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IPAA OGIS Small Cap 2005Palm Beach, FL
February 8, 2005
2
Forward-looking statements
This presentation includes certain statements that may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this presentation, other than statements of historical facts, that address the future direction, management and control of the Company, capital expenditures, and events or developments that the Company expects or believes are forward-looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include oil and gas prices, exploitation and exploration successes, continued availability of capital and financing, and general economic, market or business conditions. These risks are presented in detail in our filings with the Securities and Exchange Commission. The Company has no obligation to update the statements contained in this presentation or to take action that is described herein or otherwise presently planned.
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Petrohawk Energy Corporation
NASDAQ: HAWK
Stock Price $8.90at 2/4/05
Equity Value $353,314,318
Debt $235,000,000
Enterprise Value $553,314,318
Floyd C. Wilson – Chairman, President and CEO▬ Former Chairman, CEO and founder of 3TEC Energy▬ Proven track record of building companies and shareholder value
Shane M. Bayless – VP, CFO and Treasurer▬ Former VP – Controller and Treasurer of 3TEC Energy▬ Controller with Encore Acquisition Co. and Hugoton Energy
Experienced management team with meaningful investment in the Company Seasoned technical staff with extensive experience working together Significant experience in the public company environment
Houston, Texas
4
Building Value
Acquiring quality properties in privately negotiated transactions▬ Acquire properties with upside▬ Divest non-strategic properties
Accelerating property development
Raising appropriate capital to support strategy▬ Access to equity markets and low-cost debt▬ Have taken advantage of hedging opportunities
Managing for shareholder returns
Recent transactions:▬ May 2004: Recapitalization of Beta Oil & Gas - $60 million▬ November 2004: Acquisition of Wynn-Crosby Energy - $423 million▬ January 2005: Pending Divestment of royalty interests - $80 million▬ February 2005: Pending acquisition - $53 million
5
Building Value
Recapitalization of Beta Oil & Gas, Inc.
$60 million investment closed May, 2004
Moved company to Houston▬ Core staff on board
Implemented 1-for-2 reverse stock split and name change
Initiated significant drilling program▬ Increased daily production by 50%
Closed $8.5 million acquisition in August, 2004
Continue search for opportunities
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Acquisition of Wynn-Crosby Energy
$425 million transaction closed November 2004▬ $250 million from commercial banking group led by BNP Paribas▬ $200 million raised in equity markets
Privately negotiated▬ Deal struck when commodity prices were 30% lower – Seized hedging opportunity
Transforming Event▬ 200 Bcfe proved reserves, 46 Mmcfe/day production▬ 74% natural gas, 75% proved developed▬ Stable production and cash flow▬ Multiple core operating areas
Significant development program▬ Properties previously managed for cash distributions▬ Over 100 Bcfe in probable and possible reserves plus 80,000 net undeveloped acres▬ Opportunity to divest non-core properties and improve cost structure
Building Value
2004 Deal of the Year
7
Building Value: Petrohawk + Wynn-Crosby Overview
Permian
South Texas
Anadarko Arkoma
East Texas
Gulf Coast
At July 1, 2004 pro forma for Wynn-Crosby acquisition
67 Bcfe
53 Bcfe
57 Bcfe
14 Bcfe
22 Bcfe
20 Bcfe
233 Bcfe Total Proved Reserves
57 MMcfe / day production
8
Building Value
Divestment of Royalty Properties
$80 million cash sale, effective January 1, 2005▬ Closing scheduled for February 15, 2005
26 Bcfe, 5.1 Mmcfe/day
Buy right – Sell right
Passive interests not in line with Petrohawk strategic focus
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1.1 Bcfe
Building Value: Royalty Property Divestment
