Comstock Resources, a leading Haynesville shale owner, is considering buying Chesapeake Energy's resources in Louisiana in a deal that will be worth $1 billion, Reuters confirmed on Wednesday.
The report cites people with information a week after Chesapeake cautioned that it might not be able to service its debt if low prices continue.
Dallas Cowboys founder Jerry Jones' Chesapeake and Comstock Resources have worked out a basic structure for the potential deal that, according to reports, could be priced at more than US$ 1 billion.
By the end of this year, the sources said, the companies could settle on an agreement, noting that the talks do not guarantee an agreement will be reached.
During the past few weeks, Comstock Resources has gained assets in Haynesville, while Chesapeake Energy warned last week that its capacity to conform to the covenants under its revolving credit facilities and other indebtedness could affect its ability to remain a concern.
In a Securities and Exchange Commission filing, Chesapeake disclosed that "If continued depressed prices persist, combined with scheduled reductions in the leverage ratio covenant, our ability to comply with the leverage ratio agreement will be adversely affected over the next 12 months."
Chesapeake also said it is slashing its capital expenditure outlook for 2020 by about 30 percent and aims to reduce production and operational and operating expense by about 10 percent in 2020.
For the rest of the year, the firm, which helped propel the shale gas boom in the late 2000s, said it launched its controlled rigs and construction crews in the Haynesville Shale.
Chesapeake's stocks tumbled last week after the notice and managed to slow down until Tuesday as the stock price fell to a 25-year low.
Commenting on market volatility, Doug Lawler, chief executive officer of Chesapeake, said in a release on Tuesday that "we continue to pursue tactical strategies to reduce debt, including asset sales, capital market investments, and emphasis on cost control."
Comstock Resources, for its part, became the operator of Haynesville Basin in June after acquiring private-owned gas company Covey Park Energy in cash and stock.
According to federal energy forecasts, U.S. liquefied natural gas imports were expected to rise by more than 50 percent this year, making the country on pace to become the world's largest exporter of LNG by 2024. The U.S. ranked fourth behind China, Australia, and Malaysia in 2018.
Jones' Comstock was Haynesville's biggest owner since June's takeover of a $1.1 billion transaction kept Covey Park privately.
