While all eyes are on Jerry Jones moves during the NFL Draft taking place at AT&T Stadium in Arlington, the Dallas Cowboys owner is trading up in his investment in Frisco-based Comstock Resources Inc.
Continuing the football analogy, there’s a letter of intent, signed by Jones’ Arkoma Drilling and Williston Drilling that will see Comstock acquire interests in certain oil and gas properties located in North Dakota in exchange for common stock in the company. Comstock is acquiring the properties for $620 million, with no debt associated with the properties. Jones’ Arkoma and Willison will receive approximately 88.6 million newly issued shares of Comstock common stock based on an agreed upon share price of $7 per share. Upon completion of the transaction, Arkoma will own approximately 84 percent of the Comstock’s pro forma outstanding shares. The acquisition is subject to the parties entering into a definitive purchase agreement, which will be subject to a number of closing conditions, including the approval of the issuance of the common stock by the company’s stockholders. Comstock expects to enter into a purchase agreement within the next several weeks and will seek stockholder approval for the transaction as soon as practicable thereafter. The effective date of the acquisition of the properties will be April 1, 2018.
The oil and gas properties being acquired by Comstock in the transaction are located in North Dakota’s Bakken shale basin. The properties are currently producing 10,500 barrels of oil per day and 20 million cubic feet (MMcf) of natural gas per day and have proved reserves as estimated by Comstock’s independent reserve engineers of 22.5 million barrels of oil and 48.5 billion cubic feet of natural gas. Comstock will be acquiring 332 (52.5 net) producing oil wells, 128 (13.0 net) drilled uncompleted wells and ten (3.0 net) undrilled locations. The properties are expected to generate approximately $200 million of operating cash flow in 2018.
Sounding like someone who just signed a blue chip college player, Jones said: “I am excited to be partnering with Comstock by contributing my oil and gas properties to Comstock which will allow them to strengthen their balance sheet. This combination provides Comstock with substantial cash flow to invest in their high return Haynesville shale drilling program and the capital to grow their already substantial inventory of drilling prospects.”
Comstock has also entered into the previously announced Strategic Drilling Venture with Arkoma. Arkoma will participate in drilling projects proposed by Comstock in the Haynesville and Bossier shale in East Texas and North Louisiana and the Eagle Ford shale in South Texas.
Comstock CEO M. Jay Allison said the investment from Jones will allow Comstock “to refinance and simplify our capital structure and equip us with all the tools to substantially grow stockholder value. The proved reserve value and related cash flows from the North Dakota properties when combined with our properties will support the refinancing of our debt as well as fuel an expanded drilling program in the Haynesville shale. The strong balance sheet resulting from the combination will allow us to play offense after spending the last three years on defense.”