# TO OUR STOCKHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-e-p/NYSE_CRK_2022/NYSE_CRK_2022.mmd` · pages 2-8_

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TO OUR STOCKHOLDERS:

2022 was a break-out year for the Company driven by strong natural gas prices. We were able to exceed the goals we put in place for the year for generating free cash flow and strengthening our balance sheet. We also were able to advance our Western Haynesville exploratory play by adding 98,000 net acres in the play and drilling two very successful wells.

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## CREATING A STRONG BALANCE SHEET

We significantly strengthened our balance sheet in 2022 using the \(673 million of free cash flow we generated to retire \)506 million of debt. We improved our leverage ratio to 1.1x, down from 2.4x in 2021, exceeding our goal of reducing leverage to under 1.5x that we had established for 2022. In November, we entered into a new five-year credit facility with 17 banks, which lowered our interest costs and natural gas per day with our second Western Haynesville well averaging 42 million cubic feet per day.

## GREW PROVED RESERVE BASE AT LOW
FINDING COSTS

Our 2022 drilling activity added 1.1 trillion cubic feet of natural gas equivalent ("Tcf") of proved reserve additions at a low finding cost of 95¢ per Mcfe. Our proved reserves grew 9% in 2022 to 6.7 Tcf and we replaced
216% of our 2022 production. The present value discounted at 10% of our proved reserves was $15.5 billion on December 31, 2022.

## STRONG FINANCIAL RESULTS

Our adjusted net income increased in 2022 by 238% from 2021 to \(1 billion or \)3.73 per diluted share. Net income was adjusted to exclude certain items not related to normal

## We significantly strengthened our balance sheet in 2022 using the $673 million of free cash flow we generated to retire $506 million of debt.

increased our availability. We repaid the outstanding borrowings on the bank credit facility and retired $271 million of our outstanding senior notes. We extended the date of the earliest maturity of our debt to 2029.

The $175 million of preferred stock that helped fund the Covey Park acquisition was converted into common stock, which further enhanced our balance sheet.

## SOLID RESULTS FROM OUR 2022 DRILLING PROGRAM

We had another strong year with the drill bit in the Haynesville and Bossier shales, drilling 73 or 57.0 net wells in 2022. We drilled two very successful exploratory wells in our Western Haynesville play. The results so far of both wells put them among the best wells ever drilled in the Haynesville.

We increased the average lateral length of the wells we drilled by 14% compared to 2021 to almost 10,000 feet. We set a new corporate record with our record longest lateral to date of 15,726 feet. By continuing to execute our long lateral strategy, we are able to offset some of the higher service costs that we experienced in 2022. The wells we put on sales in 2022 had an average initial production rate of 26 million cubic feet of operating activities, which in 2022 was primarily losses from the early retirement of debt and the unrealized loss related to

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our contracts to hedge future natural gas prices.

We produced 501 billion cubic feet equivalent of natural gas in 2022. Stronger natural gas prices drove a 58% growth in our natural gas and oil sales, after hedging, to \(2.3 billion. We generated Adjusted EBITDAX of \)1.9 billion, which increased 72% over 2021. Our operating cash flow in 2022 of \(1.7 billion grew 90% over 2021. Our EBITDAX margin in 2022 was 85%, one of the highest in the industry. We also achieved a 28% return on average capital employed and a 62% return on average equity.

## SUBSTANTIAL FREE CASH FLOW GENERATION AND RETURN OF CAPITAL

We generated free cash flow from operations of \(673 million in 2022, representing a free cash flow yield of 39%. Including the acquisition and divestitures we completed in 2022, we successful. In 2022, we added 98,000 net acres that are prospective for the Haynesville and Bossier shales to our Western Haynesville area for \)54.1 million, or $550 per acre.

## ENVIRONMENTAL STEWARDSHIP

We are committed to environmental stewardship and a responsible energy future. We already have a low green house gas emissions profile and we have several initiatives ongoing to continue to improve, including using cleaner burning natural gas rather than diesel fuel to reduce emissions in our drilling and completion operations. In 2022, we deployed B.J Energy Solutions' next generation hydraulic fracturing fleet, which is fueled by 100% natural gas, in our Haynesville shale development program and will add a second fleet in 2023.

Our most significant environmental initiative is our partnership with MiQ to certify our natural gas production under the MiQ methane standard. MiQ oversees an independent, third-party audited assessment of methane

## We reinstated our quarterly common stock dividend of 12.5¢ in the fourth quarter of 2022.

generated a total of \(605 million in free cash flow. We used the free cash flow toward debt reduction, and we reinstated our quarterly common stock dividend of 12.5¢ in the fourth quarter of 2022.

## INDUSTRY LEADING LOW OPERATING COST STRUCTURE

We continue to have one of the industry's lowest operating cost structures. Our total operating cost per Mcfe produced averaged 76¢ in 2022. Our gathering and transportation costs averaged 31¢ per Mcfe in 2022, which is substantially lower than any other significant natural gas producer. Our general and administrative costs averaged only 7¢ per Mcfe in 2022 and our other operating costs per Mcfe, including production taxes, averaged 38¢ per Mcfe in 2022.

## SUBSTANTIAL UPSIDE FROM EXPLORATION PROGRAM

We are conducting an active exploration program and we are investing a part of our annual capital budget to expand our acreage holdings and delineate the emerging Western Haynesville and Bossier shale play in East Texas. Our first two Haynesville and Bossier shale wells in this play were my emissions from our natural gas production activities. We achieved independent certification for 100% of our operated

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natural gas production under the MiQ methane standard for responsibly sourced natural gas during 2022.

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The certification covers over 2 billion cubic feet of natural gas that we produce for ourselves and our partners. This initiative demonstrates our commitment to produce our
natural gas under strict environmental standards and allows us to deliver differentiated, responsibly sourced natural gas to our customers.

## OUTLOOK FOR 2023

2023 is expected to be a volatile year for natural gas as a warm winter and the prolonged outage at the Freeport LNG export facility reduced natural gas demand and increased storage levels in the first two months of 2023. In 2023, we plan to continue to de-risk and delineate our Western Haynesville play with a two rig program. We will manage our drilling activity levels to prudently respond to the lower natural gas price environment we have had so far this year and have already released two of our operated rigs to reduce our activity in response to lower natural gas prices.

We will remain focused on maintaining the strong balance sheet we created in 2022. As a result, we will continue to evaluate our activity with the intent to fund our drilling program with operating cash flow. Our industry leading lowest cost structure provides acceptable drilling returns even at current natural gas prices since our cost structure is substantially lower than the other public natural gas producers.
We plan to retain our quarterly dividend of 12.5¢ per common share and we will continue to maintain our very strong financial liquidity, which totaled more than $1.5 billion at the end of 2022.

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

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