Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

The number of shares outstanding of the registrant's common stock, par value $0.50, as of November ~~2, 2017~~8, 2018 was ~~15,427,561.~~105,871,064.

	September 30, 2017			December 31, 2016
	(In thousands)						Successor			Predecessor
ASSETS							September 30, 2018			December 31, 2017
							(In thousands)

Cash and Cash Equivalents	$	25,392		$	65,904		$	31,780		$	61,255
Accounts Receivable:
Oil and gas sales		24,693			19,339			61,003			26,700
Joint interest operations		9,703			3,105			19,619			11,872
Derivative Financial Instruments		3,203			—			—			1,318
Assets Held For Sale								—			198,615
Other Current Assets		2,494			1,824			19,070			2,745
Total current assets		65,485			90,172			131,472			302,505
Property and Equipment:
Oil and gas properties, successful efforts method		3,900,858			3,797,101
Proved								1,568,504			2,631,750
Unproved								195,178			—
Other		19,609			19,590			4,440			18,918
Accumulated depreciation, depletion and amortization		(3,087,279	)		(3,018,029	)		(174,520	)		(2,042,739	)
Net property and equipment		833,188			798,662			1,593,602			607,929
Goodwill								349,667			—
Income Taxes Receivable								19,086			19,086
Other Assets		934			1,040			549			899
							$	2,094,376		$	930,419
	$	899,607		$	889,874

LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Accounts Payable	$	92,298		$	45,311		$	124,008		$	126,034
Accrued Expenses								53,261			42,455
Derivative Financial Instruments		—			6,030			2,849			—
Accrued Expenses		19,929			40,366
Total current liabilities		112,227			91,707			180,118			168,489
Long-term Debt		1,089,719			1,044,506			1,242,844			1,110,529
Deferred Income Taxes		10,007			9,126			145,565			10,266
Reserve for Future Abandonment Costs		16,098			15,804			4,738			10,407
Total liabilities		1,228,051			1,161,143			1,573,265			1,299,691
Commitments and Contingencies
Stockholders' Deficit:
Common stock — $0.50 par, 75,000,000 shares authorized, 15,427,561 and 13,937,627 shares outstanding at September 30, 2017 and December 31, 2016, respectively		7,714			6,969
Stockholders' Equity (Deficit):
Common stock — $0.50 par, 155,000,000 shares authorized, 105,879,064 shares issued and outstanding at September 30, 2018, 75,000,000 authorized, 15,427,561 shares issued and outstanding as of December 31, 2017								52,940			7,714
Common stock warrants		3,557			5,672			—			3,557
Additional paid-in capital		545,228			531,924			454,348			546,696
Accumulated deficit		(884,943	)		(815,834	)
Total stockholders' deficit		(328,444	)		(271,269	)
Accumulated earnings (deficit)								13,823			(927,239	)
Total stockholders' equity (deficit)								521,111			(369,272	)
							$	2,094,376		$	930,419
	$	899,607		$	889,874

Three Months Ended
September 30,


Nine Months Ended
September 30,

2017


2016


2017


2016

Revenues:

(In thousands, except per share amounts)

Natural gas sales

$
56,164

$
36,852


$
147,541

$
87,726

Oil sales

10,647

13,478

34,542

39,482

Total oil and gas sales

66,811

50,330

182,083

127,208

Operating expenses:

Production taxes

1,490

1,556

3,730

4,069

Gathering and transportation

4,755

3,829

12,428

12,219

Lease operating

9,359

12,301

28,681

38,249

Exploration

—

76,391

—

84,144

Depreciation, depletion and amortization

32,807

37,545

93,009

112,410

General and administrative

6,174

4,188

19,134

15,426

Impairment of oil and gas properties

—

113

—

24,573

Loss on sale of oil and gas properties

1,036

13,196

1,060

14,103

Total operating expenses

55,621

149,119

158,042

305,193

Operating income (loss)

11,190

(98,789
)

24,041

(177,985
)

Other income (expenses):

Gain on extinguishment of debt

—

100,540

—

190,116

Gain from derivative financial instruments

1,430

—

14,585

674

Other income

170

175

398

770

Interest expense

(37,595
)

(31,227
)

(107,250
)

(90,053
)
Total other income (expenses)

(35,995
)

69,488

(92,267
)

101,507

Loss before income taxes

(24,805
)

(29,301
)

(68,226
)

(76,478
)
Benefit from (provision for) income taxes

69

825

(883
)

(3,723
)
Net loss

$
(24,736
)

$
(28,476
)

$
(69,109
)

$
(80,201
)

Net loss per share – basic and diluted

$
(1.67
)

$
(2.32
)

$
(4.74
)

$
(7.13
)

Weighted average shares outstanding – basic and diluted

14,796

12,293

14,591

11,255

	Three Months Ended September 30,										Nine Months Ended September 30,
	Transition Period										Transition Period
	Successor			Predecessor				Predecessor			Successor			Predecessor			Predecessor
	For the Period from August 14, 2018 through September 30, 2018			For the Period from July 1, 2018 through August 13, 2018				2017			For the Period from August 14, 2018 through September 30, 2018			For the Period from January 1, 2018 through August 13, 2018			2017
							(In thousands, except per share amounts)
Revenues:
Natural gas sales	$	36,393		$	32,089			$	56,164		$	36,393		$	147,897		$	147,541
Oil sales		33,730			499				10,647			33,730			18,733			34,542
Total oil and gas sales		70,123			32,588				66,811			70,123			166,630			182,083

Operating expenses:
Production taxes		4,051			707				1,490			4,051			3,659			3,730
Gathering and transportation		3,450			3,109				4,755			3,450			11,841			12,428
Lease operating		7,016			3,418				9,359			7,016			21,139			28,681
Depreciation, depletion and amortization		17,820			14,082				32,783			17,820			68,032			93,009
General and administrative		3,303			3,044				6,174			3,303			15,699			19,134
Loss (gain) on sale of oil and gas properties		(98	)		—				1,060			(98	)		35,438			1,060
Total operating expenses		35,542			24,360				55,621			35,542			155,808			158,042

Operating income		34,581			8,228				11,190			34,581			10,822			24,041

Other income (expenses):
Gain (loss) from derivative financial instruments		(2,015	)		(83	)			1,430			(2,015	)		881			14,585
Other income		42			284				170			42			677			398
Interest expense		(14,845	)		(22,140	)			(37,595	)		(14,845	)		(101,203	)		(107,250	)
Transaction costs		—			(2,549	)			—			—			(2,866	)		—
Total other income (expenses)		(16,818	)		(24,488	)			(35,995	)		(16,818	)		(102,511	)		(92,267	)

Income (loss) before income taxes		17,763			(16,260	)			(24,805	)		17,763			(91,689	)		(68,226	)
Benefit from (provision for) income taxes		(3,940	)		(605	)			69			(3,940	)		(1,065	)		(883	)
Net income (loss)	$	13,823		$	(16,865	)		$	(24,736	)	$	13,823		$	(92,754	)	$	(69,109	)

Net income (loss) per share – basic and diluted	$	0.13		$	(1.09	)		$	(1.67	)	$	0.13		$	(6.08	)	$	(4.74	)

Weighted average shares outstanding –
Basic		105,448			15,468				14,796			105,448			15,262			14,591
Diluted		105,463			15,468				14,796			105,463			15,262			14,591

		Common Stock (Shares)		Common Stock – Par Value			Common Stock Warrants			Additional Paid-in Capital			Accumulated Deficit			Total				Common Stock (Shares)		Common Stock – Par Value			Common Stock Warrants			Additional Paid-in Capital			Accumulated Earnings (Deficit)			Total
	(In thousands)																		(In thousands)

Balance at January 1, 2017		13,938		$	6,969		$	5,672		$	531,924		$	(815,834	)	$	(271,269	)
Predecessor Company:

Balance at January 1, 2018																				15,428		$	7,714		$	3,557		$	546,696		$	(927,239	)	$	(369,272	)
Stock-based compensation		451			225			—			4,230			—			4,455			623			311			—			3,601			—			3,912
Tax withholdings related to equity awards		(34	)		(16	)		—			(296	)		—			(312	)
Income tax withholdings related to equity awards																				(53	)		(26	)		—			(343	)		—			(369	)
Common stock warrants exercised																				379			189			(3,247	)		3,058			—			—
Common stock issued for debt conversions		826			412			—			7,377			—			7,789			2			1			—			28			—			29
Common stock warrants exercised		247			124			(2,115	)		1,993			—			2
Net loss		—			—			—			—			(69,109	)		(69,109	)		—			—			—			—			(92,754	)		(92,754	)
Balance at August 13, 2018																				16,379		$	8,189		$	310		$	553,040		$	(1,019,993	)	$	(458,454	)

Balance at September 30, 2017		15,428		$	7,714		$	3,557		$	545,228		$	(884,943	)	$	(328,444	)

Successor Company:

Successor common stock																				16,379		$	8,189		$	310		$	132,032		$	—		$	140,531
Vesting of equity awards																				1,029			514			—			8,312			—			8,826
Income tax withholdings related to equity awards																				(547	)		(272	)		—			(4,423	)		—			(4,695)
Jones contribution																				88,571			44,286			—			318,406			—			362,692
Stock-based compensation																				423			211			—			118			—			329
Stock issuance costs																				—			—			—			(395	)		—			(395	)
Common stock warrants exercised and expired																				24			12			(310	)		298			—			—
Net income																				—			—			—			—			13,823			13,823
Balance at September 30, 2018																				105,879		$	52,940		$	—		$	454,348		$	13,823		$	521,111

Nine Months Ended
September 30,

2017


2016

(In thousands)

Cash Flows from Operating Activities:



Net loss

$
(69,109
)

$
(80,201
)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:



Deferred income taxes

768

3,687

Loss on sale of oil and gas properties

1,060

14,103

Exploratory lease impairments

—



84,144

Impairment of oil and gas properties

—



24,573

Depreciation, depletion and amortization

93,009



112,410

Gain on derivative financial instruments

(14,585
)


(674
)
Cash settlements of derivative financial instruments

5,352



2,120

Gain on extinguishment of debt

—



(190,116
)
Amortization of debt discount, premium and issuance costs

24,914



6,413

Interest paid in-kind

28,194

2,576

Stock-based compensation

4,455



3,571

Decrease (increase) in accounts receivable

(11,952
)


101

Decrease (increase) in other current assets

(670
)


18

Increase (decrease) in accounts payable and accrued expenses

29,327



(37,443
)

Net cash provided by (used for) operating activities

90,763



(54,718
)

Cash Flows From Investing Activities:



Capital expenditures

(132,493
)


(41,142
)
Proceeds from sales of oil and gas properties

1,528

2,067

Net cash used for investing activities

(130,965
)


(39,075
)

Cash Flows from Financing Activities:



Payments to retire debt

—



(3,397
)
Common stock warrants exercised

2



9

Debt and equity issuance costs

—



(9,928
)
Tax withholdings related to equity awards

(312
)


(313
)

Net cash used for financing activities

(310
)


(13,629
)

Net decrease in cash and cash equivalents

(40,512
)


(107,422
)
Cash and cash equivalents, beginning of period

65,904



134,006

Cash and cash equivalents, end of period

$
25,392


$
26,584


	Transition Period
	Successor			Predecessor			Predecessor
	For the Period from August 14, 2018 through September 30, 2018			For the Period from January 1, 2018 through August 13, 2018			Nine Months Ended September 30, 2017
				(In thousands)
Cash Flows from Operating Activities:
Net income (loss)	$	13,823		$	(92,754	)	$	(69,109	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Deferred income taxes		3,883			1,052			768
Loss (gain) on sale of oil and gas properties		(98	)		35,438			1,060
Depreciation, depletion and amortization		17,820			68,032			93,009
(Gain) loss on derivative financial instruments		2,015			(881	)		(14,585	)
Cash settlements of derivative financial instruments		191			2,842			5,352
Amortization of debt discount, premium and issuance costs		822			29,457			24,914
Interest paid in-kind		—			25,004			28,194
Stock-based compensation		329			3,912			4,455
Decrease (increase) in accounts receivable		(44,884	)		2,834			(11,952	)
Decrease (increase) in other current assets		(1,326	)		337			(670	)
Increase in accounts payable and accrued expenses		11,034			10,462			29,327

Net cash provided by operating activities		3,609			85,735			90,763
Cash Flows From Investing Activities:
Acquisitions and capital expenditures		(59,017	)		(150,106	)		(132,493	)
Prepaid drilling costs		(4,768	)		(3,692	)		—
Proceeds from sale of oil and gas properties		13,739			103,593			1,528

Net cash used for investing activities		(50,046	)		(50,205	)		(130,965	)
Cash Flows from Financing Activities:
Borrowings		450,000			865,577			—
Retirement of long-term debt		(1,291,352	)		(49,679	)		—
Jones contribution		36,365			—			—
Common stock warrants exercised		—			—			2
Debt and stock issuance costs		(6,288	)		(18,127	)		—
Income taxes related to equity awards		(4,695	)		(369	)		(312	)

Net cash provided by (used for) financing activities		(815,970	)		797,402			(310	)

Net increase (decrease) in cash and cash equivalents		(862,407	)		832,932			(40,512	)
Cash and cash equivalents, beginning of period		894,187			61,255			65,904
Cash and cash equivalents, end of period	$	31,780		$	894,187		$	25,392

These unaudited consolidated financial statements include the accounts of Comstock and its wholly-owned subsidiaries. In management's opinion, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of Comstock Resources, Inc. and its subsidiaries ~~("Comstock"~~(collectively, "Comstock" or the "Company") as of September 30, ~~2017,~~2018, and the related results of operations ~~for the three months and nine months ended September 30, 2017 and 2016,~~ and cash flows for the ~~nine months ended September 30, 2017~~Predecessor and ~~2016.~~Successor periods being presented. Net loss and comprehensive loss are the same in all periods presented. All adjustments are of a normal recurring nature unless otherwise disclosed.

