S&P: Deal with SOCAR opens LNG segment prospects for American Comstock

The partnership with the State Oil Company of Azerbaijan (SOCAR) opens new prospects for the American company Comstock Resources Inc. in the liquefied natural gas (LNG) segment, expanding trading opportunities and product distribution channels.

As reported by Report, this is stated in a release by the international rating agency 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.

According to the agreements reached, SOCAR or its wholly owned subsidiary will acquire minority working interests in several Comstock assets. The deal provides for the purchase of a 20% interest in Comstock's Legacy Haynesville producing assets, a 15% interest in Western Haynesville, as well as 15% of the equity in Pinnacle Gas Services LLC (in which Comstock holds a 73% stake).

The total transaction value is estimated at $1.65 billion in cash, subject to customary adjustments. SOCAR's 15% interest in the Western Haynesville projects will be reduced to 7.5% five years after reaching a 15% investment payout threshold.

"This transaction will allow the company to cover its free cash flow deficit for the current year and improve near-term credit metrics," the agency states.

The parties to the deal plan to sign the definitive agreement by October 31, 2026, with closing targeted for year-end subject to customary conditions (with an effective date of July 1, 2026). In addition, SOCAR will have the opportunity to participate in future Comstock projects in the respective areas proportional to the acquired interests and will provide the American company with access to international natural gas markets.

The agency's analysts emphasize that, despite the positive nature of the agreement, a definitive contract has not yet been signed, and the company's financial results remain significantly dependent on gas market conditions. Comstock will retain operational control over all involved assets, as well as a majority stake in the Pinnacle infrastructure business (62% pro forma). The proceeds are expected to be used to pay down revolving credit facility borrowings, potentially redeem bonds maturing in 2029 (with an early call option arising in March 2027), as well as for general corporate purposes and development of Western Haynesville assets.

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