Petrohawk Energy Corporation Reports Second Quarter 2011 Financial and Operational Results

HOUSTON, Aug. 3, 2011 /PRNewswire/ -- Petrohawk Energy Corporation ("Petrohawk" or the "Company") (NYSE: HK) today announced its second quarter 2011 operational and financial results, including significant growth in production, revenues, and cash flows.

Production for second quarter averaged 943 Mmcfe/d, a 15% quarter-over-quarter increase. Second quarter total production was 85,803 Mmcfe, of which approximately 89% was natural gas, 7% was crude oil or condensate, and 4% was natural gas liquids. Revenues for the quarter were $595 million, a 21% increase over first quarter 2011 and a 69% increase compared to the same period one year ago. The Company realized 92% of the average NYMEX oil price, 97% of the average NYMEX natural gas price, and 47% of the NYMEX oil price for natural gas liquids during second quarter.

Cash flow from operations before changes in working capital (a non-GAAP financial measure; see Condensed Consolidated Statements of Cash Flows for a reconciliation to net cash provided by operating activities) was $302 million for the quarter, or $0.99 per fully diluted common share, compared to $246 million, or $0.81 per fully diluted common share for the first quarter 2011, and $163 million, or $0.54 per fully diluted common share for the same period one year ago. Net income for the quarter, after adjusting for selected items (primarily related to the non-cash impact of derivatives), was $57 million, or $0.19 per fully diluted common share (see Selected Item Review and Reconciliation table for additional information). Before excluding selected items, the Company reported net income of $104 million, or $0.34 per fully diluted common share for the quarter.

Cash operating costs (including lease operating expense, workover expense, taxes other than income, gathering and transportation expense, and general and administrative expense) were $1.69 per Mcfe for the quarter, compared to $1.56 per Mcfe for first quarter 2011 and $1.64 per Mcfe for the same period one year ago. General and administrative expense of $0.50 per Mcfe, compared to $0.45 per Mcfe in first quarter and $0.65 per Mcfe for the same period one year ago, reflected advisory fees associated with the Kinder Morgan Energy Partners L.P. transaction (discussed below) as well as a legal settlement paid during the quarter. Lease operating expense was $0.16 per Mcfe for the quarter, compared to $0.17 per Mcfe for the prior period and $0.29 per Mcfe during the second quarter of 2010. Taxes other than income increased from $0.16 per Mcfe for the first quarter 2011 to $0.20 per Mcfe for the second quarter.  Gathering and transportation expense for oil and gas increased from $0.69 per Mcfe for the prior period to $0.75 per Mcfe, and depletion expense, a non-cash item, was $2.20 per Mcfe for the quarter compared to $2.06 per Mcfe for the first quarter of 2011.

During the second quarter, Petrohawk spent approximately $621 million on drilling and completions, $239 million on leasehold acquisitions, primarily in the Permian region, and $77 million on gathering and treating infrastructure, primarily in the Eagle Ford Shale. At June 30, the Company's revolving credit facility had an outstanding balance of approximately $559 million.

On July 1, Petrohawk completed the sale of its remaining interest in KinderHawk Field Services LLC and a 25% interest in EagleHawk Field Services LLC to affiliates of Kinder Morgan Energy Partners, L.P. This transaction netted pre-tax proceeds of approximately $836 million, which were used to pay down the Company's revolving credit facility and as working capital for general corporate purposes.

Haynesville Shale

During the quarter, the Company averaged 11 operated rigs and drilled 21 operated wells, with net production in the field averaging 684 Mmcfe/d. Sixty-seven non-operated Haynesville Shale wells and 3 Bossier Shale wells were drilled during the quarter. Non-operated activity exceeded expectations during the quarter, in terms of both activity level and capital expenditures, primarily due to the transition to full section development by some operators during the quarter. Petrohawk expects that lower rig counts publicly announced by many industry partners point to lower activity levels in the Haynesville Shale during the second half of the year. Petrohawk is currently operating six rigs and has two dedicated frac fleets in the Haynesville Shale.

The Company achieved an overall cost reduction trend in Haynesville Shale completions during the quarter. Savings of approximately $600,000 to $800,000 per well were accomplished largely as a result of changes in well design that require two fewer frac stages per well, lower overall sand requirements per well, and improved pricing for resin coated sand. During the quarter Petrohawk averaged slightly less than 45 days spud to spud, more than 5 fewer days than during the preceding quarter.  Significant additional improvements are expected as the Company moves toward pad drilling and full section development toward the end of 2012.

Improvements in water handling and usage have contributed to more flexibility in water sourcing in the Haynesville Shale. Approximately half of all Petrohawk-operated wells in field have been completed with 20% recycled water. Year to date, the Company has pumped approximately over 2 million gallons of recycled waste water on well completions in the Haynesville Shale.

