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Petrohawk to Acquire Houston E&P Neighbor in Cash, Stock and Debt Deal

Houston-based Petrohawk Energy Corp. said it has entered into an agreement with crosstown independent Mission Resources Corp. to acquire the company for a combination of Petrohawk stock, cash and the assumption of debt.

If the merger is successful, Petrohawk will more than double its proved reserves from 220 Bcfe to 446 Bcfe, 67% of which will be natural gas reserves. Following the merger, Petrohawk said its daily production will likely increase from 57 MMcfe/d to 125 MMcfe/d. The company added that it will continue its strategy of hedging a "significant percentage" of its forecasted production for two to three years. Given the current commodity markets, Petrohawk said consideration will be given to restructuring certain older derivative positions and replacing them with more current, strategic derivative transactions.

Under the agreement, Petrohawk said total consideration will be approximately 60% Petrohawk common stock and 40% cash and will consist of approximately 19.2 million Petrohawk common shares and $135 million cash.

Mission shareholders will have the right to elect to receive cash or Petrohawk common stock, subject to a proration if either cash or stock is oversubscribed. Based on the closing prices of Petrohawk and Mission on April 1, the implied acquisition price represents a premium to Mission stockholders of approximately 19%.

"We believe Mission offers a number of important features that we look for -- undervalued or underdeveloped properties in areas where we have technical expertise, near-term non-core divestments, opportunities for accelerated development of proved undeveloped reserves, an attractive acreage position and significant upside in the form of 3-D seismic based drilling prospects, all within existing core areas," said Floyd C. Wilson, CEO of Petrohawk.

The per share consideration is established in the merger agreement at $8.15 in cash or 0.7718 shares of Petrohawk common stock. However, the per share consideration is subject to adjustment upwards or downwards so that each Mission share receives consideration representing equal value. This adjustment will reflect 46.3% of the difference between $10.56 and the price of Petrohawk's shares during a specified period prior to closing. Based on the April 1 closing price of $11.53 of Petrohawk, the adjusted per share consideration would be valued at $8.60 or 0.7458 shares of Petrohawk common stock.

Mission Resources CEO Robert L. Cavnar said, "By combining Mission's strong inventory of exploitation projects in the Permian Basin and exploration projects on the Gulf Coast with Petrohawk's portfolio of attractive development projects in the Permian, Anadarko and East Texas Basins and exciting exploration projects in the Arkoma Basin and along the Gulf Coast, we create a combined company with a multi-year inventory of diversified projects in key U.S. hydrocarbon basins."

Wilson will remain as Petrohawk's chairman, president and CEO. Following the completion of the transaction, two directors nominated by Mission will join Petrohawk's board of directors.

The acquisition is subject to the approval of the shareholders of Mission and Petrohawk. The boards of directors of both companies have unanimously approved the transaction, which is subject to customary conditions, including approval of listing of the Petrohawk shares to be issued in the acquisition on NASDAQ and regulatory approvals. The companies expect the acquisition to be completed during the third quarter of 2005.

Petrohawk is an independent energy company engaged in the acquisition, production, exploration and development of oil and gas, with properties concentrated in the South Texas, Mid-Continent, East Texas, Arkoma, Permian and Gulf Coast regions. Mission Resources is also an independent exploration and production company that drills for, acquires, develops and produces natural gas and crude oil primarily in the Permian Basin (in West Texas and Southeastern New Mexico), along the Texas and Louisiana Gulf Coast and in both the state and federal waters of the Gulf of Mexico.

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