Independent producer Petrohawk Energy Corp. has agreed to buy 24,000 net acres in the Fayetteville Shale for $343 million in cash from Alta Resources LLC, Contango Oil & Gas Co. and other parties, the company said last Tuesday.

The acreage has a reserve potential of more than 500 Bcfe and is located in the core of the Fayetteville Shale play, primarily in Van Buren and Conway counties in Arkansas, the Houston-based company said.

Petrohawk said its total acreage position in the Fayetteville Shale will be approximately 125,000 net acres upon closing, which is expected by Dec. 31 if customary conditions are met. Current net production from the properties is approximately 11 MMcfe/d, while proved reserves were pegged at 60 Bcfe.

At the close of 2006, the producer reported that it had proved reserves of 1.1 Tcfe in all of its properties, of which 85% were natural gas. The company's average production rate in the third quarter was 327 MMcfe/d, of which 85% was natural gas, Petrohawk said.

The company estimated that 87% of its $700 million capital spending budget in 2008 will be allocated to activities in the core area of the Fayetteville Shale and the Elm Grove Field and Terryville Field in northern Louisiana.

"This valuable property [24,000 net acres] is contiguous to our existing position in the Fayetteville Shale, where throughout 2007 we have established a successful drilling program and are making the investment necessary to support long-term development," said Petrohawk CEO Floyd C. Wilson.

"This transaction is also consistent with our plans to reinvest proceeds from the recently announced sale of our Gulf Coast division and shift our inventory and drilling focus to low-risk, low-cost opportunities," he noted.

In mid-October, Petrohawk Energy entered into a definitive agreement to sell its Gulf Coast division to a privately owned company for $825 million. The sale is expected to close during the fourth quarter (see NGI, Oct. 22). The producer said it will use the proceeds from the Gulf Coast division sale to finance acquisitions, accelerate development in the Fayetteville Shale and Cotton Valley tight gas plays and repay a portion of its revolving credit facility. At closing, Petrohawk will receive $700 million in cash and a $125 million note.

©Copyright 2007 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.