Jones Family Consolidating Control of Comstock Amid Haynesville LNG Export Push

Jones Family Consolidating Control of Comstock Amid Haynesville LNG Export Push

By Andrew Baker December 2, 2022 .naturalgasintel.com

Dallas businessman Jerry Jones has expanded his ownership stake in Haynesville Shale pure-play Comstock Resources Inc. to 66% from about 60% and funded converting all outstanding preferred shares to common stock.

“Comstock’s outstanding performance since I made my initial investment in August 2018 and my confidence in the company’s future have led me to further increase my ownership stake in Comstock,” said Jones, who also owns the Dallas Cowboys. “I am very excited to continue to partner with Comstock’s management and stockholders as we enter 2023. 

“Comstock now has a very strong balance sheet and the largest acreage position in North America’s premier natural gas basin which supports decades of drilling and reserve growth.”

Frisco, TX-based Comstock is targeting production of 1.42-1.52 Bcfe/d for the fourth quarter. Its leasehold targeting the Haynesville and Bossier formations spans 372,000 net acres in East Texas and North Louisiana.

Other Haynesville producers including Chesapeake Energy Corp. and Southwestern Energy Co. have been seeking to maximize their exposure to premium international gas pricing along the Gulf Coast LNG corridor. Midstream operators including TC Energy Corp. have responded in kind with planned pipeline capacity expansions out of the Haynesville to serve liquefied natural gas export demand.

Comstock’s announcement on Wednesday came two days after a management shakeup aimed at finding new markets for its Haynesville gas production. The company hired Trey Newell as vice president of corporate development and Lori Kanaman as vice president of marketing. Newell has two decades of commercial, marketing and operations experience in the midstream sector, while Kanaman has more than 30 years of experience marketing natural gas.

“Clearly, there is a race among Haynesville producers to feed gas into the second wave of Gulf Coast LNG projects,” said NGI’s Patrick Rau, director of strategy and research. He cited the recent sanctioning of several midstream facilities to move gas from North to South Louisiana.

“We estimate those projects could add another 10 Bcf/d of takeaway capacity from the Haynesville, with most of that supply passing through the emerging Gillis Hub,” Rau said. 

Comstock management said as of Wednesday, all outstanding shares of the Series B Convertible Preferred Stock had been converted into 43.75 million shares of common stock, with funds provided by Jones. The Series B Convertible Preferred Stock had been issued in July 2019 in connection with Comstock’s acquisition of Covey Park Energy LLC.

Following the conversion, the Jerry Jones family owns 66% of all outstanding shares.

“We are unsurprised by the announcement,” said Tudor, Pickering, Holt & Co. (TPH) analyst Jake Roberts in a note to clients, citing that TPH had modeled the event taking place in the first quarter of 2023.

 

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Comstock also is busy extending the Haynesville play deeper into East Texas.  Actually, it should be considered Haynesville "equivalent", as the target formation appears to be Lower Bossier.

Based on a review of lease and assignment filings in the counties, it appears that Comstock has established a leasehold approaching 125,000 gross acres, located primarily in Robertson, Leon, and Freestone Counties.  

To date, Comstock has permitted six horizontal wells in Robertson County.  They have publicized their first well in the play, the Circle M Allocation 1H.  That well has produced 4.8 BCF of gas in its first 167 days of production and has not yet exhibited any significant monthly decline.  Comstock reported that they expected to bring their second well into production during November.  They are now in the process of drilling the remaining four wells in Robertson County, and just submitted a permit request for their first well in Leon County.  They have two rigs working.

In addition to Comstock, other companies appear to be pursuing Lower Bossier as well (but I'm not certain yet).  Thorp Petroleum has recorded lease memos covering more than 7,000 acres in Leon and Freestone Counties.  Vanna Production LLC (leasing entity associated with Vanna Oil and Gas) has recorded lease memos covering more than 12,000 acres, primarily in Leon with some in Freestone.

It will be interesting to see how this all plays out.  Here's an image showing the surveys in which acreage has been leased by the listed firms.  Note that the distance on the map from Oakwood down to Franklin is 53 miles.

Thanks for posting this, Alan.  Rock Man and I have followed this but haven't started any dedicated GHS sub groups because a)  It's outside of our traditional geographic foot print for HA/BO, and  b)  the Bald Prairie Field may not be directly related to the Haynesville/Bossier play in NW LA & E TX but certainly might be a depth equivalent which I will leave for Rock Man to weigh in on.  No doubt, there are some impressive early wells in that footprint.

This Comstock play in Robertson and Leon County area is stratigraphically equivalent to Bossier / Haynesville section seen in NW La / NE Tx.

Same age rocks - just the other side of the basin (i.e., on the western side of the E Tx embayment)

What is vertical depth and what is the length of lateral perforations?

The completion report for the Circle M Allocation 1H shows a TVD of 15,981 feet and a producing interval of 7,861 feet.

For the other five Robertson County wells and the one Leon County well, we only have the estimates provided in the W-1 permit submissions:

Cazey Black A:  16,000 TVD  8,365 PI

McCullough Ingram A:  16,500 TVD  10,000 PI

McCullough Ingram C:  16,300 TVD  8,315 PI

Campbell B:  16,000 TVD  13,280 PI

Campbell C:  16,000 TVD  13,000 PI

Dinkins:  18,000 TVD  10,023 PI

Thanks, Alan.  Those TVDs seem exceptionally deep.  Are pressure readings available for these wells?

In excess of 0.85# per foot pressure gradient

Expensive wells

So, > 15,000 psi for a 18K TVD.  Expensive and dangerous.  The bottom hole temps must be crazy also.

For the Circle M well:

Bottom Hole Temp:  320 degrees

Shut In Wellhead Pressure:  11,900 PSI and 100 degrees

Test Run Wellhead Pressure:  9,488 PSI and 213 degrees with 28 choke

Thanks, Alan.  I would have suspected a temp closer to 400 at that depth.  Good pressures make good wells.

So there's a new twist in the story of this new play...

I mentioned above that Vanna Production had recorded some leases in Leon County (60 to be exact).  Vanna immediately assigned those leases to Sabana Royalty Partners, which I thought seemed a little odd.  An internet search didn't turn up much about Sabana, but it did find the officers:  Dan and Farris Wilks.  These two brothers got into hydraulic fracturing when by starting the company Frac Tech back in 2002.  In 2011, they sold their 70% share for $3.5 billion, becoming billionaires in the process.

If they are indeed chasing Lower Bossier like Jerry Jones is, we now have three billionaires involved!

Interesting playing field for sure

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