At July 1, 2004
Anadarko
Arkoma
East Texas
Gulf Coast
South Texas
Permian
Other Basins1.2 Bcfe
2.5 Bcfe
18.5 Bcfe
0.6 Bcfe
0.6 Bcfe
1.7 Bcfe
0.4 Bcfe
S. Alabama
1.1 Bcfe
26 Bcfe Total Proved Reserves
5.1 MMcfe / day production
10
Building Value
$53 Million Acquisition – announced February 7, 2005
Private company, privately negotiated▬ Financed on bank line at attractive rates
28 Bcfe, 5.0 Mmcfe/day▬ 97% operated
Significant development opportunity▬ 9 PUDs in Gulf Coast region, 15 PUDs in South Texas region▬ 20 Bcfe probable and 150 Bcfe possible
Accretive transaction with properties in core area▬ 17 Bcfe in South Texas▬ 11 Bcfe in South Louisiana
Expected to close February 28, 2005
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$53 Million Acquisition in Core Areas
South Texas
Gulf Coast
At January 1, 2005
11 Bcfe
17 Bcfe
28 Bcfe Total Proved Reserves
5.0 MMcfe / day production
12
Acquisition / Divestment Comparison
Acquisition Divestment
Price ($MM) 53 80
Proved Reserves (Bcfe)
Current Est. Production (Mmcfe/d)
28
5.0
26
5.1
Well Count 64 1,500+
Upside (Bcfe) Over 100 -
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Increased 2005 Capital Expenditure Forecast
Land & Seismic 3,000,000$ 4%
Development 51,000,000$ 73%
Exploration 16,000,000$ 23%
Total 70,000,000$ 100%
Meaningful exposure to exploration ▬ HAWK has identified over 250 Bcfe probable and possible reserves
Multi-year drilling program
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0
1
2
3
4
5
6
7
8
1998 1999 2000 2001 2002 2003 2004YTD
2005
$/M
cfe
Historical Acquisition Pricing vs. Blended Strip
Acquisitions trade at a significant discount to strip price Forward markets provide opportunities to secure high operating margins Favorable environment for asset sales
1 70% gas / 30% oil2 Acquisition pricing as of September 22, 2004. 2005 strip as of October 22, 2004.
Blended Strip (70%/30%)(70%/30%)11
Acquisition Pricing$1.72
$4.17
Source: Petrie Parkman database; Bloomberg
2
15
Hedging Program Overview
The Company will continue to evaluate opportunities to hedge production. Market conditions and financial objectives are major components of this evaluation. Generally, the Company expects to maintain commodity price protection on approximately 50% of expected future production.
Natural Gas (Mmbtu) 2005 2006 2007 2008
Production Hedged (Collars) 21,534 18,082 7,890 9,863 Production Hedged (Swaps) 2,433 - 3,288 - Average Daily Production Hedged 23,967 18,082 11,178 9,863
Average Floor Price $6.13 $5.64 $5.30 $5.05Average Ceiling Price $9.18 $9.19 $7.12 $6.53Average Swap Price $4.08 - $6.06 -
Oil (Bbls) 2005 2006 2007 2008
Production Hedged (Collars) 1,348 1,118 658 164 Production Hedged (Swaps) 41 - - 395 Average Daily Production Hedged 1,389 1,118 658 559
Average Floor Price $42.39 $40.00 $35.30 $34.00Average Ceiling Price $55.29 $48.89 $43.97 $45.30Average Swap Price $32.31 - - $38.10
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15.3 Mmcfe/d production
South Texas
25.4 Bcfe PDP, 22.4 Bcfe PUD▬ 27 % daily production▬ 80% operated
26 Bcfe upside reserves
21 PUD locations
Upside potential:▬ La Reforma, Los Indios, Nabors,
McAllen Ranch, Dry Hollow, Provident City
▬ Multiple 3-D surveys in need of development and expansion
Pending acquisition:▬ Heard Ranch, Four Sevens and Laredo
fields▬ 11 BCFE Proved reserves▬ 1.5 MMCFE/D▬ 15 additional PUD locations
At July 1, 2004 pro forma for Wynn-Crosby acquisition
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South Texas – La Reforma Field
Successfully drilled two Probable and one PUD location since July 2004
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South Texas – La Reforma Field
Guerra C-3: Example of directional drilling in Vicksburg sands, La Reforma Field
Current Production 11 Mmcfe/day
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South Texas – Dry Hollow Field
PUD
PUD
Probable
Possible
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South Texas – Heard Ranch Field
Amplitude Extraction: 4,000 ft. Sand
Probable
PUD
