Comstock (CRK) Signs a $1.65B SOCAR Letter of Intent and a $450M Drilling Venture. Does Deleveraging Outweigh the Economics It Gives Up?

Comstock Resources, Inc. (NYSE:CRK) signed a nonbinding letter of intent under which SOCAR would pay $1.65 billion in cash, subject to customary adjustments. SOCAR would acquire non-operated working interests representing 20% of the Legacy Haynesville and 15% of the Western Haynesville upstream interests held by Comstock Resources, Inc. (NYSE:CRK). SOCAR would also acquire 15% of the 73% ownership interest held by Comstock Resources, Inc. in Pinnacle Gas Services.

The letter of intent requires good-faith negotiations but does not obligate completion. The parties are targeting a definitive agreement by October 31, 2026, and closing by year-end, subject to negotiations, approvals, and customary conditions.

Separately, a Jerry Jones family partnership will fund 85% of the drilling and completion costs for 18 Western Haynesville wells and 80% for nine Legacy Haynesville wells. The total 27-well program is expected to cost approximately $450 million over 12 months. After a 15% return on investment, 50% of the interest covered by the venture will revert to Comstock Resources, Inc..

Bull Case

If the SOCAR transaction closes, Comstock Resources, Inc. estimates that the proceeds would reduce company-defined non-GAAP net debt from $3.1 billion to $1.5 billion as of June 30, 2026. Net debt is calculated as total debt less cash and cash equivalents. The approximately $1.6 billion reduction would nearly halve the measure and could improve financial flexibility.

The drilling venture allows development to continue without equivalent near-term cash funding. Following completion of the SOCAR transaction, Comstock Resources, Inc. would retain operatorship of the upstream assets and control of Pinnacle Gas Services. Drilling should provide volumes to Pinnacle and help delineate the 545,000 net acres in the Western Haynesville.

The reversion provisions would preserve some long-term upside. SOCAR’s Western Haynesville interest would fall from 15% to 7.5% after five years, once SOCAR earns a 15% return. The drilling venture would also return 50% of the covered interests after its return threshold is met.

Bear Case

Comstock Resources, Inc. could fail to reach final terms, obtain approvals, or close the $1.65 billion transaction on schedule. Until definitive documents are executed, the projected debt reduction remains conditional.

The economic cost is also substantial. SOCAR would receive upstream production and cash flow, but its working interests would carry corresponding shares of development and operating costs. SOCAR would also obtain a share of the Pinnacle midstream business and participation rights in future Legacy and Western Haynesville opportunities at the acquired percentages. Comstock Resources, Inc. would therefore transfer both current economics and part of the value from future leasing, acquisitions, and development.

Both reversion structures allow the funding partners to earn a 15% return before additional interests return to Comstock Resources, Inc.. The Western Haynesville reversion also requires at least five years. The drilling venture is a related-party arrangement with the family of Jerry Jones, the majority stockholder, making governance and the fairness of the transferred economics important parts of the definitive analysis.

Hedge Fund Sentiment

The filings available so far reflect positions held before Comstock Resources, Inc. announced the SOCAR letter of intent and Haynesville drilling venture. Insider Monkey’s database showed 33 hedge funds holding Comstock Resources, Inc. at the end of 2Q2026, up from 23 funds three months earlier.

Conclusion

Comstock Resources, Inc. could transform its balance sheet while continuing acreage development. However, SOCAR and the Jones family partnership would receive meaningful cash-flow claims and future participation before the reversions apply. The definitive documents must show that lower leverage and preserved operatorship outweigh the upstream, midstream, and development economics being transferred.

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This article is originally published at Insider Monkey.