Comstock to reduce debt by selling a $1.65 billion Haynesville stake to Azerbaijani SOCAR

Comstock Resources announced on Tuesday that it will sell its Haynesville assets, including its midstream business, to Azerbaijani 'SOCAR' for $1.65bn in cash. The U.S. gas producer is aiming to reduce its debt.

According to Comstock, the sale is expected to be completed by year's end and will reduce Comstock’s pro forma debt from $3.1 billion to $1.5 billion.

Comstock shares rose nearly 7% during premarket trading.

SOCAR gains a 20% stake in Comstock Legacy Haynesville assets, and a 15% share in Pinnacle Gas Services. Azerbaijan’s state-owned oil & gas?company also gets a 15% stake in Comstock’s Western Haynesville assets. This will shrink to 7.5% within five years, and after SOCAR has earned a return of 15% on its investment.

The companies hope to reach a final agreement by the 31st of October.

Comstock stated that the partnership would allow SOCAR to participate in the future Legacy and Western Haynesville Projects at the same percentages of its acquired interests. SOCAR, on the other hand, will provide Comstock with avenues to market its natural gas internationally.

The U.S. Gas?Producer will retain operatorship of upstream assets, and Pinnacle Gas Services will continue to be managed and controlled by Pinnacle Gas Services.

Separately Comstock announced that it had entered into a joint drilling venture with its majority shareholder Jerry Jones. A partnership owned by the family of Jones will fund 80 % - 85% drilling and completion costs for 27 Haynesville oil wells in the next year.

Comstock stated that the venture will cost approximately $450 million.

(source: Reuters)