Comstock Resources offering U.S. shale oil and gas assets, document shows

By Liz Hampton  August 18, 2021

 Aug 18 (Reuters) - Dallas Cowboys owner Jerry Jones' Comstock Resources (CRK.N) oil company is offering to sell properties in North Dakota's Bakken oilfield, a marketing document seen by Reuters shows, as rising energy prices lift buying and selling in the sector.

Crude oil prices are up about 38% year-to-date as economies bounce back and fuel demand recovers from travel restrictions to curb the pandemic. U.S. shale oil companies also are seeking larger scale to drive returns and operational efficiency.

A representative for Comstock did not immediately respond to a request for comment.

The properties on offer include a non-operated working interest in 436 wellbores. The holdings are valued at about $200 million based on futures pricing, according to the document.

The 427 actively producing wells in the portfolio most recently had a six-month average net production of 6,400 barrels of oil equivalent per day, the teaser said.

The value of second-quarter deals this year hit $33 billion for more than 40 deals - the highest quarterly value since the second quarter of 2019, consultancy Enverus found.

Comstock's decision to offload its Bakken assets comes as deal activity is rising in the Haynesville shale in Louisiana, where it produces most of its energy. Louisiana rivals Southwestern Energy recently bought Indigo Natural Resources and Chesapeake Energy's acquired Vine Energy.

"High oil prices and a resurgence in Bakken M&A activity may have led to the company’s decision to market its non-operated interests to help fund participation in Haynesville consolidation," said Andrew Dittmar, a senior M&A analyst with data provider Enverus.

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I wish Comstock was buying Vine.  If someone had to.

There are other remaining Haynesville acquisition targets.  GEP Haynesville and Brix come to mind.  Also the GEP Haynesville assets might be had along with the South Mansfield assets of the Williams Company that they acquired in the Chesapeake bankruptcy.  GEP Haynesville operates those wells/units for Williams.

And a super major could scoop up Chesapeake or Comstock.  All I hear is crickets out of BP.  The only other super major with some Haynesville assets (E TX) is Chevron.  Pundits are looking for more M&A activity in the Haynesville.

One would assume that Aethon or Rockcliff would also be prime acquisiton targets for a larger company looking to come into the Haynesville.

I think you're right regarding Aethon.  Rockcliff would be lower on the list of potential acquisitions IMO.

Brix is all rolled into the Vine/CHK deal. It was really just a financing vehicle for Vine operation.

Exco also is another that comes to mind. 

Andy, it's possible but I'm thinking unlikely.  Exco looked for a buyer for several years and could not find one before taking bankruptcy.  Keep in mind that Shell (RDS) owns a 50% interest in Exco Haynesville assets through its acquisition of BG US (British Gas).  Shell, one of the early Haynesville Shale players, know the rock quite well and could have drilled Exco's acreage if it wished to.  I think the problem with Exco is too little rock (acreage) that has already seen a high degree of drilling.  Largely depleted reserves, not many well locations remaining in comparison to most Haynesville operators.

Vine and Brix are definitely connected at the hip.  If similar to other Haynesville JVs in the past, the Brix E&P is likely financed by a PE company or investor group separate from Vine. Brix was never mentioned in the IPO unless I missed it. The two different operator names are basically an accounting function as Vine does not own Brix but operated for Brix (same field and front office staff).  I haven't read anywhere that Brix is part of the  CHK deal.  It may and it may not.  The money source behind Brix may entertain offers from interested parties and those assets could go somewhere other than CHK.  Since this is a good time for M&A, it would make sense.

I believe Castleton owns the 50% that Shell owned now. 

You are correct.

Castleton closes deal with Shell unit for Haynesville assets

Castleton Resources LLC, a subsidiary of Castleton Commodities International LLC (CCI), closed a deal on Dec. 25 to acquire the East Texas and North Louisiana Haynesville shale assets of BG US Production Co. LLC, a Royal Dutch Shell plc subsidiary.

Castleton Resources LLC, a subsidiary of Castleton Commodities International LLC (CCI), closed a deal on Dec. 25 to acquire the East Texas and North Louisiana Haynesville shale assets of BG US Production Co. LLC, a Royal Dutch Shell plc subsidiary. Pro forma for the acquisition, Castleton Resources will hold 222,400 net acres in the region and produce some 334 MMcfe/d (net). 

Castleton Resources is owned by CCI and Tokyo Gas America Ltd., a wholly owned subsidiary of Tokyo Gas Co. Ltd.  Concurrent with the transaction, Tokyo Gas America Ltd. will increase its interest in Castleton Resources to 46% from 30%.

According to the August O&G Investor:

"Vine's IPO rolled up three affiliated entities: Vine Oil & Gas, Brix Oil & Gas Holdings and Harvest Royalties."

Thanks, Tom.

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