Comstock Resources Sells 27% Stake in Pinnacle Gas Services to Sixth Street for $600 Million

The company has divested a 27% non-controlling common equity interest in its midstream subsidiary Pinnacle Gas Services to funds managed by Sixth Street for $600 million.

The transaction values Pinnacle Gas Services, currently a Delaware limited liability company, at an enterprise value of $2.2 billion.

Pinnacle Gas Services owns and operates the Pinnacle gathering and treating system, providing infrastructure for Comstock’s Western Haynesville natural gas development in East Texas.

Following the sale, Comstock will retain a 73% controlling equity interest valued at around $1.6 billion. The company will continue to manage and operate Pinnacle under a management services agreement.

The investment proceeds were used by Comstock to eliminate all preferred equity securities at Pinnacle for $445 million plus accrued dividends. They were also used to pay off outstanding indebtedness, cover transaction costs, and provide additional working capital.

The transaction will decrease Pinnacle Gas Services’ fixed charges by approximately $40 million per year due to the extinguishment of debt and preferred equity.

Comstock CEO M. Jay Allison stated:

Comstock is an independent natural gas producer active in the Haynesville Shale, with operations centered in north Louisiana and east Texas. The company holds an acreage of 540,000 net acres in the Western Haynesville.

If Sixth Street meets specified return thresholds, its stake in Pinnacle Gas Services will decrease from 27% to 19.5%, while Comstock’s interest would rise from 73% to 80.5%. This compares to the 70% equity interest that Comstock would have held if the preferred units had not been redeemed.

Sixth Street partner and co-head of energy and co-head of global infrastructure Zack Winegrad stated:

Jefferies served as financial adviser and O’Melveny & Myers as legal counsel to Comstock on the transaction. Financial advice to Sixth Street was provided by Wells Fargo and RBC Capital Markets, with Latham & Watkins acting as legal counsel.

“Comstock sells 27% stake in Pinnacle Gas Services to Sixth Street” was originally created and published by Offshore Technology, a GlobalData owned brand.

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