Comstock Resources Inc. (NYSE: CRK) is making progress on plans to increase its Haynesville Shale acreage—potentially doubling its current acreage—with a deal to purchase interests in Harrison and Panola counties, Texas.

Comstock agreed to pay $20.5 million for an 88% interest in Shelby Shale LLC’s 6,023-net acres. However, the deal is structured so that Comstock will compensate Shelby by granting it 12% interest in each well Comstock drills.

Dallas-based Shelby is a privately-held, fourth-generation family oil and gas company operating since the 1920s. The company operates more than 70 wells in Harrison and Panola, according to its website.

Comstock said the transaction will add 22.4 identified net future operated locations at $900,000 per well or $3,400 per acre, according to a Dec. 20 report by Seaport Global Securities analyst Mike Kelly.

“We like the way the deal was structured – no upfront payment,” Kelly said.

Comstock has said it feels wants to become the go-to player in the Haynesville, fortified by a strong balance sheet that includes liquidity of $282 million.

“Consolidation is needed to make this a reality and management has been proactively trying to make this happen,” Kelly said. “In management’s eyes, any deal would need to be deleveraging in nature and encompass a strong inventory of future locations with returns as strong as what Comstock is generating.”

The company may also offer a compelling exit strategy for private-equity companies unable to find an IPO exit, such as Covey Park Energy LLC, Indigo Natural Resources, Vine Oil and Gas, GeoSouthern Haynesville LP and Rockcliff Energy, which owns 270,000-net acres in the play. Vine, Indigo and Covey Park have all explored IPOs, some through confidential filings, without making the leap to the public markets.

Comstock has shifted its attention to the Haynesville where it closed a deal in July to buy the closed the bankruptcy sale of Enduro Resource Partners LLC’s 12,000-net acre position in Caddo and DeSoto parishes, La., for $37 million.

Comstock’s capex guidance for 2019 of $377 million is primarily earmarked for Haynesville/Bossier shale drilling and completion activities, which comprise $361.3 million of its spending. The company plans to drill 38.2 horizontal wells.

The Shelby acreage position offsets the Enduro acreage, Comstock said.

"The additional acreage added by the Shelby acquisition is near our recently acquired Enduro acreage," Comstock CEO M. Jay Allison said in a news release. "This acreage enhances our long-term opportunity set in the Haynesville shale and will be incorporated into our drilling plans over the next four years."

In December, Comstock’s Haynesville/ Bossier inventory consisted of more than 900 gross locations pm 81,000 net acres. The company’s East Texas and North Louisiana assets averaged third-quarter 2018 production of 257.8 million cubic feet equivalent per day.

The company’s natural gas supplies natural gas to meet Gulf Coast industrial demand, which is also exported to Mexico or through LNG at a price LTM advantage to North East pipelines. The company added a fourth rig to the Haynesville/Bossier shale program in September and planned to put a fifth rig to work in 2019.

In the third quarter, Comstock sold 2,200 net undeveloped acres in its Eagle Ford joint venture for $13.7 million in the quarter.

And in April, the company teamed with Dallas Cowboys Football Club Ltd. owner Jerry Jones to create a partnership in the Williston Basin. Comstock and a company owned by Jones agreed to buy interests in North Dakota properties in exchange for $620 million in Comstock’s common stock. The deal, Kelly said, allowed Comstock to immediately double its cash flow.

Onshore