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Petrohawk Delays MLP, Hikes Exploration Budget
Houston-based independent Petrohawk Energy Corp., which has made its name in unconventional natural gas production, has hiked its capital budget to $800 million this year from $700 million in 2007. However, the company has delayed the initial public offering of its planned master limited partnership (MLP) because of market conditions.
The anticipated MLP, which was announced last June, would have held a “substantial portion” of Petrohawk’s long-lived Permian Basin properties (see Daily GPI, June 26, 2007). Petrohawk said last year that HK Energy Partners LP would spin off as an MLP initially to hold some of its more mature Permian and Arkoma basin properties. The MLP was expected to grow mostly through acquisitions, both from the parent company and other sources.
The MLP was scheduled to strengthen Petrohawk’s financial position and also allow it to fund the development and acquisition of “resource-style properties” within the company’s core exploration focus. About $150-200 million of the partnership units were to be offered to the public; Petrohawk expected to own at least 50% of the partnership at closing.
Petrohawk did not indicate when it may consider rolling out the MLP. However, other energy companies of late also have delayed their planned offerings because of market conditions, including OGE Energy Corp. and EXCO Resources Inc. (see Daily GPI, Jan. 25).
Despite the MLP delay, Petrohawk said the budget increase is based on recent acquisitions, continued success in the Cotton Valley trend of the Elm Grove Field and exploratory success in the Gray Sand and Bossier formations of the Terryville Field. In addition, Petrohawk wants more money to study the “initial positive drilling results” in the more northern portions of the Fayetteville Shale.
In total, Petrohawk plans to use 22 operated rigs this year to drill about 350 wells, which represent about 90% of the budget. By area, Petrohawk plans to spend the bulk of its budget, $293 million, or 37%, in Elm Grove, where it plans eight operated rigs and 140 operated wells.
About 35% of the budget is slated for the Fayetteville play, with $278 million scheduled to be spent on eight rigs, 50 nonoperated wells and 150 operated wells. In the Terryville play, $121 million is budgeted for four rigs, 120 nonoperated wells and 60 operated wells. Petrohawk also will spend $84 million on other Midcontinent and Permian Basin plays.
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