Petrohawk Energy Corp. (HK, Financial) filed Quarterly Report for the period ended 2009-09-30.
Petrohawk Energy Corporation is an independent energy company engaged in the acquisition production exploitation exploration and development of oil and gas properties. Petrohawk Energy Corp. has a market cap of $7.29 billion; its shares were traded at around $24.24 with a P/E ratio of 89.8 and P/S ratio of 6.7. Petrohawk Energy Corp. had an annual average earning growth of 30.7% over the past 5 years.
One consequence of continued low natural gas prices is the possibility that we may be required to recognize additional non-cash impairment expense under the full cost method of accounting, which we use to account for our oil and natural gas exploration and development activities. We recorded full cost ceiling impairments before income taxes of approximately $1.7 billion and $1.0 billion at March 31, 2009 and December 31, 2008, respectively, primarily due to the decrease in the Henry Hub spot market price to $3.63 from $5.71 per million British thermal units (Mmbtu). No impairment was required at June 30, 2009 as the Henry Hub spot market price increased to $3.89. At September 30, 2009, our net book value of oil and gas properties exceeded our ceiling amount by approximately $880 million before tax, $546 million after tax based on the September 30, 2009 WTI posted price of $70.61 per barrel and the Henry Hub spot market price of $3.30 per Mmbtu. However, subsequent to September 30, 2009, the market price for Henry Hub gas and WTI oil increased significantly. As a consequence, prior to October 28, 2009, we elected to use prices on October 28, 2009, which were a WTI posted price of $77.20 per barrel and a Henry Hub spot market price of $4.51 per Mmbtu, adjusted for certain items as previously discussed. Utilizing these prices, our net book value of oil and natural gas properties at September 30, 2009, did not exceed the ceiling amount. As a result of the increase in the ceiling amount using the subsequent prices, we did not record a write-down of our oil and natural gas property costs. If natural gas prices decline, we may be required to take additional impairment charges in the future. If the September 30, 2009 WTI posted price and Henry Hub spot market price had been 10% lower while all other factors remained constant, our ceiling amount related to its net book value of oil and natural gas properties would have been reduced by approximately $206 million resulting in an additional ceiling test impairment of approximately $332 million, before income taxes had we not elected to use subsequent prices as of October 28, 2009. Changes in production rates, levels of reserves, future development costs, and other factors will determine our actual ceiling test calculation and impairment analyses in future periods.
On October 14, 2009, we entered into the Fourth Amended and Restated Senior Revolving Credit Agreement (the Fourth Amendment), which amends and restates our Third Amended and Restated Senior Revolving Credit Agreement dated September 10, 2008. The Fourth Amendment is a $2.0 billion facility with an initial borrowing base of $1.5 billion, $1.2 billion of which relates to our oil and natural gas properties and up to $300 million (currently limited as described below) of which relates to our midstream assets. The portion of the borrowing base which relates to our oil and natural gas properties will be redetermined on a semi-annual basis (with us and the Lenders each having the right to one annual interim unscheduled redetermination) and adjusted based on our oil and natural gas properties, reserves, other indebtedness and other relevant factors. The component of the borrowing base related to our midstream assets is limited to the lesser of $300 million or 3.5 times midstream EBITDA, and is determined quarterly. The initial available borrowing base aggregates $1.38 billion as the midstream component is currently $182 million. Amounts outstanding under the Fourth Amendment will bear interest at specified margins over LIBOR of 2.25% to 3.25% for Eurodollar loans or at specified margins over ABR of 0.75% to 1.75% for ABR loans. Such margins will fluctuate based on the utilization of the facility. Borrowings under the Fourth Amendment will be secured by first priority liens on substantially all of our assets, including pursuant to the terms of the Fourth Amended and Restated Guarantee and Collateral Agreement, all of the assets of, and equity interests in, our subsidiaries. Amounts drawn down on the facility will mature on July 1, 2013.
On October 30, 2009, we closed our previously announced sale of our Permian Basin properties to a privately-owned company for $376 million in cash, before customary closing adjustments, $37.6 million of which we received as a deposit during the third quarter. The effective date of the sale was July 1, 2009. Proceeds from the sale will be recorded as a reduction to the carrying value of our full cost pool. Upon closing of this sale, the oil and gas properties portion of the borrowing base under the Fourth Amendment was reduced by $200 million to $1 billion, resulting in a new aggregate borrowing base of $1.18 billion, including our midstream assets allocation. In conjunction with the closing of this sale, we deposited the remaining proceeds with a qualified intermediary to facilitate potential like-kind exchange transactions.
