Petrohawk and Chesapeake Fly on Haynesville Shale News

Petrohawk Energy (HK) and Chesapeake Energy (CHK) both are ripping up 9-11% in early action - right now anything associated with the Haynesville Shale is gold in this sector - not that the other natural gas players aren't doing great as well. [Jun 18: Will Encore Acquisition (EAC) be Bought Out?] Another name I've seen continuously on my top weekly performer list for 2 months now but have not been pulling the trigger (waiting the never surfacing "pullback") is Goodrich Petroleum (GDP). Chesapeake announced a new partnership and Petrohawk has a nice upgrade.

• Shares of Petrohawk Energy Corp. advanced in premarket trading on Wednesday after an analyst hiked his price target on the oil and gas producer, saying its oil fields are increasingly more valuable.
• Friedman, Billings, Ramsey analyst Rehan Rashid raised his price target on Petrohawk to $60 from $45 in a note to investors early Wednesday. The new target represents a 25 percent rate of return on the stock over Tuesday's close of $48.
• Rashid said the recent purchase by Plains Exploration & Production Co. of a portion of land owned by Chesapeake Energy Corp. in northwest Louisiana implies Petrohawk's portion of the same oil field is more valuable than originally expected.
• Late Tuesday, Chesapeake said Plains agreed to buy 110,000 acres of its Haynesville Shale tract in northwest Louisiana. By Rashid's calculation, that purchase came to a price tag of $25,600 per acre.
• Based on the transaction, he says Petrohawk's own share of Haynesville Shale can now be assumed to be worth $7.4 billion, which in turn makes Petrohawk stock significantly more valuable.
• Rashid said many oil companies with a presence at Haynesville Shale have seen their shares climb sharply in recent months as companies seek to buy up the land, and reiterated his "Outperform" rating on Houston-based Petrohawk.

Motley Fool has an article on the subject just out as well... "The Haynesville is Hot"

• It seems that not a day goes by without some news out of the smoking-hot Haynesville shale. The news flow is downright torrid for such an early-stage natural gas play. Of course, few investors had heard of companies like Goodrich Petroleum (NYSE: GDP) or GMX Resources (Nasdaq: GMXR) before Chesapeake Energy (NYSE: CHK) blew the story wide open back in March. You can hardly blame these companies for flaunting their stuff.
• On Monday, Petrohawk Energy (NYSE: HK) also updated its ever-growing leasehold. Land that's prospective for the Haynesville/Bossier (two gas-rich shale layers stacked on top of one another in the same region) now stands at a hearty 275,000 net acres. This renders Petrohawk highly levered to the Haynesville -- much more than larger companies like Chesapeake or Hunt-happy XTO Energy (NYSE: XTO). This looks like a positive thing, judging by the company's latest well result.
• Petrohawk just completed and production-tested its very first horizontal Haynesville well. With a horizontal well, you drill horizontally to hit the gas contained in a laterally extensive formation. Petrohawk drilled this particular well down 11,000 feet, and then nearly 4,000 feet laterally. To better coax the gas out of the rock, the company also induced fractures at eleven separate intervals.

[June 27: Natural Gas 75% Gain Speeds Horizontal Drilling at Devon Energy, Range Resources]

I've mentioned one small sliver of positive of this oil/gas boom is that it is creating overnight millionaires for people who just happen to own land in the right places in Texas, Pennsylvania and now it appears North Dakota of all places.

• Oscar Stohler was raised in a sod house in western North Dakota and ranched there for nearly seven decades. He never gave much thought to what lay below the grass that fattened his cattle. When oilmen wanted to drill there last year, Stohler, 83, doubted oil would be found two miles underground on his property.
• In less than a year, Stohler and his wife, Lorene, 82, have become millionaires from the production of one well on their land near Dunn Center, a mile or so from the sod home where Oscar grew up. A second well has begun producing on their property and another is being drilled — all aimed at the Bakken shale formation, a rich deposit that the U.S. Geological Survey calls the largest continuous oil accumulation it has ever assessed.
• Some of their neighbors in the town of about 120, from bar tenders to Tupperware salespeople, have become "overnight millionaires" from oil royalty payments.
• State and industry officials say North Dakota is on pace to set a state oil-production record this year, surpassing the 52.6 million barrels produced in 1984. A record number of drill rigs are piercing the prairie and North Dakota has nearly 4,000 active oil wells.
• "I have heard, anecdotally, that there is a millionaire a day being created in North Dakota," said Ron Ness, president of the North Dakota Petroleum Council.
• The number of taxpayers reporting adjusted gross income of more than $1 million in North Dakota rose from 266 in 2005 to 388 in 2006, Strombeck said. The 2007 numbers won't be known until October, she said.

