# To our stockholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-e-p/NYSE_CRK_2020/NYSE_CRK_2020.mmd` · pages 2-8_

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To our stockholders

Our most significant accomplishment in 2020 was our successful navigation of one of the most difficult years for our industry. Oversupply of natural gas brought about by a warm winter and the onset of the COVID-19 pandemic resulted in weak oil and natural gas prices in 2020. Despite realizing \(1.80 per Mcf for our gas and \)32.36 per barrel for our oil, we still were able to turn in profitable financial results and we were able to substantially improve our financial liquidity.

## Fortifying the Balance Sheet

We completed an accretive $207 million equity offering in May, which was the first natural gas common equity offering since 2016. The offering allowed us to redeem our Series A preferred stock and save $21 million per year from the elimination of dividend payments. The 41.3 million shares we issued in the offering eliminated the need to deliver 52.5 million shares in the future for the conversion of the preferred stock.

We also completed two successful senior notes offerings totaling $800 million to repay bank debt. This increased our financial liquidity from $166 million to $930 million. We also reduced our usage of our bank credit facility from 89% to 36%.

## Industry Leading
Low Operating
Cost Structure

The additional size and scale we gained from the Covey Park acquisition in 2019 allowed us to achieve the industry leading low operating cost structure post the merger. We maintained and improved on it in 2020. We lowered our total operating costs per Mcfe produced from 69¢ in 2019 to 59¢ in 2020. Our general and administrative costs averaged only 6¢ per Mcfe in 2020, down from 8¢ in 2019. This amount is less than of any of our competitors. Our gathering and transportation costs averaged 23¢ per Mcfe in 2020, which is substantially lower than any other significant natural gas producer. Our other operating costs per Mcfe, including production taxes, averaged 30¢ per Mcfe in 2020, down from 38¢ in 2019.

## Strong Results from 2020 Drilling Program

We had another strong year with the drill bit. Comstock and Covey Park, on a combined basis, have drilled 272 horizontal Haynesville/Bossier wells since 2015, more than any other operator in the play. Those wells had an average IP rate of 24 MMcf per day. Under our 2020 Haynesville/Bossier shale drilling program, we drilled 55 (46.1 net to us) successful operated wells which had an average per well initial production rate of 25 MMcf per day.

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The growth in proved reserves from the drilling program replaced 159% of our 2020 production and was achieved at a low finding cost of 66¢ per Mcfe

In 2020 we were also able to lower our well costs by 16%. Our two mile lateral wells averaged $1,026 per completed lateral foot in 2020 versus $1,215 in the prior year. We lead our basin with the lowest drilling and completion costs per lateral foot.

Grew Proved Reserve
Base at Low Finding Costs
of 66¢ per Mcfe
Despite having to use very low prices to determine our proved reserves in 2020, we were able to grow proved reserves by 3% to 5.6 trillion cubic feet of natural gas equivalent. The growth in proved reserves from the drilling program replaced 159% of our 2020 production and was achieved at a low finding cost of 66¢ per Mcfe, excluding price-related revisions to reserves.

Solid Financial
Results in a
Challenging Year
Despite the challenging backdrop of low oil and natural gas prices in 2020, we reported adjusted net income available to common stockholders of $50 million or 23¢ per diluted share. The net income is adjusted to excluding certain items not related to normal operating activities, which in 2020 was primarily unrealized losses from our contracts to hedge future oil and natural gas prices. We were not required to take any write downs or impairments of our assets in 2020, which is a testimony to our asset quality.

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We produced 450.8 Bcf of natural gas and 1.5 million barrels of oil in 2020. Natural gas production averaged 1.2 Bcf per day in 2020, an increase of 54% over natural gas production in 2019. Oil production averaged 4,120 Bbls of oil per day in 2020 compared to 7,356 Bbls of oil per day in 2019. Our average realized natural gas price, including realized hedging gains, was \(2.07 per Mcf for the year ended December 31, 2020, as compared to \)2.35 per Mcf realized for the year ended December 31, 2019. Our average realized oil price in 2020, including realized hedging gains, was \(40.88 per barrel as compared to \)49.64 per barrel in 2019. Oil and gas sales were $993 million in 2020, including realized hedging gains, as compared to oil and gas sales of $821 million in 2019. Adjusted EBITDAX of $722 million in 2020 was 18% higher than our adjusted EBITDAX of $614 million in 2019. We generated $521 million in operating cash flow in 2020, an 11% increase over operating cash flow of $468 million in 2019.

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We plan to focus on improving our balance sheet, reducing our leverage and lowering our cost of capital.

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Outlook for 2021 We are very excited about the prospects for the Company in 2021 with the current improved outlook for oil and natural gas prices. We plan to focus on improving our balance sheet, reducing our leverage and lowering our cost of capital. We will also remain focused on maintaining and improving our industry-leading low cost structure and our best in class well drilling returns. Our inventory of 1,953 net Haynesville/Bossier drilling locations provide us with decades of drilling inventory. We have a conservative operating plan for 2021, which we believe will deliver production growth and generate in excess of $200 million of free cash flow.

With the current outlook for natural gas prices in 2021, we would expect our leverage ratio to improve to around 2.5 times by the end of the year, down from 3.8 times in 2020. We will continue to maintain an active hedging program to protect the high returns that our Haynesville drilling program provides. We have very strong financial liquidity of $930 million that we built up in 2020. We have already begun lowering our cost of capital in 2021. In the first quarter of 2021, we completed a $1.25 billion refinancing of certain of our senior notes which will save us approximately $20 million per year in cash interest expense.

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

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M. Jay Allison
Chairman and Chief Executive Officer