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to those rules and regulations, although Comstock believes that the disclosures made are adequate to make the information presented not misleading. These unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in Comstock's Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

The results of operations for the ~~three months~~Predecessor and ~~nine months ended~~Successor periods up to and through September 30, ~~2017~~2018 are not necessarily an indication of the results expected for the full year.

~~These unaudited~~On August 14, 2018, Arkoma Drilling, L.P. and Williston Drilling, L.P. (collectively, the "Jones Partnerships") contributed certain oil and gas properties in North Dakota and Montana (the "Bakken Shale Properties") in exchange for common stock representing 84% of the Company's outstanding common stock (the "Jones Contribution"). The Jones Partnerships are wholly owned and controlled by Dallas businessman Jerry Jones and his children (collectively, the "Jones Group"). The Jones Partnerships received 88,571,429 newly issued shares of common stock based on an agreed upon share price of $7.00 per share.

The Company assessed the Bakken Shale Properties to determine whether they meet the definition of a business under US generally accepted accounting principles, determining that they do not meet the definition of a business. As a result, the Jones Contribution is not being accounted for as a business combination. Upon the issuance of the shares of Comstock common stock, the Jones Group obtained control over Comstock through their ownership of the Jones Partnerships. Through the Jones Partnerships, the Jones Group owns a majority of the voting common stock as well as the ability to control the composition of the majority of the board of directors of Comstock. As a result of the change of control that occurred upon the issuance of the common stock, the Jones Group controls Comstock and, thereby, continues to control the Bakken Shale Properties.

Accordingly, the basis of the Bakken Shale Properties recognized by Comstock is the historical basis of the Jones Group. The historical cost basis of the Bakken Shale properties contributed was $397.6 million, which was comprised of $554.3 million of capitalized costs less $156.7 million of accumulated depletion, depreciation and amortization. The change in control of Comstock results in a new basis for Comstock as the company has elected to apply pushdown accounting pursuant to ASC 805, Business Combinations. The new basis is pushed down to Comstock for financial reporting purposes, resulting in Comstock's assets, liabilities and equity accounts being recognized at fair value upon the closing of the Jones Transactions.

References to "Successor" or "Successor Company" relate to the financial position and results of operations of the Company subsequent to August 13, 2018. Reference to "Predecessor" or "Predecessor Company" relate to the financial position and results of operations of the Company on or prior to August 13, 2018. The Company's consolidated financial statements ~~include~~and related footnotes are presented with a black line division which delineates the ~~accounts~~lack of comparability between amounts presented after August 13, 2018 and dates prior thereto.

The estimated fair value of Comstock's assets and liabilities and the resulting goodwill at the date of the transaction were as follows:

The table above represents the preliminary allocation of fair value related to the assets acquired and the liabilities assumed based on the fair value of Comstock. Certain data necessary to complete the fair value allocation is not yet available or is in the process of being finalized, and includes, but is not limited to, final income tax returns. We expect to complete the purchase price allocation during the twelve month period following the Jones Contribution date, during which time the value of the assets and liabilities, including goodwill, may be revised as appropriate.

Goodwill recognized is primarily attributable to the excess of the fair value of Comstock's common stock over the identifiable assets acquired net of liabilities assumed, measured in accordance with generally accepted accounting principles in the United States. The fair value of oil and gas properties, a Level 3 measurement, was determined using discounted cash flow valuation methodology. Key inputs to the valuation included average oil prices of $79.72 per barrel, average natural gas prices of $3.87 per thousand cubic feet and discount factors of 10% - 25%. The combination of the Bakken Shale Properties with Comstock's Haynesville shale properties results in a Company with adequate resources and liquidity to fully exploit its Haynesville/Bossier shale asset base and to continue to expand its opportunity set with future acquisitions and leasing activity in the basin.

Transaction-related costs (i.e., advisory, legal, accounting, valuation, other professional or consulting fees) totaling approximately $2.6 million are not included as a component of consideration transferred but are accounted for as expenses in the predecessor periods in which the costs are incurred and the services received. Costs incurred associated with the issuance of common stock have been accounted for as a reduction of additional paid-in capital.

The successful closing of the Jones Contribution triggered payment of an aggregate of $8.1 million including success fees to financial advisors and certain other fees under our licenses for technical data. These costs were contingent on the consummation of the transactions, all of which were interdependent and all of which had to close in order to meet the legal requirements of the contribution agreement. None of these fees would have been incurred otherwise. The Jones Contribution also caused a change in control, upon which restricted shares granted to employees and directors vested, and performance share units granted to executive officers vested at the maximum number of shares granted. The Company had previously recognized stock-based compensation expense of $7.2 million related to these restricted shares and performance share units. The Company did not recognize an expense for the remaining $11.9 million of unrecognized stock-based compensation expense. The Company's accounting policy for any cost triggered by the consummation of the Jones Contribution was to recognize the cost when the Jones Contribution was consummated. Accordingly, unrecognized stock-based compensation expense has not been recorded in the Consolidated Statement of Operations for the Predecessor period since that statement depicts the results of operations just prior to consummation of the transaction. In addition, since the Successor period reflects the effects of push-down accounting, these costs have also not been recorded as an expense in the Successor period. These costs are being considered in the purchase accounting adjustments in arriving at the fair value of the liabilities assumed since they were incurred only in the event the transactions successfully closed, and they are not clearly identifiable to operations either prior to or subsequent to the Jones Contribution.

Under the terms of the Jones Contribution, April 1, 2018 was the effective date for allocation of revenues and expenses related to net cash of the Bakken Shale Properties, and Comstock will receive $43.2 million related to net cash flow from April 1, 2018 to August 13, 2018 from the Jones Partnerships which has been accounted as part of the Jones Contribution.

These financial statements are presented on the basis of the Bakken Shale Properties being contributed to Comstock in exchange for common stock of Comstock. Comstock is a corporation, which is treated as a taxable C corporation and thus is subject to federal and state income taxes. A deferred tax liability of approximately $77.9 million has been recognized related to the tax basis of the Bakken Shale Properties long-lived assets being less than the book basis in those assets. The recording of this deferred tax liability has been treated as an adjustment to additional paid-in capital in these financial statements. The change in control of Comstock results in a new basis for Comstock as the company is applying pushdown accounting pursuant to ASC 805, Business Combinations. The new basis is pushed down to Comstock for financial reporting purposes, resulting in Comstock's assets, liabilities and equity accounts being recognized at fair value upon the closing of the Jones Contribution. A deferred tax liability, net of valuation allowance, of $52.4 million has been recognized related to the change in the basis for financial reporting purposes as compared to the tax basis of the historical Comstock assets.

The unaudited pro forma financial information presented below sets forth the Company's historical statements of operations for the periods indicated and gives effect to the Jones Contribution and the Company's debt refinancing transactions as if "push down" accounting had been applied as of January 1, 2017. Such information is presented for comparative purposes to the Consolidated Statements of Operations only and does not purport to represent what the Company's results of operations would actually have been had these transactions occurred on the date indicated or to project its ~~wholly-owned subsidiaries.~~results of operations for any future period or date.


	Pro Forma
	Nine Months Ended
	September 30,
	2018 ⁽¹⁾			2017

Revenues:
Natural gas sales	$	196,049		$	158,679
Oil sales		194,328			159,812
Total oil and gas sales		390,377			318,491

Operating expenses:
Production taxes		22,168			16,722
Gathering and transportation		15,291			12,428
Lease operating		44,103			43,309
Depreciation, depletion and amortization		132,234			148,100
General and administrative		19,319			19,134
Loss on sale of oil and gas properties		35,340			1,060
Total operating expenses		268,455			240,753

Operating income		121,922			77,738

Other income (expenses):
Gain (loss) from derivative financial instruments		(1,134	)		14,585
Other income		719			398
Interest expense		(80,437	)		(89,063	)
Total other income (expenses)		(80,852	)		(74,080	)

Income before income taxes		41,070			3,658
Benefit from (provision for) income taxes		(10,818	)		(2,211	)
Net Income	$	30,252		$	1,447

Net income per share – basic and diluted	$	0.29		$	0.01

Weighted average shares outstanding –
Basic		105,448			105,095
Diluted		105,463			105,574

(1) Excludes $2.6 million of transaction costs associated with the Jones Contribution.

The Company follows the successful efforts method of accounting for its oil and gas properties. Costs incurred to acquire oil and gas leasehold are capitalized.

~~In 2017,~~On April 27, 2018, Comstock completed the ~~Company entered agreements to jointly develop certain acreage prospective for the Haynesville~~sale of its producing Eagle Ford shale in Louisiana and Texas with USG Properties Haynesville, LLC ("USG"). As of September 30, 2017, USG has acquired approximately 7,000 net acres prospective for Haynesville shale development for the joint development program primarily in Caddo Parish, Louisiana. The Company operates wells drilled on USG's acreage and has the right to acquire a 25% working interest in the acreage by reimbursing USG for the attributable acreage costs of the wells being drilled. USG is also participating in four wells being drilled in the Company's Bossier shale acreage in Sabine Parish, Louisiana and in a Haynesville shale drilling program on approximately 5,700 acres of Comstock's acreage in Harrison County, Texas. Under the terms of the participation agreements for Sabine Parish and Harrison County acreage owned by the Company, Comstock will receive between $1.1 million and $1.4 million, respectively, for 50% of Comstock's interest for each location for acreage and infrastructure related to each well location, with $400,000 of that amount being paid only if each well meets or exceeds established production targets. Comstock also receives $80,000 for each well drilled as consideration for the Company's services managing the joint drilling program in addition to customary operating fees for each well drilled except for the four Bossier shale wells. Comstock and USG plan to continue to acquire additional acreage for the joint development venture.

Frio, Atascosa, Wilson, and Karnes counties, Texas for $125.0 million. The sale was effective November 1, 2017 and the ~~three months and nine months ended September 30,~~estimated net cash flow from the properties from November 2017 to April 2018 was paid to the buyer at closing. After the sale, the Company had approximately 8,400 net undeveloped acres that are prospective for ~~total proceeds of $1.5 million and~~Eagle Ford shale development. During the predecessor period January 1, 2018 through August 13, 2018, the Company recognized a loss on sale of ~~$1.0~~oil and gas properties of$32.7 million ~~on these divestitures. In January 2016,~~to reduce the ~~Company designated certain~~carrying value of its ~~natural gas properties located in South Texas as~~assets held for sale to their fair value less costs to sell and ~~recognized an impairment charge of $20.8 million in the nine months ended September 30, 2016~~ to adjust the carrying value of ~~these assets~~the undeveloped acreage retained to their ~~estimated net realizable value.~~then fair value of $55.0 million which has been included in proved oil and gas properties. The ~~sale~~fair value of ~~these properties was completed in December 2016. The Company also sold certain other~~the oil and gas properties ~~during~~retained, a Level 3 measurement, was determined using the ~~first nine months~~discounted cash flow valuation methodology applied by Comstock in assessing oil and gas properties for impairment. Key inputs to the valuation included average oil prices of ~~2016~~$72.03 per barrel, average natural gas prices of $4.31 per thousand cubic feet and discount factors of 20% - 25%. The Company sold part of the Eagle Ford shale undeveloped acreage in September 2018 for ~~total proceeds of $2.1 million and recognized~~$13.7 million. Also included in the loss on sale for the Predecessor period January 1, 2018 through August 13, 2018 is a loss of ~~$1.6~~$2.7 million ~~on these divestitures.~~resulting from a final settlement for a property sale completed in 2012.

(1)Includes direct operating expenses, depreciation, depletion and amortization and exploration expense and excludes interest and general and administrative expense. No depreciation, depletion and amortization expense has been provided for subsequent to the date the assets were designated as held for ~~sale were as follows:~~sale.

~~Unproved~~On July 31, 2018, the Company acquired oil and gas properties ~~are periodically assessed~~in North Louisiana and ~~any impairment~~Texas for $39.3 million. These properties consist of approximately 23,000 gross acres (12,000 net) and include 120 (26.2 net) producing natural gas wells, 49 (14.7 net) which produce from the Haynesville shale. All of the acreage acquired is held by production. Comstock has identified 112 (31.0 net) potential drilling locations on this acreage of which 21 (17.9 net) would be operated by Comstock.

