Houston-based junior independent Petrohawk Energy Corp. said Wednesday it will pay $261.67 million in cash for two packages of natural gas reserves in the Elm Grove and Caspiana fields of northern Louisiana. The two private transactions, with an effective date of Jan. 1, 2006, are 98% natural gas, and include an estimated 106 Bcfe of proved reserves and 100 Bcfe of probable and possible reserves.

The assets include about 27,400 gross acres, with 80% of them operated. They include 11 producing wells and 185 identified drilling locations. About 29% of the reserves are proved developed, with an 18-year reserve-to-production ratio. Average 2006 projected output is expected to be 20 MMcfe/d; current production is 16 MMcfe/d. Lease operating expenses for 2006 are estimated to be $0.55/MMcfe.

To take advantage of the new assets, Petrohawk will add $35 million to its 2006 drilling budget, which will bring the total to $210 million. As part of the transaction, Petrohawk will assume contracts for two operated rigs in addition to three to five nonoperated rigs working in the fields at any given time. The company expects to allocate approximately $40 million of the purchase price to probable and possible reserves. Petrohawk intends to finance the acquisition with a combination of cash, bank debt and equity. Oil and natural gas derivatives will be used to cover a significant portion of expected production from the properties for the next two years.

Additionally, Petrohawk said it is in the process of selling two packages of properties: 26 Bcfe of proved reserves located in the federal waters of the Gulf of Mexico and 7 Bcfe of nonoperated proved reserves located onshore. These divestitures are expected to close in 1Q2006.

Petrohawk has scheduled a conference call for 9 a.m. EST on Thursday. To participate in the call, dial (800) 644-8607 five to 10 minutes before the call begins. Reference Petrohawk Energy, conference ID 3515428.

©Copyright 2005Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.