OilVoice - Petrohawk Energy Announces Fourth Quarter and Full Year 2009 Results

Petrohawk Energy Announces Fourth Quarter and Full Year 2009 Results

Tuesday, February 23, 2010

Petrohawk Energy Corporation has announced its fourth quarter and full year 2009 financial results, including detail on its year end estimated proved reserves and hedging activities as well as production and cost guidance for 2010.

• Cash flows from operations before changes in working capital (cash flow from operations, a non-GAAP measure) were $179.6 million, or $0.60 per fully diluted common share for the quarter, and $613.8 million, or $2.19 per fully diluted common share, for the full year. Petrohawk generated revenues of $354.9 million for the quarter ended December 31, 2009 and revenues of over $1 billion for the full year 2009. Petrohawk reported net income for the quarter of $0.12 per fully diluted common share, or $36.5 million. After adjusting for selected items, the Company's quarterly net income remained at $0.12 per fully diluted common share.
• The Company produced an average of 598 million cubic feet natural gas equivalent per day (Mmcfe/d) during the fourth quarter and 502 Mmcfe/d on average during 2009. Total production for the quarter was 55.0 billion cubic feet of natural gas equivalent (Bcfe), which includes 53.1 billion cubic feet (Bcf) of natural gas and 316 thousand barrels (MBbls) of oil. For the full year 2009, production totaled 174 Bcfe pro forma for the sale of the Permian Basin properties, a 76% year over year increase. This large increase in production growth is mainly attributable to activities in the Haynesville Shale, where Petrohawk is currently running 17 rigs with gross operated production of over 500 Mmcfe/d.
• Before the effect of derivatives, the Company realized $3.70 per Mcf of natural gas, or 93% of NYMEX, and $56.15 per barrel of oil, or 91% of NYMEX, during 2009. During the fourth quarter, Petrohawk realized $4.08 per Mcf of natural gas, or 98% of NYMEX, and $72.65 per barrel of oil, or 95% of NYMEX. Taking into account the effect of hedges, Petrohawk realized $5.83 per Mcf of natural gas and $58.86 per barrel of oil for the full year. Petrohawk collected approximately $375 million from realized hedges over 2009, which increased prices 58% for natural gas and 5% for oil.
• At the end of the quarter, Petrohawk had cash and restricted cash of $215.2 million with $203.0 million drawn on its revolving credit facility. Total available liquidity at the end of the quarter was approximately $1.2 billion. The Company's net debt to book capitalization at the end of the quarter was approximately 44%.
• Petrohawk increased its hedged oil and gas portfolio during the quarter, bringing the total of natural gas hedged to 68% of expected production in 2010 at an average floor of $5.83 per million British thermal unit (MMbtu) and an average ceiling of $9.21 per MMbtu. The Company also increased its hedge position in 2011 to over 50% of expected production with an average floor of $5.55 per MMbtu and an average ceiling of $9.66 per MMbtu for natural gas. A summary of Petrohawk's derivative positions for 2010 and 2011 can be found on the Company's website, www.petrohawk.com.
• During the fourth quarter, per unit lease operating costs were $0.41 per thousand cubic feet of natural gas equivalent (Mcfe), or $22.8 million. Lease operating expense for the year was $78.7 million, or $0.43 per Mcfe. Total cash operating costs, excluding fourth quarter 2009 legal settlements and marketing expense, were $1.62 per Mcfe for the fourth quarter, and $1.70 per Mcfe for the year.

Divestment Plan Update
Petrohawk is currently conducting data rooms on three components of its 2010 divestment program. The sale of a portion of the Company's midstream business in the Haynesville Shale is being coordinated by Barclays Capital, the sale of Terryville field in Lincoln Parish, Louisiana, is being coordinated by Bank of America Merrill Lynch, and the sale of WEHLU field in Oklahoma County, Oklahoma is being coordinated by RBC Richardson Barr. The Company expects to announce and potentially close these three transactions during the first half of 2010.

Operations and Proved Reserves
As of December 31, 2009, Petrohawk had estimated proved reserves of 2.75 trillion cubic feet of natural gas equivalent (Tcfe) compared to 1.42 Tcfe reported at year end 2008. Proved developed reserves increased to 905 Bcfe, representing proved developed reserve additions of 452 Bcfe. The majority of the Company's proved reserves were added through the drillbit in the Haynesville Shale in Northwest Louisiana, where approximately 1.45 Tcfe of proved reserves were added. Of this, 307 Bcfe of proved developed reserves were added with direct capital of approximately $621 million. Average reserves per proved location booked in the Haynesville Shale in Northwest Louisiana were 7.1 Bcfe (operated wells were booked at an average of 7.5 Bcfe).

Also in the Haynesville Shale, the Company experienced significant drilling cost decreases during 2009 and expects further drilling cost reductions in 2010. Petrohawk began 2009 running 8 rigs in the Haynesville Shale, averaged 11 rigs during the year, exited the year with 13 rigs running and currently have 17 rigs running in the play. Average days to drill decreased from 70 in the first quarter of 2009 to 54 in the fourth quarter of 2009, and the Company expected to average 42 days to drill per well in 2010. Average per well drill, complete and hook up costs decreased from approximately $12 million in the first quarter to approximately $9 million in the fourth quarter, with an average of approximately $10.5 million in 2009. Average drill, complete and hook-up costs are expected to range from $8.0 to $9.0 million in 2010.

During 2010, Petrohawk plans to expand its use of restricted rate production practices in the Haynesville Shale, which has already been accounted for in the Company's 2010 production guidance. For wells brought on under the restricted rate program, initial production rates are expected to average between 7 and 10 Mmcfe/d. Delineation wells will continue to be produced under normal production practices (standard choke size of 22/64" or 24/64"). Based on the results of a 2009 pilot program, Petrohawk believes that in certain of its Northwest Louisiana development areas, wells produced from a smaller choke size may produce approximately equivalent amounts of natural gas in a twelve month period as a well produced on a standard choke size. The Company believes that its restricted rate practices in some areas may create a more stable future production base for the Company and could result in higher EURs compared to neighboring wells produced under normal production practices.

In the Eagle Ford Shale, Petrohawk is continuing its delineation of the Hawkville Field and is transitioning into the development of the field. There are currently four rigs running in the field. In order to acquire 3D seismic data over the entire Hawkville field, the Company is currently shooting approximately 350 square miles of 3D seismic, adding to the 100 square mile data set completed in 2009. Additionally, Petrohawk is encouraged by the observed increase in the b factor, or hyperbolic factor, as more historical production data is gathered. Wells with longer production histories are displaying a 1.5, and possibly even higher, b factor. Petrohawk's current average EUR estimate is 5.5 Bcfe per well. Also, at the Red Hawk prospect in Zavala County, the Company is in the process of fracture stimulating its initial test well with a second well soon to spud.

2010 Guidance
In 2010, the Company expects average daily production to be between 670 and 680 MMcfe/d, an approximate 36% increase over the 2009 average daily production rate of 502 MMcfe/d and a 42% increase pro forma for the sale of the Permian Basin properties. For the first quarter 2010, average daily production is expected to be between 615 and 625 Mmcfe/d. It should be noted that current guidance does not take into account the potential divestments noted above.