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XTO Buys Petrohawk Fayetteville Assets

Petrohawk Energy Corp. has sold its natural gas assets in the Fayetteville Shale to XTO Energy Inc., a subsidiary of ExxonMobil Corp., for $575 million, the company said. The deal puts ExxonMobil at No. 2 in the Fayetteville leaseholder pack.

The acreage is located primarily in Cleburne and Van Buren counties, AR. The deal has an effective date of Oct. 1, 2010. As of Dec. 31, 2009, Petrohawk had estimated proved reserves in the Fayetteville of 299 Bcf. Current production is about 98 MMcfe/d, Petrohawk said.

The deal consists of 150,000 net acres with 97 MMcf/d net production, ExxonMobil said. "This acquisition provides a strategic addition to XTO's existing 410,000 net acre position in the Fayetteville Shale Trend," an ExxonMobil spokesman said. "ExxonMobil and its XTO subsidiary will continue to pursue value-adding upstream projects..."

According to Petrohawk's most recent investor presentation, the company had 157,000 net acres in the Fayetteville. The Fayetteville acquisition gives ExxonMobil about 537,000 net acres in the region, making it the second largest Fayetteville leaseholder, ahead of Chesapeake Energy Corp., and trailing only Southwestern Energy Co.

The Fayetteville is now ExxonMobil's largest North American unconventional resource holding. Previously, it had been the Bakken Shale, where the company currently holds 450,000 net acres.

Houston-based Petrohawk has also agreed to sell XTO its midstream assets in the Fayetteville for $75 million with closing expected early next year.

ExxonMobil completed its $43 billion acquisition of XTO in June (see Daily GPI, June 28).

According to a recent report from the U.S. Energy Information Administration, XTO ranked third behind BP plc and Chesapeake Operating Inc. in 2009 proved reserves of natural gas, while Petrohawk Operating Co. was ranked 16th (see Shale Daily, Dec. 10). Significant shale gas holdings was a feature common among the top reserves holders.

Last summer during a presentation to financial analysts, ExxonMobil's David Rosenthal, head of investor relations, said that during the second half of the year the company would increase its activity in the Fayetteville, as well as the Haynesville, Marcellus, Eagle Ford and Bakken shales (see Daily GPI, July 30).

Among the shale plays, the Fayetteville cuts a strong profile when it comes to gas prices. Except for the two Marcellus sections (northeast Pennsylvania and southwest Pennsylvania/West Virginia), prices for Fayetteville gas tend to be among the highest of the 13 plays covered by NGI's Shale Price Indices (see Shale Daily, Dec. 9).

Recently Fayetteville Shale pioneer Southwestern said it would cut spending in 2011 while focusing on its maturing development in the play. "Our plan for the Fayetteville Shale during the year is to transition from earning our acreage position by drilling first wells in new sections and optimizing well spacing to more drilling on multi-well pads, which will result in faster drilling times," said CEO Steve Mueller (see Shale Daily, Dec. 21).

Bank of America Merrill Lynch advised Petrohawk on both transactions.

During its third quarter earnings conference call Petrohawk said it had hired a bank to assist in the sale of its Fayetteville acreage. Petrohawk has properties concentrated in the Haynesville Shale in North Louisiana and in the Eagle Ford Shale in South Texas. Last month executives said the company would be more focused on the Eagle Ford Shale, due to its liquids- and condensate-rich characteristics (see Shale Daily, Nov. 4).

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