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Petrohawk Energy Corporation announces strong start to 2006; production up, lifting costs down


Published May 12, 2006
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Petrohawk Energy Corporation announces strong start to 2006; production up, lifting costs down-Spotlight
Petrohawk Energy Corporation ("Petrohawk" or the "Company") reported financial and operating results for the first quarter of 2006. Highlights include: - - 66 wells drilled with a 95% success rate -- Record net production of 12.2 BCFE, up 154% year over year -- Revenue increased 219% year over year to $103 million -- 33% reduction in per unit G&A expenses and 6% improvement in total lifting costs over prior quarter -- Operating cash flow (a non-GAAP financial measure) of $63.6 million, up 246% year over year -- $262.5 million invested in oil and gas properties -- $52.5 million of oil and gas properties divested

"Petrohawk had a great first quarter with increased production and lower costs, even though costs for the industry have increased in general," stated Floyd C. Wilson, Chairman, President and Chief Executive Officer. "Our drilling results were excellent, and we completed two strategic transactions during the period.

"Additionally, we look forward to completing a third strategic and transforming transaction -- our exciting merger with KCS Energy. We believe the combination of our two fine staffs, the continuation and extension of our two very successful drilling programs and the integration of our highly complimentary oil and gas assets will set the stage for dynamic growth at Petrohawk for this year and beyond."

On April 21, Petrohawk announced its proposed merger with KCS Energy, Inc. (NYSE:KCS). The merger will create an enterprise valued at approximately $3.7 billion including proved reserves of approximately one trillion cubic feet of natural gas equivalents (Tcfe) with significant exploration and development potential. The transaction is expected to close during the third quarter of this year and is subject to stockholder and regulatory approval and other customary terms and conditions.Financial and Operational

Highlights -- The Company generated revenues for the quarter of $103 million, representing a 219% increase year over year. Cash flows from operations before changes in working capital (cash flow from operations, a non-GAAP measure) were $63.6 million, or $0.76 per share. Year over year, cash flows from operations increased 246%. Net income for the quarter reached $32.9 million, or $0.39 per fully diluted common share, before excluding selected items (see the Selected Item Review and Reconciliation table for additional information), compared to a loss of $0.36 per fully diluted share for the first quarter of 2005.

-- The average oil and natural gas production rate for the quarter increased 16% over the fourth quarter of 2005 and 154% over the first quarter of 2005 to 136 million cubic feet equivalent per day (Mmcfe/d). Total production for the quarter was 8,658 Mmcf of natural gas and 596 Mbbls of oil, or 12,234 Mmcfe.

-- The Company made improvements in its overall cost structure during first quarter, including a reduction in general and administrative expenses by 33% over the prior quarter, from $8.0 million to $6.0 million. Total operating expense, including lease operating, production and severance taxes, gathering and transportation expense, showed a 6% improvement over the prior quarter on a per unit basis, from $1.95 to $1.83 per Mcfe. Depletion, depreciation and amortization, a non-cash expense, increased 30% over the prior quarter, from $28.9 million to $37.5 million, mainly due to the Company's acquisition activities.

-- During the quarter, Petrohawk completed two strategic transactions. On January 27, the Company closed its acquisition of approximately 106 Bcfe of proved natural gas reserves located in North Louisiana's Elm Grove and Caspiana fields. On March 21, Petrohawk completed its divestment of approximately 25 Bcfe of proved reserves located in the Gulf of Mexico.

-- Petrohawk's average prices from the sale of natural gas and oil were $7.75 per Mcf and $59.90 per Bbl respectively during the quarter, excluding the impact of hedges. Hedges reduced average sales prices by $0.25 per Mcf of natural gas and $6.68 per Bbl of oil. The Company does not elect hedge accounting.




   

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