Houston-based Petrohawk Energy Corp. plans to sell its 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 shale formations.
Petrohawk believes its recently announced plans to form a master limited partnership (MLP) will complement these initiatives, which reflect management’s strategy to optimize its portfolio towards long-lived, low-cost, and repeatable natural gas drilling opportunities.
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 retained 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.”
Wilson added, “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.”
Fayetteville shale acquisition
Petrohawk has signed a definitive agreement to acquire about 32,500 net acres in the Fayetteville shale, primarily in Van Buren County, Ark., nearly quadrupling the company’s holdings in that play. The transaction is expected to close in the third quarter. At closing, Petrohawk would hold about 43,400 net acres in the play.
The company is actively pursuing additional acreage in the Fayetteville shale and has additional 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 acres at Terryville field. The program to acquire additional interests and acreage in both of these fields is ongoing, says the company.
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. During 2007, the company plans to drill about 316 wells in this region.
Focus on long-life reserves
In an interview with OGFJ earlier this year, Shane Bayless, executive vice president and CFO of Petrohawk, said the company’s intent is to change its focus from higher-risk Gulf Coast opportunities to lower-risk, long-life gas reserves in North Louisiana, Northwest Arkansas, and Southeast Oklahoma, as well as the Permian basin of Texas.
Bayless is resigning from Petrohawk as of Aug. 10, and Mark Mize, currently vice president, chief accounting officer, and controller, will be promoted to executive vice president, CFO, and treasurer. Larry Helm will serve as executive vice president - finance and administration.
Integrating acquisitions smoothly
Petrohawk has shown phenomenal growth recently, vaulting into the No. 23 spot in the OGJ200 rankings of publicly held E&P companies. Much of this growth has been through acquisitions, and the company faced a challenge in absorbing its acquired companies.
To meet the challenge, Petrohawk decided to bring its back-office software services in-house for greater control and efficiency. The company eventually settled on Bolo Systems, said Mize.
“We knew we were more or less going to be in a constant state of conversion (acquiring new companies), so if a system could grow with us, that would be a huge plus,” said Mize. “We also needed a simple, easy way of getting data converted from acquired companies, meeting both public reporting deadlines and SOX regulation requirements. If the same solution could help in that regard, it would be a real win-win.”
Added Mize, “Before Bolo, our biggest focus of effort was insourcing our financial data and making sure it was reported accurately and in a timely fashion - and being able to do that has played a tremendous part in our success.”
