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One giant leap for Petrohawk Energy
Ray Tyson Petroleum News Houston Correspondent
Petrohawk Energy, a small independent with a Texas-size appetite, has made a giant leap into the exploration and production business, agreeing to buy Wynn-Crosby Energy and its related limited partnerships for a hefty $425 million.
The deal, expected to close at the end of November, would increase Petrohawk’s proved oil and gas reserves by more than 600 percent, while raising the company’s daily production by more than 500 percent.
“This is a transforming event for Petrohawk,” Floyd Wilson, Petrohawk’s CEO, said Oct. 13.
Houston-based Petrohawk, formerly Beta Oil & Gas, said it plans to finance the deal using a combination of cash, debt and stock.
The properties to be acquired are in the South Texas, East Texas, Permian, Arkoma and Midcontinent regions.
The transaction includes estimated proved reserves of 200 billion cubic feet of natural gas equivalent, 74 percent of which is natural gas, and daily production of 46 million cubic feet of gas equivalent. That compares to current Petrohawk reserves of 33 bcf of equivalent and daily production of around 9 million cubic feet of equivalent.
The properties include about 75,000 net undeveloped acres in the Arkoma basin in Arkansas, as well as significant exploration opportunities in South Louisiana, South Texas and the Anadarko basin.
The Wynn-Crosby properties also contain more than 100 bcf of estimated probable and possible reserves, the company said, adding that about $30 million of the $425-million purchase price can be attributed to probable and possible reserves, undeveloped acreage and other assets.
“We believe these high quality, long-lived assets include significant upside, and we will attempt to boost recovery rates within an accelerated development program,” Wilson said.
Major properties in the asset base include interests in La Reforma, a significant Vicksburg field in South Texas, the Dry Hollow and Provident City fields in the Wilcox trend of Lavaca County, Texas, and the Los Indios, Nabors, Ann Mag and McAllen Ranch fields, also in South Texas.
In the East Texas basin, significant properties include interests in the South Carthage, North Beckville and Blocker fields. Other key properties include interests in the Waddell Ranch, Teague and ROC fields in the Permian Basin, the Kinta/Cedars/Pine Hollow area in the Arkoma basin and the Lipscomb and Eakly-Weatherford fields in the Anadarko basin. Aggressive program planned Petrohawk said it plans an aggressive development program on the acquired properties in 2005 and beyond.
The company said it expects to hedge a significant portion of production from proved developed producing reserves for the next two to three years.
However, Petrohawk said it may sell about 5.5 million cubic feet of gas equivalent reserves on the acquired properties “as part of the company’s portfolio management strategy.” Wynn-Crosby is a private company specializing in direct investments in producing oil and gas properties. The company acquires, develops and operates producing oil and gas properties on behalf of equity based limited partnerships.
Founded in 1993, Wynn-Crosby formed its first partnership in 1995. Since, the company has acquired more than $248 million in producing oil and gas properties and invested an additional $88 million to further develop the properties acquired. The company currently manages eight limited partnerships.
Petrohawk reported a 2004 second-quarter net loss of $1.5 million or 16 cents per share on discretionally cash flow of just $1.9 million. The lower operating results were attributed to a $2 million non-cash stock option compensation expense for “certain severed or former employees” of the company.
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