Comstock's $1.65 billion sale could halve debt. What funds drilling?

Comstock Resources has signed the agreement it needs to reshape its balance sheet. Azerbaijan's state oil company, SOCAR, would pay $1.65 billion for minority interests in Comstock's gas assets. Comstock's results presentation models total debt falling from about $3.4 billion to $1.7 billion after the sale and repayments.

The question is how it keeps drilling while directing the money to lenders. Over the first nine months of 2026, the Haynesville producer spent $1.29 billion on cash capital investment, more than twice the $622 million its operations generated.

Part of the answer is a separate drilling venture with Jerry Jones, Comstock's majority shareholder. That arrangement shifts much of the cost of a selected group of wells to a Jones family partnership, in exchange for a share of their future economics.

A sale that buys time with the banks

The November 4 signing turns September's announced SOCAR plan into a definitive agreement. The $1.65 billion headline price and main ownership terms were already public. Closing is still expected by year-end, subject to approvals and other conditions.

Comstock has already extended its bank facility's maturity from November 2027 to November 2028. A further extension to November 2031 requires the SOCAR closing and debt repayments. The bank amendment requires substantially all net sale proceeds to go toward bank loans and bonds, including at least $750 million of the bonds due in 2029. The conditions for that further extension must be met by March 31, 2027.

The company would give up 20% of its interest in the Legacy Haynesville assets, 15% in Western Haynesville and 15% of its own stake in Pinnacle Gas Services. Comstock remains the operator. SOCAR's Western Haynesville share falls to 7.5% only after five years and after it earns a 15% return on that investment.

Research by Ticker Byline shows that the company's documents do not describe an identical bank repayment. The quarterly report says Comstock plans to pay off the bank balance; the results presentation instead models $110 million still drawn, alongside $1 billion of bond repayments. The precise split between bank and bond repayments remains to be confirmed.

More production, but a large investment bill

Comstock's drilling is producing more gas. Third-quarter output rose about 9% from a year earlier and 8% from the previous quarter. Operating cash flow increased to $180 million from $153 million a year earlier.

Profit told a less encouraging story. Lower gas prices, higher depreciation and other costs left operating income at $23 million, versus $50 million a year earlier. Adjusted net income fell to $5.9 million from $20.9 million. That measure removes unrealized hedge gains, exploration expense and related adjustments, while retaining cash gains from gas-price hedges.

The widening gap helps explain why Comstock needs both transactions: the SOCAR sale reduces existing debt, while the Jones venture lowers the cash Comstock must put into new wells.

The drilling money comes with a trade-off

The Jones partnership will fund 85% of the drilling and completion costs of 18 Western Haynesville wells and 80% of nine Legacy wells. Comstock estimates the partnership will put in $300 million in 2026 and another $150 million in 2027.

Comstock first receives the wells' net revenue until it recovers about $180 million of costs it had already incurred. The partnership then receives the net proceeds until it recovers its investment and a 15% return. After that, half the interest in the wells reverts to Comstock.

Management expects the venture to help produce positive free cash flow in the fourth quarter. That is the next operating test: whether the lower funding burden lets Comstock keep developing its gas acreage while reducing debt, rather than building the borrowing back up.