Comstock Resources sold a 27% non-controlling equity stake in its midstream subsidiary, Pinnacle Gas Services, to funds managed by Sixth Street for $600 million, valuing Pinnacle at a $2.2 billion enterprise value.
Comstock kept a 73% controlling interest in Pinnacle, which it said is worth about $1.6 billion based on the transaction. Under the deal, Comstock will continue to manage, operate and control Pinnacle.
The company used the proceeds to fully retire Pinnacle’s preferred equity securities for $445 million plus accrued dividends, as well as all outstanding debt at Pinnacle, along with transaction costs and working capital needs.
Comstock said the transaction will cut Pinnacle’s fixed charges by about $40 million a year.
The ownership structure is also set to shift further in Comstock’s favor if Sixth Street reaches certain return hurdles. At that point, Sixth Street’s stake would fall from 27% to 19.5%, while Comstock’s would rise from 73% to 80.5%. That compares with the 70% interest Comstock said it was entitled to before the preferred units were redeemed.
Comstock said the deal confirms the value of its Western Haynesville assets, which cover 540,000 net acres, and supports future production growth tied to that acreage. The market has reacted to these announcements by moving the company's shares 1.8% to a price of $13.285. For the full picture, make sure to review COMSTOCK RESOURCES INC's 8-K report.
