HOUSTON – Petrohawk Energy Corp. (NYSE: HK) has launched an offering of $825 million of senior notes due 2018. The offering, which is subject to market availability and other conditions, will be made only to qualified institutional buyers and non-United States persons outside the US.
Petrohawk intends to use the net proceeds from the Senior Notes offering to purchase its outstanding $769 million aggregate principal amount of 9 1/8% senior notes due 2013 pursuant to a tender offer. Any net proceeds remaining after the purchase will be used for general corporate purposes.
The offer is scheduled to expire on August 30, 2010. Holders who validly tender their Notes and provide their consents to the amendments to the Indenture before 5:00 p.m., New York City time, on August 16, 2010 will be eligible to receive the total consideration. Total consideration for each $1,000 principal amount of notes validly tendered and not validly withdrawn prior to the consent expiration is $1,048.13. The tender offer consideration for each $1,000 principal amount of notes is $1,018.13. The tender offer consideration is the total consideration minus the consent payment of $30.00 per $1,000 principal amount of Notes. Holders tendering after the consent expiration will be eligible to receive only the tender offer consideration.
In connection with the tender offer, Petrohawk is soliciting consents to certain proposed amendments to eliminate substantially all of the restrictive covenants and certain events of default in the Indenture. A consent payment (is included in the total consideration) of $30.00 per $1,000 principal amount of notes will be paid to holders who validly tender their notes and deliver their consents prior to the consent expiration.
Barclays Capital will act as the exclusive dealer manager and solicitation agent in connection with the offer.
Analyst comments
Recently, Petrohawk reported its 2Q10 results and guided to 5% sequential production growth for the 3Q10. According to a recent Dahlman Rose & Co. report, Petrohawk’s “innovative well designs in the Haynesville shale, if successful, could have industry-wide cost reduction implications.”
The company has seen an increase in service costs in the Haynesville, primarily in pressure pumping, which is up 30% since the beginning of the year. At the same time, the company is looking to modify its wells to allow fracking with significantly lower pressures at the surface. If successful, the company estimates that this technique could save $1 million per well in the Haynesville.
Petrohawk reported 2Q10 EPS/CFPS of $0.09/$0.54 compared to our estimate of $0.12/$0.57 and consensus of $0.11/$0.54. Variance from Dahlman Rose estimates resulted from methodology changes in the reporting of midstream results. The investment bank is “encouraged” by the company's 5% growth profile of 650-660MMcfped for 3Q10, while maintaining its 2010 CAPEX budget of $1.35 billion for D&C and $500 million for acquisitions.
Sources: Petrohawk, Dahlman Rose & Co.