On August 14, 2018, in ~~value is charged to exploration expense. The~~connection with the Jones Contribution, the strategic drilling venture previously entered into by the Company and Arkoma Drilling, LP was terminated and Comstock re-acquired working interests in wells drilled under the joint venture for $17.9 million representing the costs of unproved properties which are determined to be productive are transferred to oil and gas properties and amortized on an equivalent unit-of-production basis. The Company recognized impairments included in exploration expense of $76.4 million and $84.1 million in the three months and nine months ended September 30, 2016, respectively, related to leases that were expiring on certain of its unproved oil and gas properties.paid by Arkoma Drilling, LP.

The Company ~~also~~ assesses the need for an impairment of the capitalized costs for its proved oil and gas properties on a property basis. ~~Accordingly,~~No impairments were recognized to adjust the ~~Company recognized additional impairments~~carrying value of ~~its~~the Company's proved oil and gas properties during any of ~~$0.1 million~~the periods presented. Unproved oil and ~~$24.6 million for the three months~~gas properties are also periodically assessed and ~~nine months ended September 30, 2016, respectively,~~any impairment in value is charged to ~~reduce the carrying value~~expense. The costs of ~~certain~~unproved properties are transferred to ~~their estimated fair value.~~ oil and gas properties and amortized on an equivalent unit-of-production basis as wells are drilled on these properties.

The Company determines the fair values of its oil and gas properties using a discounted cash flow model and proved and ~~risk adjusted~~risk-adjusted probable oil and natural gas reserves. Undrilled acreage can also be valued based on sales transactions in comparable areas. Significant Level 3 assumptions associated with the calculation of discounted future cash flows included in the cash flow model include management's outlook for oil and natural gas prices, production costs, capital expenditures, and future production as well as estimated proved oil and gas reserves and risk-adjusted probable oil and natural gas reserves. Management's oil and natural gas price outlook is developed based on third-party longer-term price forecasts as of each measurement date. The expected future net cash flows are discounted using an appropriate discount rate in determining a property's fair value.

It is reasonably possible that the Company's estimates of undiscounted future net cash flows attributable to its oil and gas properties may change in the future. The primary factors that may affect estimates of future cash flows include future adjustments, both positive and negative, to proved and appropriate risk-adjusted probable oil and gas reserves, results of future drilling activities, future prices for oil and natural gas, and increases or decreases in production and capital costs. As a result of these changes, there may be ~~further~~future impairments in the carrying values of these or other properties.

Goodwill represents the excess of purchase price over fair value of net tangible and identifiable intangible assets related to the Jones Transactions. The Company is not required to amortize goodwill as a charge to earnings; however, the Company is required to conduct an annual review of goodwill for impairment. The Company will perform its first annual review of goodwill impairment starting on October 1, 2019. The Company has goodwill of $349.7 million as of September 30, 2018 that was recorded in connection with the Jones Contribution.

Accrued expenses at September 30, ~~2017~~2018 and December 31, ~~2016~~2017 consist of the following:

Comstock's asset retirement obligations relate to future plugging and abandonment expenses on its oil and gas properties and related facilities disposal. The following table summarizes the changes in Comstock's total estimated liability for such obligations during the ~~nine months ended September 30, 2017 and 2016:~~periods presented:

Comstock periodically uses swaps, floors and collars to hedge oil and natural gas prices and interest rates. Swaps are settled monthly based on differences between the prices specified in the instruments and the settlement prices of futures contracts. Generally, when the applicable settlement price is less than the price specified in the contract, Comstock receives a settlement from the counterparty based on the difference multiplied by the volume or amounts hedged. Similarly, when the applicable settlement price exceeds the price specified in the contract, Comstock pays the counterparty based on the difference. Comstock generally receives a settlement from the counterparty for floors when the applicable settlement price is less than the price specified in the contract, which is based on the difference multiplied by the volumes hedged. For collars, generally Comstock receives a settlement from the counterparty when the settlement price is below the floor and pays a settlement to the counterparty when the settlement price exceeds the cap. No settlement occurs when the settlement price falls between the floor and cap. All of the Company's derivative financial instruments are used for risk management purposes and, by policy, none are held for trading or speculative purposes. Comstock minimizes credit risk to counterparties of its derivative financial instruments through formal credit policies, monitoring procedures, and diversification. The Company is not required to provide any credit support to its counterparties other than cross collateralization with the assets securing its bank credit facility. None of the Company's derivative financial instruments involve payment or receipt of premiums. The Company classifies the fair value amounts of derivative financial instruments as net current or noncurrent assets or liabilities, whichever the case may be, by commodity and counterparty.

All of Comstock's natural gas derivative financial instruments are tied to the Henry Hub-NYMEX price index and all of its crude oil derivative financial instruments are tied to the WTI-NYMEX index price. The Company had the following outstanding derivative financial instruments ~~used~~ for ~~oil and~~ natural gas price risk management at September 30, ~~2017:~~2018:

~~Commodity and Derivative Type~~

	Future Production Period
	Three Months Ending December 31, 2018		Year Ending December 31, 2019		Total
Natural Gas Swap contracts:
Volume (MMbtu)		5,400,000		4,200,000		9,600,000
Average Price per MMbtu		$3.00		$3.00		$3.00
Natural Gas Collar contracts:
Volume (MMbtu)		6,300,000		13,200,000		19,500,000
Price per MMbtu
Average Ceiling		$3.40		$3.40		$3.40
Average Floor		$2.50		$2.50		$2.50
Crude Oil Collar contracts:
Volume (Barrels)		315,000		855,000		1,170,000
Price per Barrel
Average Ceiling		$77.85		$77.98		$77.94
Average Floor		$55.00		$55.00		$55.00

Weighted-Average
Contract Price

Contract Volume
(MMBtu)

~~Contract Period~~

~~Natural Gas Swap Agreements~~

~~$3.38 per MMBtu~~

~~11,655,000~~

~~October 2017 – March 2018~~

None of the Company's derivative contracts were designated as cash flow hedges. The aggregate fair value of the Company's derivative instruments reported in the accompanying consolidated balance sheets by type, including the classification between assets and liabilities, consists of the following:

Type	Consolidated Balance Sheet Location	Fair Value			Gross Amounts Offset in the Consolidated Balance Sheet					Net Fair Value Presented in the Consolidated Balance Sheet
				(in thousands)

Successor Fair Value of Derivative Instruments as of September 30, 2018
Asset Derivatives:
Natural gas price derivatives	Derivative Financial Instruments – current		$18	$		(18		)	$		—
Liability Derivatives:
Natural gas price derivatives	Derivative Financial Instruments – current		$854	$		(18		)			836
Crude oil price derivatives	Derivative Financial Instruments – current		$2,013	$			—					2,013
										$		2,849

Predecessor Fair Value of Derivative Instruments as of December 31, 2017
Asset Derivatives:
Natural gas price derivatives	Derivative Financial Instruments – current		$1,318	$		—			$		1,318

The Company recognized cash settlements and changes in the fair value of its derivative financial instruments as a single component of other income (expenses). ~~The Company recognized a gain of $1.4 million in the three months ended September 30, 2017,~~Gains and ~~$14.6 million and $0.7 million in the nine months ended September 30, 2017 and 2016, respectively,~~losses related to the change in the fair value recognized on the Company's derivative contracts recognized in the consolidated statement of ~~its natural gas swap agreements. No gains or losses attributable to derivative financial instruments~~operations were ~~recognized during the three months ended September 30, 2016.~~ as follows:

Comstock accounts for employee stock-based compensation under the fair value method. Compensation cost is measured at the grant date based on the fair value of the award and is recognized over the award vesting period. The Company recognized ~~$1.7 million and $1.1~~$0.3 million of stock-based compensation expense within general and administrative expenses related to awards of restricted stock and performance stock units ("PSUs") to its employees and directors induring the Successor period August 14, 2018 through September 30, 2018 and $0.8 million during the predecessor period July 1 through August 13, 2018. For the predecessor periods of the three ~~months ended September 30, 2017~~ and 2016, respectively. For the nine months ended September 30, 2017 and 2016, the Company recognized $4.5 million and $3.6 million, respectively, of stock-based compensation expense within general and administrative expenses.

~~During the~~ nine months ended September 30, 2017, the Company recognized $1.7 million and $4.5 million, respectively, of stock-based compensation expense.

During the period July 1, 2018 through August 13, 2018, the Predecessor Company granted ~~500,002~~100,226 shares of restricted stock with a grant date fair value of ~~$5.6~~$0.9 million, or ~~$11.11~~$8.73 per share, to its ~~employees and~~independent directors. The change of control that occurred due to the Jones Contribution resulting in the vesting of all then outstanding restricted stock grants of 904,181 shares.

During the successor period August 14, 2018 through September 30, 2018, the Company granted 422,545 shares of restricted stock with a grant date fair value of $3.7 million, or $8.70 per share, to its employees. The fair value of each restricted share on the date of grant was equal to its market price. ~~As of September 30, 2017, Comstock had 619,867 shares of unvested restricted stock outstanding at a weighted average grant date fair value of $11.14 per share.~~ Total unrecognized compensation cost related to unvested restricted stock grants of ~~$4.7~~$3.5 million as of September 30, ~~2017~~2018 is expected to be recognized over a period of ~~1.9~~2.9 years.

The change of control that occurred due to the Jones Contribution also resulted in the vesting of all then outstanding performance share units at the maximum amount that could be earned, and a total of 1,028,672 shares of common stock were issued to employees.

During the ~~nine months ended~~successor period August 14, 2018 through September 30, ~~2017,~~2018, the Company granted ~~241,814~~335,545 PSUs with a grant date fair value of ~~$4.4~~$4.3 million, or ~~$18.17~~$12.93 per unit, to its ~~employees. As~~employees, all of which were outstanding as of September 30, ~~2017, Comstock had 281,800 PSUs outstanding at a weighted average grant date fair value of $17.12 per unit.~~2018. The number of shares of common stock to be issued related to the PSUs is based on the Company's stock price performance as compared to its peers which could result in the issuance of anywhere from zero to ~~563,600~~671,090 shares of common stock. Total unrecognized compensation cost related to these grants of ~~$3.5~~$4.2 million as of September 30, ~~2017~~2018 is expected to be recognized over a period of ~~2.2~~2.9 years.

On January 1, 2018, the Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). Comstock adopted this standard using the modified retrospective method of adoption, and it applied the ASU only to contracts that were not completed as of January 1, 2018. Upon adoption, there were no adjustments to the opening balance of equity.

Comstock produces oil and natural gas and reports revenues separately for each of these two primary products in its statements of operations. Revenues are recognized upon the transfer of produced volumes to the Company's customers, who take control of the volumes and receive all the benefits of ownership upon delivery at designated sales points. Payment is reasonably assured upon delivery of production. All sales are subject to contracts that have commercial substance, contain specific pricing terms, and define the enforceable rights and obligations of both parties. These contracts typically provide for cash settlement within 25 days following each production month and are cancellable upon 30 days' notice by either party. Prices for sales of oil and natural gas are generally based upon terms that are common in the oil and gas industry, including index or spot prices, location and quality differentials, as well as market supply and demand conditions. As a result, prices for oil and natural gas routinely fluctuate based on changes in these factors. Each unit of production (barrel of crude oil and thousand cubic feet of natural gas) represents a separate performance obligation under the Company's contracts since each unit has economic benefit on its own and each is priced separately according to the terms of the contracts.

Comstock has elected to exclude all taxes from the measurement of transaction prices, and its revenues are reported net of royalties and exclude revenue interests owned by others because the Company acts as an agent when selling crude oil and natural gas, on behalf of royalty owners and working interest owners. Revenue is recorded in the month of production based on an estimate of the Company's share of volumes produced and prices realized. The Company recognizes any differences between estimates and actual amounts received in the month when payment is received. Historically, differences between estimated revenues and actual revenue received have not been significant. The amount of oil or natural gas sold may differ from the amount to which the Company is entitled based on its revenue interests in the properties. The Company did not have any significant imbalance positions at December 31, 2017 or September 30, 2018. Sales of oil and natural gas generally occur at or near the wellhead. When sales of oil and gas occur at locations other than the wellhead, the Company accounts for costs incurred to transport the production to the delivery point as gathering and transportation expenses. The Company has recognized accounts receivable of $61.0 million as of September 30, 2018 from customers for contracts where performance obligations have been satisfied and an unconditional right to consideration exists.

Deferred income taxes are provided to reflect the future tax consequences or benefits of differences between the tax basis of assets and liabilities and their reported amounts in the financial statements using enacted tax rates. The deferred tax provision in the first three months and nine months of 2017 related to adjustments to the valuation allowances on state net operating loss carryforwards. The deferred income tax provision for the first three months and nine months of 2016 related to an increase in the Company's deferred income tax liability resulting from certain state tax law changes enacted during the period. In recording deferred income tax assets, the Company considers whether it is more likely than not that some portion or all of its deferred income tax assets will be realized in the future. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those deferred income tax assets would be deductible. The Company believes that, after considering all the available objective evidence, historical and prospective, with greater weight given to historical evidence, management is not able to determine that it is more likely than not that all of its deferred tax assets will be realized. As a result, the Company established valuation allowances for its deferred tax assets and U.S. federal and state net operating loss carryforwards that are not expected to be utilized due to the uncertainty of generating taxable income prior to the expiration of the carryforward periods.

