Petrohawk Energy Makes $425 Million Acquisition

Petrohawk Energy has entered into definitive agreements to acquire Wynn-Crosby Energy Inc. and related limited partnerships managed by Wynn-Crosby. This privately negotiated transaction includes an estimated 200 billion cubic feet of natural gas equivalents (Bcfe) of proved reserves for a total cash purchase price of $425 million.

A recognized independent reserve engineering firm has evaluated the proved reserves associated with working interest properties, and the Company's engineers have evaluated proved reserves associated with royalty interest properties, resulting in 200 Bcfe of total estimated proved reserves to be acquired in the transaction.

"This is a transforming event for Petrohawk," said President and Chief Executive Officer Floyd C. Wilson. "We believe these high-quality, long-lived assets include significant upside, and we will attempt to boost recovery rates within an accelerated development program. We will continue to pursue our combined growth strategies -- acquisitions complemented by an aggressive drilling program."

The properties to be acquired are located in the South Texas, East Texas, Permian, Arkoma and Mid-Continent regions. Additional transaction highlights include:

  • Approximately 46 MMcfe per day of production
  • 74% of the proved reserves are natural gas
  • 75% of the proved reserves are proved developed
  • Approximately 60% of working interest proved reserves are operated
  • 12 year reserves-to-production ratio
  • Over 100 Bcfe of probable and possible reserves

  • The properties include approximately 75,000 net undeveloped acres in the Arkoma Basin in Arkansas, as well as significant exploration opportunities in South Louisiana, South Texas and the Anadarko Basin.

    Major properties in the asset base include interests in La Reforma, a significant Vicksburg field in South Texas, the Dry Hollow and Provident City fields in the Wilcox trend of Lavaca County, Texas, and the Los Indios, Nabors, Ann Mag and McAllen Ranch fields, also in South Texas. In the East Texas basin, significant properties include interests in the South Carthage, North Beckville and Blocker fields. Other key properties include interests in the Waddell Ranch, Teague and ROC fields in the Permian Basin, the Kinta/Cedars/Pine Hollow area in the Arkoma Basin and the Lipscomb and Eakly-Weatherford fields in the Anadarko Basin. Petrohawk plans an aggressive development program on the properties in 2005 and beyond.

    Buyer and sellers have agreed to attribute approximately $30 million of the purchase price to probable and possible reserves, undeveloped acreage and other assets.

    Petrohawk's Board of Directors has approved the transaction, which is expected to close by Nov. 30, 2004. All necessary approvals from the sellers have been obtained. The transaction is subject to customary closing adjustments and conditions.

    Petrohawk intends to finance the acquisition with a combination of cash, bank debt and equity. The Company anticipates utilizing oil and natural gas derivatives in the form of swaps or costless collars covering a significant portion of expected production from proved developed producing reserves for the next two to three years.

    Pro forma for this transaction, Petrohawk's proved reserves are estimated to be approximately 233 Bcfe, of which 74% will be proved developed and 75% will be natural gas. Estimated pro forma production is approximately 57 MMcfe per day.

    Post-closing, Petrohawk may divest certain of the acquired properties as part of the Company's portfolio management strategy. The royalty interest properties to be acquired are the most likely candidates for divestiture. Certain characteristics of these properties are listed below:

  • Approximately 5.5 MMcfe per day of production
  • 55% natural gas
  • Diverse property group in multiple basins with significant upside
  • Long history of continuous development

  • Mitchell Energy Advisors, LLC, Dallas, has acted as financial advisor to the Company for this transaction.

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