Petrohawk's Future Looks Exciting

Natural gas exploration giant Petrohawk Energy (NYS: HK) looks to be a great acquisition. Its second-quarter results have just confirmed that. It's obvious that BHP Billiton (NYS: BHP) has chosen the best company to start off its shale gas operations in North America.

Solid growth
The second quarter has shown impressive fundamental growth. The company's Haynesville and Eagle Ford properties have delivered fantastic results. Largely credited with discovering the Eagle Ford reserves, it's only a matter of time before Petrohawk's production hits a million cubic feet equivalent per day, or Mmcfe/d.

Production in the second quarter averaged 943 Mmcfe/d -- a 51% increase compared to the year-ago quarter. While natural gas has been in the midst of a bear market, it's commendable that Petrohawk has shown considerable growth in revenues. Upstream operations saw revenue growing by 85%. This is what I'm looking for in terms of operational growth. Furthermore, earnings before interests, taxes, depreciation, and amortization grew by 65% to stand at $328 million.

An area to address ...
Average cost of production, including depletion, stands at $3.95/Mcfe. While this is generally lower than the average realized prices for natural gas, the margin of profit has decreased. Last year's corresponding figure, at 3.42/Mcfe, looks much better in terms of cost efficiency. Management will have to do some work on that front. Reaching production cost levels of Southwestern Energy (NYS: SWN) and Ultra Petroleum (NYS: UPL) will be a huge plus.

Foolish bottom line
There's little doubt that this stock will make substantial gains in the future. The next few years should prove how much the acquisition will be justified. Demand for natural gas will definitely hold the key, and this is exactly where I'm bullish.

At the time thisarticle was published Fool contributor Isac Simon does not own shares of any of the companies mentioned in this article.The Motley Fool owns shares of Ultra Petroleum. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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