2010-01-07-2009-09-21-2009-10-30

Purchased Permian Basin assets in TX, NM, gaining 177 Bcfe proved, 30 MMcfe/d.

Houston-based, privately held Merit Energy Corp. has closed its acquisition of Permian Basin properties from Petrohawk Energy Corp., Houston, (NYSE: HK) for $376 million in cash. The assets involve estimated proved reserves of 177 billion cubic feet equivalent for these assets and current production of approximately 30 million cubic feet equivalent per day. Petrohawk had operations in West Texas and eastern New Mexico at year-end including Waddell Ranch, Sawyer Field, Jalmat Field and TXL Field (North) with approximately 400 net drilling locations. Waddell Ranch Field in Crane County, Texas, is comprised of 17,000 net acres and involves a 19% to 75% nonoperated working interest (13% average net revenue interest). Proved reserves were approximately 40 billion cubic feet equivalent with 2008 average daily production of 8 million cubic feet equivalent. Sawyer Canyon Field in Sutton County, Texas, involves a 92% to 100% working interest in approximately 50 sections. Proved reserves year-end 2008 were approximately 55 billion cubic feet equivalent with production of 10 million cubic feet per day. Jalmat Field in Lea County, New Mexico, involves a 96% working interest (79% net revenue interest). Proved reserves were approximately 40 billion cubic feet equivalent. Production was 5 million cubic feet equivalent per day. TXL Field in Ector County, Texas, involves a 20% nonoperated working interest (25% net revenue interest) with more than 100 additional infill drill sites identified. Proved reserves were approximately 19 billion cubic feet equivalent producing 3 million cubic feet per day. "Proceeds from this sale will add to our already-strong liquidity position, as we continue to focus our attention on our rapidly growing shale assets, particularly high-return, high-margin development in the Haynesville and Eagle Ford shales," says Petrohawk chairman and chief executive Floyd C. Wilson. The effective date is July 1. Bank of America Merrill Lynch was financial advisor to Petrohawk. Pritchard Capital Partners analyst Ray Deacon reports the metrics of the deal at $2.12 per Mcfe proved and approximately $12,500 per Mcfe of flowing daily production. "Liquidity enhancement from the Permian sale should in our view help dissipate concern some have over 'when is the next equity issuance coming?'" Analysts at Tudor, Pickering, Holt & Co. Securities Inc. estimate the deal is valued at $2.10 per Mcfe and $75,000 per flowing barrel, above Petrohawk's current valuation of $66,750, with assets consisting of about 70% oil. Michael Hall at Stifel, Nicolaus & Co. Inc. puts the metrics at $12,533 per flowing Mcfe and $2.12 per Mcfe proved, "in our view attractive for stable, low growth properties and relative to recent comps."