Acquisition to enable the Texas-based Comstock Resources become a leading player in the Haynesville shale basin
Comstock Resources has agreed to acquire Texas-based natural gas company Covey Park in a cash-cum-stock deal worth around $2.2bn (£1.73bn).
The consideration for the acquisition includes the assumption of the outstanding debt of Covey Park and the retirement of the company’s existing preferred units, totalling nearly $1.1bn (£870m).
Backed by private equity firm Denham Capital, Covey Park is focused on the acquisition, development and exploration of oil and gas assets in the Haynesville and Bossier shale plays located across North Louisiana and East Texas.
Why Comstock Resources is acquiring Covey Park
The acquisition of the natural gas producer will enable the Texas-based oil and gas firm Comstock Resources to become a leading player in the Haynesville shale basin with its net production in the natural gas basin to move up to 1.1 Bcfe/day of net production. On the other hand, the company will have nearly 374,000 net acres and 5.4 Tcfe of SEC proved reserves and 7.6 Tcfe SPE proved reserves upon completion of the transaction.
The combined company will have operations across 293,000 acres in the net Haynesville shale basin with close to 2,000 net drilling locations, including nearly 1,300 net locations with lateral length over 5,000ft. Furthermore, the enlarged company will have 804.6km of gas gathering infrastructure to market the produced gas.
Comstock Resources claims that the combined management team of the two firms has drilled more than 500 horizontal shale wells in the Haynesville basin.
Comstock Resources CEO Jay Allison said: “After a year of evaluating several potential targets in the Haynesville shale, we believe we have found the perfect merger partner. This merger is an excellent fit with our existing acreage and continues our strategic plan of creating significant scale and resource depth in the Haynesville shale basin.
“The combined company will have a stronger balance sheet, enhanced by a large inventory of high quality, low cost and high return drilling opportunities.”
As per the terms of the deal, shareholders of Covey Park will be given $700m (£551.88m) in cash, $210m (£165.56m) of newly issued preferred stock and 28.8 million shares of newly issued common stock of Comstock Resources priced at $6.00 per share.
Covey Park co-CEOs John Jacobi and Alan Levande said: “We are extremely proud of the company we built in the prolific Haynesville shale basin. We believe the combined company will possess a substantial scale advantage and an excellent foundation for significant organic growth with attractive cash flows going forward.”
Upon closing of the acquisition, Jerry Jones, who holds the controlling stake in Comstock Resources, will be the largest shareholder in the enlarged company with 75% ownership interest. Denham Capital will be the second largest shareholder with nearly 16% stake.
The deal, which will be subject to receipt of certain regulatory approvals and meeting of other customary closing conditions, is scheduled to be completed by the end of July 2019.