On November 30, 2007, we closed the sale of our Gulf Coast properties for $825 million, before customary closing adjustments, consisting of $700 million in cash and a $125 million note from the purchaser (the Note). The Note matured five years and ninety-one days from the closing date and bore interest at 12% per annum payable in kind at the purchasers option. The economic effective date for the sale was July 1, 2007. Proceeds from the sale were recorded as a reduction to the carrying value of our full cost pool. In conjunction with the closing of this sale, we deposited $650 million with a qualified intermediary to facilitate potential like-kind exchange transactions. At December 31, 2007, we had $269.8 million remaining for use in future acquisitions, all of which was utilized for property acquisitions during the first quarter of 2008. On April 28, 2008, the purchaser redeemed the Note for $100 million.
We reported a net loss of $40.2 million for the three months ended September 30, 2009 compared to net income of $305.4 million for the comparable period in 2008, resulting in a net change of $345.6 million. This change was primarily attributable to a $1.6 million net loss on derivative contracts for the three months ended September 30, 2009 versus a net gain of $388.2 million for the 2008 period. Also contributing to the change were lower revenues partially offset by lower income tax expense.
Read the The complete ReportHK is in the portfolios of John Griffin of Blue Ridge Capital, John Keeley of Keeley Fund Management, David Williams of Columbia Value and Restructuring Fund, George Soros of Soros Fund Management LLC, Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc, NWQ Managers of NWQ Investment Management Co.
Petrohawk Energy Corporation is an independent energy company engaged in the acquisition production exploitation exploration and development of oil and gas properties. Petrohawk Energy Corp. has a market cap of $7.29 billion; its shares were traded at around $24.24 with a P/E ratio of 89.8 and P/S ratio of 6.7. Petrohawk Energy Corp. had an annual average earning growth of 30.7% over the past 5 years.
Highlight of Business Operations:
We have focused our 2009 capital budget on the development of non-proved locations in our Haynesville, Fayetteville and Eagle Ford Shale plays. We believe these projects also offer the potential for high internal rates of return and reserve growth. We recently increased our capital budget for drilling, completions, seismic and workovers $100 million to $1.1 billion from $1.0 billion of our total $1.3 billion capital budget for 2009, exclusive of acquisitions. We plan to capitalize on additional drilling and seismic opportunities in the Haynesville and Eagle Ford Shales during the fourth quarter of 2009 with our increased budget. We expect to spend approximately $1.45 billion in 2010 on drilling and completion activities and an additional $250 million on infrastructure expansion. We also expect to spend an additional $100 million to $300 million on ongoing leasing activities. Our future drilling plans and infrastructure are subject to change based upon various factors, some of which are beyond our control, including drilling results, natural gas prices, the availability and cost of capital, drilling and production costs, availability of drilling services and equipment, gathering system andOne consequence of continued low natural gas prices is the possibility that we may be required to recognize additional non-cash impairment expense under the full cost method of accounting, which we use to account for our oil and natural gas exploration and development activities. We recorded full cost ceiling impairments before income taxes of approximately $1.7 billion and $1.0 billion at March 31, 2009 and December 31, 2008, respectively, primarily due to the decrease in the Henry Hub spot market price to $3.63 from $5.71 per million British thermal units (Mmbtu). No impairment was required at June 30, 2009 as the Henry Hub spot market price increased to $3.89. At September 30, 2009, our net book value of oil and gas properties exceeded our ceiling amount by approximately $880 million before tax, $546 million after tax based on the September 30, 2009 WTI posted price of $70.61 per barrel and the Henry Hub spot market price of $3.30 per Mmbtu. However, subsequent to September 30, 2009, the market price for Henry Hub gas and WTI oil increased significantly. As a consequence, prior to October 28, 2009, we elected to use prices on October 28, 2009, which were a WTI posted price of $77.20 per barrel and a Henry Hub spot market price of $4.51 per Mmbtu, adjusted for certain items as previously discussed. Utilizing these prices, our net book value of oil and natural gas properties at September 30, 2009, did not exceed the ceiling amount. As a result of the increase in the ceiling amount using the subsequent prices, we did not record a write-down of our oil and natural gas property costs. If natural gas prices decline, we may be required to take additional impairment charges in the future. If the September 30, 2009 WTI posted price and Henry Hub spot market price had been 10% lower while all other factors remained constant, our ceiling amount related to its net book value of oil and natural gas properties would have been reduced by approximately $206 million resulting in an additional ceiling test impairment of approximately $332 million, before income taxes had we not elected to use subsequent prices as of October 28, 2009. Changes in production rates, levels of reserves, future development costs, and other factors will determine our actual ceiling test calculation and impairment analyses in future periods.
