Jones’ firm buys shale company in East Texas
The oil and gas firm controlled by Dallas Cowboys owner Jerry Jones will buy another Dallas firm for about $1.6 billion to become a leading natural gas producer in the Haynesville shale on the Texas-Louisiana Border.
Comstock Resources, of which Jones acquired a controlling stake last year, said it will buy Covey Park Energy, a privately held firm, for nearly $1.6 billion in cash and stock and assume Covey Park’s $625 million in debt. In a conference call, Jones compared the deal to buying the multibilliondollar Cowboys franchise 30 years ago for just $140 million.
With natural gas prices depressed, acreage in gas plays such as the Haynesville can be picked up at low costs, Jones said.
The plan is to increase Comstock’s holdings in the Haynesville while gas prices remain low, positioning to the company to profit when they rise, which
Jones expects, and Comstock gains efficiencies with greater scale.
Comstock, of Frisco, focuses on the Haynesville and the Eagle Ford shale in South Texas. Jones will invest another $475 million in cash to help fund the deal and ensure he maintains the controlling ownership stake. Covey Park, which focuses on the Haynesville, is backed by the Houston private equity firm Denham Capital.
“I am excited to provide the funding and to team up with Denham Capital to combine the two companies to create the basin leader in the Haynesville shale,” Jones said a statement. “This combination is another step toward completing my vision to create an industry leading natural gas company.”
The Haynesville boomed a decade ago at the beginning of the hydraulic fracturing boom, but lost favor as companies turned to other shale plays with more oil, which is more valuable than natural gas. The Haynesville has experienced a modest rebound because of improvements in drilling efficiency and its proximity to the Gulf Coast’s growing liquefied natural gas terminals and petrochemical plants, which use natural gas as a feedstock.
Jones and his team have targeted the Haynesville to become the dominant player in the region. Privately held companies such as Covey Park, Indigo Natural Resources of Houston and Plano-based Vine Oil & Gas have grown into some of the top Haynesville producers, according to Drillinginfo, an energy research firm.
“With the acquisition of Covey Park,” said Andrew Dittmar, a Drillinginfo analyst, “Comstock is making good on plans to be a driving force for consolidation in the Haynesville laid out last year when Jerry Jones took control of the company.”
Comstock previously focused more on the Louisiana side of the Haynesville.
The Covey Park deal gives Comstock more acreage in the emerging East Texas portions near Carthage and in Shelby County, said Greig Aitken, an analyst at the Wood Mackenzie research firm.
“Before the deal, Comstock’s best acreage was confined to Louisiana,” he said. “But inventory was limited. Adding acreage — specifically around Carthage — should have been a big driver for Comstock.”