Comstock Resources (CRK -3.3%) says it has entered into a joint development venture with USG Properties to target the Haynesville shale in Louisiana and Texas.
CRK says it will operate wells on acreage recently acquired by USG and manage the drilling program in exchange for a 12.5% working interest in the acreage; CRK can acquire an additional 12.5% interest in each well drilled by reimbursing USG for acreage costs.
With the addition of the venture, CRK revises its 2017 capital budget to $168.5M and anticipates drilling 24 Haynesville shale wells in 2017.
Swapping about $1B of debt into paid-in-kind notes and standing up its first drilling rig in 18 months in September, previously on the verge of bankruptcy Comstock Resources (NYSE:CRK) has more than tripled over the past ninety days.
There could be plenty more legs to the story though, as word is the company has pulled forward plans, and will be standing up two more rigs within days.
Management has also been on a road show with its bondholders about converting the company's debt to equity.
What's more, Comstock recently completed a $28M land sale, the proceeds of which will be more than enough to fund capex for the next year.
Earlier fears that some energy companies might not be able to secure new lines of credit because of the collapse in oil prices seem to be a thing of the past; in fact, banks are willing to lend but energy companies do not seem particularly eager to borrow, says Stifel's Daniel Guffy and his analyst team.
Banks have sought to work through the debt challenges in the energy end markets, as forcing a bankruptcy risks a liquidation that would not come close to recovering the loan value; banks seem willing to lend again as the fall redetermination begins, but E&P companies have little appetite to add leverage, although this could shift as E&P fundamentals improve, Stifel says.
Companies in Stifel's coverage that have chosen to take a defensive posture by reigning in capex and curbing growth to protect balance sheets and/or preserve liquidity include Buy-rated CRZO, EGN, NFX and XEC, as well as Hold-rated CLR, COG, CRK and PQ.