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Comstock Secures $700 Million Credit Facility, Gains 7.7%


Comstock Resources, Inc.’s CRK shares gained 7.7% yesterday following its announcement that the company has secured a 5-year revolving credit facility from a group of 13 banks. The credit facility has an initial borrowing base of $700 million.

The credit facility will be available after the company closes the acquisition of certain assets located in the Bakken shale basin from Arkoma Drilling, L.P. and Williston Drilling, L.P., which are held by Jerry Jones and his family, in an all-stock deal. The issuance of new Comstock shares associated with the acquisition deal — expected to bring in substantial investment for the company — will be put to a vote on Aug 10 in the annual meeting.

Deal Details

The initial borrowing base of $700 million will be re-determined in an interval of six months. All the properties of the company will be used to secure the credit facility, orchestrated by the Bank of Montreal BMO.

The mode of interest payment for the borrowing base can be chosen by Comstock from the two options — London interbank offered rate plus 2-3% or a base rate added with 1-2% interest. For the unused part of the borrowing, the company has to pay 0.375-0.5% as a commitment fee.

The company has more than 800 Haynesville shale locations to develop in the coming years, which will add tremendous value for investors in the future. The credit facility will enable the company to develop the growth projects.

Price Performance

Frisco, TX-based Comstock has gained 75.3% in the past year compared with 26.5% growth of its industry.

Zacks Rank and Other Stocks to Consider

Currently, Comstock has a Zacks Rank #1 (Strong Buy). Investors interested in the Energy sector can also opt for other top-ranked stocks like BP p.l.c. BP and EOG Resources, Inc. EOG, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

London-based BP is an integrated energy company. The company’s top line for 2018 is anticipated to improve 12.6% year over year, while its bottom line is expected to increase 77.7%.

Houston, TX-based EOG Resources is an upstream energy company. The company’s top line for 2018 is anticipated to improve 41.4% year over year. In the last four reported quarters, the company recorded an average positive earnings surprise of 30.1%.

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