Good times! Now these people can feel 1/100000th of what it feels like to be a Saudi Sheikh which from nothing but good luck of sitting on oodles of dead dinosaurs are now among the most rich and powerful on Earth.

Disclosure: No position in names in this story but own a 4 stock natural gas basket

Comments

[Ernie Montague]

ripping up a negative 3 points each as of 10 AM

[jcrash]

I'd love to hear the reasoning behind valuing HK at $10 billion, or roughly $40 milllion per employee. While CHK is at about 4% of that.

[BrucePile]

HK is severely undervalued by my screwball guage even at $50 and I've had it on my buy list for awhile kicking myself all the time for not buying it. The dent in its climb from the present market selloff is probably about all the pullback there will be anytime soon.

[Trader Tim]

These stocks got shot this morning but recovered....HK has some nice acerage there

www.oilshalegas.com/ha...

[FundamentallySound]

CHK- solid fundamentals, great management, and a favorable environment for energy what isn't attractive here?

[PAULWOT]

If congress would get off the oil crap and get behind NG Opec would be put in it's place and the U.S. would be less dependant, the dollar stronger, economy would recover faster, greener emissions from NG burning cars, WE have plenty of NG!!!!! Also the infrastructure is already in place. You don't have to wait until they build NG gas stations when you can refuel you NG car in your own garage using the gas connection already there!!!!!!!!1

[richjoy]

There are many good NG investments (and oil investments also).

I like CHK--the chairman is buying huge amounts of stock;, all USA sourced, so there is no terrorism premium; company owns vast acreage in all the major new NG finds, so not dependent upon one geographic area; and finally, NG is still cheap compared to oil, and is in growing demand.

I also am careful not to allow any one company (or industry) to become too large a part of my portfolio.

[Jake2]

"Ripping up?" HK down 2.96% Thursday, and down up to 10 points last five days. CHK down 3.78% Thursday, and down up to 10 points last five days. Beware hyperbole and/or "exuberant enthusiasm," to quote our late great Chairman of the Fed. RIP rather than Rip Up is the ruibric.

[kingpinpa]

bought KCS ENERGY many years ago. It was a good company. Paid $2.98 a share. It was purchased by Petrohawk and the rest is history.
Good buys are out there if you know where to look ! Kcs was coming out of bankruptcy when I bought.

[10Q Detective]

Let's not lose sight of the fact that the drillers are going down more than 10,000 feet and then slanting 3,000 feet! Aside from that, there's gold in them there hills!

industry.bnet.com/ener.../

[sophisticated investor]

HOUSTON, July 15 /PRNewswire-FirstCall/ -- Mainland Resources, Inc., a Nevada corporation (the "Company") (OTC Bulletin Board: MNLU; 5MN-Frankfurt) and Petrohawk Energy Corporation ("Petrohawk"... (NYSE: HK) have entered a binding agreement for the joint development of the Haynesville Shale on Mainland Resources' properties ("the Leases") in De Soto Parish, Louisiana effective July 14, 2008.

Mainland Resources, Inc., holds interest in approximately 2,695 net acres which form part of the East Holly Field in De Soto Parish, northwest Louisiana.

Under the terms of the Agreement, Petrohawk agrees to pay 100% of the costs of development associated with the first well drilled below the Cotton Valley Formation, including drilling, completing and fracture stimulating, as well as costs up to and including pipeline connection. Petrohawk also agrees to pay 80% of all costs of the second well drilled on the Leases below the base of the Cotton Valley and Mainland agrees to pay 20% of the costs. For the third and all subsequent wells drilled on the Leases below the base of the Cotton Valley Formation, Petrohawk will pay 60% and Mainland will pay 40%.

Mainland will transfer 60% of its De Soto Parish leases to Petrohawk at closing, but only as the Leases relate to all depths below the base of the Cotton Valley Formation, and specifically the Haynesville Shale. Petrohawk agrees to gather and market Mainland's production from above the base of the Cotton Valley Formation, pursuant to a mutually acceptable agreement.

Mainland Resources President Mike Newport states, "The opportunity to work with Petrohawk Energy Corporation to jointly develop the Haynesville Shale on our properties changes the complexion of our entire company going forward. Petrohawk has built considerable expertise in the Haynesville and they bring major financial and operational resources that would speed up our Haynesville development in a very big way."

