At a time when companies in a U.S. natural gas field have been losing money and exiting Louisiana's Haynesville shale basin, Dallas Cowboys' owner Jerry Jones' Comstock Resources Inc. is picking up cheap assets, betting on the field's proximity to the growing U.S. Gulf Coast export hub.
Reuters on Nov. 13 reported that Comstock Resources is in talks to buy Chesapeake Energy Corp.'s Haynesville shale assets in Louisiana. A deal would come just months after Comstock paid $1.1 billion to buy privately held Covey Park Energy LLC to become the largest operator in the region.
RELATED:
“Executive Q&A: Jerry Jones” featured in the May 2019 edition of Oil and Gas Investor
The U.S. shale boom has helped turn the country into the world's third-largest exporter of LNG, and it is on track to become the top exporter within five years. But persistent low prices have left a number of major companies, including Chesapeake, in dire financial straits due to oversupply, while others have sold their stakes. Comstock is making the opposite bet.
By boosting its presence in the region, Comstock is making a bet on a rapid growth of the LNG market, with global demand expected to rise 26% by 2024, abundant export infrastructure at its doorstep, and ability to push down costs as it gains clout. The region also has access to the other big drivers of U.S. gas demand: Gulf Coast petrochemical facilities and pipelines into Mexico.
Jones, who has sunk more than $1.1 billion in Comstock so far, could not be reached for comment, but in June, after the Covey deal, he said that he believed the Haynesville assets to be "the very best hydrocarbon assets."
Long On Natural Gas
A supply glut has pushed gas prices below $3 per million British thermal units and forced producers to turn much of the surplus into LNG for export to Asia and Europe, where demand for the fuel has been rising.
The U.S. became the world's third largest LNG exporter this year and in July exported 5.2 billion cubic feet per day, according to government data. The country is on track to become the world's top LNG exporter by 2024, according to the International Energy Agency.
"It's pretty clear he's long natural gas. He's made his bet on the Haynesville," Nick Volkmer, vice president at RS Energy Group, said about Jones. Most of Haynesville's output would ultimately be taken by LNG export plants along the U.S. Gulf Coast, Volkmer said.
The Frisco, Texas-based company plans to focus almost all of its Capex in the region next year, saying it "continues to generate economic returns even in the low natural gas price environment that we live in today."
Chesapeake previously sold some of its Haynesville shale acreage in 2017 to Covey Park Energy. Other companies exiting the field include QEP Resources Inc., which sold its Haynesville assets in a deal with Aethon Energy Management LLC that closed in January.
"It's kind of a big board game now, and you got to have some size," Comstock CEO Jay Allison said in an earnings call last week, adding that the company would look to consolidate in the Haynesville and sell some of its non-core properties.
Comstock did not respond to requests for comment.
Jones has repeatedly stated that he ultimately hopes to sell Comstock to a larger integrated major, an exporter, or a utility, a person familiar with his plans said.
Recommended Reading
EIA: E&P Dealmaking Activity Soars to $234 Billion in ‘23
2024-03-19 - Oil and gas E&Ps spent a collective $234 billion on corporate M&A and asset acquisitions in 2023, the most in more than a decade, the U.S. Energy Information Administration reported.
Hess Pushes Shareholders to Vote in Favor of $53B Chevron Merger
2024-04-01 - Hess Corp.’s board is unanimously recommending its shareholders vote in favor of the proposed $53 billion all-stock merger with Chevron Corp., according to Chevron’s March 28 Securities and Exchange Commission filing.
Exxon Signals Potential Counter Offer for Hess’ Guyana Assets
2024-03-07 - Exxon Mobil has filed a contract arbitration claim related to Chevron’s proposed purchase of Hess Corp.’s interests in the Stabroek Block offshore Guyana.
CERAWeek: Exxon Mobil CEO Says Not Trying to Acquire Hess
2024-03-18 - CEO Darren Woods said Exxon Mobil is trying to secure preemption rights over Hess Corp.'s Guyana assets in its dispute with Chevron, not buy the company itself.
Chevron CEO Talks Guyana M&A, Exxon Dispute
2024-03-19 - Chevron Corp. CEO Mike Wirth said during CERAWeek by S&P Global that California’s company’s plan to acquire Hess Corporation, and specifically its 30% interest in the Guyana offshore Stabroek Block, was an important deal as well as good one.