief Executive Officer

![](images/5_1.jpg)

<--- Page Split --->

# UNITED STATES SECURITIES AND EXCHANGE COMMISSION