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Petrohawk to Sell $1B of Assets to Fund Shale Program

November 9, 2009
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Petrohawk Energy Corp. expects to sell "at least $1 billion" in assets in 2010 to help fund its onshore natural gas prospects, which include the Haynesville and Eagle Ford shale, CEO Floyd C. Wilson said last week.

In September the producer sold its Permian Basin properties to a privately owned company for $376 million in cash (see NGI, Sept. 28). Proceeds were to be used to focus on the shale properties. And the next year's sale proceeds will be used for the same objective, said Wilson.

"With the sale of our Permian Basin properties, we have completed the latest in the series of transactions, the proceeds from which are designed to be redeployed," he told financial analysts during a conference call to discuss the company's 3Q2009 performance. "We expect divestiture proceeds in 2010 to come to at least $1 billion."

Petrohawk has a "highly seasoned" acquisition and divestiture team "with a track record for getting to the goal line and making the extra point," he said. "These actions should clearly confirm that our development plan did not require additional equity."

Assets expected to be up for sale include the company's midstream assets, the Terryville Field in northwest Louisiana, interest in the West Edmond Hunton Lime Unit in Central Oklahoma and other noncore assets, the company said.

Petrohawk spent $1.1 billion in 2008 "and we're expecting to spend about the same in 2009, as our assets and opportunities have grown to include large acreage positions in the Eagle Ford and Haynesville shale," Wilson said.

Last week Petrohawk said it would partner with Swift Energy Co. to develop Swift's Eagle Ford Shale assets. Under the terms of the joint venture (JV), Petrohawk will pay Swift $26 million in cash up front and $13 million more to fund capital expenses (capex) for the first year.

An appraisal drilling program on Swift's 26,000-acre leasehold in McMullen County, TX, is to be helmed by Petrohawk and is scheduled to begin before the end of this year. Petrohawk would serve as operator for drilling and completion, and Swift would operate the wells once they have begun to produce.

This year Petrohawk's production is forecast to increase 75% above 2008 levels, and in 2010, the company is forecasting that output will be up 43% over this year. In 3Q2009 Petrohawk reported production of 512 MMcfe/d versus a guidance midpoint of 500 MMcfe/d and 2Q2009 output of 483 MMcfe/d. Of the 512 MMcfe/d, or 47,148 MMcfe, 95% was natural gas.

"For 2010, we have set our budget at $1.45 billion, almost to the level of our original 2008 budget," he said.

The Haynesville Shale is set to receive the bulk of next year's spending, $900 million, with the Eagle Ford Shale receiving around $350 million in capital spending. The Fayetteville Shale's preliminary budget is around $100 million.

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