												Three Months ended September 30,									Nine Months ended September 30,
												Transition Period									Transition Period
		Three Months Ended September 30,						Nine Months Ended September 30,				Successor		Predecessor				Predecessor			Successor		Predecessor			Predecessor
		2017			2016			2017		2016		For the Period from August 14, 2018 through September 30, 2018		For the Period from July 1, 2018 through August 13, 2018				2017			For the Period from August 14, 2018 through September 30, 2018		For the Period from January 1, 2018 through August 13, 2018			2017
		(In thousands)															(In thousands)
Current - State	Current - State	$	18		$	7		$	115	$	36	$	57	$	(22	)		$	18		$	57	$	13		$	115
- Federal	- Federal		—			—			—		—		—		—				—			—		—			—

Deferred - State	Deferred - State		(87	)		(832	)		768		3,687		20		(309	)			(87	)		20		(1,360	)		768
- Federal	- Federal		—			—			—		—		3,863		936				—			3,863		2,412			—
		$	(69	)	$	(825	)	$	883	$	3,723	$	3,940	$	605			$	(69	)	$	3,940	$	1,065		$	883

The difference between the Company's effective tax rate and the ~~35%~~21% federal statutory rate in effect in 2018 and the 35% rate in effect in 2017 is caused by valuation allowances on deferred taxes and state taxes. The impact of these items varies based upon the Company's projected full year loss and the jurisdictions that are expected to generate the projected losses.

The difference between the federal statutory rate ~~of 35%~~ and the effective tax rate ~~on the income (loss) before income taxes~~ is due to the following:

	Three Months ended September 30,										Nine Months ended September 30,
	Transition Period										Transition Period
	Successor			Predecessor				Predecessor			Successor			Predecessor			Predecessor
	For the Period from August 14, 2018 through September 30, 2018			For the Period from July 1, 2018 through August 13, 2018				2017			For the Period from August 14, 2018 through September 30, 2018			For the Period from January 1, 2018 through August 13, 2018			2017
							(In thousands)
Tax at statutory rate		21.0	%		21.0	%			35.0	%		21.0%			21.0	%		35.0	%
Tax effect of:
State income taxes, net of federal benefit		2.0			4.5				3.8			2.0			3.9			4.1
Valuation allowance on deferred tax assets		(0.6	)		(21.1	)			(37.8	)		(0.6	)		(24.1	)		(39.2	)
Nondeductible stock-based compensation		(0.2	)		(0.7	)			(0.7	)		(0.2	)		(0.7	)		(1.1	)
Other		—			(7.4	)			—			—			(1.3	)		(0.1	)
Effective tax rate		22.2	%		(3.7	)%			0.3	%		22.2	%		(1.2	)%		(1.3	)%

The Tax Cuts and Jobs Act, which was enacted on December 22, 2017, reduced the corporate income tax rate effective January 1, 2018 from 35% to 21%. Among the other significant tax law changes that potentially affect the Company are the elimination of the corporate alternative minimum tax ("AMT"), changes that require operating losses incurred in 2018 and beyond be carried forward indefinitely with no carryback up to 80% of taxable income in a given year, and limitations on the deduction for interest expense incurred in 2018 or later for amounts in excess of 30% of its adjusted taxable income (defined as taxable income before interest and net operating losses). For tax years beginning before January 1, 2022, the adjusted taxable income for these purposes is also adjusted to exclude the impact of depreciation, depletion and amortization. The Tax Cuts and Jobs Act preserved deductibility of intangible drilling costs for federal income tax purposes, which allows the Company to deduct a portion of drilling costs in the year incurred and minimizes current taxes payable in periods of taxable income. At September 30, 2018, the Company has not completed its accounting for the tax effects of enactment of the Tax Cuts and Jobs Act; however, it has made reasonable estimates of the effects on its existing deferred tax balances. The Company has remeasured certain deferred federal tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The provisional amount recognized at December 31, 2017 related to the remeasurement of its deferred federal tax balance was $140.4 million, which was subject to a valuation allowance. The Tax Cuts and Jobs Act also repealed the AMT for tax years beginning on or after January 1, 2018 and provides that existing AMT credit carryforwards can be utilized to offset federal taxes for any taxable year. In addition, 50% of any unused AMT credit carryforwards can be refunded during tax years 2018 through 2020. The Company reclassified $19.1 million to a non-current receivable at December 31, 2017 representing the amount of AMT that is now refundable through 2021. The Company is still analyzing certain aspects of the Tax Cuts and Jobs Act, and refining its calculations, which could potentially affect the measurement of those balances or potentially give rise to new deferred tax amounts. Comstock's estimates may also be affected in the future as the Company gains a more thorough understanding of the Tax Cuts and Jobs Act, and how the individual states are implementing this new law.

The shares of common stock issued as a result of the Jones Transaction triggered an ownership change under Section 382 of the Internal Revenue Code. As a result, Comstock's ability to use net operating losses ("NOLs") to reduce taxable income is generally limited to an annual amount based on the fair market value of its stock immediately prior to the ownership change multiplied by the long-term tax-exempt interest rate. The Company's NOLs are estimated to be limited to $3.3 million a year as a result of this limitation. In addition to this limitation, IRC Section 382 provides that a corporation with a net unrealized built-in gain immediately before an ownership change may increase its limitation by the amount of recognized built-in gain recognized during a recognition period, which is generally the five-year period immediately following an ownership change. Based on the fair market value of the Company's common stock immediately prior to the ownership change, Comstock believes that it has a net unrealized built-in gain which will increase the Section 382 limitation during the five-year recognition period.

NOLs that exceed the Section 382 limitation in any year continue to be allowed as carry forwards until they expire and can be used to offset taxable income for years within the carryover period subject to the limitation in each year. NOLs incurred prior to 2018 generally have a 20-year life until they expire. NOLs generated in 2018 and after would be carried forward indefinitely. Comstock's use of new NOLs arising after the date of an ownership change would not be affected by the 382 limitation. If the Company does not generate a sufficient level of taxable income prior to the expiration of the pre-2018 NOL carry forward periods, then it will lose the ability to apply those NOLs as offsets to future taxable income.

The Company's federal income tax returns for the years subsequent to December 31, ~~2012,~~2014 remain subject to examination. The Company's income tax returns in major state income tax jurisdictions remain subject to examination for various periods subsequent to December 31, ~~2011.~~2012. The Company currently believes that all other significant filing positions are highly certain and that all of its other significant income tax positions and deductions would be sustained under audit or the final resolution would not have a material effect on the consolidated financial statements. Therefore, the Company has not established any significant reserves for uncertain tax positions.

Future use of the Company's federal and state net operating loss carryforwards may be limited in the event that a cumulative change in the ownership of Comstock's common stock by more than 50% occurs within a three-year period. Such a change in ownership could result in a substantial portion of the Company's net operating loss carryforwards being eliminated or becoming restricted. It is highly likely that a change in ownership that would result from the future conversion of the Company's convertible notes would result in limits on the future use of its net operating loss carryforwards.

The Company holds or has held certain ~~items~~financial assets and liabilities that are required to be measured at fair value. These include cash and cash equivalents held in bank accounts and derivative financial instruments in the form of oil and natural gas price swap agreements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-level hierarchy is followed for disclosure to show the extent and level of judgment used to estimate fair value measurements:

Level 1 — Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date.

Level 2 — Inputs used to measure fair value, other than quoted prices included in Level 1, are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.

Level 3 — Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management's estimates of market participant assumptions.

The Company's ~~valuation of~~ cash and cash equivalents valuation is abased on Level 1 ~~measurement.~~measurements. The Company's oil and natural gas price swap agreements ~~are~~and its natural gas price collars were not traded on a public ~~exchange. Their~~exchange, and their value is determined utilizing a discounted cash flow model based on inputs that are readily available in public markets and, accordingly, the valuation of these swap agreements, is categorized as a Level 2 measurement.

~~The following table summarizes~~ There are no financial assets or liabilities accounted for at fair value as of September 30, ~~2017:~~2018 that are a Level 3 measurement.

At September 30, 2018, the Company had a liability of $2.8 million recorded for the fair value of its oil and natural gas swaps and collars. At December 31, 2017, the Company had assets recorded for the fair value of its natural gas price swap agreements of $1.3 million. There were no offsetting swap positions in 2018 or 2017. The change in fair value of these natural gas swaps and collars was recognized as a gain or loss and included as a component of other income (expense).

As of September 30, ~~2017,~~2018, the Company's ~~other financial instruments, comprised solely of its~~ fixed rate debt had a carrying value of ~~$1.1 billion~~$816.3 million and a fair value of ~~$1.1 billion.~~$850.0 million. The fair ~~market~~ value of the Company's fixed rate debt was based on quoted prices as of September 30, ~~2017,~~2018, a Level 2 measurement. The fair value of the floating rate debt outstanding approximated its carrying value, a Level 2 measurement.

Basic earnings per share is determined without the effect of any outstanding potentially dilutive securities and diluted earnings per share is determined with the effect of any outstanding securities that are potentially dilutive. Unvested share-based payment awards containing nonforfeitable rights to dividends are considered to be participating securities and included in the computation of basic and diluted earnings per share pursuant to the two-class method. PSUs represent the right to receive a number of shares of the Company's common stock that may range from zero to up to two times the number of PSUs granted on the award date based on the achievement of certain performance measures during a performance period. The number of potentially dilutive shares related to PSUs is based on the number of shares, if any, which would be issuable at the end of the respective period, assuming that date was the end of the contingency period. ~~Common stock warrants represent the right to convert the warrants into common stock at an exercise price of $0.01 per share.~~ The treasury stock method is used to measure the dilutive effect of ~~outstanding PSUs and common stock warrants.~~PSUs. The shares that would behave been issuable upon exercise of the conversion rights ~~contained~~contains in the Predecessor Company's convertible debt for each period are based on the if-converted method for computing potentially dilutive shares of common stock that could be issued upon conversion. None of the Company's participating securities participate in losses and as such are excluded from the computation of basic earnings per share during periods of net losses.

Basic and diluted ~~loss~~income (loss) per share ~~for the three months and nine months ended September 30, 2017 and 2016~~ were determined as follows:

Basic and diluted per share amounts are the same for the predecessor periods due to the net loss in those periods.

At September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, 422,545 and 619,867 ~~and 354,986~~ shares of restricted stock, respectively, are included in common stock outstanding as such shares have a nonforfeitable right to participate in any dividends that might be declared and have the right to vote on matters submitted to the Company's stockholders.

Weighted average shares of unvested restricted stock outstanding ~~during the three months and nine months ended September 30, 2017 and 2016 which were excluded from the computation of the loss per share~~ were as follows:

~~For the three months ended September 30, 2017 and 2016, all stock options,~~All unvested PSUs, common stock warrants and contingently issuable shares related to the convertible debt were anti-dilutive to earnings and excluded from weighted average shares used in the computation of earnings per share in all periods presented. Options to purchase common stock, warrants exercisable into common stock ~~PSUs that were outstanding~~ and contingently issuable shares related to the convertible debt that ~~were excluded as anti-dilutive from~~would be dilutive in the ~~determination~~computation of ~~diluted~~ earnings per share ~~are~~were as follows:

	Three Months ended September 30,							Nine Months ended September 30,
	Successor		Predecessor			Predecessor		Successor		Predecessor		Predecessor
	For the Period from August 14, 2018 through September 30, 2018		For the Period from July 1, 2018 through August 13, 2018			2017		For the Period from August 14, 2018 through September 30, 2018		For the Period from January 1, 2018 through August 13, 2018		2017
					(In thousands except per share/unit data)
Weighted average warrants for common stock		15		42			415		15		142		479
Weighted average exercise price per share	$	0.01	$	0.01		$	0.01	$	0.01	$	0.01	$	0.01

Weighted average PSUs		315		514			303		315		476		281
Weighted average grant date fair value per unit	$	12.93	$	13.83		$	17.12	$	12.93	$	13.83	$	17.12

Weighted average contingently convertible shares		—		40,631			37,624		—		39,819		36,676
Weighted average conversion price per share	$	—	$	12.32		$	12.32	$	—	$	12.32	$	12.32

Three Months Ended
September 30,


Nine Months Ended
September 30,

2017


2016


2017


2016

(In thousands except per share/unit data)

Weighted average stock options

—

12



—

12

Weighted average exercise price per share

$
—

$
166.10

$
—

$
166.10

Weighted average warrants for common stock

415

377

479

127

Weighted average exercise price per share

$
0.01

$
0.01

$
0.01

$
0.01

Weighted average PSUs

303

135

281

137

Weighted average grant date fair value per unit

$
17.12

$
22.09

$
17.12

$
22.09

Weighted average contingently convertible shares

37,624

9,770

36,676

3,257

Weighted average conversion price per share

$
12.32

$
12.32

$
12.32

$
12.32

All restricted shares, warrants, PSUs and potentially dilutive shares from conversion of senior notes in the Predecessor periods presented were anti-dilutive and excluded from the computation of loss per share.

Supplementary Information With Respect to the Consolidated Statements of Cash Flows

For the purpose of the consolidated statements of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Cash payments made for interest and income taxes for the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively, were as follows:

Interest paid in-kind related to the Predecessor Company's convertible notes was ~~$9.6 million and $2.6~~$25.0 million during the ~~three months ended September 30, 2017~~period January 1, 2018 through August 13, 2018 and ~~2016, respectively and~~ $28.2 ~~million and $2.6~~ million during the nine months ended September 30, ~~2017 and 2016, respectively.~~2017.

