Comstock Resources to acquire Covey Park for $2.2bn

Comstock Resources has signed a $2.2bn agreement to acquire US-based natural gas company Covey Park Energy.

The transaction also includes the assumption of Covey Park’s outstanding debt and the retirement of existing preferred units, which total $1.1bn.

Covey Park’s acquisition enables Comstock to expand its position in the Haynesville shale.

The company will also be able to accelerate its progress towards its strategic and financial goals of sustainable free cash flow generation.

The acquisition will increase Comstock’s daily production to 1.1 billion of cubic feet equivalent (Bcfe) and 5.4 Tcf in gas-equivalent proved reserves in the Haynesville and Bossier Shale of North Louisiana and East Texas.

Comstock will also have 293,000 net Haynesville acres with 2,000 net drilling locations, as well as 500 miles of gas gathering infrastructure.

Dallas businessman Jerry Jones will remain Comstock’s largest shareholder with a 75% stake.

Private equity firm Denham Capital will become the second largest shareholder in the company with a 16% interest.

Comstock Resources CEO Jay Allison said: “The combined company will have a stronger balance sheet, enhanced by a large inventory of high-quality, low-cost and high-return drilling opportunities.

“In integrating Covey Park, we plan to focus on operating efficiency and having a combined drilling programme that provides for substantial free cash flow to achieve our goal of reducing our leverage.”

Expected to close next month, the transaction is subject to regulatory approvals and other customary closing conditions.

Covey Park’s equity owners will receive $700m in cash, $210m of convertible preferred stock, and 28.8 million shares of newly issued Comstock common stock priced at $6 a share.