Jerry Jones has found one investment that beats the fantastical growth of his Dallas Cowboys—natural gas. Over the past four years, Jones has made more than 300% on oil and gas assets he acquired in North Dakota, compared to “just” a 58% gain in the value of the Cowboys over that same time.
In 2018 Jones swapped 52.5 net producing oil wells and a series of uncompleted wells he owned in North Dakota’s Bakken region for 88.57 million shares in publicly traded gas producer Comstock Resources worth $620 million. Arguably, Comstock overpaid, since those wells cost Jones $398 million, net of accounting write-downs including depletion and depreciation, according to Comstock’s 2019 annual report. Today, those shares are worth $1.68 billion—a 328% return on Jones’ original investment.
By comparison, in 2018 the Cowboys were worth $4.8 billion, increasing “just” 58% in value over the same period to $7.6 billion in this year’s Sportico NFL valuations. Including a follow-on investment of $475 million cash into Comstock in 2019, Jones today has the equivalent of 182.3 million shares of Comstock Resources, worth nearly $3.5 billion.
The reason has been an unexpected surge in the price of natural gas. In 2018, when Jones took control of Comstock, benchmark natural gas prices were low, about $3.25/mmbtu. When Jones doubled down in 2019, prices had fallen even further, to less than $3. This year, natural gas has traded as high as $9.85, with an average price around $6.59.
“He made one of the biggest out-of-consensus bets. It’s almost like when he bought the Dallas Cowboys,” Neal Dingmann, an energy stock analyst at Truist Securities, said in a phone call. “It looks like an easy bet now, but at the time, everybody shook their head. I couldn’t find another investor out there that was positive on natural gas.”
There are more parallels with the Cowboys than there may seem at first. In 1989, no one had ever paid more than $100 million for a sports team before Jones, a former college football player, shocked the industry with his $150 million purchase of the then money-hemorrhaging franchise. Jones followed that by firing legendary coach Tom Landry as his first—very unpopular—act. Since 1989, the Cowboys have risen 5,000% in value. When Jones, who originally made a fortune in oil and gas before the Cowboys, took control of Comstock, not only was the natural gas business slumping, Comstock itself was saddled with a poor balance sheet and mediocre oil and gas reserves, based on a review of the company’s annual reports. The Jones deal more than tripled Comstock’s oil reserves and, just as importantly, improved its balance sheet and gave the business direction. The Cowboys declined immediate comment when reached Thursday night. Comstock Resources declined comment.
Under Jones’ majority ownership, Comstock didn’t stay in North Dakota for long—the company sold off its assets in the state last year to Northern Oil and Gas for $154 million. Jones has refocused the company as a natural gas producer in the Haynesville Basin, a massive gas deposit beneath the surface of east Texas and northern Louisiana. Jones didn’t just buy into natural gas at the right time, he’s put the company into what many consider the best natural gas geography. The Haynesville region means producers have a short pipeline run to the Gulf Coast, where the expected growth in the global liquefied natural gas (LNG) trade to Europe and elsewhere should power Comstock’s business for years to come.
“How much is luck, how much is skill, no one will ever know. But I don’t want to call it a risky bet—I think he weighed the options and thought he bought it cheap enough,” Dingmann said. “Long story short, here we are a few years later, and it has turned out to be one of the best buys in the oil and gas business in years.”