Thursday, July 14, 2011

Petrohawk to be Sold to BHP Billiton

In a news release dated tomorrow (7/15 - I guess it's already tomorrow in Australia), BHP Billiton announced that the company has entered into a definitive agreement to acquire Petrohawk Energy.  The total value of the deal is $15.1 billion (about $12.1 for equity and the assumption of $3 billion in debt). The deal is an all cash offer for $38.75 per share.  Petrohawk's shares closed today at $23.49, so that implies a 65% premium.  Not bad.  The cash tender offer would begin July 25 and the company's board recommends shareholders to take the offer.  BHP expects the deal to close in Q3 2011.

This is the deal I've been expecting for the past several years.  It has always seemed to me that HK has been waiting for the right suitor to come along.  The question was always who would buy it and when.  Honestly, I'm surprised it took so long.

For BHP it makes a lot of sense given its exposure to the Fayetteville Shale through an asset purchase from Chesapeake back in February.  The Chesapeake deal didn't include an operating company, so the Petrohawk deal should allow BHP to put its own people in Arkansas.

What does this mean in the Haynesville Shale?  BHP clearly is serious about building its shale portfolio, but to be honest, I'm sure BHP is a little more interested in Petrohawk's Eagle Ford Shale holdings at this time.  Petrohawk has some pretty good acreage in the Haynesville play but has stated its intentions to reduce rig count before year end.  BHP is well capitalized and has the heft to weather a downturn.  The big question is whether BHP will put more capital behind the Haynesville drilling program or proceed to the sidelines to wait for prices to increase.  Given the hefty price tag and the fact that it's an all cash deal, I imagine BHP didn't buy Petrohawk to put it on the shelf for a few years while market conditions solidify.

This deal is yet another in the natural progression where the independents find and prove the big play and ultimately get taken out by the deep pocketed major players.  It will be interesting to watch which stocks gets bid up on Friday by speculators looking for the next takeover play.  Comstock, GMX, Goodrich???

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