Petrohawk sells some assets to Exxon for $650 million

BANGALORE (BestGrowthStock) – Independent energy company Petrohawk Energy Corp (HK.N: ) sold its natural gas assets in Fayetteville shale, Arkansas, to Exxon Mobil Corp (XOM.N: ) unit XTO Energy for $650 million, in a deal that analysts said undervalued the assets.

Petrohawk shares were down 2 percent at $18.26 in midday trade on Thursday on the New York Stock Exchange, having touched a low of $18.02 earlier in the day.

This is the last of the four asset-packet divestitures that Houston-based Petrohawk had planned for the year.

The company had sold its stake in its Haynesville midstream operations to Kinder Morgan Energy Partners (KMP.N: ) for $875 million in April and said it would reduce its rig count in the “gassy” Haynesville and double it in the liquid-focused Eagle Ford shale in Texas.

And in March it had sold assets in Louisiana and Oklahoma for combined proceeds of about $475 million.

Oil prices are up over 23 percent year-to-date but gas prices are down about 30 percent, pushing U.S. exploration and production firms to shift dollars to acreage with crude oil or natural gas with a high liquids content.

The company said it will sell its Fayetteville upstream assets for $575 million and midstream assets for $75 million.

Jefferies and Co analyst Subash Chandra said in a note that the Fayetteville sale was below his expectations, adding he expected $650 million for the upstream assets and $300 million for midstream.

Chandra, however, said the company will not face problems with funding its capital needs till the end of 2011. In November, Petrohawk set its 2011 capital budget at about $2.3 billion.

Wells Fargo Securities analyst Michael Hall said the deal value was below his expectations, but viewed it as a positive in terms of funding.

The sale values the assets’ proved reserves at $1.92 per thousand cubic feet equivalent, according to brokerage firms Global Hunter Securities and Tudor Pickering Holt.

This is about 32 percent lower than what Exxon Mobil was estimated to have paid for XTO, which it acquired in December last year.

Petrohawk estimates Fayetteville upstream proved reserves of about 299 billion cubic feet equivalent as of December 31, 2009, and current production of 98 million cubic feet equivalent per day.

Bank of America Merrill Lynch acted as financial adviser to Petrohawk for both transactions.

(Reporting by Arup Roychoudhury and Krishna N Das in Bangalore; Editing by Don Sebastian, Unnikrishnan Nair)

Petrohawk sells some assets to Exxon for $650 million