Jay Allison & Comstock Resources: Energy driven

Baylor Business Review, Fall 1999 by Corwin, Judy

From on 1860's Gold and Silver Company, An Oil and Gas Company Emerges

Not only was Miles Jay Allison one of the first in his family to attend college, he was also a man who wouldn't settle for just one degree. He earned three! A Bachelor of Business Administration, a Master of Science in Economics, and a Juris Doctorate-all from Baylor University. Today this native of Brownwood, Texas is head of one of the fastest growing independent oil and gas companies in the country, Comstock Resources, Inc.

However, the energy that Comstock generates is only equaled by the energy that Jay Allison himself generates! Jay is an ultra-marathon runner, a devoted family man, a deacon in his church, an active professional in the energy field, and a supporter of higher education-most recently as a newly elected member of Baylor's Board of Regents.

What follows are descriptions of how Jay Allison developed his career and his company, how he views the energy industry, and how he approaches life in general.

A Career and a Company Emerge

Right out of college in 1981, Allison was hired as an oil and gas attorney with the law firm of Lynch, Chappell, Allday and Alsup in Midland, Texas. After practicing oil and gas law for six years, Jay left the field of law to devote his time to cofounding and developing a private oil and gas company called Midwood Petroleum, whose production was mainly in the Fort Worth Basin.

In 1987, Allison acquired Comstock Tunnel and Drainage-a company based in Virginia City, Nevada, whose operations dated back to 1863. Comstock was incorporated in 1919 and held various gold and silver claims, an old silver mine, and real estate in Nevada. The company was named after Virginia City's famous silverbearing Comstock Lode. [During the Civil War, over $50 million in gold and silver from the Comstock mines was of distinct aid to the Federal government.]

"When we bought Comstock," says Jay "it was an inactive mining company whose stock was traded 'by appointment only' on a regional exchange. Our business plan was to turn it into an oil and gas 'E&P' [exploration and production] company. We changed the name to Comstock Resources, and over a period of several years, sold off all the gold and silver mining assets as well as the real estate holdings. However, we did hang on to Comstock's original safe where silver was once kept. It's on display in our headquarters at the Comstock Tower in Frisco, Texas."

Such was the beginning of Comstock Resources, Inc.

Comstock On the Rise

"Starting with 'nothing more than an idea,' we took the original Comstock Tunnel and Drainage Company to what is now Comstock Resources, Inc.-the 54th largest public oil and gas company in America and also the 18th largest producer of oil and gas in Texas," says Jay.

Allison believes that much of the company's success can be attributed to the talent and experience of those who served on its initial Board of Directors, several of whom are still on the board today. Among its first board members were two well known national business leaders: Hal Logan, former head of Grace Energy and vice chairman of W.R. Grace Company, and Richard Hickok, former head of the national accounting firm then known as Main Hurdman (now KPMG). With such guidance and leadership, the company immediately began buying oil and gas properties and drilling oil and gas wells. By means of its new assets and highly skilled management, Comstock Resources soon qualified for a NASDAQ listing. By 1992, the company was listed on the New York Stock Exchange.

With operations located in Texas, Louisiana and the Gulf of Mexico, Comstock has produced over $440 million in assets and annual revenues of almost $100 million. "Our growth has come primarily from acquisitions of producing oil and gas properties," explains Jay, who also points out that since 1991 Comstock has completed eighteen acquisitions for a total cost of $412 million, which have in turn built company reserves equal to 372 Bcfe (billion cubic feet of natural gas equivalent) at the end of 1998.

Strategy In the Evolving Field of Energy

In 1996, Comstock began shifting its emphasis from growth through acquisitions to growth through the "drill bit." Says Jay, "A major part of our strategy is to be a low cost producer. We have consistently put up low operating cost numbers and have the lowest overhead cost per unit produced by any public oil and gas producer of similar size or larger."

By 1998, Comstock's growth was coming exclusively from its exploration program, under which the company discovered 56 Bcfe from its Gulf of Mexico drilling program.

A good example of Comstock's growth strategy is its Double A Wells field in Southeast Texas, where 19 producing wells in Polk County were acquired in 1996 for

$ 100 million. Since then, 20 additional wells have been drilled, substantially increasing the field's production and revenues (currently accounting for 30% of Comstock's total revenues). The company has already received net revenues from this field in excess of its acquisition costs, and the field still contains over 100 Bcfe of oil and gas reserves yet to be recovered!