S&P: SOCAR deal opens up LNG prospects for US-based Comstock

A partnership with the State Oil Company of Azerbaijan (SOCAR) opens up new opportunities for American company Comstock Resources Inc. in the liquefied natural gas (LNG) segment, expanding trading opportunities and product distribution channels, reads a statement by S&P Global Ratings, which views the binding letter of intent announced by Comstock Resources Inc. with SOCAR as a positive signal for the issuer's credit profile, Report informs.

The transaction announced September 1, 2026, will include a 20% nonoperated working interest in Comstock"s Legacy Haynesville upstream assets, 15% nonoperated working interest in its Western Haynesville upstream assets, and 15% of its 73% ownership interest in Pinnacle Gas Services LLC. The aggregate purchase price of $1.65 billion in cash is subject to customary purchase price adjustments. SOCAR"s 15% interest in the Western Haynesville assets would reduce to 7.5% after five years and once SOCAR has achieved a 15% return on investment in those assets.

"This transaction helps Comstock offset its free cash flow deficit year-to-date and should improve near-term credit metrics," the agency noted.

The letter of intent binds the parties to negotiate a definitive agreement, with a targeted execution date of October 31, 2026, and a closing by year-end. It is subject to customary closing conditions, with an effective date of July 1, 2026. SOCAR will have the opportunity to participate in opportunities generated by Comstock in the Legacy and Western Haynesville areas at the same percentages as it is acquiring. SOCAR will provide opportunities for Comstock to market its natural gas to international customers.

"While we view this transaction as positive for credit, the deal has yet to be signed, and Comstock"s credit measures remain highly dependent on natural gas prices.

Comstock will retain operatorship of all assets involved in the transaction and majority ownership of its Pinnacle midstream asset (62% pro forma). We expect Comstock to use a portion of the net proceeds to reduce debt on its credit facility; potentially take out some or all of its 2029 notes, which are callable in March 2027; and for general corporate purposes, including development of its 545,000 net acres in the Western Haynesville," reads the message.

S&P Global Ratings affirmed Comstock's issuer credit rating at "B" with a "stable" outlook.