Nov. 4, 2009 (PR Newswire) --

HOUSTON, Nov. 4 /PRNewswire-FirstCall/ -- Petrohawk Energy Corporation ("Petrohawk" or the "Company") (NYSE: HK) today announced 1) its third quarter 2009 financial and operating results, including higher than expected production; 2) 2010 capital budget, production targets and planned divestments; 3) updated activities in the Haynesville and Eagle Ford Shales; 4) an expansion of its Eagle Ford Shale acreage position and 5) an evaluation of the Company's Bossier Shale potential.

"The third quarter was defined by continued expansion of our activities in the Haynesville and Eagle Ford Shales. Today we detail plans that move these important assets to the forefront of our production and reserve profiles and predict significant production and reserve growth in the coming months and years," said Floyd C. Wilson, Chairman and Chief Executive Officer. "Our focus is on seizing the substantial growth potential in these plays, how we plan to fuel that growth, and how we translate that growth into value for shareholders. The plans outlined today aim to balance 2010 cash flow and expenditures and accelerate drilling in these core shale plays, eliminating the need for future capital raises to fund their development."

Production and Capital Expenditure Update

For the third quarter, Petrohawk reported production of 512 Mmcfe/d versus a guidance midpoint of 500 Mmcfe/d and second quarter production of 483 Mmcfe/d. Of the 512 Mmcfe/d, or 47,148 Mmcfe, produced during the quarter, 95% was natural gas. During 2009, Petrohawk has grown production at an average of approximately 12% per quarter. The Company's previously stated guidance for fourth quarter 2009 was between 525 and 535 Mmcfe/d, which included production from the Permian Basin properties. Fourth quarter production is now expected to range between 565 and 575 Mmcfe/d, excluding the effect of Permian Basin production for two months of the quarter. With this increase in guidance for the fourth quarter, the Company is tracking to post 2009 average production of between 490 and 500 Mmcfe/d, or approximately 75% over 2008.

Petrohawk spent approximately $310 million on drilling, completions, seismic and workovers during the quarter. Petrohawk is increasing its budget for these expenditures in 2009 by $100 million, to $1.1 billion, to account for additional drilling and seismic opportunities in the Haynesville and Eagle Ford Shales. The Company has drilled 116 operated and non-operated Haynesville Shale wells year to date and is on track to meet its leasehold requirements in this important play.

Acquisitions and Divestitures

Petrohawk closed approximately $135 million in leasehold acquisitions during the third quarter, including: 1) Haynesville Shale acreage located in the company-defined core of the play in Northwest Louisiana; 2) Haynesville and Bossier Shale acreage located in the southern portion of the play and in East Texas (Nacogdoches / Shelby) Extension; 3) Eagle Ford Shale acreage contiguous to Petrohawk's core activity area in McMullen and LaSalle Counties of South Texas; and 4) additional Eagle Ford Shale acreage in the Company's newly announced oil prospective area in Dimmit County. During 2009, Petrohawk expects its total expenditures on leasehold acquisitions to be approximately $300 million.

For the year, Petrohawk has added approximately 53,000 net acres to its position in the Haynesville Shale play at a cost of approximately $190 million. By pairing the activities of its drilling and acquisition programs, Petrohawk expects that nearly half of the acreage acquired in the Haynesville Shale during 2009 is in units that will be drilled and evaluated in its year-end 2009 reserve estimate. The Company's net acreage position in the Haynesville Shale now totals approximately 345,000 net acres.

Petrohawk has continued to be active in acquiring additional acreage in the Hawkville Field area, as well as the overall Eagle Ford Shale trend. Total net acreage in the Hawkville Field area has increased to over 225,000 net acres, a portion of which is located outside of Hawkville Field. On November 2, 2009, Petrohawk closed on the acquisition of approximately 13,000 net acres located in McMullen County, adjacent to its existing Eagle Ford Shale position at Hawkville Field for total consideration of approximately $39 million. During the course of 2009, the Company has expanded its position in the Hawkville Field area by approximately 20 miles to the northeast.

Petrohawk completed the sale of its Permian Basin assets on October 30, 2009 for $376 million, subject to ordinary post-closing adjustments. These properties accounted for 177 Bcfe in estimated proved reserves as of December 31, 2008 and were producing approximately 30 Mmcfe/d.

2010 Production Guidance and Capital Budget

Production guidance for 2010 is being increased to between 665 and 685 Mmcfe/d, which represents a 43% pro forma increase over 2009, taking into account the sale of the Permian Basin properties.

Petrohawk has established a drilling and completion budget of $1.45 billion for 2010. The 2010 budget will be heavily weighted to activities in the Haynesville Shale, comprising $900 million or 62% of the total drilling and completion budget. The Eagle Ford Shale is allocated $350 million, or 24% of this budget, and the Fayetteville Shale is allocated $100 million, or 7%. The remaining 7% is expected to be spent in other areas, including the Company's conventional drilling program in North Louisiana.

Petrohawk's midstream subsidiary, Hawk Field Services, will have an estimated capital program of $250 million. Additionally, the Company expects to spend between $100 million and $300 million on ongoing leasing activities. A significant part of the capital plan will be funded through operating cash flow, a portion of which is protected through the Company's hedging program, with the balance to be provided for by currently available liquidity.

To further enhance the Company's liquidity position, Petrohawk has identified over $1 billion in potential asset transactions during 2010, which may include a transaction involving the Company's midstream assets, divesting Terryville Field in northwest Louisiana, divesting its interest in the West Edmond Hunton Lime Unit in central Oklahoma as well as other non-core assets.

