# To our stockholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-e-p/NYSE_CRK_2021/NYSE_CRK_2021.mmd` · pages 2-8_

---

To our stockholders:

2021 was a turnaround year for the Company. We exceeded the goals we put in place for the year including generating in excess of $200 million in free cash flow and reducing leverage to below 2.5x. We also reduced our cost of capital by refinancing our high coupon bonds. We added approximately 49,000 net acres to our Haynesville footprint to continue to build up our already substantial drilling prospect inventory.

## Solid Results from Our 2021 Drilling Program

We had another strong year with the drill bit. We have drilled and completed 331 horizontal Haynesville/Bossier wells since 2015, more than any other operator in the play. Those wells had an average IP rate of 23 MMcf per day. Under our 2021 Haynesville/Bossier shale drilling program, we drilled 64 (51.9 net) successful operated wells which had an average per well initial production rate of 23 MMcf per day.

In 2021, we improved our drilling performance by 25% by drilling on average just over 1,000 feet per day as compared to 800 feet per day in 2020. We set a new corporate record with our fastest well to date which averaged 1,461 feet drilled per
day. In 2021, the average lateral length for all the wells we drilled increased to 8,800 feet, including our record longest lateral to date of 15,155 feet. This is one of four 15,000 foot laterals we drilled in 2021. Building on the success of these ultra long laterals, we expect the average lateral length of our wells to be drilled in 2022 to average over 10,000 feet. In 2022, we anticipate drilling approximately 21 wells with laterals longer than 11,000 feet, with nine of these being 15,000 foot laterals. This will increase our average lateral length for wells drilled in 2022 by almost 20%. By continuing to execute our long lateral strategy, we will be able to better maintain our low cost structure in the anticipated higher service cost environment.

![](images/2_1.jpg)

## Grew Proved Reserve Base at Low Finding Cost of 60¢ per Mcfe

In 2021, we were able to grow proved reserves by 9% to 6.1 trillion cubic feet of natural gas equivalent. The growth in proved reserves replaced 199% of our 2021 production and was achieved at a low finding cost of 60¢ per Mcfe. The present value discounted at 10% of our proved reserves was $6.8 billion.

<--- Page Split --->

![](images/3_0.jpg)

We generated free cash flow from operations of $262 million in 2021, representing a free cash flow yield of 29%.

![](images/3_1.jpg)

## Improving our Balance Sheet and Lowering our Cost of Capital

As the outlook for natural gas prices continued to improve in 2021, we were able to refinance $2 billion of our senior notes in March and June, saving $48 million in cash interest payments per year with the lower coupons on the new bonds. The refinancing transactions also extended our senior notes weighted average maturity by almost three years.

We repaid $265 million outstanding under our bank facility in 2021, increasing our financial liquidity to $1.2 billion. Our leverage ratio improved to 2.2x in the fourth quarter of 2021, down from 3.8x in 2020.

## Strong Financial Results

Our adjusted net income available to common stockholders increased in 2021 over 500% from 2020 to $303 million or $1.16 per diluted share. Net income was adjusted to exclude certain items not related to normal operating activities, which in 2021 was primarily losses from the early

![](images/3_2.jpg)

retirement of debt, the sale of our Bakken shale properties and the unrealized loss related to our contracts to hedge future natural gas prices.

We produced 489 Bcf of natural gas and 1.2 million barrels of oil in 2021. Our natural gas production averaged 1.3 Bcf per day in 2021, an increase of 9% over natural gas production in 2020. The higher gas production combined with stronger oil and natural gas prices drove 44% growth in our oil and gas sales, after hedging, to $1.4 billion. We generated Adjusted EBITDAX of \(1.1 billion, which increased 55% over 2020. Our operating cash flow in 2021 of \)908 million grew 74% over 2020. Our EBITDAX margin in 2021 was 78%, one of the highest in the industry. We also achieved a 12% return on average capital employed and a 27% return on average equity.

## Substantial Free Cash Flow Generation

We generated free cash flow from operations of $262 million in 2021, representing a free cash flow yield of 29%. Including the acquisition and divestitures we completed in 2021, we generated a total of $343 million in

<--- Page Split --->

![](images/4_0.jpg)

In 2021, we added approximately 49,000 net acres prospective for the Haynesville and Bossier shales through a leasing program and acquisitions.

free cash flow. We used the free cash flow toward debt reduction. Our goal is to reduce our financial leverage to under 1.5 times before reinstating our dividend and initiating a return of capital program. We expect to reach this goal in 2022.

## Industry Leading Low Operating Cost Structure

We continue to have one of the industry's lowest operating cost structures. Our total operating costs per Mcfe produced averaged 63¢ in 2021. Our gathering and transportation costs averaged 26¢ per Mcfe in 2021, which is substantially lower than any other significant natural gas producer. Our general and administrative costs averaged only 6¢ per Mcfe in 2021 and our other operating costs per Mcfe, including production taxes, averaged 31¢ per Mcfe in 2021.

## Value Added Acquisitions

In 2021, we added approximately 49,000 net acres prospective for the Haynesville and Bossier shales through a leasing program and acquisitions. Included in that activity was an attractive $35 million bolt-on acquisition in East Texas. The acquisition included 18.1 net producing wells and 17,331 net acres. With the acquisition, we added 57.9 net drilling locations, which represents approximately one year's worth of our drilling activity.

![](images/4_1.jpg)

![](images/4_2.jpg)

## Environmental Stewardship

We are committed to environmental stewardship and a responsible energy future. We already have a low GHG 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 expect to employ BJ Energy Solutions' next generation fracturing fleet, which is fueled by 100% natural gas, in our Haynesville shale development program.

Our most significant environmental

<--- Page Split --->

![](images/5_0.jpg)

initiative is our partnership with MiQ to initiate the certification of our natural gas production in the Haynesville shale under the MiQ methane standard. MiQ will oversee an independent, third-party audited assessment of methane emissions from our Haynesville shale gas production. The certification will cover 2 Bcf 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 will allow us to deliver differentiated, responsibly sourced natural gas to our customers. We anticipate that we can achieve this certification during the first half of 2022.

## Outlook for 2022

2022 is expected to be an outstanding year for natural gas and the Company. We expect to be able to meet our debt reduction goal and reinstate a dividend to our stockholders later in the year. We expect our 2022 drilling program to generate 4% to 5% production growth and we expect to generate in excess of $500 million of free cash flow based on the current natural gas price outlook.

![](images/5_1.jpg)

In 2022, the lateral length of our planned wells is expected to be 19% longer than our 2021 wells. The additional investment we are making this year in our drilling program is expected to pay off in future years as the longer lateral wells have a lower decline rate than the shorter laterals.

In 2022, our operating plan is focused on repaying $479 million of debt, including redeeming our 2025 senior notes. We continue to have an industry leading low cost structure, which gives us best in class drilling returns. At the end of 2021, we had financial liquidity of almost $1.2 billion, which is expected to increase further in 2022 as we repay the remaining borrowings outstanding on our bank credit facility.

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

![](images/5_2.jpg)

M. Jay Allison
Chairman and Chief Executive Officer