Dallas Cowboys owner Jerry Jones' oil and gas company, Comstock Resources, is making a $2.2 billion acquisition that will make it the leading producer in one of the nation's largest natural gas basins.
The cash-and-stock deal for Covey Park Energy is expected to advance Frisco-based Comstock's position in the Haynesville Shale in East Texas and northwest Louisiana. The Haynesville region is the third-largest natural gas producer in the U.S., according to the U.S. Energy Information Administration.
Jones will put in $475 million for 50 million new shares of Comstock stock to finance the deal, upping his total Comstock investment to $1.1 billion. Jones is also buying $175 million of stock that can be converted later to common shares. He's the company's biggest investor.
Comstock's production will more than double to 1.1 billion cubic feet equivalent per day with Covey Park's assets. And it will gain more than 1,000 drilling locations, bringing its total to 2,000.
"We continue to see the need for additional industry consolidation of the basin to gain meaningful scale," analysts at Tudor, Pickering, Holt & Co said in a note to investors.
Dallas-based Covey Park Energy, a private natural gas company, was founded in 2013 and operates exclusively in the Haynesville Basin. Its Haynesville assets are near Comstock's, making the merger a strategic move, executives said in a Monday conference call.
Chesapeake Energy first discovered gas in the Haynesville Basin back in 2008. Since then, companies have flocked to the region.
The U.S. Geological Survey estimates there are 304 trillion cubic feet of recoverable natural gas in the Haynesville Shale. That's up from the 61.4 trillion cubic feet estimated in 2010.
Comstock CEO Jay Allison will continue to lead the company. He made just over $8 million in 2018. Allison's management team will include representation from both companies.
Covey Park co-CEO John Jacobi and Jordan Marye, managing partner of Denham Capital, will join Comstock's board of directors when the deal closes near the end of July.
The deal will merge the companies' staff, saving about $25 million in general expenses.
Jones is Comstock's biggest investor with 75% ownership interest. He gained a controlling stake in May 2018, when the company bought his interests in a North Dakota shale in exchange for $620 million in stock.
Energy-focused equity firm Denham Capital Management is the firm's second-largest investor with 16% ownership.
"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 in a statement. "This combination is another step toward completing my vision to create an industry leading natural gas company."
Jones first dabbled in the oil industry in the 1970s, when he founded Jones Oil and Land Lease in Arkansas. He got a break in 1986 when he sold land from another of his companies, Arkoma Production Co., for $175 million. The land had cost him just $15 million four years earlier.
Those investments gave him the resources to buy the Dallas Cowboys for $140 million in 1989. At $4.8 billion, the Cowboys are the world's most valuable sports franchise, according to Forbes' annual ranking.
Comstock's stock price closed Monday at $4.82, up about 9% on the day.
Visit The Dallas Morning News at www.dallasnews.com