In January 2017, the FASB issued Accounting Standards Update No. 2017-04 (ASU 2017-04) “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates step two of the goodwill impairment test and specifies that goodwill impairment should be measured by comparing the fair value of a reporting unit with its carrying amount. ASU 2017-04 is effective for annual or interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019 and early adoption is permitted. The Company has initially recognized goodwill in its financial statements for the quarter ended September 30, 2018 and it will assess the impact of ASU 2017-04 on its financial statements when it performs its initial annual impairment assessment.

On January 1, ~~2017,~~2018, the Company adopted ASU ~~No. 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting~~ ("ASU 2016-09"). The adoption of this new standard did not have a material impact on the Company's financial statements. The Company is accounting for forfeitures in compensation cost as they occur, and it is applying the prospective transition method for presentation of the income tax effects of vested equity awards in its consolidated statements of cash flows.

~~In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")~~ 2014-09,~~Revenue from Contracts with Customers (Topic 606)~~ ~~("ASU 2014-09"),~~ which supersedes nearly all existing revenue recognition guidance under existing generally accepted accounting principles. This new standard is based upon the principal that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from ~~customer contracts. ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted beginning~~contracts with periods after December 15, 2016 and entities have the option of using either a full retrospective or modified approach to adopt ASU 2014-09. The Company is currently reviewing its primary oil and natural gas marketing agreements in order to assess the impact of adoption. At this time, adoptingcustomers. Comstock adopted this standard is not expected to have a material impact on the Company's financial statements because recognition of revenue is not expected to materially change under the new standard, since most of the Company's revenue will continue to be recognized as production is delivered. However, the Company is still evaluating the ultimate impact of this accounting standard on its consolidated results of operations, financial position, cash flows and financial disclosures. This evaluation will continue throughout 2017, and the Company will adopt this new standard in the first quarter of 2018. The Company currently expects to applyusing the modified retrospective method of adoption ~~for this new standard.~~and it applied the ASU only to contracts that were not completed as of January 1, 2018. Upon adoption, there were no adjustments to the opening balance of equity and the Company does not expect the standard to have a significant effect on its results of operations, liquidity or financial position.

In February 2016, the FASB issued ASU No. 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 requires lessees to include most leases on their balance sheets, but recognize lease costs in their financial statements in a manner similar to accounting for leases prior to ASC 2016-02. ASU 2016-02 is effective for annual periods ending after December 15, 2018 and interim ~~period~~periods thereafter. Early adoption is permitted. The Company ~~is currently evaluating the new guidance~~has analyzed its major contracts for indications that they contain a lease, and ~~anticipates that certain operating~~has identified some leases that ~~it has in place~~ will need to be reflected as an asset and a liability in its consolidated balance sheet. The Company ~~has not yet determined which~~presently intends to use the modified retrospective method of adoption ~~it will apply~~ for this new ~~standard.~~standard and is evaluating the applicability of the available transition practical expedients as it finalizes its plans for adoption of ASC 2016-02.

In connection with the Jones Contribution, the Company completed a series of refinancing transactions in which it completed a private placement of $850.0 million of new unsecured 9¾% Senior Notes due 2026 and entered into a new bank credit facility with an initial borrowing base of $700.0 million. The Company utilized the net proceeds from the notes offering, $450.0 million of borrowings under the new bank credit agreement and cash on hand to retire all of its other then-outstanding senior secured and unsecured notes.

The senior notes placement closed on August 3, 2018. Interest on the ~~10% Senior Secured Toggle Notes~~notes is payable at an annual rate of 9¾% on ~~March~~February 15 and ~~September~~August 15 and the notes mature on ~~March~~August 15, 2020. The Company has the option to pay up to $75.0 million of accrued interest by issuing additional notes. To the extent that interest is paid in kind, the interest rate increases to 12¼% only for that interest payment and would result in up to an additional $91.9 million of notes outstanding.

Interest on the 7¾% Convertible Second Lien PIK Notes is payable on April 1 and October 1 and these notes mature on April 1, 2019. Interest on the 9½% Convertible Second Lien PIK Notes is payable on September 15 and December 15 and these notes mature on September 15, 2020. Interest on the convertible notes is only payable in kind. Each series of the convertible notes is convertible, at the option of the holder, into 81.2 shares of the Company's common stock for each $1,000 of principal amount of notes. The convertible notes will mandatorily convert into shares of common stock following a 15 consecutive trading day period during which the daily volume weighted average price of the Company's common stock is equal to or greater than $12.32 per share. $9.9 million of principal amount of the convertible notes plus accrued interest thereon were converted into 826,327 shares of common stock during the nine months ended September 30, 2017.2026.

On September 6, 2016, Comstock completed a debt exchange offer with the holders of approximately 98% of the Company's outstanding senior notes. Transaction costs of $4.4 million related to the exchange were recognized in the three months ended September 30, 2016 as a reduction to the gain on extinguishment of debt which is reported as a component of other income (loss). The exchange of the 2019 Senior Notes and the 2020 Senior Notes was accounted for as a debt extinguishment due to the substantial difference in the terms of the exchanged notes. A gain of $106.2 million on extinguishment of debt was recognized on this exchange representing the difference between the fair market value of the then issued 7¾% Convertible Second Lien PIK Notes and the 9½% Convertible Second Lien PIK Notes convertible second lien notes and the then carrying amount of the 2019 Notes and the 2020 Notes that were exchanged. Transaction costs of $6.5 million related to these exchanges were reflected as debt issuance costs which are being amortized to interest expense over the life of the notes.

~~During the nine months ended September 30, 2016,~~August 14, 2018, the Company retired $87.5 million in principal amount of the 2019 Notes and $19.8 million of the 2020 Notes in exchange in the aggregate for the issuance of 2,748,403 shares of common stock and $3.5 million in cash. A gain of $89.6 million was recognized on the exchanges and purchases of the 2019 Notes and the 2020 Notes during the nine months ended September 30, 2016. The gain is included in the net gain on extinguishment of debt for the difference between the market value of the stock on the closing date of the exchange and the net carrying value of the debt and the related net premium and net debt issuance costs.

~~Comstock has~~entered into a ~~$50.0 million revolving~~new bank credit facility with Bank of Montreal, as administrative agent, and ~~Bank~~the participating banks. The bank credit facility is subject to a borrowing base, which is initially $700.0 million and is re-determined on a semi-annual basis and upon the occurrence of ~~America, N.A. that matures March 4, 2019.~~certain other events, and will mature on August 14, 2023. As of September 30, ~~2017, the Company did not have any~~2018, there were $450.0 million of borrowings outstanding under the revolving credit facility. ~~Indebtedness under the revolving credit facility is guaranteed by all of the Company's subsidiaries and is secured by substantially all of Comstock's and its subsidiaries' assets.~~ Borrowings under the revolving credit facility bear interest, at Comstock's option, at either (1) LIBOR plus 2.5% or (2) the base rate (which is the higher of the administrative agent's prime rate, the federal funds rate plus 0.5% or 30 day LIBOR plus 1.0%) plus 1.5%. A commitment fee of 0.5% per annum is payable quarterly on the unused credit line. The revolving credit facility contains covenants that, among other things, restrict the payment of cash dividends and repurchases of common stock, limit the amount of additional debt that Comstock may incur and limit the Company's ability to make certain loans, investments and divestitures. The only financial covenants are the maintenance of a current ratio, including availability under the revolving credit facility, of at least 0.9 to 1.0 which increases to 1.0 to 1.0 on March 31, 2018 and the maintenance of an asset coverage ratio of proved developed reserves to amounts outstanding under the credit facility of at least 2.5 to 1.0. The Company was in compliance with these covenants as of September 30, 2017.

~~All of the Company's subsidiaries guarantee~~ the bank credit facility the 10% Senior Secured Toggle Notes, the 7¾% Convertible Second Lien PIK Notes, the 9½% Convertible Second Lien PIK Notes, and the other outstanding senior notes. The bank credit facility, the 10% Senior Secured Toggle Notes and the convertible notes are secured by ~~liens on~~ substantially all of the assets of the Company and its subsidiaries. ~~The allocation of proceeds related~~and bear interest at the Company's option, at either LIBOR plus 2.0% to ~~the liens~~3.0% or a base rate plus 1.0% to 2.0%, in each case depending on the ~~Company's assets are governed by intercreditor agreements granting priority~~utilization of the borrowing base. The Company also pays a commitment fee of 0.375% to 0.5% on the unused borrowing base. The bank credit ~~facility. Proceeds from liens on~~facility places certain restrictions upon the ~~convertible notes~~Company's, and its restricted subsidiaries', ability to, among other things, incur additional indebtedness, pay cash dividends, repurchase common stock, make certain loans, investments and divestitures and redeem the new senior notes. The only financial covenants are ~~also subject~~the maintenance of a leverage ratio of less than 4.0 to 1.0 and a current ratio of at least 1.0 to 1.0 beginning with the ~~priority of the 10% Senior Secured Toggle Notes.~~three months ended December 31, 2018.

At the annual meeting of stockholders held August 10, 2018 the stockholders approved an increase in the authorized capital for the Company to a total of 160,000,000 shares, of which 155,000,000 shares are common stock, par value $0.50, and 5,000,000 shares, are preferred stock, par value $10.00. Upon the closing of the Jones Contribution, the Company issued 88,571,429 shares of common stock to the Jones Partnerships.

As of September 30, ~~2017~~2018, all of the ~~Company had~~previously outstanding warrants ~~outstanding~~ to purchase ~~415,087~~ shares of common stock at an exercise price of $0.01 per ~~share.~~share were exercised or expired. Warrants for 402,708 and 246,793 shares of common stock were exercised during the nine months ended September 30, 2018 and 2017, respectively. The remaining 11,955 warrants expired without being exercised on September ~~30, 2017.~~7, 2018.

From time to time, Comstock is involved in certain litigation that arises in the normal course of its operations. The Company records a loss contingency for these matters when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company does not believe the resolution of any of these matters will have a material effect on the Company's financial position or results of operations.

The Company has entered into natural gas transportation and treating agreements through July 2019. Maximum commitments under these transportation agreements as of September 30, ~~2017~~2018 totaled ~~$2.9~~$1.0 million. As of September 30, ~~2017,~~2018, the Company had commitments for contracted drilling services through ~~April 2018~~September 2019 of ~~$9.1~~$16.5 million.

On October 31, 2017, the Company adopted a plan to divest of its South Texas oil properties in the Eagle Ford shale. These properties have a net book value of approximately $238.0 million as of September 30, 2017. This decision was based upon a strategic assessment of Comstock's business plans including current and projected future economic conditions in the crude oil markets. The Company intends to sell these assets through a competitive bid process, and has engaged a financial advisor to facilitate the potential sale. The Company plans to use the proceeds from the divestiture to reduce its long-term debt and enhance its liquidity.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains forward-looking statements that involve risks and uncertainties that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those anticipated in our forward-looking statements due to many factors. 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 filed on Form 10-K for the year ended December 31, ~~2016.~~2017.

We are presenting Successor Company's and Predecessor Company's results in Management's Discussion and Analysis of Results of Operations due to the business combination that we consummated on August 14, 2018 wherein we received certain oil and gas properties in the Bakken Shale in exchange for a controlling interest of our common stock to the Jerry Jones and certain of his family members. The results of the Successor and the Predecessor are not comparable, and our discussion of operating results accordingly does not focus on comparisons to prior periods.

