Petrohawk said a mouth full here!
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?
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?
Views: 88
Replies to This Discussion
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Permalink Reply by adubu on -
with shale wells EUR 7.5 Bcf forget the big lease bonus and look more at 25% royalty with other good terms sure as veritcal pugh clause, no WI charges,etc. You want the minerals leased to be drilled with max. # wells in unit. Just make sure you lease with excellent E&P who knows how to drill a H shale well without screwing up the completion.
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Permalink Reply by Checkmateking on
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LOL, Stay away from Matador, they have had nothing but trouble.
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Permalink Reply by Dion Warr, CPL on -
Buck:
Alluding to Checkmateking's remark above, I remember the HK mgmt. stating their drilling goal to be in line with a philosophy of better reserve creation for tomorrow, rather than saving a few dollars today. Matador seems intent on showing us the effects of the reverse, as best as can be surmised from the drilling reports.
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Permalink Reply by Dion Warr, CPL on
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Buck:
The connection between Matador and Petrohawk in my previous post was a mental takeoff from Checkmateking's comment on Matador; my point was that these appear to be two companies on opposite ends of the cut completion costs / create better reserves spectrum. Matador is completing a lot of cheaper verticals and/or small-bore horizontals, and is having all kinds of issues up in Caddo-Pine Island; Petrohawk has concentrated on drilling more robustly engineered horizontal multistage frac wells which may be on the upper end of well costs, but paying off in IP and flow rates and reserve potential.
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Permalink Reply by Taylor on
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Yep. There is no sense in half-a**ing it. If you are going to drill a hole.... get it right the first time. Here's to hoping their strategy will pay off down the road....
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Permalink Reply by Laman_71106 on
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HKs website displayed this news today. Really another BIG mouthfull.
http://www.petrohawk.com/news/default.aspx?id=1260681
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Permalink Reply by Phil on
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Does anyone have a link to the time-zero curve mentioned in this conference call? I found a transcript of the conference call, but no chart was included. I believe this curve reflects the decline rate and I'm very interested to see it,a s I suspect many of us would be.
Thanks in advance to anyone who knows where we can see the time-zero chart.
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Permalink Reply by Les Bamburg on
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Bacon, please see the attached.
- Attachments:
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Permalink Reply by Grillin' - MmmMmm on
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Thanks. Initial average rate at 18 MMCF/day. After 180 days, rate has fallen to 6 MMCF/day. Get your big money quick then settle in for nice cashflows for years to come...we think! The Barnett Shale has proven over several years that the tail is real and production hangs in there for many many years. We'll see how the HS does. I think it will behave much like the Barnett, but I worry about what will happen when the overpressure is depleted at these depths. Will we see compaction to the point that the flow rates are severely reduced and the rate drops off the table?? Hope not but really only time will tell. We can model it in the computer, we can test it in the lab but Morther Nature is still Mother Nature and can be one real mother!! Hope for everyone's sake that this is not a worry. Everyone will make a ton of money (before taxes!! couldn't resist!).
But what this curve tells me is that if you are a mineral owner, don't get set in a lifestyle based on the first 3 months of your checks!! They will go down and go down dramatically (assuming prices are level). So hold off on joining that "BMW of the Month" club!!
And yes, I am envious as I don't have any minerals up in these parts!!!!! Congrat's to all!
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Permalink Reply by Two Dogs, Pirate on
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Welcome back Jay as ShaleGeo. We all need your help.
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