Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains forward-looking statements that involve risks, uncertainties and assumptions that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 including those described under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025 (the "Annual Report"). All statements other than statements of historic facts contained, or incorporated by reference, in this report, may be forward-looking statements. Actual results may differ materially from those anticipated in our forward-looking statements due to many factors. Such forward-looking statements are based on management's current expectations and are subject to a number of factors and uncertainties which could cause actual results to differ materially from those described herein. Although the we believe the expectations in such statements to be reasonable, there can be no assurance that such expectations will prove to be correct. You are cautioned not to place undue reliance on the forward-looking statements included in this report, which speak only as of the date made. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in our expectations with regard thereto or any change of events, conditions or circumstances on which any such statement was based, except as required by law. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in this report and in our Annual Report as well as with the Risk Factors contained in our Annual Report.

Results of Operations

Revenues -

Natural gas and oil sales of $419.0 million for the three months ended March 31, 2026 increased by $6.0 million (1%) as compared to $413.0 million for the first quarter of 2025. The increase was due to higher natural gas prices realized in the first quarter of 2026 as compared to the same period in 2025. The average realized price for our natural gas was $4.27 per thousand cubic feet ("Mcf"), which increased 19% from the average realized natural gas price in the first quarter of 2025. Our natural gas production for the first quarter of 2026 decreased 15% to 97.9 billion cubic feet ("Bcf") (1.1 Bcf per day). Natural gas production for the first quarter of 2025 was 115.0 Bcf (1.3 Bcf per day) and was sold at an average price of $3.58 per Mcf.

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We utilize natural gas price derivative financial instruments to manage our exposure to changes in prices of natural gas and to protect returns on investment from our drilling activities. The following table presents our natural gas prices before and after the effect of cash settlements of our derivative financial instruments:

Gas service revenues of $166.5 million increased $66.6 million (67%) for the first quarter of 2026 from $99.9 million in the first quarter of 2025. The increases were primarily due to higher natural gas prices related to sales of natural gas purchased to utilize our excess transport capacity.

We reported a gain on sale of assets of $1.8 million for the first quarter of 2026, which was primarily due to post-closing adjustments related to the divestiture of our Shelby Trough properties in East Texas during the fourth quarter of 2025.

Costs and Expenses -

Our production and ad valorem taxes decreased $0.8 million (7%) to $10.4 million for the first quarter of 2026 from $11.2 million in the first quarter of 2025. The decrease was primarily due to lower production in the first quarter of 2026.

Gathering and transportation costs for the first quarter of 2026 decreased $0.8 million (2%) to $41.8 million as compared to $42.6 million in the first quarter of 2025. The decrease was due primarily to lower production.

Our lease operating expense of $28.3 million ($0.29 per Mcfe) for the first quarter of 2026 decreased $6.7 million (19%) as compared to our lease operating expense of $35.0 million ($0.30 per Mcfe) for the first quarter of 2025. The decrease was due to lower production in the first three months of 2026.

Gas service expenses of $162.9 million increased $46.1 million (39%) for the first quarter of 2026 from $116.8 million in the first quarter of 2025. The increase was primarily due to higher natural gas prices related to purchases of third party natural gas for resale.

Depreciation, depletion and amortization ("DD&A") decreased $26.4 million to $141.5 million in the first quarter of 2026 from $167.9 million in the first quarter of 2025 due to lower natural gas production in the first quarter of 2026. Our DD&A per equivalent Mcf produced was $1.45 per Mcfe for the quarter ended March 31, 2026 which was comparable to $1.46 for the quarter ended March 31, 2025.

General and administrative expenses, which are reported net of overhead reimbursements, increased to $18.2 million for the first quarter of 2026 as compared to $11.1 million in the first quarter of 2025. The increase was primarily due to higher employee compensation, including stock-based compensation, which increased to $7.4 million in the first quarter of 2026 as compared to $4.4 million in the first quarter of 2025.

We use derivative financial instruments as part of our price risk management program to protect our capital investments. During the quarter ended March 31, 2026, we had net gains related to our derivative financial instruments of $2.4 million, as compared to net losses on derivative financial instruments of $330.3 million during the quarter ended March 31, 2025, resulting from the decline in future natural gas prices since December 31, 2025. Realized net losses from our price risk management program were $80.4 million for the quarter ended March 31, 2026 as compared to realized net losses of $8.0 million for the quarter ended March 31, 2025.

Interest expense was $53.1 million and $54.8 million for the quarters ended March 31, 2026 and 2025, respectively. The decrease in interest expense was due primarily to decreased borrowings on our bank credit facility.

Exploration expense was $9.3 million for the first quarter of 2026 as compared to $2.2 million for the first quarter of 2025, which was related to the acquisition of seismic data in our Western Haynesville area.

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Income taxes for the quarters ended March 31, 2026 and 2025 were a provision of $12.0 million and a benefit of $143.3 million, respectively. Income taxes for the quarters ended March 31, 2026 and 2025 reflect an effective tax rate of 9.6% and 55.4%, respectively. The difference between the federal statutory tax rate of 21% and our effective rate is primarily attributable to research and development and other tax credits, release of valuation allowance on deferred tax assets, state income taxes, changes in certain nondeductible items and the income attributable to noncontrolling interest.

We reported net income of $112.5 million, or $0.38 per share for the quarter ended March 31, 2026. Income from operations for the first quarter of 2026 was $174.9 million as compared to income from operations of $126.2 million for the first quarter of 2025. We reported a net loss of $115.4 million or $0.40 per share for the quarter ended March 31, 2025.