Three Months Ended
September 30,


Nine Months Ended
September 30,

2017


2016


2017


2016

(In thousands, except per unit amounts)

Net Production Data:







Natural gas (Mmcf)

19,987



14,074



51,307

41,418

Oil (Mbbls)

229



320



737

1,092

Natural gas equivalent (Mmcfe)

21,362



15,997



55,730

47,971

Revenues:







Natural gas sales

$
56,164


$
36,852


$
147,541

$
87,726

Oil sales

10,647



13,478



34,542

39,482

Total oil and gas sales

$
66,811


$
50,330


$
182,083

$
127,208


Expenses:







Production taxes

$
1,490


$
1,556


$
3,730

$
4,069

Gathering and transportation

4,755



3,829



12,428

12,219

Lease operating⁽¹⁾

9,359



12,301



28,681

38,249

Exploration expense

—



76,391



—

84,144

Depreciation, depletion and amortization

32,807



37,545



93,009

112,410


Average Sales Price:







Natural gas (per Mcf)

$
2.81


$
2.62


$
2.88


$
2.12

Oil (per Bbl)

$
46.45


$
42.07


$
46.86


$
36.15

Average equivalent (Mcfe)

$
3.13


$
3.15


$
3.27


$
2.65


Expenses ($ per Mcfe):







Production taxes

$
0.07


$
0.10


$
0.07


$
0.08

Gathering and transportation

$
0.22


$
0.24


$
0.22


$
0.25

Lease operating⁽¹⁾

$
0.44


$
0.77


$
0.51


$
0.81

Depreciation, depletion and amortization⁽²⁾

$
1.52


$
2.33


$
1.65


$
2.33

	Three Months ended September 30,							Nine Months ended September 30,
	Transition Period							Transition Period
	Successor		Predecessor			Predecessor		Successor		Predecessor		Predecessor
	For the Period from August 14, 2018 through September 30, 2018		For the Period from July 1, 2018 through August 13, 2018			2017		For the Period from August 14, 2018 through September 30, 2018		For the Period from January 1, 2018 through August 13, 2018		2017
					(In thousands except per unit amounts)
Net Production Data:
Natural gas (Mmcf)		14,098		11,876			19,987		14,098		55,240		51,307
Oil (Mbbls)		542		7			229		542		287		737
Natural gas equivalent (Mmcfe)		17,351		11,919			21,362		17,351		56,963		55,730
Revenues:
Natural gas sales	$	36,393	$	32,089		$	56,164	$	36,393	$	147,897	$	147,541
Oil sales		33,730		499			10,647		33,730		18,733		34,542
Total oil and gas sales	$	70,123	$	32,588		$	66,811	$	70,123	$	166,630	$	182,083
Expenses:
Production taxes	$	4,051	$	707		$	1,490	$	4,051	$	3,659	$	3,730
Gathering and transportation	$	3,450	$	3,109		$	4,755	$	3,450	$	11,841	$	12,428
Lease operating⁽¹⁾	$	7,016	$	3,418		$	9,359	$	7,016	$	21,139	$	28,681
Depreciation, depletion and amortization	$	17,820	$	14,082		$	32,783	$	17,820	$	68,032	$	93,009
Average Sales Price:
Natural gas (per Mcf)	$	2.58	$	2.70		$	2.81	$	2.58	$	2.68	$	2.88
Oil (per Bbl)	$	66.21	$	69.42		$	46.45	$	66.21	$	65.23	$	46.86
Average equivalent (Mcfe)	$	4.04	$	2.73		$	3.13	$	4.04	$	2.93	$	3.27
Expenses ($ per Mcfe):
Production taxes	$	0.23	$	0.06		$	0.07	$	0.23	$	0.06	$	0.07
Gathering and transportation	$	0.20	$	0.26		$	0.22	$	0.20	$	0.21	$	0.22
Lease operating⁽¹⁾	$	0.41	$	0.29		$	0.44	$	0.41	$	0.37	$	0.51
Depreciation, depletion and amortization⁽²⁾	$	1.02	$	1.17		$	1.52	$	1.02	$	1.18	$	1.65

~~Our~~During the successor period comprising 48 days from August 14, 2018 to September 30, 2018, we had $70.1 million in total oil and ~~natural~~ gas ~~sales grew 33% in~~sales. Natural gas production of 14.1 Bcf (294 MMcf per day) was sold at an average price of $2.58 per Mcf. Oil production of 542,200 barrels (11,300 barrels per day) was sold at an average price of $66.21 per barrel. During the ~~third quarter of 2017~~predecessor period comprising 42 days from July 1, 2018 to ~~$66.8 million from $50.3~~August 13, 2018, we had $32.6 million in ~~the third quarter of 2016, primarily due to the growth in our natural~~total oil and gas sales. Natural gas production driven by our Haynesville shale drilling program and higher oil and natural gas prices. Natural gas sales in the third quarter increased 52% to $56.2 million due to higher natural gas prices and production growth. Our natural gas production increased by 42% and our realized natural gasof 11.9 Bcf (270 MMcf per day) was sold at an average price ~~increased by 7% as compared to~~of $2.70 per Mcf.

the third quarter of 2016. Oil sales in the third quarter of 2017 decreased by 21% to $10.6 million from the third quarter of 2016 due to a 28% decrease in our oil production which was offset in part by a 10% increase in oil prices. The decline in oil production is attributable to the lack of drilling activity in our Eagle Ford shale properties in South Texas.

In the first nine months of 2017, our oil and natural gas sales increased by $54.9 million (43%) to $182.1 million from $127.2 million in the first nine months of 2016. Natural gas sales in the first nine months of 2017 increased by $59.8 million (68%) from 2016 while oil sales decreased by $4.9 million (13%) from 2016. Our natural gas production increased by 24% from 2016 and our realized natural gas price increased by 36%. The decrease in oil sales is attributable to the 33% decline in our production which was partially offset by the 30% increase in realized oil prices.

We utilize crude oil collars and natural gas price swaps and collars to manage our exposure to oil and natural gas prices and protect returns on investment from our drilling activities. ~~Gains~~We had a loss related to our natural gas derivative financial instruments ~~were $1.4~~of $2.0 million ~~for~~during the ~~three months ended~~period August 14, 2018 through September 30, 2017 and $14.6 million and $0.7 million for the nine months ended September 30, 2017 and 2016, respectively. We had no gains from derivative financial instruments in the three months ended September 30, 2016.2018. The following table presents our natural gas prices before and after the effect of cash settlements of our derivative financial instruments:

									Three Months ended September 30,						Nine Months ended September 30,
									Transition Period						Transition Period
	Three Months Ended September 30,				Nine Months Ended September 30,				Successor		Predecessor		Predecessor		Successor		Predecessor		Predecessor
	2017		2016		2017		2016		For the Period from August 14, 2018 through September 30, 2018		For the Period from July 1, 2018 through August 13, 2018		2017		For the Period from August 14, 2018 through September 30, 2018		For the Period from January 1, 2018 through August 13, 2018		2017
Average Realized Natural Gas Price:
Natural gas, per Mcf	$	2.81	$	2.62	$	2.88	$	2.12	$	2.58	$	2.70	$	2.81	$	2.58	$	2.68	$	2.88
Cash settlements of derivative financial instruments, per Mcf		0.17		—		0.10		0.05		0.01		0.03		0.17		0.01		0.05		0.10
Price per Mcf, including cash settlements of derivative financial instruments	$	2.98	$	2.62	$	2.98	$	2.17	$	2.59	$	2.73	$	2.98	$	2.59	$	2.73	$	2.98

Our production taxes decreased $0.1 million to $1.5 million for the third quarter of 2017 from $1.6 million in the third quarter of 2016 despite the increase in sales. Production taxes of $3.7 million for the first nine months of 2017 decreased $0.4 million as compared with production taxes of $4.1 million ~~for~~during the ~~first nine months~~period August 14, 2018 through September 30, 2018 were mainly comprised of ~~2016. The decrease is mainly due~~$3.2 million on our Bakken shale production and $0.9 million on our other production. Our production taxes of $0.7 million during the period July 1, 2018 through August 13, 2018 primarily relate to our ~~lower oil sales. Much of the increase in~~ natural gas ~~sales is attributable to new wells drilled which are initially exempt from production taxes.~~production.

Gathering and transportation costs of $3.5 million and $3.1 million for the ~~third quarter of 2017 increased $1.0 million to $4.8 million as compared to $3.8 million in~~period August 14, 2018 through September 30, 2018 and the ~~third quarter of 2016. Gathering and~~period July 1, 2018 through August 13, 2018, respectively, mainly reflect the transportation costs for our Haynesville/Bossier shale production to transport and treat that gas from the ~~first nine months of 2017 increased $0.2 million~~wellhead to ~~$12.4 million as compared to $12.2 million for the first nine months of 2016. Our gathering and transportation costs have increased primarily as~~ a ~~result of our higher~~delivery point into a natural gas ~~production.~~sales delivery point.

For the period August 14, 2018 through September 30, 2018, our lease operating expenses of $7.0 million primarily include $3.3 million related to our Bakken shale properties and $3.7 million related to our other properties. Our lease operating expense of ~~$9.4 million~~$0.41 per Mcfe produced during this period reflects the average lifting cost of $4.32 per barrel for our Bakken shale properties and $0.29 per Mcfe for our natural gas properties. During the ~~first quarter of 2017 decreased $2.9 million (24%) from~~period July 1, 2018 through August 13, 2018, our lease operating ~~expense~~expenses of ~~$12.3~~$3.4 million ~~for~~primarily relate to our natural gas production from the ~~third quarter of 2016 despite the increase in production. This decrease primarily reflects lower costs associated with our~~ Haynesville ~~shale properties as well as the divestiture of certain high lifting cost properties in 2016.~~shale. Our lease operating expense for the first nine months of 2017 of $28.7 million decreased $9.5 million or 25% from our lease operating expense of $38.2 million for the first nine months of 2016. Our lease operating expense of $0.51cost during this period was $0.29 per ~~Mcfe produced for the nine months ended September 30, 2017 was $0.30 per Mcfe lower than the lease operating expense of $0.81 per Mcfe for the same period in 2016.~~

~~Exploration costs of $76.4 million and $84.1 million in the three and nine months ended September 30, 2016, respectively, related to the impairments of certain unevaluated leases.~~Mcfe.

Depreciation, depletion and amortization (“("DD~~&A”~~&A") ~~decreased $4.7~~of $17.8 million ~~(13%)~~($1.02 per Mcfe) during the period August 14, 2018 through September 30, 2018 reflects the combined rate for the Bakken Shale properties and for the value of our Haynesville/Bossier shale properties that was adjusted to ~~$32.8 million in~~fair value as part of our accounting for the ~~third quarter of 2017 from $37.5 million in~~Jones Transactions. During the ~~third quarter of 2016. Our~~period July 1, 2018 through August 13, 2018, DD&A was $14.1 million or $1.17 per equivalent Mcf produced decreased $0.81 (35%) to $1.52 for the three months ended September 30, 2017 from $2.33 for the three months ended September 30, 2016. DD&A for the first nine months of 2017 of $93.0 million decreased by $19.4 million (17%) from DD&A expense of $112.4 million for the nine months ended September 30, 2016. For the first nine months of 2017, our per unit DD&A rate of $1.65 decreased $0.68 (29%) from our DD&A rate of $2.33 for the first nine months of 2016. The lower rates in 2017 reflect the increase in production from our lower cost Haynesville shale properties.Mcfe.

General and administrative expenses, which are reported net of overhead reimbursements, ~~increased to $6.2~~were $3.3 million and $3.0 million for the third quarter of 2017 from $4.2 million in the third quarter of 2016. Included in general and administrative expenses are stock-based compensation of $1.7 million and $1.1 million for the three months endedperiod August 14, 2018 through September 30, ~~2017~~2018 and ~~2016,~~the period July 1, 2018 through August 13, 2018, respectively. ~~For the first nine months of 2017, general and administrative expenses of $19.1 million increased $3.7 million (24%) from general and~~

~~administrative expenses for the nine months ended September 30, 2016 of $15.4 million.~~ Included in general and administrative expense is stock-based compensation of ~~$4.5~~$0.3 million and ~~$3.6~~$0.8 million, respectively in these same periods.

Interest expense of $14.8 million for the ~~nine months ended~~period August 14, 2018 through September 30, ~~2017~~2018 includes interest on our newly issued 9¾% senior secured notes and ~~2016, respectively. The increase in 2017 primarily relates to higher compensation costs for~~ our ~~employees.~~

~~We assess the need for impairment~~new bank credit facility. All of the ~~capitalized costs~~Company's other previously outstanding debt was retired on August 14, 2018. Interest expense for ~~our oil~~the period July 1, 2018 through August 13, 2018 of $22.1 million reflects the higher interest rates and ~~gas properties on a property basis. We recognized impairment charges of $24.6 million on our oil~~debt discount and gas properties during the nine months ended September 30, 2016 which included an impairment of $20.8 million to reduce the carrying value of our South Texas natural gas properties classified as assets held for sale. We also had a net loss on sale of oil and gas properties of $1.0 million in the three and nine months ended September 30, 2017 that was primarilydebt cost amortization associated with the sale of several non-operated properties. The net loss on sale of oil and gas properties of $14.1 million for the first nine months of 2016 reflected the sale of certain oil and gas properties and a $13.2 million adjustment to reduce the carrying value of our ~~assets held for sale.~~

Interest expense increased $6.4 million to $37.6 million for the third quarter of 2017 from interest expense of $31.2 million in the third quarter of 2016. Interest expense increased $17.2 million to $107.3 million for the first nine months of 2017 from interest expense of $90.1 million in the first nine months of 2016. The increase in interest expense mainly reflects the amortization of the debt discounts recognized as a result of the gain recognized on debt exchange that we completed in September 2016 and the amortization of costs incurred on the exchange. These increases were partially offset by lower interest expense as a result of the reduction in the principal amount of our debtthen outstanding ~~due to our debt reduction program in 2016.~~

During the nine months ended September 30, 2016, we recognized a net gain on extinguishment of debt of $190.1 million. $100.5 million of the net gain was associated with the debt exchange we completed on September 6, 2016. Prior to the exchange we retired $107.3 million of our unsecured notes in the nine months ended September 30, 2016.debt.

Income taxes for the ~~three months ended~~periods August 14, 2018 through September 30, ~~2017~~2018 and July 1, 2018 through August 13, 2018 were ~~a benefit~~provisions of ~~$0.1~~$3.9 million ~~as compared to a benefit of $0.8~~and $0.6 million, respectively. The provision for income taxes for the ~~three months ended~~period August 14, 2018 through September 30, ~~2016.~~2018 reflects an effective tax rate of 22.2%. The successor tax rate reflects a more normal effective tax rate following the recognition of the purchase price adjustments associated with the book-tax differences for the Comstock and Bakken Shale oil and natural gas properties. Income taxes for the ~~nine months ended~~period July 1, 2018 through August 13, 2018 primarily reflect the effect of valuation allowances on our deferred tax assets.

