Petrohawk Energy Expands Position in Fayetteville Shale
Petrohawk Energy has signed a definitive agreement to purchase strategic assets in the Fayetteville Shale for $343 million in cash from Alta Resources, Contango Oil & Gas, and other parties.
The assets include over 24,000 net acres with estimated reserve potential of over 500 billion cubic feet equivalent (Bcfe), approximately 50% operated. The properties are located in the core of the Fayetteville Shale play, primarily in Van Buren and Conway Counties, Arkansas.
Based on 60-acre spacing, the properties add a substantial number of drilling locations to Petrohawk's current inventory in the play. Of the total net acreage acquired, the Company estimates that only 11% is classified as proved. Petrohawk's total acreage position in the Fayetteville Shale will be approximately 125,000 net acres upon closing, which, subject to customary closing conditions, is expected to occur before December 31, 2007. The effective date of the transaction is October 1, 2007.
"Today's acquisition is another strategic step in our building a uniquely resource-rich company. This valuable property is contiguous to our existing position in the Fayetteville Shale, where throughout 2007 we have established a successful drilling program and are making the investment necessary to support long-term development. This transaction is also consistent with our plans to reinvest proceeds from the recently announced sale of our Gulf Coast division and shift our inventory and drilling focus to low-risk, low-cost opportunities," said Floyd C. Wilson, Chairman, President and CEO.
Current net production from the properties is approximately 11 million cubic feet of natural gas equivalent per day (Mmcfe/d). The average initial gross production rate for the eight operated wells drilled on the acreage during 2007 is approximately 2.0 Mmcfe/d. Petrohawk estimates proved reserves to be approximately 60 Bcfe.
Additionally, the asset purchase will qualify as a like-kind exchange for property to be sold in Petrohawk's recently announced Gulf Coast divestment, with expected deferred tax benefits to the Company.
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