Financial Highlights

During the third quarter, Petrohawk generated revenues of $238 million and cash flows from operations before changes in working capital of approximately $152 million, or $0.52 per fully diluted common share (cash flow from operations before changes in working capital is a non-GAAP financial measure; see Condensed Consolidated Statements of Cash Flows in the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009 for a reconciliation to net cash provided by operating activities).

Cash flows were substantially protected through the Company's active hedging program. Third quarter revenues were $346 million, including a realized cash derivative gain of $108 million. During the third quarter, Petrohawk gained $2.40 per Mcf from hedging, bringing realized natural gas prices to $5.55 per Mcf. The Company also gained $1.57 per barrel from its hedging program during the quarter, bringing realized oil prices to $66.21 per barrel. Before the effect of hedges, Petrohawk realized 93% of NYMEX for its natural gas production and 95% of NYMEX for oil.

After adjusting for the effects of unrealized losses on derivatives, net income for the quarter was $0.11 per fully diluted common share, or $31.2 million after tax (see Selected Item Review and Reconciliation table for additional information). Before excluding selected items, the Company reported a net loss of $40.2 million, or $0.14 per fully diluted common share, for the quarter.

Cash costs (including lease operating, gathering and transportation, production taxes, workover, general and administrative, and interest expense) were $2.94 per Mcfe for the quarter. Lease operating expense was $0.44 per Mcfe for the quarter and is expected to trend lower in future quarters based on an increased proportion of production from the Haynesville Shale, as well as the effect of the sale of the Permian Basin properties. Depletion, depreciation and amortization (DD&A) expense, a non-cash item, for the third quarter was $1.94 per Mcfe.

Petrohawk closed its amended credit facility in October, which provided for a borrowing base of $1.3 billion, including $1.0 billion in capacity allocated to oil and gas reserves (already adjusted for the sale of the Permian Basin properties) plus up to an additional $300 million in value supplied by Hawk Field Services. Petrohawk's liquidity at the end of the third quarter, prior to the closing of the Permian Basin sale, was approximately $1.1 billion.

Operational Highlights

During the third quarter, Petrohawk drilled 170 gross wells with 100% success. Of these, 92% were in the Haynesville, Eagle Ford and Fayetteville shales.

Q3 Operational Statistics

Haynesville    Eagle Ford      Fayetteville
Shale         Shale            Shale
-----------    ----------     -------------
Operated Wells
Drilled                          24               10                8
--------------                    --               --                -
Non-operated
Wells Drilled                    29                1               84
--------------                    --                -               --
Total Wells
Drilled                          53               11               92
-----------                       --               --               --
Average Operated
Rigs Running                     12              2.5                1
----------------                  --              ---                -
Average Operated
Well IP            18.6 (normally produced)
(Mmcfe/d)           8.5 (test constrained)       8.0              1.7
----------------    -------------------------     ---              ---
Average Cost per
Operated Well
(Drill &
Complete) ($MM)                 9.5              5.3              2.6
----------------                 ---              ---              ---
2010 Target Cost
per Operated
Well (Drill &
Complete) ($MM)             8.0-9.0          4.5-5.0            N/A(1)
----------------             -------          -------            ------

1 Petrohawk plans to target deeper wells in the Fayetteville Shale in 2010
that are not comparable to 2009 well types.

Haynesville Shale

The Company drilled a total of 24 operated wells in the Haynesville Shale during the third quarter. Twenty-three wells were in Northwest Louisiana and one well was located in Shelby County, Texas. Eighteen of the wells were completed during the quarter. Of these, fourteen were produced according to normal procedure with an average initial production rate of 18.6 Mmcfe/d, ranging from 12.6 Mmcfe/d to 25.5 Mmcfe/d. Petrohawk currently has 62 operated Haynesville Shale wells on production with current gross operated production of approximately 450 Mmcfe/d and net operated production of approximately 285 Mmcfe/d. Of the 62 operated wells that are currently producing, there are now 53 wells that have greater than 30 days of production. The average initial 30-day production rate for those wells is 14 Mmcfe/d.

Included in the 62 operated wells that are currently on production are four wells being tested at restricted rates to compare the decline characteristics of the test wells to other wells in the same area that have been produced conventionally. The four test wells, which have been kept on a 14/64" choke since first production, had initial production rates of between 8-9 Mmcfe/d and flowing casing pressures of approximately 8500#. They have all exhibited shallower decline rates in both production and flowing pressure than the control set. The oldest well in the group has produced approximately 900 Mmcfe and has considerably higher flowing pressure than the control wells had at the same cumulative production. Further study of the economic and reservoir implications of this reduced rate method are needed before any conclusions are reached that would impact the Company's production practices.

Petrohawk accomplished a significant reduction in average drilling days per well during the quarter in the Haynesville Shale operations, primarily due to more efficient rigs and faster rates of penetration during the horizontal lateral drilling phase. From January through June 2009 the average days from spud to spud for all Haynesville Shale "grass roots" wells (wells drilled from spud to total depth with the same rig) was approximately 68 days. In July, that number decreased to just over 61 days and in August decreased to less than 47. The Company's current forecast for average drilling days per well in 2010 is 42 days, a 20% reduction from the expected 2009 average of 51 days and approximately a 50% reduction from average drilling days of 79 in 2008. A direct example of how this improvement has occurred is a review of the number of days in which greater than 800' of drilling occurred in the lateral. Prior to third quarter 2009 there had been only 1 of these days.