Comstock Resources (CRK) Risk Analysis

Our operations and facilities are subject to extensive federal, state and local laws and regulations relating to the exploration for, and the development, production and transportation of, natural gas and oil, as well as the safe operations thereof. Future laws or regulations, adverse changes in the interpretation of existing laws and regulations or our failure to comply with existing legal requirements may harm our business, results of operations and financial condition. We may be required to make large and unanticipated capital expenditures to comply with present and future governmental laws and regulations, such as: - lease permit restrictions;- drilling bonds and other financial responsibility requirements, such as plug and abandonment bonds;- spacing of wells;- unitization and pooling of properties;- safety precautions;- regulatory requirements; and - taxation. Under these laws and regulations, we could be liable for: - personal injuries;- property and natural resource damages;- well reclamation costs; and - governmental sanctions, such as fines and penalties. Our operations could be significantly delayed or curtailed and our cost of operations could significantly increase as a result of regulatory requirements or restrictions. There are also costs associated with responding to changing regulations and policies, whether such regulations are more or less stringent. As such, there can be no assurance that material cost and liabilities will not be incurred in the future.

Our business is heavily dependent upon the price of and demand for natural gas. Historically, natural gas prices have been volatile and are likely to remain volatile in the future. The prices we receive for our natural gas production depend on numerous factors beyond our control, including the following: - the domestic and foreign supply of natural gas;- weather conditions;- the price and quantity of exports of natural gas;- political conditions and events in other natural gas-producing countries, including embargoes and other sustained military campaigns, and acts of terrorism or sabotage;- domestic government regulation, legislation and policies;- the level of global natural gas inventories;- technological advances affecting energy consumption;- the price and availability of alternative fuels; and - overall U.S. and global economic and political conditions, including inflationary pressures, further increases in interest rates, a general economic slowdown or recession, political tensions and war (including future developments in the ongoing Russia-Ukraine and Israel-Hamas conflicts). Lower natural gas prices will adversely affect: - our revenues, profitability and cash flow from operations;- the value of our proved natural gas reserves;- the economic viability of certain of our drilling prospects;- our borrowing capacity; and - our ability to obtain additional capital.

We rely on information technology and operational technology systems to process, transmit, and store information, to manage and support a variety of business processes and activities, and to comply with regulatory, legal and tax requirements. Our information technology and operational technology systems, some of which are dependent on third-party business partners, may be vulnerable to damage, interruption or shutdown due to any number of causes outside of our control such as catastrophic events, natural disasters, fires, power outages, systems failures, telecommunications failures and employee error or malfeasance. As a natural gas and oil producer, we face various security threats, including cybersecurity threats to gain unauthorized access to sensitive information or to render data or systems unusable, threats to the safety of our employees, threats to the security or operation of our facilities and infrastructure or third party facilities and infrastructure, such as processing plants and pipelines, and threats from terrorist acts. Cybersecurity attacks in particular are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data. We seek to prevent, detect and investigate cybersecurity incidents, but in some cases, we might be unaware of an incident or its magnitude and effects. Although we utilize various procedures and controls to monitor and protect against these threats and to mitigate our exposure to such threats, there can be no assurance that these procedures and controls will be sufficient in preventing security threats from materializing. Further, we rely on third-party service providers and technologies on a limited basis to operate business systems to process sensitive information in a variety of contexts, including, without limitation, cloud-based infrastructure, encryption and authentication technology and other similar functions. Our ability to monitor these third parties' information security practices is limited, and these third parties may not have adequate information security measures in place, or they may suffer unexpected power losses or computer system or data network failures that negatively impact the systems or solutions on which we rely. If our third-party service providers experience a security incident or other type of interruption or if an unexpected flaw or failed software update related to third-party software used in our information systems occurs, even if inadvertent, our information systems may become disabled or inaccessible and access to our data and other business information may be limited, which could materially disrupt our operations. If any of these events were to materialize, either to the Company or a third party upon which we rely, they could lead to, without limitation, any of the following: - Loss of or damage to our data, intellectual property, or other proprietary or confidential information;- Interruption or degradation of our operations, services, or systems availability;- Compromise or corruption of our data or systems integrity;- Reputational harm or loss of customer trust or confidence;- Legal liability, regulatory fines, penalties, or sanctions;- Remediation or mitigation costs, such as increased security expenditures, investigation expenses, or litigation fees;- Increased insurance premiums or difficulty in obtaining adequate insurance coverage; or - Other negative consequences. Any of the foregoing could have a material adverse effect on our reputation, financial position, results of operations, or cash flows.

We are heavily dependent on our information systems and computer-based programs, including our well operations information, seismic data, electronic data processing and accounting data. If any of these programs or systems were to fail or create erroneous information in our hardware or software network infrastructure, possible consequences include loss of our communication links, our inability to find, produce, process and sell natural gas and oil and the inability to automatically process commercial transactions or engage in similar automated or computerized business activities. Any of these consequences could have a material effect on our business.

Changing climate may create physical and financial risks to our business. ?Energy needs vary with weather ?conditions. To the extent weather conditions may be affected ?by climate change, energy use could increase or decrease depending on ?the duration and ?magnitude of any changes. Increased energy use due to weather changes may require us to ?invest in more infrastructure to serve increased demand. A decrease in energy use due to ?weather changes may affect our financial ?condition through decreased revenues. Extreme ?weather conditions in general require more equipment redundancy, adding to costs, and can ??contribute to increased risk of delivery disruptions. ? Additionally, many climate models indicate that global warming is likely to result in rising sea ?levels and increased frequency ?and severity of weather events, which may lead to higher ?insurance costs, or a decrease in available coverage, for our assets in areas ?subject to severe ?weather. These climate-related changes could damage our physical assets, especially operations ?located in low-lying ?areas near coasts and riverbanks, and facilities situated in hurricane-prone ?and rain-susceptible regions. To the extent the frequency of extreme weather events increases, ?this could increase our cost of ?producing products. We may not be able to pass on the higher ?costs to our customers or recover all costs related to mitigating these ?physical risks.? Regulations relating to climate change and/or greenhouse gases could also reduce demand for our products or increase our operating and drilling costs. Our business could also be affected by the potential for lawsuits against companies that emit greenhouse gases, based on links drawn between greenhouse gas emissions and climate change. To the extent financial markets view climate change and GHG emissions as a financial risk, this ?could ?negatively impact our cost of and access to capital.

Market conditions or the unavailability of satisfactory natural gas transportation arrangements may hinder our access to natural gas markets or delay our production. The availability of a ready market for our natural gas production depends on a number of factors, including the demand for and supply of natural gas and the proximity of reserves to pipelines and processing facilities. Our ability to market our production depends in a substantial part on the availability and capacity of gathering systems, pipelines and processing facilities, which, in some cases, may be owned and operated by third parties. Our failure to obtain such services on acceptable terms, if at all, could materially harm our business. We may be required to shut in wells due to a lack of market demand or because of the inadequacy or unavailability of pipelines or gathering system capacity. If that were to occur, then we would be unable to realize revenue from those wells until arrangements were made to deliver our production to market.