Original Article

Petrohawk Energy Corp. (HK) agreed to sell a 50% interest in its Haynesville Shale gathering and processing business to Kinder Morgan Energy Partners LP (KMP) for $875 million in a deal that will form a strategic partnership with the pipeline operator.

Petrohawk has reached agreements or closed on $1.4 billion in divestitures this year to help boost its liquidity. The company has been selling off assets to focus on its growing Haynesville and Eagle Ford shale assets.

Analysts with the Houston-based energy investment bank Tudor Pickering Holt & Co. wrote in a note to clients on Tuesday that the deal “tops expectations” by at least $200 million.

Petrohawk plans to use the proceeds of the joint venture with Kinder Morgan Energy Partners to fund its existing drilling programs, said the company’s chairman and chief executive, Floyd Wilson, speaking on the sidelines of the Independent Petroleum Association of America’s 16th Annual Oil & Gas Investment Symposium in New York on Tuesday. The company isn’t likely to make any other significant shale-gas divestitures this year, Wilson said.

Petrohawk has ramped up gas production in the Haynesville Shale to keep its leases, despite falling gas prices. Many leases of shale-gas acreage require the leaseholders to drill within a certain time period. All of Petrohawk’s acreage in the Haynesville should be held by production by mid-2011, although drilling activity isn’t likely to drop off dramatically after that, even if gas prices remain low, Wilson said.

“We’re hedged out for a couple of years, so we’re not totally at the mercy of gas prices,” he said.

Petrohawk’s assets in the Haynesville area are located in Northwest Louisiana. Kinder Morgan has no current presence in the shale play and doesn’t expect the effort to boost its earnings until next year.

Petrohawk will continue to operate the business until the deal closes, expected by the end of May. The new company, KinderHawk Field Services LLC, is expected to have an enterprise value of up to $1.75 billion at inception.

Separately, Petrohawk said it is shifting capital toward its Eagle Ford efforts in southern Texas to increase oil and condensate production while cutting back on gas drilling amid weak natural-gas prices. Petrohawk plans to reduce its 2010 capital spending plan by $100 million. The move underscores how natural gas producers are increasingly turning to oil to take advantage of higher commodity prices and boost profits. Natural gas producers Chesapeake Energy Corp. (CHK) and EOG Resources Inc. (EOG) have both announced plans to find more oil.

Petrohawk’s production has soared over the past few quarters, but earnings haven’t been matching up amid the price swoon. Meanwhile, Kinder Morgan has proven fairly resilient amid slumping gas prices owing to its diverse business segments, assets in several regions of the U.S. and a strong balance sheet.

Shares of Petrohawk were 2.57% higher at $23.19 in recent trading, while shares of Kinder Morgan were recently down 1.56% at $66.18.