We reported net income of $13.8 million, or $0.13 per diluted share, for the period August 14, 2018 through September 30, ~~2017 were a~~2018. Our net income during this period includes income from operations of $34.6 million, which was offset mainly by interest expense and the provision ~~of $0.9 million as compared to a provision of $3.7 million~~ for the nine months ended September 30, 2016. The provisions in 2017 primarily related to adjustments of the valuation allowances against our federal and state net operating loss carryforwards. During the first quarter of 2016, Louisiana changed its tax laws with respect to the utilization of net operating losses. As a result of this tax law change we increased our deferred income ~~tax liability related to state income taxes by $3.7 million.~~

taxes. We reported a net loss of ~~$24.7~~$16.9 million or ~~$1.67~~$1.09 per share ~~for~~during the ~~three months ended September 30, 2017 as compared to net~~period July 1, 2018 through August 13, 2018. The loss during this period included operating income of ~~$28.5~~$8.2 million or $2.32 per share, for the three months ended September 30, 2016. We reported a net loss of $69.1 million, or $4.74 per share, for the nine months ended September 30, 2017, as compared to a net loss of $80.2 million, or $7.13 per share, for the nine months ended September 30, 2016. The net loss for the nine months ended September 30, 2017which was ~~primarily due to~~offset by our interest expense ~~which includes the higher non-cash interest expense recognized in 2017 related to the amortization of discounts~~ and ~~costs recognized on our senior notes exchange.~~provision for income taxes.

Funding for our activities has historically been provided by our operating cash flow, debt or equity financings or proceeds from asset sales. For the ~~nine months ended~~period August 14, 2018 through September 30, ~~2017,~~2018, our primary source of funds was operating cash flow and cash on hand. Cash provided ~~from~~by operating activities during this period was $3.6 million. Cash provided by operations for the ~~nine months ended September 30, 2017~~period January 1, 2018 through August 13, 2018 was $90.8 million as compared to cash used for operating activities of $54.7 million for the first nine months of 2016. This increase in operating cash flow is due to higher oil and gas sales and the reduction in cash interest.$85.7 million.

Our primary needs for capital, in addition to funding our ongoing operations, relate to the acquisition, development and exploration of our oil and gas properties and the repayment of our debt. In the ~~first nine months of 2017,~~period August 14, 2018 through September 30, 2018, we incurred capital expenditures of ~~$129.8~~$75.2 million to fund our development and exploration activities.

The following table summarizes our capital expenditure ~~activity, on an accrual basis, for the nine months ended September 30, 2017 and 2016:~~activity:

During the successor period we drilled four (1.1 net) wells and completed six (2.4 net) wells. During the predecessor period January 1, 2018 through August 13, 2018, we drilled twenty-three (8.8 net) wells and completed thirty-one (9.4 net) horizontal Haynesville and Bossier shale wells. We expect to spend an additional $90.0 million in the fourth quarter of 2018 to drill twelve (6.3 net) Haynesville shale wells, to complete seven (3.5 net) Haynesville shale wells and to complete 30 (4.4 net) Bakken shale wells. We expect to fund our future development and exploration activities with future operating cash flow and from cash on hand. The timing of most of our future capital expenditures is discretionary because we have no 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. As of September 30, ~~2017,~~2018, we have ~~three~~four drilling rigs under contract through ~~April 2018~~September 2019 at a cost of ~~$9.1~~$16.5 million and commitments of ~~$2.9~~$1.0 million to transport and treat natural gas through July 2019. We also have obligations to incur future payments for dismantlement, abandonment and restoration costs of oil and gas properties which are currently estimated to be incurred primarily after ~~2022.~~

Through September 30, 2017, we drilled 18 (13.0 net) wells and completed 16 (11.9 net) horizontal Haynesville shale wells. We are currently planning to drill seven (2.8 net) additional wells in 2017. Capital expenditures for the remainder of 2017 are estimated at $38.0 million.2023.

On ~~October~~July 31, ~~2017,~~2018, we ~~adopted a plan~~acquired oil and gas properties in North Louisiana and Texas for $39.3 million. These properties consist of approximately 23,000 gross acres (12,000 net) and include 120 (26.2 net) producing natural gas wells, 49 (14.7 net) of which produce from the Haynesville shale. All of the acreage acquired is held by production. We have identified 112 (31.0 net) potential drilling locations on this acreage of which 21 (17.9 net) would be operated by us.

On August 14, 2018, we closed the contribution with Arkoma and Williston wherein they contributed to ~~divest~~us certain oil and gas properties in North Dakota and Montana in exchange for approximately 88.6 million newly issued shares of our ~~South Texas oil~~common stock. The effective date of the acquisition of the properties was April 1, 2018. We also terminated the strategic drilling venture with Arkoma Drilling, LP and paid $17.9 million to reacquire interests in six (2.4 net) wells.

In connection with the ~~Eagle Ford shale. These properties have~~Jones Contribution, we completed a ~~net book value~~series of ~~approximately $238.0~~refinancing transactions in which we completed a private placement of $850.0 million as of ~~September 30, 2017. This decision was based upon~~new unsecured 9¾% Senior Notes due 2026 and entered into a ~~strategic assessment~~new bank credit agreement with an initial borrowing base of ~~Comstock's business plans including current and projected future economic conditions in~~$700.0 million. We utilized the ~~crude oil markets. We intend to sell these assets through a competitive bid process, and have engaged a financial advisor to facilitate the potential sale. We plan to use the~~net proceeds from the ~~divestiture to reduce our long-term debt and enhance our liquidity.~~

~~At September 30, 2017 we had outstanding $697.2~~new senior notes offering, $450.0 million of ~~10% Senior Secured Toggle Notes due 2020, $273.8 million~~borrowings under our new bank credit facility and cash on hand to retire all of ~~7¾% Convertible Second Lien PIK Notes due 2019~~our other then-outstanding senior secured and ~~$178.6 million of 9½% Convertible Second Lien PIK Notes due 2020. We also had $25.6 million of~~ unsecured ~~notes outstanding due in 2019 and 2020.~~ notes.

Interest on the ~~10%~~9¾% Senior ~~Secured Toggle~~ Notes due 2026 is payable on ~~March~~February 15 and ~~September~~August 15 at an annual rate of 9¾% and the notes mature on ~~March~~August 15, 2020. We have the option to pay up to $75.0 million of accrued interest by issuing additional notes. To the extent that interest is paid in kind, the interest rate increases to 12¼% only for that interest payment and would result in up to an additional $91.9 million of notes outstanding. Interest on the 7¾% Convertible Second Lien PIK Notes is payable on April 1 and October 1 and these notes mature on April 1, 2019. Interest on the 9½% Convertible Second Lien PIK Notes is payable on September 15 and December 15 and these notes mature on September 15, 2020. Interest on the convertible notes is only payable in kind. Each series of the convertible notes is convertible, at the option of the holder,2026.

On August 14, 2018, we entered into ~~81.2 shares of our common stock for each $1,000 of principal amount of notes. The convertible notes will mandatorily convert into shares of common stock following~~ a 15 consecutive trading day period during which the daily volume weighted average price of our common stock is equal to or greater than $12.32 per share. $9.9 million of principal amount of the convertible notes plus related accrued interest were converted into 826,327 shares of common stock during the nine months ended September 30, 2017.

During the nine months ended September 30, 2016, we retired $87.5 million in principal amount of the 2019 Notes and $19.8 million of the 2020 Notes in exchange in the aggregate for the issuance of 2,748,403 shares of common stock and $3.5 million in cash. A gain of $89.6 million was recognized on the exchanges and purchases of the 2019 Notes and the 2020 Notes during the nine months ended September 30, 2016. The gain is included in the net gain on extinguishment of debt for the difference between the market value of the stock on the closing date of the exchange and the net carrying value of the debt and the related net premium and net debt issuance costs.

~~We have a $50.0 million revolving~~bank credit facility with Bank of Montreal, as administrative agent, and ~~Bank~~the other

participating banks. The bank credit facility is subject to a borrowing base, which is initially $700.0 million and is re-determined on a semi-annual basis and upon the occurrence of ~~America, N.A. that matures March 4, 2019.~~certain other events, and will mature on August 14, 2023. As of September 30, ~~2017,~~2018, there were no$450.0 million of borrowings outstanding under the revolving credit facility. ~~Indebtedness~~Borrowings under the ~~revolving~~bank credit facility ~~is guaranteed by all of our subsidiaries and is~~are secured by substantially all of our and our ~~subsidiaries' assets. Borrowings under the revolving credit facility~~subsidiaries assets and bear interest at our option, at either ~~(1)~~ LIBOR plus ~~2.5%~~2.0% to 3.0% or ~~(2) the~~a base rate ~~(which is~~plus 1.0% to 2.0%, in each case depending on the ~~higher~~utilization of the ~~administrative agent's prime rate, the federal funds rate plus 0.5% or 30 day LIBOR plus 1.0%) plus 1.5%. A~~borrowing base. We also pay a commitment fee of 0.375% to 0.5% ~~per annum is payable quarterly~~ on the unused ~~credit line.~~borrowing base. The ~~revolving~~bank credit facility ~~contains covenants that,~~places certain restrictions upon us, and our restricted subsidiaries' ability to, among other things, ~~restrict the payment of~~incur additional indebtedness, pay cash dividends, ~~and repurchases of~~repurchase common stock, ~~limit the amount of additional debt that we may incur and limit our ability to~~ make certain loans, investments and ~~divestitures.~~divestitures and redeem the new senior notes. The only financial covenants are the maintenance of a leverage ratio of less than 4.0 to 1.0 and a current ratio ~~including availability under the credit facility,~~ of at least ~~0.9 to 1.0, which increases to~~ 1.0 to 1.0 ~~on March~~beginning with the three months ended December 31, 2018, and the maintenance of an asset coverage ratio of proved developed reserves to amounts outstanding under the revolving credit facility of at least 2.5 to 1.0. We were in compliance with these covenants as of September 30, 2017.

All of our subsidiaries guarantee the bank credit facility, the 10% Senior Secured Toggle Notes, the 7¾% Convertible Second Lien PIK Notes, the 9½% Convertible Second Lien PIK Notes, and the other outstanding senior notes. The bank credit facility, the 10% Senior Secured Toggle Notes and the convertible notes are secured by liens on substantially all of our and our subsidiaries assets. The allocation of proceeds related to the liens on our assets are governed by intercreditor agreements granting priority to the bank credit facility. Proceeds from liens on the convertible notes are also subject to the priority of the 10% Senior Secured Toggle Notes.2018.

~~Future use~~The Tax Cuts and Jobs Act, which was enacted on December 22, 2017, reduced the corporate income tax rate effective January 1, 2018 from 35% to 21%. Among the other significant tax law changes that affect us are the elimination of the corporate alternative minimum tax ("AMT"), changes that require operating losses incurred in 2018 and beyond be carried forward indefinitely with no carryback up to 80% of taxable income in a given year, and limitations on the deduction for interest expense incurred in 2018 and later for amounts in excess of 30% of its adjusted taxable income (defined as taxable income before interest and net operating losses. For tax years beginning before January 1, 2022, the adjusted taxable income for these purposes is also adjusted to exclude the impact of depreciation, depletion and amortization. The Tax Cuts and Jobs Act preserved deductibility of intangible drilling costs for federal income tax purposes, which allows us to deduct a portion of drilling costs in the year incurred and minimizes current taxes payable in periods of taxable income. At September 30, 2018, we have not completed our accounting for the tax effects of enactment of the Tax Cuts and Jobs Act; however, we have made reasonable estimates of the effects on our existing deferred tax balances. We have remeasured certain deferred federal tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The provisional amount recognized related to the remeasurement of our deferred federal tax balance was $140.4 million, which was subject to a valuation allowance. The Tax Cuts and Jobs Act also repealed the AMT for tax years beginning on or after January 1, 2018 and provides that existing AMT credit carryforwards can be utilized to offset federal taxes for any taxable year. In addition, 50% of any unused AMT credit carryforwards can be refunded during tax years 2018 through 2020 with any remaining AMT credit carryforward being fully refunded in 2021. We reclassified $19.1 million to a non-current receivable at December 31, 2017 representing the amount of AMT that is now refundable through 2021. We are still analyzing certain aspects of the Tax Cuts and Jobs Act, and refining our calculations, which could potentially affect the measurement of those balances or potentially give rise to new deferred tax amounts. Our estimates may also be affected in the future as we gain a more thorough understanding of the Tax Cuts and Jobs Act, and how the individual states are implementing this new law.

The shares of common stock issued as a result of the Jones Transaction triggered an ownership change under Section 382 of the Internal Revenue Code. As a result, our ability to use net operating ~~loss carryforwards may~~losses ("NOLs") to reduce taxable income is generally limited to an annual amount based on the fair market value of our stock immediately prior to the ownership change multiplied by the long-term tax-exempt interest rate. Our NOLs are estimated to be limited ~~in the event~~to $3.3 million a year as a result of this limitation. In addition to this limitation, IRC Section 382 provides that a ~~cumulative~~corporation with a net unrealized built-in gain immediately before an ownership change inmay increase its limitation by the amount of recognized built-in gain recognized during a recognition period, which is generally the five-year period immediately following an ownership change. Based on the fair market value of our common stock immediately prior to the ownership change, we believe that we have a net unrealized built-in gain which will increase the Section 382 limitation during the five-year recognition period.