Eagle Ford Shale

The Black Hawk area (DeWitt County, Texas) continues to produce excellent results. A majority of Petrohawk-operated wells were produced on a constrained basis due to transportation infrastructure limitations. During the quarter, Petrohawk averaged nine operated rigs in the Black Hawk area, with 25 operated and one non-operated wells drilled. Net production from Black Hawk averaged 73 Mmcfe/d, comprised of 22% natural gas, 62% condensate and 16% natural gas liquids. Transportation infrastructure issues for the Company are moderating in the area with the addition of a dedicated truck fleet. Modifications to facilities at the Company's Point Comfort barge facility are nearly complete and the facility is expected to begin operating during the third quarter.

In Hawkville Field (LaSalle and McMullen Counties, Texas), Petrohawk averaged five operated rigs and drilled 15 operated wells and two non-operated wells during the quarter. Net production in the field averaged 129 Mmcfe/d, comprised of 67% natural gas, 14% condensate and 20% natural gas liquids. Well performance in Hawkville Field has continued to improve as a result of the expanded implementation of HiWAY frac technology, deployed by two dedicated Schlumberger hydraulic fracturing fleets. Petrohawk and Schlumberger are experimenting with variations in the HiWAY design, including higher sand volumes and fiber concentrations, in an attempt to optimize well performance for each area of the Eagle Ford trend. In addition, the Company is testing new frac designs in both the Hawkville Field and Black Hawk area with its Halliburton dedicated hydraulic fracturing fleet.

Results in the Red Hawk prospect in Zavala County, Texas, failed to meet minimum expectations during the quarter. As a result, capital spending at Red Hawk will be terminated and capital budgeted for 2011 will be reallocated to other operating areas.

Permian Region

Petrohawk is currently operating four rigs in the Permian region, all concentrated in the Delaware Basin where the majority of the Company's leasehold is located. An initial vertical well in Culberson County, Texas tested approximately 1.0 Mmcf/d of 1250 BTU gas from the Wolfcamp formation. Total depth was reached on the Company's first horizontal Bone Springs well in Reeves County, Texas. A completion date for this well has been set for early August. A commingled Wolfcamp and Bone Springs vertical completion in Reeves County is planned with a completion date expected in mid-August. The Company is also currently drilling the lateral portion of its first horizontal Wolfcamp well in Culberson County with a planned completion date of mid-August. In addition, the Company is undertaking necessary infrastructure construction in order to market all products with minimum delays as wells come online.

Petrohawk Energy Corporation is an independent energy company engaged in the acquisition, production, exploration and development of oil and natural gas with properties concentrated in North Louisiana, in the Haynesville Shale;  South Texas, in the Eagle Ford Shale; and West Texas, in the Delaware and Midland Basins.

For more information contact Joan Dunlap, Vice President - Investor Relations, at 832-204-2737 or [email protected]. For additional information about Petrohawk, please visit our website at www.petrohawk.com.

Additional Information for Investors

This press release contains forward-looking information regarding Petrohawk that is intended to be covered by the safe harbor for "forward-looking statements" provided by of the Private Securities Litigation Reform Act of 1995, such statements are based on Petrohawk's current expectations and includes statements regarding acquisitions and divestitures, drilling plans and capital expenditures, estimates of future production, future results of operations, quality and nature of the asset base, and other expectations, beliefs, plans, objectives, assumptions, strategies or statements about future events or performance (often, but not always, using words such as "expects", "anticipates", "plans", "estimates", "potential", "possible", "probable", or "intends", or stating that certain actions, events or results "may", "will", "should", or "could" be taken, occur or be achieved). Statements concerning oil and gas reserves also may be deemed to be forward-looking statements in that they reflect estimates based on certain assumptions including that the resources involved can be economically exploited. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those reflected in the statements. These risks include, but are not limited to: the risks of the oil and gas industry (for example, operational risks in exploring for, developing and producing crude oil and natural gas; risks and uncertainties involving geology of oil and gas deposits; risks associated with the timing of and potential proceeds from divestitures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to future production, costs and expenses; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; health, safety and environmental risks and risks related to weather such as hurricanes and other natural disasters); uncertainties as to the availability and cost of financing; fluctuations in oil and gas prices; risks associated with derivative positions; inability to realize expected value from acquisitions, inability of our management team to execute its plans its meet our goals, shortages of drilling equipment, hydraulic fracturing crews, oil field personnel and services, unavailability of gathering systems, pipelines and storage and processing facilities, inability to transport condensate and natural gas liquids to geographic locations where it can be successfully marketed and the possibility that government policies may change or governmental approvals may be delayed or withheld, including the possibility of new and restrictive regulation relating to hydraulic fracturing. Additional information on these and other factors which could affect Petrohawk's operations or financial results are included in Petrohawk's reports on file with the SEC. Investors are cautioned that any forward-looking statements are not guarantees of future performance and actual results or developments may differ materially from the projections in the forward-looking statements. Forward-looking statements are based on the estimates and opinions of management at the time the statements are made. Petrohawk does not assume any obligation to update forward-looking statements should circumstances or management's estimates or opinions change.

SOURCE Petrohawk Energy Corporation