On October 14, 2009, we entered into the Fourth Amended and Restated Senior Revolving Credit Agreement (the Fourth Amendment), which amends and restates our Third Amended and Restated Senior Revolving Credit Agreement dated September 10, 2008. The Fourth Amendment is a $2.0 billion facility with an initial borrowing base of $1.5 billion, $1.2 billion of which relates to our oil and natural gas properties and up to $300 million (currently limited as described below) of which relates to our midstream assets. The portion of the borrowing base which relates to our oil and natural gas properties will be redetermined on a semi-annual basis (with us and the Lenders each having the right to one annual interim unscheduled redetermination) and adjusted based on our oil and natural gas properties, reserves, other indebtedness and other relevant factors. The component of the borrowing base related to our midstream assets is limited to the lesser of $300 million or 3.5 times midstream EBITDA, and is determined quarterly. The initial available borrowing base aggregates $1.38 billion as the midstream component is currently $182 million. Amounts outstanding under the Fourth Amendment will bear interest at specified margins over LIBOR of 2.25% to 3.25% for Eurodollar loans or at specified margins over ABR of 0.75% to 1.75% for ABR loans. Such margins will fluctuate based on the utilization of the facility. Borrowings under the Fourth Amendment will be secured by first priority liens on substantially all of our assets, including pursuant to the terms of the Fourth Amended and Restated Guarantee and Collateral Agreement, all of the assets of, and equity interests in, our subsidiaries. Amounts drawn down on the facility will mature on July 1, 2013.
On October 30, 2009, we closed our previously announced sale of our Permian Basin properties to a privately-owned company for $376 million in cash, before customary closing adjustments, $37.6 million of which we received as a deposit during the third quarter. The effective date of the sale was July 1, 2009. Proceeds from the sale will be recorded as a reduction to the carrying value of our full cost pool. Upon closing of this sale, the oil and gas properties portion of the borrowing base under the Fourth Amendment was reduced by $200 million to $1 billion, resulting in a new aggregate borrowing base of $1.18 billion, including our midstream assets allocation. In conjunction with the closing of this sale, we deposited the remaining proceeds with a qualified intermediary to facilitate potential like-kind exchange transactions.
On November 30, 2007, we closed the sale of our Gulf Coast properties for $825 million, before customary closing adjustments, consisting of $700 million in cash and a $125 million note from the purchaser (the Note). The Note matured five years and ninety-one days from the closing date and bore interest at 12% per annum payable in kind at the purchasers option. The economic effective date for the sale was July 1, 2007. Proceeds from the sale were recorded as a reduction to the carrying value of our full cost pool. In conjunction with the closing of this sale, we deposited $650 million with a qualified intermediary to facilitate potential like-kind exchange transactions. At December 31, 2007, we had $269.8 million remaining for use in future acquisitions, all of which was utilized for property acquisitions during the first quarter of 2008. On April 28, 2008, the purchaser redeemed the Note for $100 million.
We reported a net loss of $40.2 million for the three months ended September 30, 2009 compared to net income of $305.4 million for the comparable period in 2008, resulting in a net change of $345.6 million. This change was primarily attributable to a $1.6 million net loss on derivative contracts for the three months ended September 30, 2009 versus a net gain of $388.2 million for the 2008 period. Also contributing to the change were lower revenues partially offset by lower income tax expense.
Read the The complete ReportHK is in the portfolios of John Griffin of Blue Ridge Capital, John Keeley of Keeley Fund Management, David Williams of Columbia Value and Restructuring Fund, George Soros of Soros Fund Management LLC, Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc, NWQ Managers of NWQ Investment Management Co.
