Jay Allison - CEO Roland Burns - President and CFO Mack Good - COO

Good day, ladies and gentlemen, and welcome to the Comstock Resources Inc. Second Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Jay Allison, CEO. Please go ahead.

Abigail, thank you and welcome to Comstock Resources second quarter 2016 financial and operating results conference call. You can view a slide presentation during or after this call by going to our website at www.comstockresources.com and downloading the quarterly result presentation. There you'll find a presentation entitled second quarter 2016 results. I’m Jay Allison, Chief Executive Officer of Comstock, and with me is Roland Burns, our President and Chief Financial Officer and Mack Good, our Chief Operating Officer. During this call, we'll discuss our quarterly operating financial results and also the exchange offer we have launched today to further improve our balance sheet and liquidity. Please refer to slide 2 in our presentation and note that our discussions today will include forward-looking statements within the meaning of securities laws, while we believe the expectations of such statements to be reasonable, there can be no assurance of such expectations will prove to be correct. Slide 3, a summary of our second quarter is outlined on slide 3, oil and gas prices continue to be weak. Our realized oil prices fell by 24% and our average realized natural gas price declined by 16% in the second quarter as compared to 2015, lower prices caused our oil and gas sales to fall by 46% to $42 million. EBITDAX came in at $19 million but it was not high enough to cover our interest expense this quarter of $29 million. Our Haynesville drilling program continues to get better. All of the 13 wells drilled in 2015 and 2016 are performing above our 14 to 16 Bcf type curve. And the two additional wells we reported on today had an average IP rate 24 million a day and added an additional 13 million a day from offset wells. With low prices, we are very focused on improving our balance sheet. We tried 107 million in long-term debt in 2016 which saves us $8.7 million in annual interest payments and $28.4 million in total interests with total liquidity of $117 million and hope to add to that with our pending asset sale. We launched an exchange offer today to give us additional liquidity and flexibility to allow us to use our successful Haynesville drilling program to grow our revenues and cash flow to a level that works with our current leverage. I will cover the exchange offer after Roland and Mack report on the second-quarter results, Roland will now go over the financial results. Roland?

Thanks Jay. Slide 4 shows our natural gas production, despite having limited capital available for drilling this year we are expecting natural gas production to grow. We put a rig to work in March and drilled three 7,500 foot horizontal lateral wells which have all now been completed. We recently released that drilling rig to conserve our liquidity. Our natural gas production averaged 149 million cubic feet per day in the second quarter which was 22% higher than the second quarter of 2015, 9 million cubic feet per day of our second quarter production is from the South Texas gas property that we plan to divest out this year. We expect our natural gas production in 2016 will average between 130 to 145 million cubic feet per day, given effect to the divestiture assuming we don't do any more drilling this year. On slide 5, we summarize our oil production. Our oil production averaged 3,900 barrels per day in the second quarter, a 62% decrease from the second quarter of last year. The production decline is due to our sale of the Burleson properties in July of last year and also shutting down our oil drilling program at the end of 2014. With a little drilling activity for this year, we expect oil production to decline further. We expect our oil production in 2016 will approximate between 3,800 and 4,100 barrels per day. On slide 6, we summarize our second quarter financial results. We had a 22% increase in gas production offset by 62% decrease in our oil production in the quarter. Production on equivalent unit basis was also down 6%. Our oil and gas prices also declined. Oil prices fell by 24% and gas prices were lower by 16%. Oil and gas sales this quarter were down 46% to…

Thanks Roland, morning everybody. If you flip to slide10, you will see a familiar map. It basically shows the location of our acreage highlighted in blue within the Haynesville and Bossier shale plays as well as the Cotton Valley trend that extends through East Texas and Northwest Louisiana. And as you can see we have around 67,000 net acres within the Haynesville/Bossier plays and we have drilled 13 gross or 12.4 net horizontal wells within this region since the beginning of 2015. I think most of you know already that all of the wells that we’ve drilled all 13 of them and completed since the start of 2015 have been extraordinary producers. Slide 11 gives you some information about why we have been able to be so successful. First, we decided to extend the horizontal length of any Haynesville or Bossier well be drill from the traditional 4,500 foot length we have drilled before to something approaching 7,500 foot in length. We then changed our completion design to include less gel loading, fewer preparation clusters for stage, less distance between each cluster, last but not least more profit. This combination of changes in a nutshell has allowed us to reach rates of return between 49% to 79% at gas prices ranging from 2.50 to 3 bucks per Mcf, pardon me at current well costs. This type of economic benefit all extends to all the various horizontal wells that are in our drilling inventory. And I will give you some more detail on our project economics a little later. This kind of economic benefit is obviously what we always target and this is especially important within the very challenging market environment that exists today. Obviously the more opportunities and operator has to create this kind of economic value within a challenging…

Thank you, Mack and also Roland. Thank you. Go to slide 20 if you would. Today, we announced that we are commencing an exchange offer for no secured notes in exchange for all of our existing senior notes as outlined on slide 20. The exchange offer was commenced following many, many months of dialog with representatives of certain of our current note holders. Our existing senior secured notes are exchangeable into new first lien secured notes with warrants for up to 1,050,000 shares of common stock. The no secured notes allow the company to pay in kind two interest payments. Our unsecured notes can be exchanged into new secured second lien notes, which would be convertible into shares of the company’s common stock. These bonds require that all interest is paid in kind to maturity. The total shares related to the convertible bond and the warrants represent approximately 75.6% of the company's total issued and outstanding common stock. The exchange is intended to improve our capital structure, decrease our cash interest expense, enhance our near-term liquidity and allow us to resume our successful drilling program in the Haynesville shale. The savings in interest expense combined with our existing liquidity provides us the cushion to build up cash flow and reserve value with our proven and very economic drilling program as shown on slide 21. In order to preserve liquidity, we recently released our last operated rig after drilling three additional successful Haynesville shale wells in 2016. This will allow us to preserve more of the cash on our balance sheet, but it will result in future reductions to our natural gas production and proven oil and natural gas reserves. With no additional drilling in 2016 and ‘17, oil and gas production would continue to decline from 2016 levels - 2800…

Ladies and gentlemen, thank you for participating in today's call. This does conclude the program. You may all disconnect. Everyone, have a great day.