Dallas Cowboys Owner Jerry Jones and Comstock Chairman Jay Allison join Yahoo Finance Live to discuss investing in natural gas, growth, Amazon’s Thursday Night Football deal, NFL team valuations, and the outlook for streaming.
BRIAN SOZZI: Dallas Cowboys owner Jerry Jones has taken his investment strategies outside of the world of football, seeing a more than 300% return on his now 182.2 shares of natural gas producer Comstock Resources since 2018. Jerry Jones and Comstock chairman and CEO Jay Allison join us now live from the New York Stock Exchange. Yahoo Finance's Josh Shafer is also with us. Good morning to you both.
Jerry, I'll start with you. Why did you make this investment in 2018? And how confident are you in the outlook for the company moving forward?
JERRY JONES: Well, I deliberately went to where the gas was, the Haynesville gas. Comstock had drilled more Haynesville gas wells than anyone. They had initiated the play when it first started years earlier.
But it was an opportunity, in my mind, to get involved with the ability to export natural gas liquids, LNG, the ability to do that. Then I wanted to saddle up with the people that knew it the best in Haynesville.
I made an investment initially of about 600 million. And then I came in behind that with an investment of about 475 million. The more I found out about Comstock, the more I wanted to put in it.
BRAD SMITH: Jay, it's been a good year in the energy sector. I mean, it's been the best outperforming sector at this point in time. So even as you think about the gains that the share price may have seen, how do you think about the future, moving forward from here and where you may have to continue to invest in order to grow out the business even further?
JERRY JONES: Well, I'll speak as an investor. Comstock can differentiate itself from the idea of an energy company. Comstock has very unique reserves. The acreage is where the ethos of the people that do the work, they're generational in being in the oil and gas business.
The laws let you put in pipelines. And they let you take it a short distance to the Gulf where you want the gas to be. And so we have a huge butane tank, if you will, of supplies that frankly, in and of itself, could knock a big dent and what Germany needs. It's that kind of size.
So I'm excited about where we are and this current time of investors looking at a natural gas company, where its place is in the energy world. And I'm excited about our management team we have at Comstock.
BRIAN SOZZI: Jay, you've spent a lot of time in this industry. And we still might see economic growth slow into the winter season. Perhaps we might already be in a recession. Who knows? What does that mean for the outlook for natural gas prices?
JERRY JONES: Well, I'm not going to get into-- because I don't go there-- really analyzing seasonal trends. I will say this, that we all understand that weather and climate help influence gas prices. And we understand aberrations, catastrophes, those kinds of things.
But I look at this long-term. These reserves that Comstock has can make it go at $2 gas. We can make it go at the different ranges of whatever gas is. It will, though, be there without loading the company down with debt so that we will be able to manage through low prices so that you can basically be viable and have the gas for the complete spectrum of demand.
Gas is about delivery not about reserves. It's about delivery. And Comstock is in the place to take huge reserves and get it delivered to the market at the lowest cost in the industry. That's why I'm here.
JAY ALLISON: When Jerry called, he asked, if we drill a well, can we take it to sales? And, if LNG has legs, can we deliver it to the LNG shippers? And then do we have inventory?
I think the one thing that the M&A world is doing, they had to really grow, even recently, because they had a lack of inventory. If you look at what Jerry did in 2018, he consolidated his private company into Comstock. And then we were aggressive in M&A in 2019. That's when gas was $2 and $3.
To be aggressive in M&A when gas is $6, $7, $8, $9, we think goes against our plan. So what we have today, we've got the lowest-cost producer with the highest margins with, we think, the greatest inventory. We drill about 80 wells a year. We turn about 58 of those to sales every year. So we have about 25 years' worth of inventory.
So it's pristine. And the cost structure is extremely low. I think we've got the lowest GNA in the whole sector. And if you just look at sheer cost, it takes us $1 to run the company. And our historic finding costs for three years, our numbers, is about $1 to find and develop these reserves. So anything over $2 is a profit for Comstock.
Our EBIDTA, ex-margins, if you compare them to other oil companies and/or gas companies, they're 85%. I mean, these are the highest of the high. So that's what we have. And gas prices will fluctuate. But I do see natural gas, it's kind of taken a detour from where oil is. And it's probably trying to get a 10 to 1, now, ratio.
So that's important. I think it'll be important in the future. They predict by 2023 that the demand for natural gas will probably be greater than oil. So we'll see. As Jerry said, we're sitting on some tremendous gas reserves. And most of that is held by production. 85% of what we own we do not have to drill. So you put a rig or two out there. If things get really tough, then we're still in tremendous shape, particularly--
JERRY JONES: Well, Jay, I want to interrupt you because he and two or three other of his management team just bought $5 million worth of stock in the last few days. Now, of course, I sit here as someone who's put over a billion dollars in the stock in this company. I've always believed, put your money where your mouth is.