Cash Flows, Liquidity and Capital Resources

Cash Flows

The following table summarizes sources and uses of cash and cash equivalents:

Cash flows from operating activities. Net cash provided by our operating activities increased $97.2 million (56%) to $272.0 million in the first three months of 2026 from $174.7 million in the same period in 2025. The increase was due primarily to higher natural gas prices.

Contributions from noncontrolling interest. During the first three months of 2025, our noncontrolling interest partner contributed $59.5 million to our midstream partnership to fund the build-out of our Western Haynesville midstream system.

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Capital expenditures. Our capital expenditures are summarized in the following table:

We drilled 17 (15.3 net) wells and completed 13 (11.7 net) Haynesville and Bossier shale operated wells during the first three months of 2026. We currently expect to spend an additional $1.1 billion to $1.2 billion in the remaining nine months of 2026 on drilling, completion, infrastructure and other activity.

Liquidity and Capital Resources

As of March 31, 2026, we had $1.27 billion of liquidity, comprised of $1.15 billion of unused borrowing capacity under our bank credit facilities and $14.8 million of cash and cash equivalents on hand. $103 million of unused borrowing capacity under our PGS bank credit facility is restricted to PGS midstream activities. Our short and long-term capital requirements consist primarily of funding our development, exploration and midstream activities, acquisitions, payments of contractual obligations and debt service.

We expect to fund our future development and exploration activities with future operating cash flow and borrowings under our bank credit facilities. The timing of most of our future capital expenditures is discretionary because of our limited number of material long-term capital expenditure commitments. Consequently, we have a significant degree of flexibility to adjust the level of our capital expenditures as circumstances warrant. We believe that our cash provided by operations and borrowings available under our bank credit facilities will be sufficient to satisfy our foreseeable liquidity needs and capital expenditure requirements for at least the next twelve months. If our plans or assumptions change or our assumptions prove to be inaccurate, we may be required to seek additional capital, including debt or equity financing. We cannot provide any assurance that we will be able to obtain such capital, or if such capital is available, that we will be able to obtain it on acceptable terms.

We do not have a specific acquisition budget for the remainder of 2026 because the timing and size of acquisitions are unpredictable. We intend to use our cash flows from operations, borrowings under our bank credit facilities, or other debt or equity financing to the extent available, to finance such acquisitions. The availability and attractiveness of these sources of financing will depend upon a number of factors, some of which will relate to our financial condition and performance and some of which will be beyond our control, such as prevailing interest rates, natural gas and oil prices and other market conditions. Lack of access to the debt or equity markets due to general economic conditions could impede our ability to complete acquisitions.

As of March 31, 2026, we had $350.0 million outstanding under the Comstock bank credit facility. Aggregate commitments under this bank credit facility are $1.5 billion, which matures on November 15, 2027. Borrowings under our bank credit facility are subject to a borrowing base that is currently set at $2.0 billion. The borrowing base is re-determined on a semi-annual basis and upon the occurrence of certain other events. Borrowings under the Comstock bank credit facility are secured by substantially all of our assets and those of our subsidiaries, except for PGS, and bear interest at our option at either adjusted SOFR plus 2.25% to 3.25% or an alternate base rate plus 1.25% to 2.25%, in each case depending on the utilization of the borrowing base. We also pay a commitment fee of 0.375% to 0.5%, which is dependent on the utilization of the borrowing base. Comstock's bank credit facility places certain restrictions upon our and our subsidiaries' ability to, among other things, incur additional indebtedness, pay cash dividends, repurchase common stock, make certain loans, investments and divestitures and redeem the senior notes. The only financial covenants are the maintenance

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of a leverage ratio of less than 3.5 to 1.0, and an adjusted current ratio of at least 1.0 to 1.0. We were in compliance with the covenants as of March 31, 2026.

As of March 31, 2026, PGS had $47.0 million outstanding under a bank credit facility. Aggregate commitments under the PGS bank credit facility are $150 million, which matures on March 26, 2030. Borrowings under the PGS bank credit facility bear interest at our option, at either SOFR plus 2.5% to 3.5% or an alternate base rate plus 1.5% to 2.5%, in each case depending on a consolidated net leverage ratio. PGS also pays a commitment fee of 0.375% to 0.5%, which is dependent on the PGS consolidated net leverage ratio. The PGS bank credit facility contains financial covenants that require the maintenance of an interest coverage ratio of at least 2.5 to 1.0 and a consolidated net leverage ratio of less than 4.0 to 1.0.

Federal and State Taxation

At March 31, 2026, we had $1.5 billion in U.S. federal net operating loss ("NOL") carryforwards and $1.9 billion in certain state NOL carryforwards. As a result of the change of control in August 2018, our ability to use NOLs to reduce taxable income is limited. If we do not generate a sufficient level of taxable income prior to the expiration of the pre-2018 NOL carryforward periods, then we will lose the ability to apply those NOLs as offsets to future taxable income. We estimate that $720.7 million of the U.S. federal NOL carryforwards and $1.2 billion of the estimated state NOL carryforwards will expire unused.

Our federal income tax returns for the years subsequent to December 31, 2021 remain subject to examination. Our income tax returns in major state income tax jurisdictions remain subject to examination for various periods subsequent to December 31, 2022. Currently, we are under examination with the United States Internal Revenue Service and believe that our significant filing positions and deductions will be sustained under audit or the final resolution will not have a material effect on the consolidated financial statements. Therefore, we have not established any significant reserves for uncertain tax positions.

Critical Accounting Policies and Estimates

Our management's discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities as of the date of the financial statements. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

In Part II, Item 7 of our 2025 Annual Report, we disclosed our critical accounting policies and estimates, which are made in accordance with GAAP, involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operation. There have been no significant changes to our critical accounting policies and estimates during the three months ended March 31, 2026, as compared to those disclosed in the 2025 Annual Report.