This post was included in the Wednesday post and is reposted here for inclusion in the archives. Notes from the conference call are attached at the bottom

HK Misses On Bottom Line Which I Think Will Get Overlooked After The Fall; Guides 2009 To 30 to 40% Growth

2Q Numbers:

• Revenue of $305 vs $268 million expected
• EPS of $0.23 vs $0.27 expected
• CFPS of $0.80 vs $0.86 expected (range of $0.70 to $0.97)
• Production of 283,000 Mcfepd (91% gas) vs guidance of 280 to 290,000 Mcfepd. This represents
• Lease operating expense of $0.50 / Mcfe vs $0.52 last quarter. Very low.

Guidance:

• 3Q Expected production of 310 to 320,000 Mcfepd
• 2008 range stays the same at 295 to 315,000 Mcfepd. Implies annual growth of 27% and implies a 4Q average of 360,000 Mcfepd.
• 2009: Anticipates 30 to 40% organic growth

Mid Year Reserves up 25%: Reserves rise to 1.33 Tcfe (internal estimate) from 1.1 Tcfe booked at YE07. This includes no reserves from the Haynesville which should be a significant add by year end putting gross reserves of between 5 and 7 Bcfe per well on the books.

Operations Update: Getting Busier

Haynesville Shale:

• > 300,000 net acres in LA and TX, up from 275,000 at last count…plan was to go to 400k
• half acreage is longer than 3 year lease term, avg cost is $5,000 per acre.
• First well results to date:
  • 30 day average production of the first well was 13.7 MMcfepd
  • Core analysis indicates possibility of 170 Bcf gas in place per section (they have been thinking the whole play in the core would be seeing 45 to 55 Bcf per section).
• Second horizontal well: the Hutchinson 9-5 (91% working interest)
  • completed at 16.7 MMcfepd; recall the first well IP’d at 16.8 MMcfepd.
  • see 151 feet of Haynesville
• Third well still drilling, expect to complete early September, see 160 feet of pay here.
• A fourth non-operated well is completing now and shows 158 feet of pay
• 3 rigs running, doubles in September…plan to drill 29 wells here (including the four above) this year so its about to get very busy. Sees spud to connection timeline of 75 days falling to 60 days in 2009.
• 2009 plan calls for 140 wells

Fayetteville Shale:

• Production: > 90 MMcfepd gross which should put their net production > 50 MMcfepd
• 9 rigs drilling horizontals and one spudder rig, up from 6 rigs last quarter. Moving to 10 rigs and 2 spudders this quarter.
• Continuing to see improved initial results here.