Petrohawk to Divest Gulf Coast Division
Petrohawk Energy Corporation plans to sell the Company's Gulf Coast division, and will concentrate its efforts on developing and expanding its significant base of Mid-Continent natural gas resource-style activities, including tight-gas development in North Louisiana and East Texas and in the Fayetteville and Woodford Shales. The Company believes its recently announced plans to form a Master Limited Partnership will complement these initiatives, which reflect management's ongoing strategy to optimize its portfolio towards long-lived, low-cost, and repeatable natural gas drilling opportunities.
Fayetteville Shale Acquisition
Petrohawk has signed a definitive agreement to acquire approximately 32,500 net acres in the Fayetteville Shale, primarily in Van Buren County, Arkansas, nearly quadrupling the Company's holdings in that play. The Company expects to close the transaction during the third quarter 2007. At closing, Petrohawk would hold approximately 43,400 net acres in the play. The Company is actively pursuing additional acreage in the Fayetteville Shale and has additional potential acquisitions in various stages of evaluation and negotiation.
Other Mid-Continent Acquisitions
Petrohawk has also acquired additional interests and acreage in both the Elm Grove and Terryville fields, its two highest producing tight-gas fields in north Louisiana. The acquisitions at Elm Grove involve additional interest in more than 10,000 acres and additional interest in approximately 3,000 at Terryville field. The program to acquire additional interests and acreage in both of these key fields is ongoing.
Petrohawk employs a strategy in this region that involves acquiring underdeveloped properties and acreage, maintaining a high level of operational control, optimizing stimulation techniques, and accelerating drilling to improve the present value of long-lived natural gas fields. The Company currently holds significant acreage in the Cotton Valley, James Lime, Fayetteville and Woodford Shale trends within its Mid-Continent region. Proved reserves in the Mid-Continent region as of December 31, 2006 were 663 Bcfe, 95% natural gas, with probable and possible reserves of over 2 Tcfe. During 2007, the Company plans to drill approximately 316 wells in this region.
Planned Sale of Gulf Coast Division
The Gulf Coast division includes a substantial inventory of exploration and development projects. Petrohawk's properties in the Gulf Coast are primarily Company-operated and were producing approximately 105 Mmcfe/d at June 1, 2007. This division is active with eight rigs currently drilling and a 2007 capital budget of approximately $200 million. Year to date, 38 wells have been drilled in the Gulf Coast region with a success rate of 86%. The sale process for the Gulf Coast division is expected to begin during the third quarter of 2007. Merrill Lynch Petrie Divestiture Advisors has been engaged to assist in the sales effort.
"Our Gulf Coast division has been an excellent performer for Petrohawk," said Floyd C. Wilson, Chairman, President and CEO. "We have built a highly successful drilling program there, bolstered by an extensive library of 3D surveys, joint ventures with quality partners, and we have a large inventory of 3D-based drilling prospects in the Wilcox, Vicksburg and Frio trends. In late 2006, we announced three major discoveries -- the Nabors, Colson and Winchester fields -- and additional exploration prospects are being evaluated with the 2007 drilling program.
"The proceeds from the divestment of our Gulf Coast division will significantly strengthen our balance sheet, and allow us to continue to grow our already strong position in tight gas development areas. Today's announcement to increase our position in the Fayetteville Shale and North Louisiana are important steps in that direction."
Petrohawk Energy Corporation is an independent energy company engaged in the acquisition, production, exploration and development of oil and gas, with properties concentrated in the Mid-Continent, Gulf Coast and Permian regions.
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