And what you're seeing is the people that are in the weeds, the people that are seeing the future both on a microscopic level as well as a broad picture, are putting their money into Comstock.
BRIAN SOZZI: So Jerry--
JAY ALLISON: Well, to Jerry's point--
BRAD SMITH: Just to jump in very quickly, Jay--
JAY ALLISON: $5 or $6--
BRAD SMITH: Yeah.
JAY ALLISON: Yes?
BRAD SMITH: Just to jump in very quickly, Jay, I just wanted to follow up on what Jerry just said. Jerry, would you be willing to take more of a stake in Comstock than you already have? And what threshold would that look like to you?
JERRY JONES: Absolutely. I have been ready to buy more of Comstock since the day I got here. And we manage that way, if necessary.
What's ended up happening though, is that we have delivered our balance sheet. And because of the gas prices, we are sitting here today internally. And so we really can develop these reserves. We can figuratively double our gas production and do it all internally.
We don't have to go issue stock. We don't have to go borrow a lot of money. We can do it internally. And that's what makes Comstock so special.
JOSH SHAFER: And Jerry--
Sorry, Jay, I was going to cut in and ask Jerry a little bit about football here. I wanted to ask you a little bit about the Cowboys.
JERRY JONES: Football!
JOSH SHAFER: We know you're here in New York because you've got the Giants game tonight as well. The Cowboys are playing the Giants. That game's going to be on ESPN, of course, "Monday Night Football." But there has been a lot of talk about what Amazon's doing with "Thursday Tonight Football."
I'm curious just what you make of Amazon's interest in the NFL. And what does that mean for the NFL as a whole, to have these big tech giants that now want to come and get involved with you guys, with Amazon, maybe even potentially Apple down the road?
JERRY JONES: Well, I think Thursday night's audience was epic. Frankly, it deserves special notice by a lot of factions. Those numbers were surprising to me. And I think they're a picture of what's to come.
I don't believe there's any question that the game has the interest and has the eyeballs. We're at the right time of the year when you want the decision makers in front of the screens in the fourth quarter. I think all of that's alive and well.
Frankly, the picture for the National Football League, in the entire time I've been associated with it, has never been better because of the continued interest. And then, again, you look at last night. Look at how these games turned out last night, six or seven of them decided just with a minute to go or with a point difference, that type of thing. All of this points to real eyeball interest. And that's a big deal for the NFL.
JOSH SHAFER: And Jerry, you said the picture has never been better, right? We've talked a lot about valuations on this program as teams have been sold. The Broncos were sold for 4 and 1/2 billion dollars. I know your valuation, according to Forbes, has basically doubled in the last five years at about 8 billion now. I mean, what do you make of valuations? Do you think those numbers are the right numbers? Do you think they're going to keep going up? Do you think the Cowboys are worth more than 8 billion anyway?
JERRY JONES: Well, I know that I wouldn't sell the Cowboys for 10. Book it, I would not. Of course, I'm not interested in selling the Cowboys. And therein lies a part of the answer. You have limited owners. You have limited teams that might ever be available. And you have outstanding growth in those franchises.
And then you have the fact that I bought the Cowboys not to make money at all. I had a little money. I'd done it in gas business. I had a little money. But what I wanted to do was coach football. I never thought that I could be involved in something that would have economic viability. The fact that it does have economic viability and has for the last 30 years, beyond anything I could have ever imagined, is just a major plus. So I think there is a future of values that will exceed what Denver went for, for sure.
BRAD SMITH: Is there another big player you'd like to add to the team, Jerry? I ask this from a Philadelphia Eagles fan perspective. I just want a sense, landscape of the competition out there.
JERRY JONES: Well, I'm impressed with the Eagles' team, period.
BRAD SMITH: Thank you, Jerry.
JERRY JONES: And I love the way quarterback has evolved. And I'll tell you this right now-- this is really going to seem funny to you. I actually like Eagle fans because they are so passionate. They're so mad at it. And it just tickles me to death to be involved with them up there. And they're all frauds because they're pretty good people behind that hate that they have when they get on the football field.
BRAD SMITH: I had to bring some of that Eagles energy to New York. That's why I moved up here, Jerry. It's great to see you up here in New York as well at the New York Stock Exchange. I know you'll probably be at the game later on today too between the Cowboys and the Giants. Also thanks to Jay Alison, Comstock chairman and CEO, alongside Yahoo Finance's Josh Shafer. Appreciate the conversation this morning.