PREVIEW-Petrohawk Energy to benefit from production rise
* What: Petrohawk Q3 results
* When: Nov. 5
* Co likely to beat estimates
* Higher production will help
By Arup Roychoudhury
BANGALORE, Nov 4 (Reuters) - Independent oil and natural gas company Petrohawk Energy Corp's (HK.N) third-quarter results are likely to beat analysts' estimates on increased production and lower expenses. The global economic slowdown, coupled with the subsequent fall in oil and natural gas prices, led to many exploration and production companies to cut down on spending and drilling activity in late 2008 and the first half of 2009.
Petrohawk, however, sustained its drilling programme and focused on raising capital through asset sales and equity offerings.
"They didn't curtail production, they didn't shut in wells, the growth is unfettered, that's why you are going to see 60 percent or so year-over-year growth," Jefferies and Co analyst Subash Chandra said by phone.
Natixis Bleichroeder analyst Curtis Trimble said Petrohawk had "vastly" outpaced the industry as a whole as it was increasing drilling activity when others were cutting theirs.
"You have two phenomena specific to Petrohawk that will lead them a little bit more on the upside (for the third quarter). One is continued cost containment, and the other is slightly higher content of liquids," said Trimble, who expects the company to earn 14 cents a share.
On average, Petrohawk is expected to post net income of 12 cents a share on revenue of $305 million, according to Thomson Reuters I/B/E/S.
The slowdown curbed demand for fuel to run power plants and factories. In response, U.S. natural gas stockpiles reached record levels, causing prices to fall 66 percent from the 2008 third quarter. However, U.S. oil prices CLc1 have rebounded and for the first time in a year averaged $68 a barrel last quarter.
Many oil and gas companies have looked to shift their asset base and acquire oil producing properties.
"Given the massive decoupling of natural gas prices from crude oil prices, a higher proportion of liquids is more valuable than a higher proportion of natural gases," Trimble said.
The company has raised liquidity through a stock offering and, in September, sold off its Permian Basin assets for $376 million to a privately-held company.
PRODUCTION GROWTH
Petrohawk had earlier forecast third-quarter production to average between 495 million cubic feet equivalent per day (mmcfed) and 505 mmcfed, and said it expected to raise average daily production by 30 to 40 percent over the course of 2009.
"Production and commodity prices will drive revenue. I think production will be pretty good in the quarter," RBC Capital markets analyst Leo Mariani, who expects the company to earn 12 cents a share for the third quarter, said.
Mariani added that while Petrohawk may further raise estimates in their third-quarter commentary, most of the exploration and production space is expected to maintain status quo.
"Investors will be looking for signs that management has raised production guidance again...further signs that they are growing faster than they said," Morgan Keegan and Co analyst Chris Pikul, who estimates the company to earn 11 cents a share, said.
Jefferies' Chandra, however, said the company's main focus will have to be on converting production growth to reserve growth.
"That is going to be the big driver because there are some indications that they are growing production 60 percent, but they might grow reserves much more than that," he added. (Reporting by Arup Roychoudhury in Bangalore) (arup.roychoudhury@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: arup.roychoudhury.reuters.com@reuters.net))
