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Petrohawk Doubles Gas-Weighted Proven Reserves

February 8, 2010
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Exploration success from onshore shale gas operations doubled Houston-based Petrohawk Energy Corp.'s proven reserves in 2009, setting the producer on track to once again top its production numbers in the first three months of 2010, company executives said last week.

Petrohawk is forecast to reach 615-625 MMcfe/d in 1Q2010, which is ahead of 4Q2009's 598 MMcfe/d, COO Dick Stoneburner told financial analysts during a conference call. Production, which is 98% weighted to gas, topped company guidance by 28 MMcfe in the last three months of 2009. In 2010, the company intends to operate 17 rigs and drill up to 120 operated wells, he said.

"Any way you look at it, we're a new company," CEO Floyd Wilson said.

The Houston-based independent doubled its proved reserves in 2009 to 2.75 Tcfe and exited 2009 producing about 600 MMcfe/d, compared with a pro forma exit rate (excluding assets since sold) of 366 MMcfe/d in 2008.

Most of Petrohawk's reserves additions last year came from its holdings in the Haynesville, Eagle Ford and Fayetteville shales, where the independent produced a total of about 183 Bcfe.

"Petrohawk experienced significant growth during 2009 in both production and reserves thanks to our successful development program and an asset portfolio that was resilient during the year's low price environment for natural gas," said Wilson. "While our growth in proved reserves was impressive, these reserves were booked using SEC [Securities and Exchange Commission] guidelines for offset locations, taking into account full-year average pricing and governed by development scheduling criteria of five years or less, and are equally impressive when viewed on historical rules.

"The results of our 2009 drilling program have a tremendous impact on our net asset value," he said. "As never before, the stage is set for a Petrohawk multi-year development plan designed to continue to deliver double-digit production and reserve growth with an overarching focus on free cash flow."

Under the revised SEC guidelines, Petrohawk increased its proved undeveloped reserves by 227%. Organic finding and development costs, excluding land and seismic costs, were the lowest in Petrohawk's history last year, at 68 cents/Mcfe, with $1.15 billion in capital expenditures. The new reserves-to-production ratio, defined as proved reserves of 2.75 Tcfe divided by 2009 pro forma production of 173 Bcfe, is 15.9 years, the company said.

Of Petrohawk's 2.75 Tcfe of proved reserves (98% natural gas), 1.96 Tcfe were added through the drillbit in 2009. About 1.5 Tcfe of the reserves came from the Haynesville Shale, where the company drilled 176 wells (73 operated and 103 nonoperated). Another 294 Bcfe was from the Eagle Ford Shale, where Petrohawk completed 26 wells (24 operated and two nonoperated). The Fayetteville Shale was responsible for 178 Bcfe, and there Petrohawk drilled 362 wells (35 operated and 327 nonoperated). In "other areas," the company added 18 Bcfe with 62 wells drilled.

Proved reserves are 33% proved developed, compared with 56% proved developed at year-end 2008. Revisions, including pricing-related revisions resulted in a reduction of 277 Bcfe. As it fine-tunes its portfolio, the company intends to sell three assets this year: the Terryville Field in North Louisiana, the Haynesville Shale portion of its midstream business, and a field in Central Oklahoma. Other properties in the Midcontinent are to be marketed later this year, part of a plan to sell up to $1 billion of properties by the end of 2010.

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