Petrohawk Energy (NYSE:HK) will devote most if its capital in 2010 to accelerate development of its acreage in the Haynesville Shale, solidifying its leadership in this play. The company will also devote a lesser, but still significant amount to the Eagle Ford Shale in Texas.
Capital Expenditures
Petrohawk Energy will spend $1.45 billion in capital expenditures in 2010. The company will devote $900 million to development activities in the Haynesville Shale and $350 million in the Eagle Ford Shale.
Although the company finds the Eagle Ford Shale as attractive as the Hayesville Shale in terms of economics, the company needs to drill less to hold its acreage in the Eagle Ford Shale because the lease sizes are larger.
Hedging Investors concerned about the macro situation in natural gas in 2010 should take some comfort in Petrohawk Energy's hedge position. The company has 61% of its anticipated 2010 natural gas production hedged through a series of collars and swaps at a floor price of $5.93 and a ceiling of $9.21.
Haynesville Shale In the Hayesville Shale in 2010, Petrohawk Energy plans on operating an average of 17 rigs, and will drill 319 total wells, 112 operated and 207 non-operated. Petrohawk has a separate budget for Hawk Field Services, its midstream business, and will allocate $250 million in capital to build the infrastructure needed to bring its production to market.
Petrohawk Energy already has 64 operated wells in the Haynesville shale and is producing 500 million cubic feet per day equivalent of natural gas.
The Haynesville Shale has become one of the hottest areas in the industry to develop. Other exploration and production companies active in the Haynesville Shale include:
* Goodrich Petroleum (NYSE:GDP) - The company has 85,000 net acres, and will drill 46 gross wells in 2010. * Comstock Resources (NYSE:CRK) - The company has 72,000 net acres and will drill 59 gross wells in 2010.
Eagle Ford Shale The Eagle Ford Shale is also a key area for Petrohawk Energy, but is at an earlier stage of development for the company. The company has 16 wells completed here to date, and has 225,000 acres under lease. In 2010, Petrohawk Energy is also testing an oil prospect in the Eagle Ford Shale called Red Hawk. The company started a test well in late 2009, and should have completion results early in 2010.
Another company developing the Eagle Ford Shale is Rosetta Resources Inc. (Nasdaq:ROSE) with 47,000 net acres.
The Bottom Line All of this activity should give Petrohawk Energy another year of high production growth, with the company guiding to 43% year-over-year production growth in 2010.
Petrohawk Energy will put most of its money into the Haynesville Shale in 2010, as it attempts to be the industry leader in this high growth shale play. This will give the company close to industry leading growth in production in 2010 as well
ADI Price at posting:
18.0¢ Sentiment: Buy Disclosure: Held