NOLs that exceed the Section 382 limitation in any year continue to be allowed as carry forwards until they expire and can be used to offset taxable income for years within the carryover period subject to the limitation in each year. NOLs incurred prior to 2018 generally have a 20-year life until they expire. NOLs generated in 2018 and after would be carried forward indefinitely. Our use of new NOLs arising after the date of an ownership change would not be affected by ~~more than 50% occurs within~~the 382 limitation. If we do not generate a ~~three-year period. Such a change in ownership could result in a substantial portion~~sufficient level of taxable income prior to the expiration of the pre-2018 NOL carry forward periods, then we will lose the ability to apply those NOLs as offsets to future taxable income.

of our net operating loss carryforwards being eliminated or becoming restricted. It is highly likely that a change in ownership that would result from the future conversion of our convertible notes would result in limits on the future use of our net operating loss carryforwards.

Our financial condition, results of operations and capital resources are highly dependent upon the prevailing market prices of natural gas and oil. These commodity prices are subject to wide fluctuations and market uncertainties due to a variety of factors, some of which are beyond our control. Factors influencing oil and natural gas prices include the level of global demand for crude oil, the foreign supply of oil and natural gas, the establishment of and compliance with production quotas by oil exporting countries, weather conditions that determine the demand for natural gas, the price and availability of alternative fuels and overall economic conditions. It is impossible to predict future oil and natural gas prices with any degree of certainty. Sustained weakness in natural gas and oil prices may adversely affect our financial condition and results of operations, and may also reduce the amount of oil and natural gas reserves that we can produce economically. Any reduction in our natural gas and oil reserves, including reductions due to price fluctuations, can have an adverse effect on our ability to obtain capital for our exploration and development activities. Similarly, any improvements in natural gas and oil prices can have a favorable impact on our financial condition, results of operations and capital resources.

As of September 30, ~~2017,~~2018, we have entered into natural gas price swap agreements to hedge approximately ~~11.7~~9.6 billion cubic feet of our ~~2017~~2018 and ~~2018~~2019 production at an average price of ~~$3.38~~$3.00 per Mcf. We have also entered into natural gas collars to hedge approximately 19.5 Bcf of natural gas with an average floor price of $2.50 per Mcf and an average ceiling price of $3.40 per Mcf. We also have oil collars to hedge 1,170,000 barrels with an average floor price of $55.00 per barrel and an average ceiling price of $77.94 per barrel. None of our derivative contracts have margin requirements or collateral provisions that could require funding prior to the scheduled cash settlement date. The change in the fair value of our natural gas swaps that would result from a 10% change in commodities prices at September 30, ~~2017~~2018 would be ~~$1.8~~$2.3 million. Such a change in fair value could be a gain or a loss depending on whether prices increase or decrease.

Based on our oil and natural gas production for the ~~nine months ended~~period August 14 through September 30, ~~2017~~2018 and our outstanding natural gas price swap agreements, a $0.10 change in the price per Mcf of natural gas would have changed our cash flow by approximately ~~$2.8~~$1.1 million and a $1.00 change in the price per barrel of oil would have resulted in a change in our cash flow ~~from continuing operations~~ for such period by approximately ~~$0.7~~$0.5 million. Our natural gas collars which cover the period October 1, 2018 through August 31, 2019 will result in natural gas prices on 19.5 Bcf of our future production to be subject to a floor price of $2.50 per MMbtu and an average ceiling price of $3.40 per MMbtu. Our crude oil price collars which cover the period October 1, 2018 through September 30, 2019 will result in oil prices on 1,170,000 barrels of our future oil production to be subject to a floor price of $55.00 per barrel and an average ceiling price of $77.94 per barrel. These collars may increase or decrease our cash flow depending upon whether future prices are below the floor or above the ceiling prices.

At September 30, ~~2017,~~2018, we had approximately ~~$1.2~~$1.3 billion principal amount of long-term debt outstanding. ~~All but $25.6~~$850.0 million of this ~~debt is secured by substantially all of our assets. Of this~~ amount ~~our first lien notes of $697.2 million bear~~bears interest at a fixed rate of ~~10%, our second lien notes of $273.8 million bear interest at a fixed rate of 7¾% and our second lien notes of $178.6 million bear interest at a fixed rate of 9½~~9¾%. At our option, up to $75.0 million of the interest on the first lien debt is payable in-kind. All of the interest on the second lien debt is payable in kind. The $25.6 million of unsecured senior notes bear interest at rates of between 7¾% to 10% and mature in 2019 and 2020. The fair market value of our fixed rate debt as of September 30, ~~2017~~2018 was ~~$1.1 billion~~$850.0 million based on the market price of approximately ~~93%~~100% of the face amount of such debt. At September 30, ~~2017,~~2018, we ~~did not have any borrowings~~had $450.0 million outstanding under our ~~revolving~~bank credit facility, which is subject to variable rates of interest that are tied ~~at our option~~ to ~~either~~ LIBOR or the corporate base ~~rate.~~rate, at our option. Any increase in these interest rates would have an adverse impact on our results of operations and cash flow. Based on borrowings outstanding at September 30, 2018, a 100 basis point change in interest rates would change our successor period interest expense on our variable rate debt by approximately $0.6 million.

As of September 30, ~~2017,~~2018, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of September 30, ~~2017~~2018 to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and to provide reasonable assurance that information required to be disclosed by us is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. There were no changes in our internal controls over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that occurred during the quarter ended September 30, ~~2017,~~2018, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Large accelerated filer ☐	Accelerated filer ☐☒	Non-accelerated filer ☐	~~(Do not check if a smaller reporting company)~~
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PART I. Financial Information
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets –as of September 30, ~~2017~~2018 (Successor) and December 31, ~~2016~~2017 (Predecessor)	4
Consolidated Statements of Operations ~~- Three Months~~– For the period from August 14, 2018 through September 30, 2018 (Successor), and ~~Nine~~for the periods from July 1, 2018 through August 13, 2018 (Predecessor) and January 1, 2018 through August 13, 2018 (Predecessor) and for the three and nine months ended September 30, 2017 ~~and 2016~~(Predecessor)	5
Consolidated Statement of Stockholders' ~~Deficit - Nine months ended~~ Equity (Deficit) – For the period from August 14, 2018 through September 30, ~~2017~~2018 (Successor) and for the period from January 1, 2018 through August 13, 2018 (Predecessor)	6
Consolidated Statements of Cash Flows ~~- Nine~~– For the period from August 14, 2018 through September 30, 2018 (Successor) and for the period from January 1, 2018 through August 13, 2018 (Predecessor) and for the nine months ended September 30, 2017 ~~and 2016~~(Predecessor)	7
Notes to Consolidated Financial Statements	8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	1721
Item 3. Quantitative and Qualitative Disclosure About Market Risk	2125
Item 4. Controls and Procedures	2125
PART II. Other Information
Item 6. Exhibits	22
EX-10.1 Third Amendment to Credit Agreement dated September 30, 2017, among Comstock Resources, Inc., the lenders party thereto and Bank of Montreal, as administrative agent.	26
EX-31.1 Section 302 Certification of the Chief Executive Officer.
EX-31.2 Section 302 Certification of the Chief Financial Officer.
EX-32.1 Certification for the Chief Executive Officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.
EX-32.2 Certification for the Chief Financial Officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.
EX-101 ~~INSTANCE DOCUMENT~~Instance Document
EX-101 ~~SCHEMA DOCUMENT~~Schema Document
EX-101 ~~CALCULATION LINKBASE DOCUMENT~~Calculation Linkbase Document
EX-101 ~~LABELS LINKBASE DOCUMENT~~Labels Linkbase Document
EX-101 ~~PRESENTATION LINKBASE DOCUMENT~~Presentation Linkbase Document
EX-101 ~~DEFINITION LINKBASE DOCUMENT~~Definition Linkbase Document

	(In thousands)

Fair Value of Comstock's common stock	$	149,357

Fair Value of Liabilities Assumed —
Current Liabilities		180,452
Long-Term Debt		2,059,560
Deferred Income Taxes		63,708
Reserve for Future Abandonment Costs		4,440
Net Liabilities Assumed		2,308,160

Fair Value of Assets Acquired —
Current Assets		936,026
Oil and Gas Properties		1,147,749
Other Property & Equipment		4,440
Income Taxes Receivable		19,086
Other Assets		549
Total Assets		2,107,850
Goodwill	$	349,667

	Predecessor			Predecessor			Predecessor
	Three Months Ended September 30, 2017			For the Period from January 1, 2018 through August 13, 2018			Nine Months Ended September 30, 2017

Total oil and gas sales	$	11,079		$	17,747		$	36,495
Total operating expenses⁽¹⁾		(11,664	)		(6,134	)		(38,262	)
Operating income (loss)	$	(585	)	$	11,613		$	(1,767	)

					Successor		Predecessor
	As of September 30, 2017		As of December 31, 2016		As of September 30, 2018		As of December 31, 2017
	(In thousands)				(In thousands)
Accrued drilling costs	$	4,834	$	7,498	$	18,811	$	5,874
Accrued interest payable		4,016		22,721		14,328		21,277
Accrued transportation costs		3,005		2,227		5,022		3,269
Accrued employee compensation		3,841		6,292		3,841		6,449
Accrued ad valorem taxes		2,700		—		5,021		—
Accrued lease operating expenses						3,311		68
Asset retirement obligation – assets held for sale						—		4,557
Other		1,533		1,628		2,927		961
	$	19,929	$	40,366	$	53,261	$	42,455

	Carrying Value Measured at Fair Value at September 30, 2017		Level 1		Level 2
	(In thousands)
Assets measured at fair value on a recurring basis:
Cash and cash equivalents held in bank accounts	$	25,392	$	25,392	$	—
Derivative financial instruments		3,203		—		3,203
Total assets	$	28,595	$	25,392	$	3,203

	Successor
	For the Period from August 14, 2018 through September 30, 2018
	Income			Shares		Per Share
	(In thousands, except per share amounts)
Net income attributable to common stock	$	13,823
Income allocable to unvested restricted shares		(51	)
Basic income attributable to common stock		13,772			105,448	$	0.13
Effect of Dilutive Securities:
Income allocable to unvested restricted shares		—			15
Diluted income attributable to common stock		13,772			105,463	$	0.13

	Predecessor
	For the Period from July 1, 2018 through August 13, 2018								Three Months Ended September 30, 2017
	Loss			Shares		Per Share			Loss			Shares		Per Share
	(In thousands, except per share amounts)

Basic and diluted net loss attributable to common stock	$	(16,865	)		15,468	$	(1.09	)	$	(24,736	)		14,796	$	(1.67	)

	Predecessor
	For the Period from January 1, 2018 through August 13, 2018								Nine Months Ended September 30, 2017
	Loss			Shares		Per Share			Loss			Shares		Per Share
	(In thousands, except per share amounts)

Basic and diluted net loss attributable to common stock	$	(92,754	)		15,262	$	(6.08	)	$	(69,109	)		14,591	$	(4.74	)

	Nine Months Ended September 30				Successor			Predecessor		Predecessor
	2017		2016		For the Period from August 14, 2018 through September 30, 2018			For the Period from January 1, 2018 through August 13, 2018		Nine Months Ended September 30, 2017
	(In thousands)						(In thousands)
Interest payments	$	72,913	$	109,642	$	1,999		$	36,187	$	72,913
Income tax payments	$	3	$	—	$	—		$	2	$	3

	(In thousands)			(In thousands)

10% Senior Secured Toggle Notes due 2020:
9¾% Senior Notes due 2026:
Principal	$	697,195		$	850,000
Discount, net of amortization		(9,812	)		(33,650	)
7¾% Convertible Second Lien PIK Notes due 2019:
Bank Credit Facility
Principal		273,832			450,000
Accrued interest payable in kind		10,611
Discount, net of amortization		(45,342	)
9½% Convertible Second Lien PIK Notes due 2020:
Principal		178,580
Accrued interest payable in kind		4,993
Discount, net of amortization		(33,937	)
10% Senior Notes due 2020:
Principal		2,805
7¾% Senior Notes due 2019:
Principal		17,959
Premium, net of amortization		79
9½% Senior Notes due 2020:
Principal		4,860
Discount, net of amortization		(77	)
Debt issuance costs, net of amortization		(12,027	)		(23,506	)
	$	1,089,719		$	1,242,844

Exhibit No.		Description
101.CAL*		XBRL Calculation Linkbase Document
101.LAB*		XBRL Labels Linkbase Document
101.PRE*		XBRL Presentation Linkbase Document
101.DEF*		XBRL Definition Linkbase Document

	COMSTOCK RESOURCES, INC.
Date: November ~~2, 2017~~9, 2018	/s/ M. JAY ALLISON
	M. Jay Allison, Chairman, Chief
	Executive Officer (Principal Executive Officer)
Date: November ~~2, 2017~~9, 2018	/s/ ROLAND O. BURNS
	Roland O. Burns, President, Chief Financial
	Officer and Secretary (Principal Financial and Accounting Officer)