Q4 2008 Earnings Call
February 25, 2009 10:30 AM ET
Presentation
Floyd C. Wilson
Today, we're recapping 2008, and we've included some information related to our course of action in 2009. I'll start by discussing some steps we've recently taken to interest of (ph) our already strong financial position and degree of predictability for Petrohawk, against the backdrop of an unpredictable financial landscape. We've been fortunate to have been able to reach this excellent financial position without any ill-timed assets sales or JVs.
Late last month, we completed a $600 million senior notes offering. We repaid our senior revolving credit facility, and we announced today that we've completed an early re-determination of that revolving credit facility. Our borrowing base was confirmed at $950 million. This is what we asked of the banks at this time, pricing and terms did not change.
We did this to further secure our ability to execute a very important capital program this year, and again, to reduce uncertainty in these uncertain times.
By the time we visit with our bank group in the fall, we'll have significant new reserves to be included in the valuation. We've also placed additional hedges on for 2010, locking in so far about 300 Mcfe per day of production at, mostly with callers ranging floors and sealing 628 to 928 per MMbtu.
We plan to increase our 2010 hedge position to about 70% of expected production. We've also included some basis hedging in our program designed to anticipate expected disruptions in the natural gas market.
Our marketing activities will be delineated in our financial statements starting with the fourth quarter of 2008, you'll see that today. Also our gathering and transportation subsidiary, Hawk Field Services will be broken out starting in Q1 of 2009.
These activities are designed to optimize price realizations and to serve our rapidly growing production from the Haynesville Shale. We are offering third party services and expect this will be a revenue generating business for Petrohawk and will further leverage our extensive and anchor position in the play.
We are also working on one of the major new pipeline projects designed to transport our additional Haynesville Shale gas out of the area. And we are confident that that project will get underway soon, we'll be the largest shipper on that line.
In the meantime, we have acquired ample transportations based on existing pipes to serve our needs in the Haynesville into early 2010.
All of these actions I have mentioned further enable us to move ahead with our exciting development program, which for 2009 is focused on our great Haynesville Shale position.
The Haynesville Shale will, has been, and will be, a powerful driver of lower operating costs in F&D in 2009 and beyond. 2008 organic F&D costs were 277 per m, a competitive number which was achieved with the Haynesville only contributing during the latter part of the year.
This attractive F&D was accompanied by triple-digit reserve growth, and in 2008, we feel will be an even, will have an even greater positive impact on our organic F&D and reserve growth.
Our Haynesville development will also continue to lower lease operating costs which is one of the most enduring measures of asset value. We've included revised guidance on our lease operating costs for 2009, adjusting our targets even lower. This already good stat is getting better and better.
We've also increased our production target for 2009 from 30% year-over-year growth to 40% year-over-year growth. This is ... we have not increased our CapEx projections. Our Haynesville drilling results and projections are more than offset in the decline, we expect to come from reduced capital spending in other fields. We're doing more with less.
Importantly, we've announced higher estimated ultimate recoveries from the Haynesville wells, based on a more mature data set, the consistency exhibited is remarkable.
We've raised our EUR estimate to 7.5 Bcfe, and the time-zero plot of this data set is included in today's press release.
Our observations also include the note that the production profile is hyperbolic in nature and consistent with other known type gas reservoirs just as we expected it would be.
I'll turn the call over to Mark right now to talk about our quarter, 2009 guidance and anything else he cares to talk about. Mark?