"This arrangement allows Mainland to continue development on our De Soto Parish leases focusing on upper levels in the Cotton Valley and Hosston formations that we believe could also prove very productive," says Newport. Petrohawk (or its affiliate) will be designated Operator on all development. The first well under this agreement between Mainland and Petrohawk is anticipated to be spudded before August 31, 2008.

The Agreement is subject to customary due diligence to be carried out by Petrohawk. The companies expect to close the transaction no later than July 31, 2008.

About Mainland Resources, Inc.

Mainland Resources is a junior company engaged in the exploration and development of oil and gas resources. The Company's current initiatives are focused on the acquisition and development of leases in Louisiana's emerging northeastern gas region that is gaining notoriety for recent discoveries in the Haynesville shale.

Symbol: MNLU - OTCBB, Symbol: 5MN; Frankfurt, WKN No.: A0ND6N

SAFE HARBOR STATEMENT -THIS NEWS RELEASE CONTAINS "FORWARD-LOOKING STATEMENTS", AS THAT TERM IS DEFINED IN SECTION 27A OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE UNITED STATES SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. STATEMENTS IN THIS NEWS RELEASE, WHICH ARE NOT PURELY HISTORICAL, ARE FORWARD-LOOKING STATEMENTS AND INCLUDE ANY STATEMENTS REGARDING BELIEFS, PLANS, EXPECTATIONS OR INTENTIONS REGARDING THE FUTURE.

EXCEPT FOR THE HISTORICAL INFORMATION PRESENTED HEREIN, MATTERS DISCUSSED IN THIS NEWS RELEASE CONTAIN FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH STATEMENTS. STATEMENTS THAT ARE NOT HISTORICAL FACTS, INCLUDING STATEMENTS THAT ARE PRECEDED BY, FOLLOWED BY, OR THAT INCLUDE SUCH WORDS AS "ESTIMATE," "ANTICIPATE,"... "BELIEVE," "PLAN" OR "EXPECT" OR SIMILAR STATEMENTS ARE FORWARD-LOOKING STATEMENTS. RISKS AND UNCERTAINTIES FOR THE COMPANY INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS ASSOCIATED WITH PROPERTY DEVELOPMENT AND FUNDING AS WELL AS THE RISKS SHOWN IN THE COMPANY'S MOST RECENT ANNUAL REPORT ON FORM 10-KSB AND ON FORM 10-QSB AND FROM TIME-TO-TIME IN OTHER PUBLICLY AVAILABLE INFORMATION REGARDING THE COMPANY. OTHER RISKS INCLUDE RISKS ASSOCIATED WITH THE REGULATORY APPROVAL PROCESS, COMPETITIVE COMPANIES, FUTURE CAPITAL REQUIREMENTS AND THE COMPANY'S ABILITY AND LEVEL OF SUPPORT FOR ITS EXPLORATION AND DEVELOPMENT ACTIVITIES. THERE CAN BE NO ASSURANCE THAT THE COMPANY'S DEVELOPMENT EFFORTS WILL SUCCEED AND THE COMPANY WILL ULTIMATELY ACHIEVE COMMERCIAL SUCCESS. THESE FORWARD-LOOKING STATEMENTS ARE MADE AS OF THE DATE OF THIS NEWS RELEASE, AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE THE FORWARD-LOOKING STATEMENTS, OR TO UPDATE THE REASONS WHY ACTUAL RESULTS COULD DIFFER FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE BELIEFS, PLANS, EXPECTATIONS AND INTENTIONS CONTAINED IN THIS NEWS RELEASE ARE REASONABLE, THERE CAN BE NO ASSURANCE THOSE BELIEFS, PLANS, EXPECTATIONS OR INTENTIONS WILL PROVE TO BE ACCURATE. INVESTORS SHOULD CONSIDER ALL OF THE INFORMATION SET FORTH HEREIN AND SHOULD ALSO REFER TO THE RISK FACTORS DISCLOSED IN THE COMPANY'S PERIODIC REPORTS FILED FROM TIME-TO-TIME WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

THIS NEWS RELEASE HAS BEEN PREPARED BY MANAGEMENT OF THE COMPANY WHO TAKES FULL RESPONSIBILITY FOR ITS CONTENTS. EACH OF THE NASD, THE SEC AND THE OTCBB NEITHER APPROVES NOR DISAPPROVES OF THE CONTENTS OF THIS NEWS RELEASE. THIS NEWS RELEASE SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION.

SOURCE Mainland Resources, Inc.

Contact: Investor Relations (USA), 1-866-590-6589, or Investor Relations (Europe), [phone], both for Mainland Resources, Inc.

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