Petrohawk Energy Corp., Houston, (NYSE: HK) shares have jumped about 36% on further news of its Haynesville shale potential. The stock price at press time was $35, up from a May 29 close of $25.95, and a year-end 2007 close of $17.31.
“Due to the land grab, limited drilling and completion information has kept us from modeling the Haynesville shale,” says Michael D. Bodino, E&P analyst with Coker & Palmer Investment Securities. “However, industry data points, combined with rumored production rates between 10- and 30 million cubic feet equivalent, encouraging reservoir characteristics, and a better understanding of a development timetable have provided enough data for us to begin to consider the play’s impact to Petrohawk’s future production and reserves.”
Bodino maintains a Buy on HK shares with a $38 target price.
The growing importance of the Haynesville shale is evident in the land prices in north Louisiana, Bodino says. In the past several months, land prices have jumped from several hundred dollars an acre to more than $10,000.
In studying Petrohawk’s involvement in the shale, Bodino says the company’s first announced horizontal well was drilled in the East Texas area of the Haynesville which tested at 8 million cubic feet equivalent per day and could have initial pr0duction rates from 10- to 15 million equivalent per day.
“The market perceives the play gets better as it moves east and south, away from these encouraging results in Harrison County, Texas, that provides a western most data point,” Bodino says. Petrohawk has more than 150,000 net acres in the Haynesville, but Bodino says that could grow through aggressive leasing.
Petrohawk chief executive Floyd C. Wilson says, "This expansion in the emerging Haynesville shale play is part of our ongoing efforts to add substantially to our lower-risk, higher-margin inventory of drilling opportunities in core areas where we bring experience and economies of scale to the table.”
Bodino says, with wells taking about 60 days to drill and with three-year leases, Petrohawk is likely going to be very aggressively attacking the play, Bodino says. The company’s goal is to have 10 rigs running by year-end and keep those rigs on the play. With each rig able to drill about six wells per year, the company could drill 12 to 15 wells this year and more than 60 in 2009, Bodino says.
“This should not only provide enough data points to fully evaluate the play but also aid Petrohawk in substantially growing future production and reserves,” Bodino says. “Although we are heavily discounting our production and reserve forecasts due to uncertainty, Petrohawk could still double its production and reserves from the Haynesville alone over the next three years.”