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9.3 Bcfe PDP; 2.9 Bcfe PUD
9% daily production
10 PUD locations
Pending acquisition: ▬ Gueydan Field
▬ 11 BCFE Proved reserves
▬ 3.0 MMCFE/D
▬ 9 additional PUD locations
▬ Upside potential:● Numerous untested structures in the
2500’ and 2700’ on crest of salt dome● Additional attic fault blocks in the
Alliance and Mulvey sands● Het, Camerina and Miogyp sands
(11,000’-14,000’) are untested on the flank of the dome
● Total Probable/Possible >120 BCFE
Gulf Coast
5.0 Mmcfe/d production
At July 1, 2004 pro forma for Wynn-Crosby acquisition
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Gulf Coast – Gueydan Field
Seismic Structure: 2700 ft. Sand
23
Gulf Coast – Gueydan Field
Seismic Structure: Alliance Sand
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16.8 Mmcfe/d production
Anadarko Basin
55.4 Bcfe PDP; 10.3 Bcfe PUD▬ 61% operated
▬ 30% daily production
18 PUD locations
Upside potential:▬ Infill drilling in WEHLU, Oklahoma
Co., OK
▬ Shale gas play in Texas Panhandle
▬ CBM play in Oklahoma
▬ Extensive interests owned in Deep Anadarko gas trend
▬ Cleveland sand horizontal development opportunities in Texas Panhandle
At July 1, 2004 pro forma for Wynn-Crosby acquisition
25
3.5 Mmcfe/d production
East Texas / North Louisiana Basin
8.9 Bcfe PDP, 11.1 Bcfe PUD▬ 83% operated
▬ 6% daily production
20 PUD locations
Upside potential:▬ Over 5,500 net acres in
Cotton Valley play
▬ Three new wells drilled in Q4 2004 (two Probable and one PUD)
▬ Will maintain operated drilling throughout 2005
At July 1, 2004 pro forma for Wynn-Crosby acquisition
26
5.4 Mmcfe/d production
Arkoma Basin
16.8 Bcfe PDP, 3.3 Bcfe PUD▬ 49% operated
▬ 10% daily production
11 PUD locations
Woodford and Caney Shale gas play in Pittsburg and McIntosh Counties, Oklahoma
80,000 net acres covering large four way flower structure in Scott County, Oklahoma
At July 1, 2004 pro forma for Wynn-Crosby acquisition
27
Arkoma Basin – Multiple Fields and Prospects
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Permian Basin
43.2 Bcfe PDP, 5.9 Bcfe PUD▬ 32% operated
▬ 19% of daily production
22 PUD locations
Pending divestment of royalty property:
▬ 78% of Proved Reserves located in Permian Basin
10.7 Mmcfe/d production
At July 1, 2004 pro forma for Wynn-Crosby acquisition
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Investment Considerations
Company Building Track Record▬ Significant management investment
Attractive Acquisitions▬ Substantially hedged
▬ Significant drilling program underway
Divestment Strategy
Capacity to Pursue Additional Opportunities
Proven Business Plan▬ Create value
▬ Build to sell
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Share Update
Diluted Share Calculation (post $200MM equity offering)(assumes $8.56 share price at 12/31/04)
Basic Shares
5,075,757 Management and Private Equity Common Shares8,816,031 Other Common Shares
25,806,450 Equity Offering
39,698,238 Total Basic Shares
Fully Diluted Shares1
39,698,238 Total Basic Shares3,072,430 Management and Private Equity Warrants8,750,000 Management and Private Equity Convertible Note
444,493 Other Options and Warrants299,136 Preferred Shares
52,264,296 Total Fully Diluted Shares
1 Treasury method applied
31
Ownership Update
Ownership Profile (post $200MM equity offering)(assumes $8.56 share price at 12/31/04)
at 12/31/04 % OwnedBasic:
Management and Private Equity 5,075,757 12.8%Public Shareholders 34,622,481 87.2%
Total Basic 39,698,238 100.0%
Fully Diluted:Management and Private Equity 16,898,187 32.3%Public Shareholders 35,366,110 67.7%
Total Diluted 52,264,297 100.0%
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Corporate Information
Independent Reserve Engineers Netherland, Sewell & Associates Corporate Counsel Hinkle Elkouri Law Firm LLC Securities Counsel Thompson & Knight LLP Auditor Deloitte Stock Transfer Agent OTR, Inc. State of Incorporation Delaware Website www.petrohawk.com Listing NASDAQ: HAWK Equity Research Petrie Parkman, Next Generation,
FBR, Johnson Rice