Sixth Street acquires 27% stake in COMSTOCK midstream unit for $600M

Comstock Resources, Inc. (NYSE: CRK) has sold a 27% non-controlling equity interest in its midstream subsidiary, Pinnacle Gas Services LLC, to funds managed by Sixth Street for $600 million, according to a press release from the company.

The transaction values Pinnacle at a $2.2 billion enterprise value. Comstock retained a 73% controlling interest in Pinnacle, which the company values at approximately $1.6 billion. Comstock will continue to manage and operate Pinnacle under a management services agreement.

Proceeds from the investment were used to retire Pinnacle's preferred equity securities for $445 million plus accrued dividends, repay all outstanding debt at Pinnacle, cover transaction costs, and fund working capital.

The transaction is expected to reduce Pinnacle's fixed charges by approximately $40 million per year. If Sixth Street achieves certain return hurdles, its ownership stake will decrease from 27% to 19.5%, with Comstock's interest rising from 73% to 80.5%.

M. Jay Allison, Chief Executive Officer of Comstock, said the deal strengthens the company's balance sheet by reducing debt and simplifying its capital structure while maintaining full operational control of Pinnacle.

Pinnacle owns and operates a gathering and treating system supporting Comstock's Western Haynesville natural gas development in East Texas, covering approximately 540,000 net acres.

Jefferies LLC served as financial advisor to Comstock, with O'Melveny & Myers as legal counsel. Wells Fargo and RBC Capital Markets advised Sixth Street, with Latham & Watkins as its legal counsel.

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