Petrohawk CEO: Squeezed By Low Gas Prices, High Service CostsBy...

Petrohawk CEO: Squeezed By Low Gas Prices, High Service Costs


By Ryan Dezember, Of DOW JONES NEWSWIRES

HOUSTON -(Dow Jones)- Petrohawk Energy Corp. (HK) Chief Executive Floyd Wilson said Tuesday that the energy explorer, pressured by low natural gas prices and high oil-field service costs, is pushing to improve efficiency and lower costs and shifting to more lucrative oil production.

"While we focus on the day-to-day business of commodity prices and development costs and the current squeeze we're in with natural gas and service costs, we also focus on refinements and improvements in all of our practices and we've engineered a significant shift towards liquids," Wilson told investors during a call to discuss the company's fourth-quarter results.

The Houston company swung to a fourth-quarter loss on steep mark-to-market charges, although adjusted earnings benefited from higher production, which helped boost revenue.

Petrohawk reported a loss of $79.6 million, or 26 cents a share, compared with a year-earlier profit of $36.5 million, or 12 cents. Excluding items such as mark-to-market charges, earnings fell to 11 cents from 12 cents.

Revenue jumped 14% to $402 million.

Analysts polled by Thomson Reuters had most recently forecast earnings of 15 cents a share on $455 million in revenue.

Production climbed 27%, while average natural-gas prices slid 13% excluding hedging impacts. Petrohawk saw year-end reserves grow 23%.

On Tuesday the company touted a new hydraulic fracturing technology developed by Schlumberger Ltd. (SLB) that it is applying to its wells in south Texas' Eagle Ford shale formation.

Trials of the technology, called HiWAY, have yielded "spectacular early results" since they began in October, Wilson said. HiWAY boosted production 32% in liquids-rich reservoirs and 37% in those containing mostly natural gas, while lifting estimated ultimate recovery between 25% and 90% per well, Petrohawk said.

HiWAY is now being applied to all of Petrohawk's Eagle Ford wells. Wilson said it's yet to be determined if the technology will be transferred to Petrohawk's other operation areas.

Petrohawk is also planning a shift to pad drilling, which reduces mobilization costs, in some fields has the potential to lower costs by as much as $1 million per well, Wilson said.

The company is also evaluating potential sales of pipelines and conventional production areas, Wilson said.

In December, Petrohawk sold pipelines and natural gas production fields in Arkansas' Fayetteville shale formation to Exxon Mobil Corp.'s (XOM) XTO Energy unit for $650 million. In all the company sold $2.1 billion worth of assets in 2010 to pay down debt and fund drilling campaigns.

Shares of Petrohawk fell 0.79% at $20.19 after trading higher early Tuesday.

-By Ryan Dezember, Dow Jones Newswires; 713-547-9208; Ryan.Dezember@ dowjones.com;
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Pad drilling

When multiple wells are drilled from the same pad, it is often referred to as pad drilling. Often 6 or 8 horizontal wells stem from the same pad.

Typically the well pad drains an area that is rectangular known as a spacing unit, unit or pool--usually about one half mile wide by two miles long with the pad itself positioned at the center of the rectangle. The majority of the surface area in the rectangle is not required for the well pad and will be left completely undisturbed. The well pad generally consists of 4-5 acres that is cleared, leveled and surfaced over for siting the drilling rig, trucks and various other equipment required for drilling and completion activities.

Pad drilling may be accomplished through the use of a movable flex of fit-for-purpose rigs.

The intent is to drill as many wells on a pad as are economically feasible. Drilling more wells on a pad helps to minimize the environmental footprint of drilling.